News & Updates

Alaska buys TransCanada’s stake in LNG megaproject

Nov 27, 2015

Alaska has bought Calgary-based TransCanada Corp.’s stake in an LNG megaproject for $64.6-million (U.S.) – another twist in a four-decade quest to build a natural gas conduit from the state’s remote North Slope.

Developed by Exxon Mobil Corp., ConocoPhillips Co. and BP PLC, the Alaska LNG proposal includes a 1,300-kilometre pipeline to a terminal at Nikiski, southwest of Anchorage, where the gas would be liquefied for export to Asia as early as 2024. The project’s final price tag could reach $65-billion.

The Canadian pipeline company and the state signed an agreement last year, which authorized TransCanada to pay upfront capital costs and hold the state’s 25-per-cent share of ownership in the project’s gas treatment plant and pipeline. TransCanada spokesman Mark Cooper said the agreement also provided Alaska the right to buy the Canadian pipeline company’s stake in the project.

After being recommended by Alaska Governor Bill Walker in September, the acquisition was finalized on Tuesday. The deal allows Alaska to become a direct participant in the project and could make the venture more beneficial to state coffers – by up to $400-million annually when gas starts flowing, based on the expectation by the state that it can finance its share of the project at a lower cost than TransCanada could.

Prior to 2010, TransCanada and Exxon had been eyeing an overland pipeline project through Western Canada to reach U.S. markets. But with the continental U.S. awash in natural gas owing to booming production from shale fields, the focus shifted to potential LNG exports to Asia.

“TransCanada has been committed to the development of natural gas resources in Alaska for decades, and has made considerable contributions to the advancement of the Alaska LNG project over the last few years,” Mr. Cooper said in an e-mail. “While our role in this project has concluded, we will continue to watch its progress closely.”

However, it is now unclear who will operate the Alaska LNG project. TransCanada said there is currently no plan to get involved.

 

 

 

 

 

 

Source: Cryderman, Kelly. "Alaska Buys TransCanada's Stake in LNG Megaproject."The Globe and Mail. Phillip Crawley, 25 Nov. 2015. Web. 26 Nov. 2015. http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/alaska-buys-transcanadas-stake-in-lng-megaproject/article27477852/.

The Making of a Buyer’s Market in Natural Gas

Nov 23, 2015

Next year, on a remote island off Australia’s western coast, the world’s most expensive liquefied natural gas export terminal will start shipping cargoes into a market that has changed vastly since 2009, when the project was approved. Chevron’s $54 billion Gorgon LNG facility, initially budgeted at $31 billion, was supposed to have begun operations in 2014. Labor disputes have delayed it, and lower LNG prices have potentially reduced its profitability.

LNG producers no longer have the bargaining power they once did. Weakening demand in Asia combined with an increase in LNG supply is giving the world’s biggest buyers not only cheaper gas but also more say on how contracts are designed. “The buyers have the upper hand,” says Neil Beveridge, an analyst at Sanford C. Bernstein.

LNG suppliers have historically been able to lock customers into 20-year contracts, with clauses that restrict the resale of gas. In Japan, the world’s largest LNG market, two of the country’s largest utilities have teamed up to gain leverage and demand more flexibility. Jera, a joint venture of Tokyo Electric Power and Chubu Electric Power, says it will no longer sign contracts that give producers control over the destination of the product.

If buyers succeed in negotiating better terms, the LNG market could become more like the one for crude oil, where producers, suppliers, and traders all compete for profits through constant buying and selling. That would require a fully functioning spot market, where supplies are traded for immediate delivery, a development that’s still a decade away, Beveridge says.

By then, Australia will be the world’s top LNG exporter, unseating Qatar. For the first time in eight years, exports from Qatar shrank in 2014. Qatar still provides about a third of the world’s LNG, but customers are lining up for new supplies from Australia and the U.S.

Gorgon will join three other LNG megaprojects that have been completed recently along Australia’s east coast and will tap the country’s vast gas deposits. In the U.S. five LNG projects under construction will export cheap natural gas unlocked by the shale boom. The first will begin exports in 2016. Over the next decade the U.S. is likely to become a net exporter of natural gas and compete with Australia to be the world’s leading LNG supplier.

After these projects come online, it may be a while before any others are built. “LNG is the last of those sectors where we’re seeing a wave of new projects hit the market,” says Daniel Hynes, a commodity strategist at Australia & New Zealand Banking Group. “It’s coming at a time when demand is weakening across the board. It’s clearly a tough market.”

 

 

 

 

Source: Sharples, Ben. "The Making of a Buyer's Market in Natural Gas."Bloomberg.com. Bloomberg, 5 Nov. 2015. Web. 19 Nov. 2015. http://www.bloomberg.com/news/articles/2015-11-05/the-making-of-a-buyer-s-market-in-natural-gas.

Shell to Focus on Liquefied Natural Gas in Deal for BG Group

Nov 9, 2015

Seeking to reassure investors, Royal Dutch Shell on Tuesday said its $70 billion acquisition of the BG Group would allow it to realize $3.5 billion in savings, shed $30 billion in uncompetitive assets, and expand its operations in the fast-growing liquefied natural gas industry.

Although the British-based BG is only a midsize oil company, it is a major player in liquefied natural gas, known as L.N.G., which is becoming an increasingly popular alternative to other fossil fuels. The deal gives Shell a world-leading position in producing and trading L.N.G.

The company has been criticized for making a big acquisition at a time of low oil prices, but it is portraying the BG deal as an opportunity to streamline its own portfolio. Shell said it now expected to gain $3.5 billion in cost savings through job cuts, procurement savings and other operational efficiencies.

Shell, which hopes to complete the BG dealby early next year, said it would place its liquefied natural gas and related businesses into a separate unit called Integrated Gas.

The energy giant has invested heavily in L.N.G. in recent years — to the tune of about a third of its overall $200 billion in invested capital, including in a process called gas-to-liquids that converts natural gas into fuels like diesel and jet fuel.

A study by Oswald Clint of Bernstein Research in London concluded that with BG, “Shell will take the No. 1 spot in global L.N.G.,” with about 18 percent of the global market by 2020. The Persian Gulf emirate of Qatar would remain a bigger player than Shell, but its output is divided between two state-controlled companies, Qatargas and RasGas.

Mr. Clint estimated that Shell could add $1 billion ayear to its earnings through measures including sending L.N.G. to countries offering the highest prices.

As an indication of the increasing importance of liquefied gas to Shell, the company said that Maarten Wetselaar, who will head the new Integrated Gas unit, would join Shell’s executive committee, its top management rung.

Shell calculates that countries in Asia and other emerging markets will increasingly turn to gas, which burns cleaner than coal, as a fuel for generating power and for other uses. It is also betting that L.N.G., because it is not dependent on pipelines, will increasingly find markets in locales that have not traditionally burned natural gas.

Because BG holds undeveloped oil and gas properties in Brazil, East Africa and other areas, Shell, which has had lackluster exploration results, also says it can make large reductions in drilling and other exploration expenses. Previously, Shell had put the overall gains from BG at around $2.5 billion.

In other areas, Shell said it would cut back on North American shale activities, which have led to large write-downs at the company, and stop making new investment in tar sands projects.

The L.N.G. business is partly cushioned from the impact of lower oil prices because the fuel is usually sold on long-term contracts that are linked to oil with a delay of three to six months. Still, low prices cut Shell’s earnings from L.N.G. and related products in the third quarter to about $820 million, compared with $2.8 billion in the period a year earlier.

Over all, the company reported a loss of $7.4 billion for the third quarter. It took $7.9 billion in write-offs for operations including its recently halted exploration venture off Alaska and a Canadian heavy-oil project that it recently canceled.

“Low oil prices are driving significant changes in our industry; I am determined that Shell will be at the forefront of that and emerge as a more focused and more competitive company,” Ben van Beurden, Shell’s chief executive, said in a conference call with reporters on Tuesday.

 

 

 

 

 

Source: Reed, Stanley. "Shell to Focus on Liquefied Natural Gas in Deal for BG Group." The New York Times. The New York Times, 03 Nov. 2015. Web. 06 Nov. 2015. http://www.nytimes.com/2015/11/04/business/energy-environment/shell-bg-group-lng.html?_r=1.

World's first LNG-powered container ship, the Isla Bella, begins service

Nov 2, 2015

Isla Bella

On Friday, General Dynamics subsidiary NASSCO has delivered Isla Bella, the world's first container ship to be powered by liquefied natural gas.

Isla Bella is the first of two 764-foot long Marlin Class container ships contracted by TOTE Maritime. Together, the two vessels will be the largest LNG-powered dry cargo ships in the world.

Officials with NASSCO say the ship's natural gas-powered engine will boost the vessel's fuel efficiency, drastically reducing its emissions— equivalent to taking 15,700 gas-powered cars off the road.

"Successfully building and delivering the world's first LNG-powered container ship here in the United States for coast-wise service demonstrates that commercial shipbuilders, and owners and operators, are leading the world in the introduction of cutting-edge, green technology in support of the Jones Act," Kevin Graney, vice president and general manager of General Dynamics NASSCO, said in a press release.

The Jones Act requires that all domestic shipping—shipping from one American port to another— be carried out by American-made and operated ships.

Isla Bella will carry cargo between Jacksonville, Florida, and San Juan, Puerto Rico.

 

 

 

 

 

Source: Hays, Brooks. "Isla Bella Is the World's First LNG-powered Container Ship."UPI.com. United Press International, Inc., 16 Oct. 2015. Web. 30 Oct. 2015. http://www.upi.com/Business_News/2015/10/16/Isla-Bella-is-the-worlds-first-LNG-powered-container-ship/7031445023601/.

The Liberal Majority-- What it Could Mean for the Oil and Gas Industry

Oct 23, 2015

Canada’s oil producers are facing new risks with the stunning election victory of Justin Trudeau, who campaigned on promises of tougher environmental rules and greater ambition in the fight against climate change.

With the Alberta New Democratic Party government already pursuing policies that could drive up industry costs, the Liberals’ win on Monday raises the prospect of delays in regulatory hearings for proposed oil-sands pipelines; greater pressure on the industry to reduce its greenhouse-gas emissions; and a government that is less inclined to defend the oil sands in the global marketplace.

The industry remains focused on enhancing market access through new pipeline capacity to the U.S. and offshore markets, and maintaining the regulatory changes imposed by the previous Conservative government, Tim McMillan, president of the Canadian Association of Petroleum Producers, said in a post-election statement.

CAPP worries that new governments in Edmonton and Ottawa will ratchet up carbon regulations and impose new costs on the industry, which is already struggling with low prices.

Prior to and during the campaign, Mr. Trudeau proclaimed his support for the oil industry during visits to Alberta. While he opposed Enbridge Inc.’s proposed Northern Gateway pipeline, he has supported TransCanada Corp.’s Keystone XL to the U.S. Gulf Coast, and offered a qualified endorsement of TransCanada’s Energy East project and Kinder Morgan Inc.’s Trans Mountain expansion.

However, he slammed Conservative changes to environmental-assessment procedures for pipeline projects, saying they resulted in a loss of confidence among Canadians. Both Energy East and Trans Mountain have applied for approval to the National Energy Board, and those reviews are governed by the Conservatives’ controversial changes to process.

Environmentalists and opposition critics on Tuesday urged the Liberals to reverse the Harper government’s conditional approval of Northern Gateway and to suspend the reviews of Trans Mountain and Energy East until they can strengthen the review process.

On Northern Gateway, it’s not clear what power the new government would have to overturn a certificate issued by its predecessor, particularly since Enbridge has signed up a number of aboriginal communities as partners and those First Nations would have to be fully consulted before such a decision was taken.

“If there is an existing approval, it becomes challenging [for the new government] to unwind that approval,” said lawyer Alan Ross, a Calgary-based partner in Border Ladner Gervais LLP and former Alberta government representative in Ottawa. “It will raise some legal concerns.”

However, the Liberals pledge to impose a ban on oil-tanker traffic in environmentally sensitive waters off the British Columbia coast, including the Dixon Entrance and Hecate Strait that leads to the planned Gateway terminus at Kitimat. Such a move would amount to a de facto rejection of the Gateway project, but it too could face a court challenge by the proponents.

TransCanada and Kinder Morgan also face the possibility that their project will be sidelined as the Liberals consider changes to environmental regulations.

In his now-famous memo to TransCanada, former Liberal campaign co-chair Daniel Gagnier warned that Energy East was likely to face such a delay, and encouraged the company to establish relations early with a new government and promote the prospect of investment and jobs. Mr. Gagnier’s memo was leaked last week, causing a brief controversy in what was otherwise a virtually flawless campaign.

Typically, projects already submitted for approval would be grandfathered when a government changes regulatory rules. But Mr. Ross said a Liberal cabinet will find it politically difficult to approve controversial pipeline projects that were reviewed under a process that Mr. Trudeau had publicly condemned as lacking in credibility.

The industry insists the regulatory process for major projects remains rigorous, but was merely streamlined to avoid duplication between agencies and levels of government. The changes “in no way undermined the rigour with which a breadth of issues are being reviewed,” Brenda Kenny, president of the Canadian Energy Pipeline Association, said Tuesday.

 

 

 

 

Source: McCarthy, Shawn. "What the Liberal Majority Could Mean for the Oil and Gas Industry." The Globe and Mail. Phillip Crawley, 20 Oct. 2015. Web. 22 Oct. 2015. www.theglobeandmail.com/report-on-business/what-the-liberal-majority-could-mean-for-the-oil-and-gas-industry/article26898667/.

National Fuel Gas adds new gas flows out of Marcellus/Utica this week

Oct 19, 2015

 The project will accomplish: 

1. The addition of transportation services for natural gas produced in western Pennsylvania.

2. The enhancement of the integrity and reliability of the pipeline system.

The original pipeline will be abandoned in place.

 

Expansion Project

 

 

 

 

 

 

 

 

Use the lessons of Exxon Valdez to manage Canada’s pipeline risks

Apr 27, 2015

A wise man once said that we are products of our past but we don’t have to be prisoners of it. When the federal government established a Joint Review Panel on the Enbridge Northern Gateway Project to transport Alberta hydrocarbons to Kitimat, B.C., for shipment to Asian markets, there seemed to be an elephant in the room: Alaska’s 1989 Exxon Valdez spill.

 

 

 

 

 

Some participants were vehement that what happened off the coast of Alaska, 26 years ago this month, could happen off the coast of British Columbia. First Nations were particularly concerned about the impact the project might have on their traditional way of life and the value of their coastal fisheries.

The United States, and indeed the world, learned a lot from that Alaskan spill. Alaska and the U.S. reduced the risk of its repetition by implementing the 1990 Oil Pollution Act. The U.S. legislation promoted worldwide changes in the way hydrocarbons are transported, particularly through the phase-in of double-hulled tankers. No double-hulled tanker has sunk since 1990, contributing to the steady decline in global oil spills since the 1970s despite a remarkable growth in traffic.

The 1990 Act also did something else. It created two regional citizens’ advisory councils in Alaska with strong and guaranteed aboriginal representation funded in part by revenues from the trans-Alaska pipeline. Last year, the Prince William Sound Advisory Council examined how oil transportation has changed during that 25-year period. It concluded that one of the most innovative changes was the establishment of permanent, industry-funded, independent citizen oversight giving those in the region a guaranteed voice in safety, planning and scrutiny of oil transport.

Alaska also had something else in its favour: the 1971 Alaska Native Claims Settlement Act. This U.S. legislation created 12 regional profit-making native corporations in Alaska. The native Chugach Alaska Corporation is particularly relevant since its lands and communities include more than 8,000 kilometres of coastline along the Gulf of Alaska and adjacent waters north of B.C. Their lands also include the port of Valdez on Prince William Sound, the marine terminal for the 1,300 km trans-Alaska pipeline and the port from which the Exxon Valdez embarked.

The Chugach Alaska Corporation not only provides maintenance services along the pipeline’s entire length but also offshore spill response services. After the 2010 Deepwater Horizon spill in the Gulf of Mexico, Chugach deployed personnel to provide training in oil recovery, cleanup and monitoring. In order to obtain the pipeline right-of-way, the pipeline operator was required under U.S. legislation to provide 20-per-cent native employment both on land and off shore. The operator also funds programmes to increase native employment and provide training, career development and scholarships.

Surely, the Alaska experience must mean something for Canada to learn from and draw on as we look at energy development on our own West Coast. It is important to remember that there is not just one energy project on the table, Northern Gateway, but 19. Two projects, Northern Gateway and Kinder Morgan, propose to ship hydrocarbons from Alberta’s oil sands to B.C. ports. The others involve shipping B.C. gas to coastal Liquefied Natural Gas (LNG) terminals for onward tanker shipment to Asia. In contrast to Alaska, Canada’s record of institutionalizing community and First Nations involvement in maritime energy development and in native employment has not been exemplary.

In his 2013 report to Prime Minister Stephen Harper on aboriginal Canadians and energy development, Douglas Eyford examined aboriginal employment and business opportunities, finding that First Nations had an interest in participating in partnership with government and industry on the pipeline and the marine environment. He recommended the federal government collaboratively engage in regional planning with B.C., Alberta, aboriginal and local communities. Unfortunately, he concluded that there has not been a constructive dialogue with First Nations on West Coast energy projects.

In response to Exxon Valdez, Canada amended the Canada Shipping Act in 1993 to improve oil spill preparedness and response measures. It also provided for the establishment of six regional advisory councils which, in contrast to the Alaskan experience, have since faded into such obscurity that a government report recently recommended they be abolished. Instead of abolishing the B.C. Regional Advisory Council, which awaits an aboriginal representative, the government has the opportunity of looking north to Alaska for inspiration and appoint a new, independent advisory council with industry funding representing the local communities, First Nations and citizens’ groups.

Beyond the Alaskan experience, Alberta and Saskatchewan can provide examples of successful Aboriginal energy-related businesses, such as the Fort McKay Group of Companies and Lynco-Construction. Uranium producers Cameco and Areva have signed a $600-million collaborative agreement with the English River First Nation to develop the community’s work force and to help build long-term sustainable businesses. These can be emulated to provide First Nation services, construction and maintenance along the pipeline and tanker routes.

It is not too late for the governments of Canada, Alberta and British Columbia to start working together with affected First Nations and local communities to ensure their ongoing input and, for Aboriginal Canadians, project equity support, training, enterprise development and employment. West Coast energy might become a positive, sustainable reality.

 

 

Source: Hage, Robert. "Use the Lessons of Exxon Valdez to Manage Canada's Pipeline Risks." The Globe and Mail. Phillip Crawley, 31 Mar. 2015. Web. 23 Apr. 2015. <http://www.theglobeandmail.com/globe-debate/use-the-lessons-of-exxon-valdez-to-manage-canadas-pipeline-risks/article23702191/>.

Img Source: E-Tech International Inc. via Google.

Alberta’s premier seeks more North American energy integration

Mar 16, 2015

Better policy integration and cooperation will be needed for Canada, Mexico, and the US to fully realize the North American energy renaissance’s potential, Alberta Premier Jim Prentice said. Unfortunately, trends are leading more toward fragmentation and confrontation, he warned.

 

As Canada’s environment minister, Prentice said he worked closely with the Obama administration on automotive efficiency standards that have contributed significantly to greenhouse gas emissions on both sides of the border.

 

“Unfortunately, this cooperation has been waning into fragmentation,” he said in a Feb. 4 luncheon address at the US Chamber of Commerce. “We’re actually headed for the worst of all worlds—a fragmentation with rules which apply to some oils but not others, or exclude one country’s crude in some states and communities while giving a free pass to oil from Venezuela.”

 

Prentice said that strengthening North American energy principles, establishing the continent as a global environmental performance leader, and developing safer and more modern energy transmission systems should be the primary goals in all three countries.

 

“Free markets produce impressive results when they’re allowed to work,” he said. “It’s time we started doing that.”

 

Free trade is largely responsible for the North American energy market integration that has been achieved so far, Prentice said. “The energy renaissance under way in Canada and the US only augments what we already share,” he said. “It has opened up a triple North American competitive security, industrial, and environmental advantage unmatched anywhere else in the world.”

 

Hardly one-sided

 

After nearly a century of dwindling crude oil supplies and increasing imports, US government decision-makers soon will be able to dispense with having to do business with regimes which fundamentally oppose this country’s interests and values, Prentice said.

 

Beyond US oil production’s growth, Canada’s emergence as the largest foreign oil supplier to the US is by no means one-sided, with more than 1,900 US companies working in the oil sands value chain, he said.

 

Lower natural gas prices have generated substantial industrial and manufacturing growth on both sides of the border, Prentice said. “We are now opening up a tremendous advantage, but it will have to be shored up by building more infrastructure in both countries,” he said.

 

Prentice said he has visited Enbridge Pipeline’s LLC’s recently completed Flanagan South crude oil pipeline, a nearly 593-mile, 36-in. interstate system which originates in Pontiac, Ill., and terminates in Cushing, Okla. It has an initial 585,000 b/d capacity, with an ultimate 880,000 b/d design capacity after pumping station enhancements, according to the Enbridge Inc. division.

 

Flanagan South was simply the latest of several crude pipelines Canadian companies have built to move Alberta’s heavy crude to US Gulf Coast and Midcontinent refineries without significant opposition, Alberta’s premier said.

 

That’s why many Canadians are confused over more than 6 years of delays in TransCanada Corp.’s obtaining a crossborder permit for its proposed Keystone XL crude pipeline, he said. “I agree with [US President Barack Obama] that this should be about more than one pipeline,” Prentice said. “We need a renewed focus on the bigger picture and longer term.”

 

 

Source: Snow, Nick. "Alberta's Premier Seeks More North American Energy Integration." Oil and Gas Journal. Oil and Gas Journal, 5 Feb. 2015. Web. 06 Mar. 2015. <http://www.ogj.com/articles/2015/02/alberta-s-premier-seeks-more-north-american-energy-integration.html>

16 Amazing Facts about Natural Gas

Mar 9, 2015

1. Natural gas chiefly consists of methane (CH4), but also contains other hydrocarbons such as ethane, butane, propane and naphtha.

 

2. Natural gas is odourless, colourless and flammable. It is non-toxic and lighter than air; utility companies add the smell of rotten eggs – a product called mercaptan – to make leaks easier to detect.

 

3. Natural gas is thought to have been first discovered in the Middle East between 6000 and 2000 BC when lightning strikes ignited natural gas seeping from the ground.

 

4. The first pipelines were built in China in 500 BC. The lines, made out of bamboo, moved gas which was used to make evaporated salt brine.

 

5. Naturally occurring natural gas was found in the USA in 1626, when French explorers discovered Native Americans igniting gases that were seeping into and around Lake Erie.

 

6. Rembrandt Peale, a famous portrait painter, founded the first natural gas utility in Baltimore, USA, in 1816 after using natural gas as an energy source to light an exhibit at his museum and gallery.

 

7. The American industry really took off in 1859, when former rail conductor Colonel Edwin dug the first well and found oil and natural gas 69 feet below the earth’s surface.

 

 

8. Natural gas comes in two forms – dry or wet. Dry natural gas is what is commonly referred to by the media and is used in heating and cooling systems, and for electrical power generation. Dry natural gas is almost completely methane (the higher the methane concentration within the gas, the drier it is). In comparison wet natural gas contains less than 85% methane and has a higher percentage of liquid natural gasses such as ethane and butane.

 

9. Liquefied natural gas (LNG) is made when natural gas is cooled to temperature of minus 260 Fahrenheit (-162 Celsius). When it becomes liquid its volume is reduced 615 times, which can be done by cooling the gas.

 

10. There are over 11 million road vehicles worldwide that run on natural gas as a fuel. The gas is used in a compressed or liquefied state to power cars, buses, taxis, and trucks.

 

11. Natural gas isn’t just used for heating and cooking. Numerous every day products wouldn’t be possible without it! From vinyl flooring, carpeting, and piping to Aspirin, artificial limbs and heart valves to sun glasses, deodorant and cell phones.

 

12. Natural gas produces less than half the CO2 emissions of coal when burned and far fewer other particulates and emissions. When burned to heat homes or for industrial uses, it releases 25-30% less CO2 than oil and 40-50% less than coal per unit of energy produced.

 

13. Natural gas has had a tremendous growth as part of the global energy mix, and today accounts for 21% of global primary fuel consumed. Current reserves are enough to support global conventional gas consumption for the next 60 years.

 

14. The International Energy Agency (IEA) suggests that unconventional oil and gas could account for as much as 50% of undiscovered global reserves.

 

15. China has the largest expected recoverable shale gas resources in the world, with almost double the resources of the United States. Argentina has the second.

 

16. And finally… every hour on the hour in the evenings, a volcano erupts in front of the MGM Mirage Hotel in Las Vegas. It’s fuelled by Pina colada-scented natural gas.

 

 

 

Source: "16 Amazing Facts About Natural Gas." Forbes. Forbes Magazine, 12 Jan. 2015. Web. 02 Mar. 2015. <http://www.forbes.com/sites/statoil/2015/01/12/16-amazing-facts-about-natural-gas/>

 

Natural Gas Vehicles: The Future Of Transport

Mar 2, 2015

Natural gas as a transport fuel is not a new story. With over 14.8 million natural gas vehicles (NGVs) on the roads worldwide, the industry is well-established, challenging perceptions about how all forms of transport are powered. In addition to increased supplies – thanks to the US shale revolution – the change towards gas has been further incentivised by regulatory, economic and environmental imperatives.

 

Road transport alone is currently responsible for 20 percent of CO2 emitted by the European Union; replacing petrol and diesel with natural gas is widely agreed to be the most effective route to both lowering fuel costs and improving emissions performance. And the success of NGVs on the road has blazed the trail for rail and marine – we explore the future of a cleaner, more efficient means of powering our transportation globally.

 

NGV Inforgraphic

 

 

ROAD:

CARS: LEADING THE WAY

There are over 14.8 million natural gas vehicles (NGVs) on the roads worldwide, and thanks to the environmental and cost saving benefits that number is set to rise rapidly – to as much as 25 million by 2019.

The increasing number of cars on the road, combined with extensive innovations in NGV engines, means natural gas is a highly competitive industry. China is leading the way with 1.6 million NGVs currently, but the US is fast catching up thanks to growing investor confidence and cheap gas reserves.

Although adoption of NGVs is slower in Europe, Italy is leading the way with almost a million NGVs on the road, and other markets such as Italy and Germany are introducing tax incentives and regulations to encourage their growth.

 

HEAVY GOODS VEHICLES: HUGE ECONOMIC AND ENVIRONMENTAL BENEFITS

The economic and environmental advantages of natural gas are particularly acute for Heavy Goods Vehicles. As a result there is a significant global truck market opportunity where the adoption rate in the leading markets of China, India and Europe is moving faster than the gasoline to diesel.

A truck travelling on natural gas can travel on £0.39 per mile, which is a saving of 37% on diesel. By switching to natural gas each truck could save over £16,000 per year on fuel.

Taking diesel powered trucks off the roads has the dual-advantage of reducing NOx and other harmful particulates being emitted into the atmosphere.

 

 

With car ownership and road freight set to rise, combined with extensive innovations in NGV engines, natural gas as a road transport fuel is becoming highly competitive. The economic and environmental advantages are particularly acute for Heavy Goods Vehicles (HGVs), making them attractive to both individual operators and fleet businesses alike.

China is leading the way with 1.6 million NGVs currently on the roads, predicted to rise to 5 million by 2020, but thanks to growing investor confidence and cheap gas reserves, the US is fast catching up. The International Energy Agency (IEA) predicts that together these two giants will account for the majority of gas consumption in transport by 2035.

By comparison the European market is slower to adapt, with only 10 percent of global NGVs. Yet here too change is taking place; Italy appears an early front runner, with Germany ambitious to catch-up. Several other European nations have also announced the introduction of tax incentives and regulations to encourage the growth of NGVs.

 

 

RAIL:

RAIL: A GAME CHANGER

The railway system is one of the most fuel consuming forms of transport; in 2012 alone the seven major US freight railroads collectively consumed more than 3.6 billion gallons of diesel, accounting for 7% of US consumption for the fuel that year.

So the benefits to be gained for converting to gas are huge. Liquefied Natural Gas (LNG) boasts cost savings of between 40% and 60% for rail, and although the start-up capital is high, overall cost saving is expected to be $200,000 each year across the typical 30 year lifespan of a train.

Due to the potential savings and environmental benefits that come with using LNG it is thought that in the US alone 35% of freight rail energy consumption will be powered by LNG by 2040.

 

 

American company Class 1 railroads spent a staggering $9 billion on diesel fuel in 2012, so the appeal of cheaper, cleaner natural gas is clear. The preferred rail solution is fast becoming Liquefied Natural Gas (LNG), which boasts cost savings of between 40 percent and 60 percent.

GE and Electro-Motive Diesel are currently collaborating with different railway operators to develop LNG-Diesel engines and running pilot programmes across North America.

Although high capital investment costs are required to retrofit an LNG engine to a train, the overall cost saving is expected to be $200,000 each year across the typical 30 year lifespan of a locomotive. An added benefit is the need to refuel less frequently – an LNG powered train can run between Los Angeles and Chicago without stopping to refuel.

 

 

MARINE:

SAFER, CHEAPER, CLEANER

Many predict that gas powered ships could achieve the greatest market penetration of all natural gas vehicles (NGVs), particularly in light of regulations limiting emissions from shipping.

Whilst costs vary, the cost of Liquefied Natural Gas (LNG) is often less than half that of Heavy Fuel Oil which is currently used in most ships, and forecast to drop in the future, making it even cheaper for marine vehicles. When compared to oil LNG is far better for the environment, with 25% less CO2, 90% less NOX, 100% less SO2 and 100% less soot and other harmful particles.

LNG also has significant safety benefits over oil; it is much less flammable, and in over 40 years there has never been a notable safety concern or issue.

 

 

Although the number of gas powered ships is much lower in comparison to road vehicles; this is not to say gas does not have a significant role to play. Marine vessels have much lower turnover and both the economic and environmental factors mean many predict that gas powered ships could achieve the greatest market penetration. This is particularly true in light of International Maritime Organisation regulations that ensure that both industry and governments limit the amount of emissions from shipping over the next decade.

In Europe natural gas fuelled ships are already being built and operated in national waters (mainly for transport and commercial use). Norway has long been a front runner, and Statoil uses gas powered boats to transport goods and equipment to offshore installations where the gas originally is first extracted from the ocean floor.

Gas is also being used to power longer ocean voyages: LNG is unsurprisingly used to power LNG tankers and now shipping owners are exploring the possibility of using gas to power huge container ships around the globe.

The step-change from diesel to gas does not require a huge engineering leap as there is a healthy market of marine vessels being retrofitted with gas powered engines. Retro-fitting or building new gas powered marine vessels can also help to stimulate the global ship manufacturing industry.

Christopher Le Fevre, of the Oxford Energy Institute, agrees that the opportunity for LNG fuelled ships in the marine sector is particularly significant, as it will form the base for the next wave of developments in the use of natural gas as a transportation fuel. “The combination of regulatory and economic drivers could kick start the build-up of a marine fuelling network that could then extend to land based applications in HGVs and rail.”

In summary, natural gas as an alternative transport fuel works and is here to stay. The environmental and economic benefits, combined with market forces, are creating a new chapter in manufacturing and transport.

 

 

 

Source: "Natural Gas Vehicles: The Future Of Transport." Forbes. Forbes Magazine, 12 Jan. 15. Web. 27 Feb. 2015. <http://www.forbes.com/sites/statoil/2015/01/12/natural-gas-vehicles-the-future-of-transport-infographic/>.