American Oil and Gas Reporter - January 2015 - 80

Outlook 2015
in ships, locomotives, and drilling and
hydraulic fracturing, as well as for heavyduty mining equipment-a key market
overall for Caterpillar and a niche opportunity for natural gas fuels that may grow
to significant scale within a few years.
Rail And Marine
In many markets, such as heavy-duty
engines for stationary power generation,
ships and trains, as well as some equipment
the engines are dropped into, CAT's main
competitor is GE. In particular, the two
firms go head-to-head as the only significant suppliers of locomotives in the
United States. Both see strong potential
for railroads to adopt LNG as a primary
fuel, and are very actively attempting to
gain a leadership position. Having two
large players such as CAT and GE vie
for the high-horsepower market is an important development that will help make
the transition.
In addition, dozens of ferries, tugs
and other boats in service in northern
Europe have been built in the past decade
to run on LNG or a combination of LNG
and diesel. In the rest of Europe, dozens
more LNG boats and ships are being
built or planned, and hundreds are expected
by the end of the decade.
Europe has a 10-year head start on
the United States and Canada. But, spurred
by rules set by the International Maritime
Organization concerning vessel emissions,
North America is catching up fast, and
some predict the two countries will have
hundreds of LNG-powered vessels by
2020. LNG fueling at seaports to serve
these vessels opens all sorts of other opportunities because seaports also are major
intermodal hubs. Ships, heavy-duty trucks
and trains all operate there, shuffling
containerized goods from one mode of
transport to another.
LNG also holds significant potential
for railroads. Just one railroad company,
Union Pacific, claims to be the second
largest consumer of diesel fuel in the
United States, after the U.S. Navy, and
the differential between LNG and diesel
prices is large.
The first step toward using LNG for
locomotives took place several decades
ago, but the economics were not compelling and those efforts were largely
abandoned. Some of the equipment used
in the 1990s has been dusted off and
reused in new trials.
80 THE AMERICAN OIL & GAS REPORTER

The most recent efforts were kicked
off by Canadian National Railway in
partnership with Vancouver's Westport
Innovations and Montreal's Gaz Metro,
which ran trials using LNG starting in
2012-13. Canadian National Railway decided before the end of 2013 to advance
LNG use from trials to commercial status.
These efforts were being watched closely
by other rail companies, of course, and
BNSF, Union Pacific and CSX all decided
in 2013 to run their own trials.
So, progress in this realm is being
made and arguably the snowball is rolling.
But, lots of money will be needed to
convert a sizable share of the rail industry
to LNG. LNG storage tanks need to be
located at regular intervals along tracks,
and that alone will cost hundreds of millions of dollars. New LNG production
facilities to serve rail demand could cost
billions of dollars. LNG fuel tender cars
(rail cars with tanks attached to the locomotives, because not enough LNG can
be carried on the locomotives themselves)
and engines optimized for LNG could
cost $1 million or more for every train.
Class 8 Trucks
Cummins Inc. designs and builds
spark-ignited, dedicated natural gas engines, which are sold through its joint
venture with Westport Innovations in sixand nine-liter engine sizes. These have
been the mainstay for installing in medium-duty trucks and buses, and "lighter"
heavy-duty trucks. However, these engines
generally are considered insufficient to
power Class 8 trucks, especially those
hauling up to the United States' 80,000
pound weight limit.
A 12-liter, 400 horsepower Cummins
Westport engine was introduced in 2013,
and is considered the single greatest game
changer for natural gas-fueled heavyduty trucks.
Cummins has decided to develop and
commercialize a 15-liter analogue of its
12-liter engine for the heaviest of heavyduty tractor-trailer trucks in a few years,
which will be sufficient for most applications, including weight limits exceeding
80,000 pounds (e.g., in Canada).
All of the major heavy-duty-truck
original equipment manufacturers have
come onboard with natural gas vehicles.
Yet, the market still has not reached a
critical mass, so each of these companies
is calculating how much to integrate CNG

and LNG truck manufacturing into its
core operations.
As a fallback, Agility Fuel Systems is
able to provide the services necessary to
integrate the engine, fuel system, controls
and truck chassis into a finished product.
More and more diverse truck fleet customers are beginning to line up to buy
these.
United Parcel Service has been a leading experimenter and subsequent advocate
for natural gas trucks, first buying more
than 1,000 CNG-powered package delivery trucks and more recently committing to 1,000 LNG-fueled tractors for
long-distance hauls. The company apparently doesn't have to crunch and recrunch the numbers to determine whether
it makes economic sense. UPS realizes
there is an upfront expenditure for the
trucks and, more recently, for stations,
since UPS is building them for its own
use. But, it can keep its tractors operating
far longer than is necessary for an adequate payback.
Other large fleets are following the
lead of UPS and a few other pioneers.
But within a few years, when even more
fleets convert, they, too, will be seen as
leaders. Pepsico's FritoLay business is a
good example. Its spokesman went so
far as to tell an industry audience that
CNG was not an alternative fuel anymore,
but rather was its preferred fuel, such
that it needed to justify decisions that
didn't involve CNG.
Proctor & Gamble also took a significant step by announcing in 2013 that it
had agreed to convert 20 percent of its
for-hire carrier fleet, which runs the majority of the firm's heavy-duty trucking
operations. Ryder's truck rental business
also has taken bold steps to encourage its
lessees to use natural gas-fueled trucks
in place of diesel, leasing both 18-wheelers
and smaller box trucks. More recently,
Penske Truck Leasing has entered the
natural gas truck rental business.
Fueling Infrastructure
After shrinking for quite a few years,
the number of CNG and LNG fueling
stations is on the rise in North America.
As of December, the United States was
adding CNG stations at a pace not seen
since the 1990s. This time, not only
natural gas utilities, but private enterprises
are building these stations as well, in
cities, along highways at truck stops, and

American Oil and Gas Reporter - January 2015

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