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Issue #590 | Perishables | Mediterranean | Middle East | Africa Trade

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2014 Media Kit
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On roads and rails, natural gas threatens diesel’s dominance

By: | at 12:52 PM | Intermodal  

Warren Buffett’s Burlington Northern-Santa Fe (BNSF) railroad captured headlines earlier this year when it announced it would start trialling trains powered by liquefied natural gas (LNG).

But even a pilot program is still some way off. BNSF must still convince U.S. rail regulators trains powered by highly combustible natural gas can be operated safely.

North of the border, however, Canadian National Railways (CN) has been successfully running an LNG-powered train on the 480-kilometre line between Edmonton and Fort McMurray in the oil sands region of Alberta since September 2012.

CN’s train has a specially strengthened LNG tender, manufactured by Chart Industries in Minnesota, placed between two locomotives. The engines run on a blend of around 90 percent LNG and 10 percent diesel, which provides the ignition.

In June, CN ordered four more LNG tenders from Wesport Innovations to expand the testing program. The first of these new tenders will be delivered in the fourth quarter of 2013.

The Westport tenders will each be able to hold over 10,000 gallons of LNG, providing a longer range than an ordinary diesel locomotive and reducing the need for refueling stops.

Each tender can support two locomotives, reducing the capital investment required, and utilizes a standard vehicle design and conventional 40-foot LNG ISO tank, avoiding costly design, testing and manufacturing work.

Acceleration

Two years ago, the idea that natural gas could capture a substantial portion of the transport market seemed outlandish.

But compressed natural gas (CNG) and LNG are being used in a growing number of public transit systems and waste collection services which have their own dedicated central refueling systems.

Delivery services such as UPS and FedEx and large haulage firms are trialling LNG-powered tractor-trailers on selected long-distance routes in the United States.

An entire eco-system of engineering companies is developing to supply the compressors, small-scale liquefaction units, storage tanks and dispensing facilities to allow LNG and CNG to be used on roads, railways, barges and ships, as well as in the powerful engines used to drill and pressure pump new wells in the oil and gas fields themselves.

Chart Industries announced on Thursday it has been awarded a contract by an unnamed “major oil company” to build and commission 20 retail LNG fueling stations across North America “built at existing truck stop sites with the intention of adding dispensers alongside existing diesel fueling lanes.” The entire network should be rolled out by June 2015 according to the company.

Chart has already announced a series of contracts to provide small-scale liquefaction plants, capable of producing around 100,000 gallons per day, including one in Texas to supply LNG for high horsepower oilfield applications in the Eagle Ford shale play.

In Canada, Westport has teamed up with locomotive manufacturer Caterpillar Inc to demonstrate the first high-pressure direct injection (HPDI) locomotive in 2014. Funding is being provided by the federal government’s Sustainable Technology Development Canada agency as well as CN and other rail operators.

CN’s trains are fueled from a small-scale liquefaction plant operated by gas-producer Encana. Earlier this year, Encana commissioned a small liquefaction plant producing 4-5,000 gallons of LNG per day 34 miles east of Calgary, which supplies LNG to the railroad, among other customers.

The company is also developing a much larger plant, capable of producing around 50,000 gallons per day near Grande Prairie, to supply LNG fuel for drilling companies, mines, trains and trucks in the oil patch.

US Rail Trials

BNSF and rival railroad Union Pacific have both stated they plan to test LNG-powered locomotives on their route networks. Both are among the largest diesel buyers in the United States. While LNG locomotives would require costly retrofits and new, specially designed tenders, using natural gas rather than diesel would significantly cut their operating costs.

But despite the hype, the concept remains at a very early stage. New locomotives and tenders must be approved by the U.S. Federal Railroad Administration (FRA) which must certify they are “in proper conditions and safe to operate without unnecessary danger of personal injury” (49 USC Chapter 207).

The railroads must make a safety case to the FRA before running any tests on their networks. On August 26, the FRA wrote to the major trade associations representing the rail industry outlining its conditions before granting approval for any tests.

“Recently, a number of railroads, vendors and other interested parties have requested meetings with FRA staff to discuss potential plans and testing programs related to the use of natural gas ... as an alternative fuel source by the railroad industry,” the agency’s chief safety officer wrote.

“FRA is supportive of all efforts to use more efficient, less polluting, and domestically produced fuel in rail operations,” he went on.

But “prior to initiating the testing of new dual-fuel locomotives or tender vehicles, railroads and vendors must conduct a comprehensive safety analysis that must be provided to FRA for approval. This analysis must identify the risks of the operation and any measures to mitigate those risks,” the letter went on.

In addition, the FRA will insist pilot programs identify any highway crossings at which there have previously been incidents, and require additional safety measures to be taken at them, such as flagging, meaning a person or other safety mechanism will provide additional traffic control.

Tenders will have to be engineered to ensure they can withstand the forces between the two locomotives as well as avoid rupturing in the event of a crash.

Approval for the trials, let alone the trials themselves, still appears some way off.

LNG could be a rolled out to a significant share of the trucking fleet before it is in widespread use on the railways, which would be ironic, because railroads with their centralized fueling facilities were thought to be more suited to using gas.

But there appears to be no insurmountable barrier to rolling out dual-fuel locomotives across a large part of the North American rail network if gas prices remain at a deep discount to diesel.

Tipping Point

Following the oil shocks in 1973-74 and 1979-80, diesel and residual fuel oil derived from crude lost much of their share of the market for heating and power generation. Now the 2003-2011 oil shock threatens their last remaining dominant position in the market for transport fuels.

Many oil analysts and exporting countries still underestimate the risk, and assume it will never happen. But it is the same blinkered thinking that confidently predicted shale gas and oil production would never amount to much.

In 2012, the United States consumed almost 8.7 million barrels of gasoline per day and 3.7 million barrels of distillate fuels, most of them used in transportation, according to the U.S. Energy Information Administration.

Much of that diesel fuel was used in trucks, locomotives and high horsepower industrial engines, where its market share is now threatened by LNG and CNG.

The equipment needed to compress and liquefy natural gas, dispense it safely, store it on board, and use it in dual-fuel engines is being rapidly developed and installed across North America.

LNG as a transport fuel enjoys powerful backing from petroleum producers like Shell as well as major manufacturers and suppliers like Caterpillar and GE and oilfield services companies like Schlumberger and Baker Hughes.

The fuel market appears to be nearing a tipping point. If the present gap between natural gas and crude oil prices remains for another 2-3 years, it should be enough for natural gas to establish a major beach-head in the transport market, pitting crude oil in direct competition with natural gas. (Reuters)