(John Kemp is a Reuters market analyst. The views expressed are
By John Kemp
LONDON Oct 4 LNG-powered locomotives could be
in widespread use on North American railroads as early as 2016
or 2017, according to Railway Age, one of the industry's leading
technical publications - which is far sooner than most energy
Burlington Northern Santa Fe (BNSF) railroad, owned by
Warren Buffett's Berkshire Hathaway, made headlines earlier this
year when it announced it would begin experimenting with an
LNG-fuelled locomotive and might in future switch a large
proportion of its train fleet from diesel to cleaner-burning and
cheaper natural gas.
In 2011, the railroads consumed just over 3 billion gallons
of distillate fuel oil, almost 5.5 percent of the total diesel
consumption in the United States.
Oil analysts have been openly sceptical about how far and
how quickly natural gas could displace diesel as a
The cost of retrofitting compression engines to run on a mix
of natural gas and diesel, and the need to build an extensive
refuelling infrastructure, are a major barrier, especially when
no one can be certain how long gas prices will remain at the
current low level.
Fuel accounts for around 30 percent of operating expenses on
the major Class 1 railroads, roughly as much as they spend on
compensation and other benefits, and far larger than any other
operating cost. BNSF spends more than $1 billion every three
months buying fuel, according to the company's quarterly
Switching to LNG could generate savings of up to $200,000
per year per locomotive, and slash the total fuel bill, but each
LNG fuel tender could cost around $1 million, so the railroads
would have to trade off lower operating costs against higher
Switching to LNG would be a major investment decision and
bet that the price of gas will remain much lower than oil for
the next decade.
The rail industry may, however, be closer to making the
switch than many oil analysts realise. "Test programmes at BNSF
and Union Pacific are expected to start in the fourth quarter,"
according to Railway Age.
The Association of American Railroads (AAR) and its
Transportation Technology Center are already developing
technical specifications for an industry-standard LNG fuel
tender, Railway Age reported last month ("Experts weigh in on
LNG", Sept. 6).
The AAR Natural Gas Fuel Tender Technical Advisory Group is
working to address safety and regulatory issues. At the moment
U.S. federal regulations do not allow LNG to be carried by rail.
The AAR taskforce is now working with the Federal Railroad
Administration to develop safety standards.
The first locomotives are likely to burn a dual-fuel mix of
80 percent LNG and 20 percent diesel. It would not require major
engine modifications and the engine could switch back to burning
100 percent diesel if LNG was not available or there was a
technical fault with the LNG system.
The proportion of LNG could be pushed as high as 95 percent
but only with engine modifications that would render it
difficult to switch back to pure diesel burning.
According to Railway Age, one of the major strategic
decisions is whether to carry the LNG fuel in a 10,000-gallon
ISO tank or a 25,000-gallon tender. ISO tanks would provide more
limited range, but could be loaded already filled onto an
ordinary intermodal railcar, making refuelling easier.
Tenders would provide greater range but take 30-45 minutes
to fill. Nonetheless, a train using 25,000-gallon tenders should
be able to travel from Los Angeles to Chicago without refuelling
along the route.
Unit coal trains, which make long, unbroken journeys with a
single cargo, are the most likely to use LNG initially, Railway
BNSF experimented with LNG-powered trains in the 1980s and
1990s, and the first tests this time are likely to employ
modernised tenders that were originally built for those earlier
If the gap between gas and oil prices remains wide, gas
could seize a significant share of the transport market as early
as the end of the decade.
LNG and other forms of natural gas are already making
inroads into the market for high-horsepower engines.
Oilfield operators are increasingly using heavy-duty
dual-fuel engines for drilling and pressure pumping to cut the
costs of each well and boost returns. Schlumberger, Halliburton
and Baker Hughes all now boast about their ability to supply
dual-fuel engines for contract work.
LNG or compressed natural gas is now used in most new
vehicles ordered by mass transit operators and waste collection
firms in the United States. Major road transport companies are
starting to roll out LNG-fuelled trucks on selected routes.
At sea, many of the major oceangoing LNG transporters use
boil-off gas to fuel their engines, and other LNG-fuelled
vessels are being built.
Shell, which is as much a gas company as an oil one, is
making a strategic effort to support the broader take-up of LNG
in the transport system.
Like other systems with large sunk costs and expensive
infrastructure, it will be hard to dislodge diesel from its
dominant position in heavy transportation.
But the technical work now under way on the railways and in
other forms of transportation implies the system may be nearing
a tipping point. If the price gap between oil and gas remains,
widespread switching appears inevitable and could be apparent
within the next five years.
Experts weigh in on LNG, Railway Age, Sep 6, 2013:
(Editing by Dale Hudson)