(Repeating to additional subscribers)
By Julie Gordon
VANCOUVER, April 9 Just over a year ago,
Canadian trucking firm Bison Transport took a bet on a
potentially game changing technology, buying 15 big rigs powered
by liquefied natural gas.
The privately-held company was attracted by the promise of a
cheap and abundant fuel source and lower greenhouse gas
emissions. If all went well, it would be the first step toward
converting more of its 1,250-strong fleet to a type of fuel that
costs about $1.50 less per equivalent gallon than diesel.
After 14 months on the road, though, the Winnipeg-based
company has found that the reality - at least initially - is
less rosy. The savings on fuel have been offset by other costs
that are much higher than expected.
Bison is not alone. There are already signs that broader
adoption is falling short of initial expectations, particularly
in off-road sectors like locomotives and mining vehicles.
While the lack of fueling infrastructure remains the largest
hurdle, other operational teething pains are now tempering some
of the growth in LNG use that was expected to further reduce oil
demand in North America, as well as carbon emissions, according
to interviews with industry experts and officials from five
Bison had anticipated that LNG, which generates fewer miles
per unit than diesel, to be 10 percent less efficient; instead,
the drop was closer to 18 percent. Maintenance costs were about
double that of a diesel tractor, more than budgeted.
While Bison is not considering abandoning its investment, it
now expects to take at least four years to break-even on the
rigs - which cost roughly $75,000 more than standard engines -
rather than the two-year pay-off it had hoped for.
"We just wanted to be clear that when you first look at LNG,
it can look like there's a potential windfall for carriers, and
the reality is not that," said Lionel Johnston, corporate
marketing manager with Bison, a top Canadian carrier known for
its large, modern trucks that haul two trailers.
The longer pay-off "doesn't mean it's a bad investment, but
it was definitely not as good as we were hoping," he said.
To be sure, it takes time for both technicians and drivers
to adjust to new equipment, impacting early costs, and technical
glitches are not uncommon with new technologies.
Still, Royal Dutch Shell last month surprised the
LNG industry when it scrapped a small-scale liquefaction unit it
was building at its Jumping Pound complex near Calgary.
"This additional demand has not developed in line with
market expectations," said Shell spokeswoman Destin Singleton.
The company also paused work on two other plants, in Ontario and
in Louisiana, but Singleton said those projects may resume due
to better opportunities for LNG-powered marine vessels.
A BRIDGE TO RENEWABLE
Operators of commercial trucking fleets have been eyeing
natural gas as a potential fuel since the shale boom sent prices
plunging. Gas burns cleaner than diesel and is produced
domestically, thus insulating supplies from global political
events that can drive up petroleum prices.
Thus far it's been compressed natural gas (CNG), rather than
its frozen cousin, LNG, that has captured more of the market.
With cheaper fuel and a more established infrastructure, CNG
vehicles now make up a large portion of smaller truck fleets for
companies like garbage collector Waste Management and
United Parcel Service's (UPS) local delivery. They are
ideal in urban or short-haul operations.
North America's CNG infrastructure is also more developed,
with 681 public stations across the United States, according to
the U.S. Department of Energy. By comparison, there are 52
public LNG stations, with another 37 planned, the data shows.
And CNG is cheaper than LNG at about $2 less per equivalent
gallon than diesel, providing hefty savings in vehicles that use
40,000 gallons of fuel or more each year.
But LNG is ideal for large highway tractors that haul heavy
loads. Its energy density is greater than CNG, which means its
fuel tank is smaller and lighter, leaving more room for cargo.
Support is still building despite some setbacks. For
example, UPS has started deploying its new fleet of 1,100
heavy-haul LNG trucks, which have a 600 mile range.
However long-haul applications raise other problems, say
industry insiders. Drivers can only be on the road for so many
hours, and the trucks are restricted to routes where there are
existing fueling stations.
Heavy-duty fleet operators are "recognizing it's not going
to be a universal fit and in some cases there might be parts of
the operation where natural gas just isn't going to work," said
Erik Neandross, chief executive of Gladstein, Neandross &
Associates, a clean transportation consulting firm.
Indeed, the viability of natural gas as a diesel alternative
depends on many factors, in particular whether a fleet burns
enough fuel to justify the additional cost of buying LNG rigs.
Bison's rough first year experience was familiar to other
early adopters in the trucking sector, they said. Early costs
are often higher-than-expected, as truck service and maintenance
shops need to be retrofitted for the natural gas technology and
technicians need time to get comfortable with the new equipment.
In Bison's case it did not convert its shop for the trial,
so maintenance was done externally, leading to higher labor
charges. Many of the trucks also had fickle fuel sensors, gauges
and software, which had to be addressed by suppliers.
Other companies Reuters spoke with also ran into technical
issues. One, Quebec-based Robert Transport, was forced to
install solar panels on truck roofs to power energy-intensive
methane detectors. Raven Transport, a beverage hauler based in
Florida, said its first rigs stalled on the road and had to be
towed after the LNG tanks were filled at the wrong pressure.
Westport Innovations, a leading natural gas engine
designer behind many models now on the road, says that it can
take time to work out the bugs for first-generation technology.
"There have been challenges with reliability or just with
performance not as expected," said Karen Hamberg, vice president
of strategy at Westport. "So those things are being addressed
and as we see new products being launched, there will be higher
levels of reliability with those new products."
The Vancouver-based company is working on its
second-generation heavy-haul offering, the HPDI 2.0, which it
says will deliver breakthrough performance and fuel economy,
making it competitive with current high performance
Back on the road, industry experts say once equipment and
use practices are modified, maintenance costs should be close to
in-line with diesel, no more than 1 to 2 cents more per mile -
or up to $2,000 for a 100,000-mile per year vehicle.
"When you're saving in the order of magnitude of $25,000 on
fuel and paying $1,500 more in maintenance, that's obviously a
fair trade off," said Neandross.
UPS was the only company that Reuters spoke with that said
its LNG maintenance costs were currently even with diesel,
though trucking companies that have made the switch say that as
they gain experience, reliability goes up and costs come down.
PREACHING THE GOSPEL
Fueling infrastructure remains a critical issue.
"It's like the chicken and egg, if you don't have fuel
stations, then people won't buy trucks, and if people don't buy
trucks, then you don't get infrastructure," said Yves Maurais,
engineering manager for Robert Transport, which runs its 125 LNG
trucks between Quebec City and Windsor, Ontario.
Despite the hurdles, many early-adopters remain strong
supporters of natural gas for transport.
"Natural gas is good for the environment, and it's good for
this country to reduce its dependence on foreign oil from our
enemies," said Phil Crofts, director of marketing for Dillon
Transport, an Illinois-based firm with 25 LNG and 150 CNG
tractors. "So we are disciples and we are spreading the gospel."
(Additional reporting by Edward McAllister in New York; editing
by Jonathan Leff and Martin Howell)