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CNG or LNG? Fueling Supplier Unsure If One Will Dominate NGVs

It is still a toss up as to whether compressed natural gas (CNG) or liquefied natural gas (LNG) will prevail as the preferred fuel for fleet operators switching to natural gas vehicles (NGV), the head of a leading national fueling company said Thursday.

While still struggling to make a profit, Newport Beach, CA-based Clean Energy Fuels Corp. has built more than twice as many CNG stations as LNG facilities, but the fuel volumes it provides for transportation are split about 50-50 between the forms of natural gas for transportation, CEO Andrew Littlefair said during a conference call in which he reported bigger losses and smaller margins in 2Q2014 compared to 2Q2013.

Net losses for 2Q2014 totaled $26.6 million, compared with a $6.2 million loss in 2Q2013. Nevertheless, Littlefair said Clean Energy "continued to make progress in our path to profitability" because its getting close to breaking even on earnings before interest, taxes, depreciation and amortization.

"A lot has been said and written about [the question of CNG or LNG], and we're in the center of it," Littlefair said. "We do both, and it is hard to get our arms around it, hard to get that sort of information from [major NGV engine makers] Cummins or Westport. But we try to keep close tabs on it, and we're seeing the break at about 50-50."

A study released in June by consultants at Pace Global said the viability of the two natural gas transportation forms is still evolving (see Daily GPI, June 30).

Littlefair said it is too early to see if one of the fuels will be more predominant. "We're glad that we are in both camps. We have LNG production and stations, and we think they are going to be needed, but we're also glad we have a compressor company."

Clean Energy has 70 CNG stations and 30 LNG fueling facilities nationally; some of the facilities offer both fuels.

In response to an analyst's question about the prospects for small-scale LNG production in the United States, Littlefair said Clean Energy has access to about 400 million gallons of LNG annually through two plants it operates, a third one in development, and contracts with 13 peak-shaving LNG production plants scattered around the nation.

"We have a couple of years running room with LNG supplies from our company's standpoint," Littlefair said. "But if demand growth goes the way we think it is, we're going to run short eventually, and we will need more LNG production capability."

Littlefair said “small scale” refers to plants that can produce up to 200,000 gallons daily. Longer term, he said Clean Energy is trying to determine if "real small scale" (10,000-gallon batches) can be economically viable. "Our conclusion so far is that it is very difficult to make the economics of that work.

"You really need larger scale, 100,000 gallons/day liquefiers and they need to be near the load. You don't want the production to be more than 150 or 200 miles away from the load. I would say that in the next year or so we will need to begin to see some added liquefaction plants built."

Clean Energy has an agreement with a unit of General Electric to develop two LNG production facilities in the United States (see Daily GPI, Nov. 14, 2012).

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