Liquefied natural gas (LNG) pumps at a Blu Transfuels filling station in Salt Lake City
Executives at ENN, drawn to the vast potential of America's fracking boom, plan to convert natural gas into a liquefied form and use it to power the country's fleet of 8 million heavy and medium-weight trucks, which account for 15% of U.S. oil consumption. The company, which has 30,000 employees, is familiar with the LNG business: It operates more than 238 natural-gas stations in 59 cities in China. Richard Peterson, executive VP of sales and marketing at Blu, says, "LNG will allow our transportation fleet to save money and at the same time reduce its carbon footprint by 25%."
ENN is not alone. Clean Energy, a company backed by T. Boone Pickens, says it will have about 150 natural-gas stations in 33 states by year-end. Shell's ( first LNG station opened in April in western Canada. Marvin Odum, president of Shell's upstream Americas business, says, "LNG has the potential to transform the transportation sector in a big way." )
While LNG is cleaner and has the potential to be more cost-effective than diesel, the sticking point has been the price of LNG trucks, which cost roughly $80,000 more than diesels. That, too, is changing. As the cost of LNG trucks drops -- and it is dropping -- and more filling stations open, 18-wheelers will be able to make do with only one tank (most have two), which saves about $30,000. The new LNG trucks should cost only $30,000 to $40,000 more than diesels. Given that a typical 18-wheeler travels 100,000 miles a year at five miles per gallon and that LNG is about $1 to $1.50 a gallon cheaper than diesel, a driver can save as much as $30,000 a year in fuel -- a one-year payback. Many trucking companies lock in their fuel costs for five years, which would provide a total savings of $120,000 over the life of the contract.
It is true that the history of natural-gas prices has been volatile, and a big spike could erase its cost advantage over diesel. ENN, Shell, and others are willing to take that bet. If it works, expect to see more tall white silos along the highway.
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