Natural Gas for HHP Applications USA - Supply & Infrastructure

In recent years, companies involved in natural gas for high horsepower (HHP) application fuelling have unsurprisingly focused on areas with advantageous gas supplies, with the Gulf of Mexico a particular hotspot.

As much of the growth so far has been in marine, HHP transportation and E&P, gas fuelling companies are able to serve localized demand.

On a global scale, by 2018, annual investment in natural gas will rise to nearly $400 billion, according to a report by GE (GE, 2013). $120 billion (30%) will be focused on the use of gas in transportation. On a more regional level, projects costing between $40 million and $100 million in Canada and the United States have been commissioned explicitly to supply HHP industries (Fuel Fix, 2013).

There are however interesting questions to be asked when the localized market is exhausted and suppliers have to look further afield to areas where infrastructure and gas transportation methods will need to be imported, raising costs and competing more heavily with incumbent energy suppliers.

Investment

Clean Energy Fuels announced in October 2013 that it intends to build an LNG fuel terminal in Jacksonville, Florida to serve marine, heavy-duty trucking and rail facilities. This is the first project to be developed by the Eagle LNG partners, a consortium of Clean Energy, GE Ventures, GE Energy Financial Services and Ferus Natural Gas. Construction is expected to begin in 2014 and after completion at the end of 2015; the facility could produce approximately 300,000 gallons of LNG per day. “The Jacksonville project is a strong first step for Eagle LNG Partners and would put the Eastern seaboard and Southeast region clearly in play for high horsepower LNG fuelling applications,” comments Sanjay Bishnoi, Senior Director, GE Ventures. The project is a strategically-important step for supplying the southeast region of the United States.

In Canada meanwhile, in 2016 the first of two LNG liquefaction plants resulting from the Ferrus Natural Gas Fuels and ENN Canada is expected to begin producing. Each plant is designed to produce 100,000 gallons of LNG per day with the possibility of increasing production to reflect the expected growth in demand. These plants, located in Vancouver, British Columbia and Edmonton, Alberta, are expected to “help build the market for clean-burning natural gas as a transportation fuel,” according to a statement from Ken Hughes, Alberta’s Energy Minister. The projects, and Ken Hughes’ accompanying comments, reflect the importance of guaranteed supply in building demand, especially for HHP markets. Both plants will serve rail, marine, mining, oil and gas production as well as the on-road trucking market.

Challenges

Crucial to the rollout of a wider use of LNG as a transportation fuel is of course increasing geographic access to its supply. This is partly being achieved by developing small and midscale LNG liquefaction infrastructure. Gas producers, suppliers, utilities, and public companies are planning and building new facilities.

LNG supply will however need to match adoption in HHP industries. An additional 40 mmtpa of liquefaction will be required in global LNG production just to support a 50% market penetration of the HHP market which, based on historic projections, will take place within the next 10-15 years (Westport innovations, 2013). A dual approach to LNG infrastructure has been observed. Firstly a proliferation of small-mid scale LNG facilities to provide fuel near fleets. Secondly, gas producers working with large end users to provide LNG infrastructure that will strategically supply an entire region.

The financing of LNG infrastructure projects is far from straight-forward, however, and a key contributory factor to this is a lack of skilled labor, and there has also been localized community resistance to the creation of LNG fuelling facilities. Educating the public on what is entailed in the supply and delivery of LNG is a significant challenge.

Industries

Within the marine industry, there is a lack of infrastructure to support demand, but there is a lack of demand to encourage infrastructure development. Additionally, there is a lack of clear regulatory guidance on siting, permitting and operating a small-scale LNG fuel terminal to fuel marine vessels.

There are also a number of practical challenges facing the marine industry, including the human element of training and bunkering issues. Clear procedures and practices need to be established to ensure safe refueling.

For mining meanwhile, the shift from diesel to natural gas-powered drilling rigs will require significant infrastructure development due to the remote nature of many drilling locations, and this is a particular issue for LNG-powered equipment. LNG plants can be located hundreds of miles from the drilling sites.

Disruptions to fuel supply are therefore a significant concern. Field gas can be used from producing wells, but this is not available for an exploratory well. Unforeseen disruptions in production can occur in producing wells, requiring a reliance on the onsite fuel supplies, such as LNG.

A slightly different set of challenges faces the rail industry. Adoption of LNG would here have to occur in phases. Similar to the adoption of diesel for locomotives and natural gas vehicles (NGVs), transportation corridors could be created. However, this would require the cooperation of a number of Class 1 railroads, all of whom could adopt different fuelling strategies, adding to the complexity. For example, the use of an LNG truck rather than an LNG plant would be the fastest means of refueling a tender car.

Currently for the railroads, then, the largest challenge to infrastructure development and supply is achieving industry consensus.