The survey of 12 analysts conducted this week forecasts a ten-fold increase in the use of natural gas to power U.S. cars, trucks and trains by 2020, showing growing interest in the fuel but not enough to boost natural gas demand or make much of a dent in U.S. reliance on imported oil.
Use of natural gas for transport will climb to about 1.2 billion cubic feet per day by 2020, up from about 100 million cubic feet daily now, the poll said. That is only 1.7 percent of total predicted 2020 U.S. natural gas demand.
Natural gas has staked its claim as a cheaper and cleaner alternative to gasoline and diesel since drilling in shale formations has pushed output to record highs this decade, attracting high profile support from the likes of billionaire oilman T. Boone Pickens keen to break U.S. dependency on oil imports.
Growing ranks of engine makers are developing natural gas prototypes not just for trucks, but for small-scale vehicles with huge market potential.
But the poll anticipates the fuel will remain on the sidelines in the coming years, plagued by the same issues that have kept it there in the past, despite growing political support and investments from oil majors and large fleet owners.
The higher cost of a natural gas-powered engine and a dearth of refueling stations continue to be the main obstacles keeping natural gas from becoming a more widely used transport fuel.
There are more than 1,300 compressed natural gas (CNG) and liquefied natural gas (LNG) stations in the United States, though more than half of those are private stations reserved for fleets, according to the U.S. Department of Energy. There are more than 120,000 gasoline stations nationwide.
Some say it will not be until well into the next decade that natural gas begins to be widely adopted outside of its current market of buses and fleet vehicles, when more fueling stations attract a greater number of high-use vehicles.
“It’s not a smooth growth profile, and a lot of it depends on fueling infrastructure. Once you have that then it can really take off exponentially,” said Gordon Pickering, a director at Navigant, which expects 0.9 bcf per day of natural gas in transport by 2020. He said that number could rise to 2.5 bcf per day by 2025.
There are positive signs for natural gas, even if the going is slow. More fueling stations are cropping up across the country as natural gas prices languish near ten-year lows and gasoline prices rise. Analysts estimate cost savings of between $1 and $2 per gallon.
A recent report by Citigroup said that, assuming natural gas is about $2 a gallon cheaper than diesel, the main fuel fortrucking, it could yield national savings of nearly $50 billion annually. Citi expects natural gas demand in transport to hit 2.2 bcfd by 2020.
Between 200 and 300 new natural gas fueling stations are expected to be built in the next few years, analysts said, as oil majors like Shell invest in infrastructure.Clean Energy Fuels Corp, a company backed by T. Boone Pickens, is aiming to build 150 natural gas stations by the end of the year.
Many government and corporate vehicle fleets have already made the switch to CNG or LNG. Three American auto manufacturers now offer natural gas options for some vehicles. BNSF Railway Co earlier this year said it launched a pilot program to run some locomotives on natural gas.
“Fleets have been first adopters and have the largest footprint in terms of gas use, but we do see strides made in gas use in the heavy dutytruckingmarket, not only long haul but shorter routes too,” said Nina Fahy, director of North American natural gas at PIRA Energy Group in New York.
Fleet owners have the capital to cover the higher up front cost of a natural gas vehicle - estimated by analysts to be as much as $80,000 extra for a heavy duty truck - in order to reap the savings in cheaper fuel within a few years.
About 370,000 barrels per day of oil could be displaced by more natural gas vehicle use by 2020, according to Anthony Yuen, gas analyst at Citigroup in New York.
The United States uses about 8.7 million barrels of gasoline each day, according to government figures, and imports nearly 8 million barrels per day of crude.
The cost advantage of natural gas is likely to widen the user base to include more heavy duty trucks and long-haul trucks, analysts said.
“There’s a growing acceptance that the U.S. has a massive natural gas resource base and that the discount for natural gas is going to exist for some time,” said PIRA’s Fahy. (Reuters)