American Gas - July 2014 - (Page 11)
BY THE NUMBERS
LNG is likely to play an increasing role in powering freight locomotives, the U.S. Energy Administration
projects in its new Annual Energy Outlook 2014 report. However, while there is appeal for major U.S.
railroads to use LNG, there are key uncertainties as to whether the railroads can take advantage of it.
PRICE DIFFERENTIAL: RAILROAD DIESEL FUEL VERSUS LNG
4
2012 dollars per gallon diesel equivalent
The large differential between crude oil and natural gas
commodity prices translates directly into a significant
disparity between projected LNG and diesel fuel prices,
even after accounting for natural gas liquefaction costs that
exceed refining costs. In the reference scenario for EIA's
Annual Energy Outlook, the long-run price difference
between locomotive diesel fuel and LNG in rail applications
increases from $1.48/gallon of diesel equivalent in 2014
to $1.77 in 2040.
DIESEL
3
2
$1.34
$1.48
LNG SAVINGS
PER GALLON
$1.77
$1.59
1
LNG
0
2014
2020
2025
2030
2035
2040
NPV OF FUEL SAVINGS FOR LNG LOCOMOTIVES
in trillion BTU
The net present value of future fuel
savings across the reference case
projection for an LNG locomotive
compared to a diesel counterpart
is well above the roughly $1
million higher cost of the LNG
locomotive and tender, according
to EIA. Relatively large changes in
assumptions used to evaluate
investments in LNG locomotives
(such as a significantly higher
payback period or much higher
discount rate) or in fuel prices
would be required to change LNG
fuel economics for railroad use
from favorable to unfavorable.
25
POSITIVE ECONOMICS
FOR LNG USE
REFERENCE CASE:
15-year payback,
11% discount
Payback years
20
15
15-year payback
20% discount
10
5
7-year payback,
11% discount rate
NEGATIVE ECONOMICS
FOR LNG USE
0
22%
20%
15%
5%
11%
Discount rate
1%
FUEL COST SAVINGS FOR A NEW LOCOMOTIVE IN THREE CASES
2.5
2020
2025
2030
2035
2040
Net present value, million 2012 dollars
3.0
2.0
$1 MILLION
INCREMENTAL COST
FOR LNG LOCOMOTIVE
AND TENDER
1.5
1.0
.5
0
High Oil Price
Reference
Low Oil Price
Source: Energy Information Administration, Annual Energy Outlook 2014
JULY 2014 AMERICAN GAS
ALEX REARDON
Uncertainty about future fuel prices poses a degree of
risk for railroad companies switching to LNG. While
the economics of LNG adoption are quite attractive
in a scenario of high oil prices, in the low-price case,
the net present value of fuel cost savings associated
with LNG use is not large enough to offset the higher
additional upfront cost of LNG locomotives and
tenders. Other challenges standing in the way of
large-scale adoption of LNG for rail use include the
lack of fuel delivery infrastructure and regulatory
hurdles, EIA said.
11
Table of Contents for the Digital Edition of American Gas - July 2014
Contents
American Gas - July 2014
https://www.nxtbook.com/nxtbooks/aga/20151201
https://www.nxtbook.com/nxtbooks/aga/201411
https://www.nxtbook.com/nxtbooks/aga/201410
https://www.nxtbook.com/nxtbooks/aga/20140809
https://www.nxtbook.com/nxtbooks/aga/201407
https://www.nxtbook.com/nxtbooks/aga/201406
https://www.nxtbook.com/nxtbooks/aga/201405
https://www.nxtbook.com/nxtbooks/aga/201404
https://www.nxtbook.com/nxtbooks/aga/201403
https://www.nxtbook.com/nxtbooks/aga/201402
https://www.nxtbook.com/nxtbooks/aga/20141201
https://www.nxtbook.com/nxtbooks/aga/201311
https://www.nxtbook.com/nxtbooks/aga/201310
https://www.nxtbook.com/nxtbooks/aga/20130809
https://www.nxtbook.com/nxtbooks/aga/201307
https://www.nxtbook.com/nxtbooks/aga/201306
https://www.nxtbook.com/nxtbooks/aga/201305
https://www.nxtbook.com/nxtbooks/aga/201304
https://www.nxtbook.com/nxtbooks/aga/201303
https://www.nxtbook.com/nxtbooks/aga/201302
https://www.nxtbook.com/nxtbooks/aga/20131201
https://www.nxtbook.com/nxtbooks/aga/201211
https://www.nxtbook.com/nxtbooks/aga/201210
https://www.nxtbook.com/nxtbooks/aga/201208
https://www.nxtbook.com/nxtbooks/aga/201207
https://www.nxtbook.com/nxtbooks/aga/201206
https://www.nxtbook.com/nxtbooks/aga/201205
https://www.nxtbook.com/nxtbooks/aga/201204
https://www.nxtbook.com/nxtbooks/aga/201203
https://www.nxtbook.com/nxtbooks/aga/201202
https://www.nxtbook.com/nxtbooks/aga/201112
https://www.nxtbook.com/nxtbooks/aga/201111
https://www.nxtbook.com/nxtbooks/aga/201109
https://www.nxtbook.com/nxtbooks/aga/201108
https://www.nxtbook.com/nxtbooks/aga/201107
https://www.nxtbook.com/nxtbooks/aga/201106
https://www.nxtbook.com/nxtbooks/aga/201105
https://www.nxtbook.com/nxtbooks/aga/201104
https://www.nxtbook.com/nxtbooks/aga/201103
https://www.nxtbook.com/nxtbooks/aga/201102
https://www.nxtbook.com/nxtbooks/aga/201012
https://www.nxtbook.com/nxtbooks/aga/201011
https://www.nxtbook.com/nxtbooks/aga/201010
https://www.nxtbook.com/nxtbooks/aga/201008
https://www.nxtbook.com/nxtbooks/aga/201007
https://www.nxtbook.com/nxtbooks/aga/201006
https://www.nxtbook.com/nxtbooks/aga/201005
https://www.nxtbook.com/nxtbooks/aga/201004
https://www.nxtbook.com/nxtbooks/aga/201003
https://www.nxtbookmedia.com