Fuel Smarts

ATA Summit: Plenty of Natural Gas to go Around, but Few Users So Far

November 2012, TruckingInfo.com - Feature

by Tom Berg, Senior Editor, Senior Editor - Also by this author

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There are only about 167,000 natural gas-fueled vehicles in the United States, according the head of a group that promotes natural gas as a vehicle fuel, but its abundance and cheap price is spurring so much interest that an almost overflow crowd turned up at the American Trucking Associations Natural Gas Summit, which began yesterday in Alexandria, Va.
Up to 8% of the Class 6-8 truck population could be natural gas fueled by 2017.
Up to 8% of the Class 6-8 truck population could be natural gas fueled by 2017.


According to Richard Kolodziej, president of NGV America, the numbers of natural-gas-fueled vehicles elsewhere around the globe range from 600,000 in China to 3.1 million in Iran, 1.6 million in Europe and 4.3 million in South America. All major manufacturers in those markets produce natural gas vehicles. They include cars and buses as well as various classes of trucks, but his point was, "We've got a long way to go."

Natural gas fuel makes the most sense in heavy trucks because they burn a lot of fuel, and the lower price of gas makes it pay for the still-stiff upcharges for NG equipment. The more miles run and the heavier the truck, the better the return on investment for a natural gas truck, Kolodziej and other presenters pointed out.

A Lifetime Supply

Low prices will continue because America is sitting on plenty of natural gas something repeatedly reported in the general media and trade press in recent years and it was reiterated by most speakers at this meeting. Many cited estimates of 100 years supply and growing, as Kolodziej said.

Based on estimates he's seen, T. Boone Pickens, the oilman-turned-chairman and CEO of BP Capital Management and campaigner for conversion of over-the-road trucks to natural gas, thinks there are probably 2,000 trillion cubic feet of gas in the ground, which supports the 100-year-supply estimate.

Pickens quoted a J.P Morgan study that put reserves at 8,000 trillion, but its not all recoverable, Pickens points out. "I think 30 to 40% is, and that would be 3,000 trillion. And 3,000 trillion is twice what the Saudis have in oil, and that's declining.

"We will run out of oil and diesel 100 years before we run out of natural gas," he declared.

The fact that we're sitting on such an abundant supply suggests prices are going to stay reasonable for the foreseeable future. Pickens says the important factor is the spread between natural gas and diesel.

And that price spread is not likely to collapse, said several presenters. One of the fears harbored by fleet managers contemplating a move to natural gas is that its price might rise and diesels might fall. Neither is likely to happen, attendees heard.

First, gas as a commodity accounts for only 20 to 25% of the pump price of gas, compared to about 80% for diesel. So if the commodity price of gas doubles, the pump price for a diesel-gallon equivalent of gas would rise only 50 cents.

Meanwhile, the price of diesel will almost certainly stay high. "If demand for diesel drops," perhaps because of extensive use of natural gas, "producers will lower production to adjust the price upward," Pickens said. "$80 a barrel [for crude oil] will cause oil rigs to come down all over the country."

That would restrict supply and raise prices. Per-barrel crude oil prices at the end of November ranged from about $88 for West Texas Intermediate to about $110 for North Sea Brent. Natural gas at the same time was trading for $3.65 per 1,000 cubic feet.

Opening Up the Supply Chain

Sitting on all that gas is great, but it has to get to trucks. That shouldnt be a problem, according to the heads of three truck stop chains. James Haslam III, chairman of Pilot Flying J, Thomas OBrien, chief executive officer of TravelCenters of America, and Frank Love, president and CEO of Loves Travel Stops. All said they were installing fueling stations in anticipation of coming demand.

Haslam said his chain now has more than 100 liquefied natural gas stations and will have 150 by the end of next year with the help of its partner, Clean Energy Fuels. OBrien said TAs partner, Shell Oil, is putting in 100-plus LNG stations along strategic interstate routes.

Love believes compressed natural gas makes more sense, and has installed its first CNG station at its Oklahoma City travel center.

"CNG has a bad reputation for slow filling; 45 minutes for a truck," he said. "So our station is a fast-fill because replenishing a trucks tanks in 8 to 10 minutes, as with diesel, is non-negotiable for productivity and good driver experience."

Demand today from truck customers is not great enough to pay the high cost of fueling stations, OBrien told the crowd. Thats being offset by the partnership with Shell, which is making most of the investment.

Pilot Flying J is likewise benefiting with Clean Energy as its partner in the U.S., and with Shell in Canada, Haslam said. Both fuel suppliers expect to recover their investments as demand for gas increases.

The three presented their views at a session called, "Infrastructure Hurdles: The Chicken or the Egg." A later presenter, Jim Arthurs, president of Cummins Westport, commented, "I call it chicken and chicken feed, with chickens being the trucks. If the trucks want to eat, the feed will be there."

Build it. They'll Come

Kolodziej showed figures from independent studies that forecast 8% of Class 6-8 vehicles using NG by 2017, which would be nearly 30,000 trucks, Another estimate puts it at 10% by 2017. That "almost 50%" figure for Class 7-8 by 2050 came from the National Petroleum Council, which also sees 50% of all light trucks and 35% of the Class 3-6 trucks using natural gas in the near future.

"I cant wait to see that," Kolodziej jested, as the audience recognized that he was not likely to because hes well into middle age. "Please let me know."

Noting that sales momentum is beginning to grow, Kolodziej observed, "Some fleets are doing it because they see the world fuel situation and see natural gas as a solution. Some fleets are doing it because they want to reduce greenhouse gases and some fleets are doing it as a way to reduce urban pollution.

"The other 99%," he said with a grin, "make the decision for economic reasons."

Altruism only goes so far, and natural gas price -- $1 to $2 less per gallon equivalent than diesel fuel -- is what gets business peoples' attention.

Regardless of why one might want a natural gas engine, there are few choices for consumers in the higher weight classes.

The engine products of the joint venture between Cummins Inc. and Westport Innovations now dominate the existing, albeit small, market for natural gas trucks. Arthurs noted that CWI's 8.9-liter ISL-G is offered by many truck builders for highway use and by most builders of trash trucks. He says more than 17,000 of the engines have been sold.

But the ISL-G, with a maximum output of 320 horsepower and 1,150 pound-feet, is "a little less power than you want" for full Class 8 use, Arthurs acknowledged. Cummins Westport's upcoming 11.9-liter ISX12-G will be more appealing for heavy truck operators because of its greater output -- up to 400 horsepower and 1,450 pound-feet.

Cummins meanwhile, is preparing a 15-liter natural gas ISX with spark ignition, as used in the joint ventures 8.9- and 11.9-liter products. The ISX15-G is planned for 2015, said Roe East, general manager for Cummins on-highway NG engines.

Westport Innovations current 15-liter dual-fuel HD engine, called GX by Paccars Kenworth and Peterbilt units, is offered by those and other builders, said Jonathon Burke, vice president for global market development. It uses small amounts of diesel fuel as the pilot ignitor of natural gas, which combusts at a higher temperature and needs such a kick to burn. Thus diesel fuel does the job of spark plugs in the upcoming Cummins ISX15-G.

The ISX12-G "is a game changer" because of its greater power and more usefulness for Class 8 trucks, said T.J. Reed, director of product strategy for Freightliner Trucks. It will offer the larger gas engine starting this spring, and will continue to sell the smaller ISL-G in Class 7 and 8 trucks.

Detroit Diesel, a sister company to Freightliner under Daimler ownership, has no plans to develop natural gas engines because current and foreseeable market volume is too small, Reed said. So it will continue partnering with Cummins Westport and those individual companies to offer such engines.

This is also Paccar's approach, said Andy Douglas, national sales manager for Kenworth. Paccar makes its own 12.9-liter diesel, but it wouldn't pay to develop a gas version. The Cummins Westport engines work well and install easily because their blocks are the same as corresponding diesels, and share 80 to 90% parts commonality.

Navistar International now offers the ISL-G in one tractor model and is considering the ISX12-G, said Steve Gilligan, vice president, product and vocational marketing. It has put a hold on plans for its own 12.4-liter dual-fuel engine because of financial pressures.

"As you may have heard, we have a lot of other things on our plate right now," he said.

Volvo Group is continuing with its work on a 13-liter dual-fuel engine, scheduled for 2014 or 2015, said Bill Dawson, senior advisor, truck sales and marketing. Further out is a diesel fueled by dimethyl ether, or DME, which Volvo believes has great promise. DME can be produced from natural gas or biomass, handles easily like propane, and burns like diesel fuel in engines that need little or no modification.

Meanwhile, Volvo and Mack offer the Cummins Westport ISL-G in certain models and plan to offer the larger ISX12-G in others when it becomes available next year.

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