COLUMN-Shell plants LNG at truck stops along the interstates: Kemp
LONDON, Nov 4 (Reuters) - In the decade to 2013, shale gas and oil transformed the U.S. and global energy markets. The next revolutionary development over the decade to 2023 is likely to be the widespread use of gas as a transport fuel, starting in the United States.
Freight trucks powered by liquefied natural gas (LNG) rather than diesel could become a common sight on the U.S. interstate highway system under plans being developed and financed by Royal Dutch Shell.
Shell has reached an agreement with TravelCenters of America , a major truck stop operator, to run two LNG fuelling lanes at up to 100 of its sites along the interstates.
Shell will fund the construction of fuelling lanes and associated storage capacity and supply the fuel, assuming most of the financial risk associated with the venture.
In exchange, the oil and gas major gets access to prime fuelling locations along the most heavily used trucking routes to help realise its vision of making LNG a transport fuel.
Switching the trucking fleet from diesel to natural gas could produce substantial cost savings and reductions in greenhouse emissions.
One barrier is the high upfront costs of new LNG or dual-fuel engines. But some of the larger fleet operators are already converting trucks to LNG to take advantage of lower operating costs.
The bigger barrier has been lack of convenient fuel stations.
"Natural gas retail refuelling infrastructure is in early-stage development and will require major expansion and investment," according to a report published last year by the National Petroleum Council, the industry committee that advises the U.S. Department of Energy.
"The transition to a fully scaled and mature retail infrastructure system ... will take time and investment" it went on. ("Advancing Technology for America's Transportation" 2012)
Shell's partnership with TA is likely to solve the refuelling problem and herald the next big shake-up in the oil and gas markets after the shale revolution.
Most existing LNG filling stations are owned by the operators of transit buses and waste collection vehicles. There are currently just 42 refuelling stations dispensing LNG open to the public, according to the U.S. Department of Energy's Alternative Fuels Data Center (Map 1).
It should be possible to fuel a significant part of the trucking market from a relatively small number of stations placed in strategic locations.
The vast majority of long-distance road freight moves along the interstate highway system, according to an analysis by the National Renewable Energy Laboratory in 2007 (Map 2).
With LNG stations on or close to the interstate network, hauliers could be guaranteed reliable and convenient access to fuel for long-distance routes.
For Shell, the advantage of a strategic partnership with TA is the company's network of 244 refuelling stops along the interstates (Map 3).
Many existing LNG stations are already clustered along two routes: interstate 15 (I-15) between San Diego and Los Angeles in California to Salt Lake City and Tremonton in Utah and I-84 between Portland, Oregon, Boise, Idaho and Tremonton.
In the United States, it is common for major logistics companies and retailers to practice a "four corners" distribution strategy. Manufactured items, whether produced domestically or imported, are first sent to a transloading centre in one of the four corners of the United States before being dispatched to a final destination.
Four corners facilities are usually established in the Pacific Southwest (California), Pacific Northwest (Washington/Oregon), Northeast (New Jersey/Pennsylvania/Ohio) and Southeast (Georgia).
Stations placed on the main freight corridors leading to and from these transloading centres would be able to capture a large share of the fuel market. Both I-15 and I-84 serve the four-corners system. TA has many other prime locations.
Establishing up to 100 refuelling stations along the interstates would be enough to serve a significant share of the trucking market.
For a company the size of Shell, the investment is modest but could bring enormous rewards. Shell's production was split 50:50 between oil and gas in 2012, and it is keen to monetise its gas reserves by developing new uses for them in the higher-value transportation market.
"Shell has been working to develop the LNG for Transport market globally," the company said in a press release in April.
Shell has the financial muscle to help overcome the technological inertia that would otherwise hamper switching from one fuel system (diesel) to another (natural gas).
North of the border, Shell has started selling LNG to trucking firms via selected Flying J fuelling stations in Canada's oil-and-gas rich province of Alberta.
Shell and TA have pledged a "phased approach" to rolling out their network of LNG fuelling lines, subject to customer demand.
On Oct. 31, Chart Industries, a major supplier of gas storage, transportation and dispensing equipment announced it had secured a contract to "build and commission 20 retail natural gas fuelling stations across North America" from an unidentified "major oil company".
All 20 fuelling stations are due to be completed and in service by mid-2015, Chart revealed. That one order alone will increase the number of fuelling stops with LNG available by 50 percent.
If Shell's planned network of 100 stations is built, it would cover almost all the major freight routes in the United States, essentially eliminating the biggest obstacle to widespread use of LNG as a road fuel (Map 4).
If gas prices remain competitive compared with diesel, the infrastructure for widespread switching could be in place as early as 2016.