My name is Laura Hudy, and I lead the Thermal Energy Systems team at GE Global Research. One of our areas of focus is developing low cost Liquefied Natural Gas (LNG) technology solutions for enabling the NG fueling infrastructure build out.
I recently attended the World LNG Fuels 2013 Conference in Houston, TX. The attendance for this conference has grown 16 fold in the last three years since it started. It is true that better advertisement could play a big role in that growth, but it is also true that LNG as fuel in the transportation space is a BIG interest for many companies today. Trucking, locomotive, and marine companies are looking for education to help them evaluate switching their fleets to LNG fuel. To quote one of the speakers at the conference, “LNG fueling is now!”
You can see it just by watching the news today. In the past 6 weeks, Citigroup announced that they predict 30% of US trucking will be fueled by NG by 2020. ConocoPhillips announced developing a 100,000 gallons/day plant in Texas and GE announced with Clean Energy the commitment to build two 250,000 gallons/day plants. Globally, China’s Anhul Providence (population 60M) plans to convert all trucks, buses, and ships to LNG by 2015.
There is momentum building throughout the world. Companies and countries are warming up to using LNG as a fuel source, recognizing that, with the price spread between NG and oil being large and oil prices steady to rising, today is the time to convert. Today is the time to make the investment and to take advantage of this, what is predicted to be, large window of opportunity.
In the US alone, shale gas has grown by 48% per year in the last 4 years. The rapid growth has collapsed NG prices and caused O&G companies to cap drilled gas wells until the price rebounds. McKinsey & Co. estimates that oil prices will stay between $80-120/barrel ($13-20/MMBTU) for the foreseeable future and NG prices will stay around $5/MMBTU. The concern coming out of the conference is whether this price delta is enough of a catalyst to significantly increase the penetration of LNG as a transportation fuel.
Today, there are only 91 LNG stations worldwide and 30 L-CNG fill stations. Fourty-six of these stations are in the US, followed by the UK and then China. If you look at the number of NG vehicles in these countries, US ranks # 14 (114,000 vehicles), UK rank is unknown (559), and China ranks # 7 (600,000).
Nonetheless, there is movement from Clean Energy and BLU to build a more extensive fueling infrastructure in the United States. Clean Energy has made a commitment to build 150 CNG/LNG fuel stations along America’s NG Highwayby the end of 2013. So far 80 stations have been built with 10 stations actually operating. The remaining stations will be built this year.
So where will the customers come from? Who will convert their vehicles and start using LNG or CNG as their fuel? McKinsey says that LNG used in trucks that travel more than 400+ miles per day make the most sense. Heavy duty, medium, and city buses will most likely be the first to go. The payback for Class 8 trucks is estimated to be 2-3 years, for Class 6 its 1-2 years, fleets/taxis/vans can take 2-3 years, and for personal LDVs (light-duty vehicles) the estimate is 7-10 years. The irony is the personal LDV is the largest current market.
Some companies have started to convert or are converting their heavy-duty trucks such as Gulf Oil, Ferus Wellsite Cyrogenic Solutions, and Omya, to name a few. Right now there are only two heavy duty truck engine offerings today, the 9L spark ignited and 15L high pressure direct injection (HPDI). It is believed more trucks will convert once the 12L engines emerge on the market. Four engine manufacturers will introduce a 12L engine optimized for 18-wheelers in 2013.
We are definitely in an interesting time period when it comes to NG and its usage. Many companies are moving fast to take advantage of this window. Other companies remain skeptical. For GE, our Oil & Gas business is positioning to sell both Micro-LNG (100,000 gallons/day) plants and CNG-in-a-Box fuel stations to support the development of the fueling infrastructure across the US. So back to the original quote from the conference…LNG fueling is now. What do you think?
For more information on the home refueling appliance we are developing, please read: The Future of Refueling