American Oil and Gas Reporter - October 2015 - 60

SpecialReport: LNG & Market Update
With many early adopters in public and
municipal fleets (buses, trash trucks, delivery vehicles, etc.), there were more
than 300 public CNG stations large enough
to fuel large trucks around the country as
of September 2014. There were less than
half as many LNG stations.
Whether looking at economics, engine
and truck technology, or the maturity of
infrastructure, CNG has enough of a head
start in the U.S. market that it should
have broader long-term application than
LNG. That is reflected in company announcements about fleet conversions,
with many more announcements about
CNG fleet additions than LNG.

FIGURE 2
Global LNG Bunker Demand
Million Tons Heavy Fuel Oil Equivalent

80

Containers
Bulkers

70

All other tankers

60

General cargo
RoRO

50

Ferries

40

Cruise ships

30

Offshore

20

Service vessels
Fishing & other

10

LNG tankers

0
2020

2025

routes to move cargoes within local areas.
On the other hand, LNG is a better choice
for engines that travel longer distances.
Long-haul trucking holds the greatest
promise. A large portion of the national
fleet drives tens of thousands of miles
annually. In addition, the average life
span of an 18-wheeler is much shorter
than a locomotive or ship, which means
fleets turn over more often-every sevennine years on average in the United States
and every four years in China. As a
result, the opportunity to switch fuels
presents itself much more frequently to
heavy-duty truck fleet managers charged
with making purchasing decisions.

Regional Considerations
As noted, unique regional considerations also come into play in fuel-switching
decisions, and ultimately, in choosing
whether to use LNG or CNG as the fuel
of choice. For instance, one of the conversion drivers in western Europe is high
diesel taxes. In France, diesel is taxed at
a rate equivalent to $1.96 a gallon), but
the excise tax on natural gas is negligible
(about $0.11/gallon equivalent). That, of
course, means truck owners have the
considerable incentive of saving almost
$1.85 a gallon equivalent of fuel by converting to natural gas.
Apart from the economics, most of
the trucks in Europe are cab-over designs.
Adding CNG cylinder racks to the backs
of these trucks would mean less space
available to haul cargo. Plus, with western
European nations producing little domestic
natural gas, supplies come either from
pipeline imports from eastern Europe or
LNG shipments from overseas. With higher-density LNG already being imported
at close to the same price as imported
60 THE AMERICAN OIL & GAS REPORTER

2030

Fuels compliance
scenario
High LNG scenario

2035

Marine, Rail Markets
The biggest change agent in the marine
segment (Figure 2), is environmental regulations, specifically the International
Convention for the Prevention of Pollution
from Ships (MARPOL) limits on nitrogen
oxide and sulfur oxide emissions in emission control areas (ECAs). The regulations
impose progressively more stringent emissions standards on ocean-going vessels
operating in ECA waters within 50 nautical
miles of the United States and other
nations, with intentions of adding these
same or similar limits to all global waters
To date, the vast majority of LNG
adopters have been operators of ferries,
cruise ships and other vessels operating
exclusively within the ECAs. However,
within the next decade, ECAs are expected
to be adopted globally. Ultimately, ship
operators-including fleets of giant container vessels-will have three main options
to comply with the standards: switch

pipeline gas, there is minimal difference
between LNG and CNG costs, even though
LNG has added liquefaction/regasification
cost components.
Contrast western Europe to the United
States, which ranks as the world's largest
natural gas producer. Pipeline gas is plentiful, and it is cheaper on a Btu-equivalent
basis than LNG because it does not have
the associated liquefaction cost. With respect to truck design, overall weight tends
to be the limiting factor for heavy-duty
trucks on U.S. roads rather than length,
as with European cab-over trucks. Onboard
CNG storage cylinders do add weight
compared with LNG or diesel tanks, but
the additional weight is small relative to
total cargo weight.
Another key advantage for CNG in
the lower-48 transportation sector is that
fueling infrastructure is several years (if
not a decade) ahead of LNG infrastructure.
FIGURE 3

Global LNG Rail Freight Transport
50%

0.8

45%

0.7

40%
0.6
35%
0.5

30%

MMboe/d

2015

Penetration

2010

25%
20%

0.4
0.3

15%
0.2
10%
0.1

5%
0%
2015

2020

2025

2030

2035

2040

United States

Europe

India

Canada

Russia

Australia

0.0
2000 2005 2010 2015 2020 2025 2030 2035 2040
United States
Global Diesel
Europe
India
Canada
Russia
American Oil and Gas Reporter - October 2015

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