The growth potential for natural gas as a transportation fuel is a long-term proposition, according to a report released Tuesday by PIRA Energy Group, a New York City-based energy marketing consulting firm.
Prices for natural gas are expected to stay lower than oil or diesel for a long time, creating a bullish future for the spread of natural gas vehicles (NGV), according to the report, which estimated under a high-end scenario that demand for gas for NGVs could reach 14 Bcf/d by 2030.
While acknowledging the well-documented infrastructure and technology uncertainties inherent in NGVs, PIRA sees fleet and heavy duty vehicle markets as the most viable and compressed natural gas (CNG)-powered vehicles as the potential winners. In contrast, PIRA is lukewarm toward liquefied natural gas (LNG) as a transportation fuel.
"The challenge that faces widespread LNG adoption for Class-8 trucking looks daunting," said PIRA's Jeff Steele. "The market needs to build a consumer base for trucks that are not yet built and that also lack a viable fueling infrastructure."
The interdependency of the two crucial needs -- vehicles and fueling stations -- make the future problematic, according to PIRA, although it does conclude that the private sector appears to be responding to the chicken-egg situation "without help from the federal government, which previously looked essential."
Ultimately, PIRA said the success of natural gas marketers' efforts in the trucking space will be "a driving force" for both the sale of new general Class-8 trucks and the capital investments for building the needed fueling infrastructure.
"Another pivotal building block will be the ability of the auto manufacturers to produce and sell LNG trucks capable of satisfying the wide ranging needs of commercial trucking," said PIRA.
A lot is riding on a Cummins/Westport Innovations (CWI) joint venture plan to release an 11.9 liter LNG engine early next year with an implied payback period similar to what mid-size LNG trucks have (see Daily GPI, Feb. 9).
With the potential for longer-term price advantages for natural gas driving robust demand for NGVs, PIRA concluded that as much as 2.4 million b/d of diesel demand could be at risk. Even with the near-term reservations, PIRA calculated that by 2030 there could be 10 Bcf/d of LNG-driven transportation fuel use and another 4 Bcf/d coming from CNG transportation.
In PIRA's base case with more moderate growth, the on-highway U.S. transportation market could include at least 7 Bcf/d. It is the high-use case (up to 14 Bcf/d in 2030) that is subject to major downside risks of infrastructure hurdles, technology uncertainties and other issues.
Fleet use of NGVs promises to have the fastest penetration of market share. This will be most evident in markets where CNG is used an alternative to diesel in NGVs, PIRA said. "A high degree of NGV visibility and share of new orders in the public transit and refuse market are standout examples."
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