The U.S. Energy Information Administration (EIA) is predicting that natural gas use in transportation will grow 100% by 2017, but Barclays Capital analysts who broke down some of the metrics have concluded that natural gas vehicles (NGV) would have to swell 12-fold to meet those projections.
If NGV demand for gas effectively doubles by 2017, then the daily volume is still relatively small in the larger gas demand picture, equating to about 170 MMcf/d, according to Barclays. Without strong regulatory backing, there won’t be any “meaningful support” of national demand from natural gas in transportation, said Barclays. Natural gas is cheaper than diesel, but the NGVs cost a lot more than the equivalent diesel-equipped vehicle, analysts said.
“Diesel-fueled commercial vehicles [buses, freight trucks, commercial light-duty trucks] are the largest potential market for NGV penetration,” said Barclays analyst Shiyang Wang. In 2010, diesel-fueled commercial vehicles consumed the equivalent of 13 Bcf/d or about 20% of the nation’s total natural gas demand.
Trade group NGVAmerica contends that with strong regulatory support, natural gas could displace 6-20% of the EIA’s forecasted 51 billion gasoline gallon equivalent diesel-fueled commercial vehicle market by 2017. If NGVAmerica is correct and natural gas could displace all the diesel-fired commercial vehicles on the road, the natural gas load would approach 20% of the total gas demand.
Barclays analysts noted that compressed natural gas (CNG) continues to account for most of the natural gas transportation market (89%), but liquefied natural gas has momentum, particularly in long-haul trucking. LNG’s 11% share is likely to grow, given current plans in place to add another 300 fueling stations nationwide (there are 32 now, compared to nearly 600 CNG fueling stations).
An Energy Vision report, “Tomorrow’s Trucks: Leaving the Era of Oil Behind,” analyzed the expanded use of NGVs among waste hauling truck fleets in the New Jersey, New York City area, and found five factors that promoting NGV growth for the area’s 10,000-truck refuse truck market. Those factors include local government mandates; the “power of example”; public/private sector educational outreach and technical assistance; expanded choice of NGVs for communities; and federal/state economic support from which the New York-New Jersey area has benefited in the past five years.
Ultimately, the New York-based nonprofit said there is also an increased desire among fleet operators and communities to be what it called “green leaders.” And the diesel-to-natural gas switch has some powerful carbon emission reduction advantages, Energy Vision’s report said. As an example, GDF Suez Gas NA late last month said it is supplying Transgas with LNG for use as a vehicle fuel in 10 new tanker-truck tractors at GDF’s Everett, MA, LNG fueling station north of Boston. Transgas trucks carry LNG around the region, mostly to utilities and commercial/industrial facilities. The GDF fueling facility is adjacent to its Distrigas LNG import terminal and is said to be the first fueling facility of its kind in Massachusetts.
Last week Pace Global consultants discussed the use of LNG in small-scale applications in a webinar. There is a long-term opportunity in the U.S. trucking sector for domestic gas demand growth if current favorable price spreads between gas and diesel are sustained, they said.
Pace Vice President Todd Thurlow said that the “most significant risk factor” for growing LNG in the transportation sector would be sustained low crude oil prices of $50/bbl or lower. “Our view is that we are not going to see sustained crude oil pricing below the $80/bbl range for a number of reasons. Even with the expected growth in oil shale development here in North America, the federal EIA is forecasting a total increase in OPEC and non-OPEC production of about 8.5 million b/d, which they are forecasting to be totally offset by net global demand growth.
“Further, as we look at the fiscal break-even point for OPEC reserves, we see the vast majority fall at or above the $80/bbl range. In summary, our view is that the current spread in price between LNG and diesel is durable, and we think it will be sustained over the midterm.”
Besides price advantages, small-scale LNG has the prospects for a large incremental market and also for cashing in on the need for more low-carbon solutions to meet more stringent air emissions standards. “We’re seeing the producers and the suppliers really pushing the growth of small-scale LNG in response to a large potential market,” said Thurlow, adding that diesel in the United States is a roughly 50 billion-gallon annual market, or the equivalent of 8 Tcf of natural gas, or about one-third of the U.S. gas market. Long-haul trucking alone represents about 36 billion gal/year, or a 4.7 Tcf market.
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