A different kind of gas fills more tanks

2 December 2013

Natural gas vehicles are fairly rare in OECD countries, but major auto manufacturers are developing models. Graphic: © Daimler AG

Much of the 15.6% growth in global demand for natural gas over 2012-18 will come from power plants and other predictable sources, but the IEA also sees a new and rising use of natural gas: to power cars and trucks. In the longer term, trains and ships could represent a significant demand centre as well.

Road transport represented just 1.4% of global gas demand in 2012, but that was already more than ten times the amount of natural gas it used in 2000. With China aiming to use cleaner fuels in the transport sector and the shale gas revolution triggering strong investor interest in natural gas as a transport fuel in the United States, the IEA expects this share to rise to 2.5% by 2018. That increase represents 9.4% of total additional gas demand – which means natural gas will have a greater impact than electric cars in slowing oil demand growth.

Natural gas vehicles (NGVs) are not unheard of, and four countries – Pakistan, Iran, Argentina and Brazil – already have a total of nearly 10 million on their roads, accounting for 61% of the world’s fleet. Next are the estimated 2.7 million NGVs in India and China, up from an insignificant 16 000 in the two countries in 2000. And China will dwarf developments in other regions as its consumption triples to 39 billion cubic metres of natural gas by 2018. That growth will be the result of attractive gas prices versus oil as well as the country’s need to develop cleaner transport vehicles and its wish to reduce oil dependency through alternative vehicles technologies.

Even so, NGVs are a negligible share in the total number of cars in India, at 3.5%, and China, where they are just 1.2%. But China added more than 500 000 NGVs in 2011 and 220 000-plus more over the first five months of 2012.

A shift towards OECD countries

In contrast, OECD countries have only 7% of all NGVs, with two-thirds of this share in Italy alone. Though the United States has the most vehicles in the world, Peru, to say nothing of China, has more NGVs.

But the price divergence between gas and oil as well as policy incentives and the recent abundance of natural gas in the United States are expanding use of gas in transport there, with the conversion of long-haul heavy trucks from diesel fuel an especially promising prospect. The premium to buy a natural gas-powered truck is currently estimated at USD 70 000 over the diesel equivalent, but that difference could be significantly reduced when more trucks are built. With future premiums estimated at USD 20 000 to USD 30 000, the investments could be recovered in only a few years in the current price environment.

Some North American gas producers have already started switching rigs that deliver water and other material to fracking sites, running them on natural gas instead of diesel, a retrofit that costs about USD 40 000. The producers then liquefy their gas at the production stage for use in the trucks.

Necessary conditions for NGV growth

NGV development requires political backing, sufficient gas supplies, and individual pricing and fiscal conditions. But most essential is the availability of fuelling stations and the vehicles themselves. Natural gas stations are appearing slowly, notably in China and the United States. At the Geneva Motor Show in March 2013, several NGVs were presented, such as the VW Golf TGI BlueMotion and the SEAT Mii. Audi recently presented its first NGV, an Audi 3. Additionally, many major heavy truck makers in the United States and Europe either have one LNG-powered model available or have announced plans to include such vehicles in their product lines.

Fleets are critical to adoption of NGVs, because natural gas in the transport sector faces the same chicken-and-egg problem confronting electric and hydrogen vehicles: filling stations need to be built so that cars and trucks can be refuelled, but these would need a sufficient number of vehicles to justify the investment.

This challenge is easier to address with trucks or buses confined to determined areas or driving along specific highways, usually operated in fleets with dedicated places to refuel.

On the road, on rails, on the sea

Natural gas is not just for cars and trucks. Rail for regions such as North America and Asia, where locomotives use diesel, is one opportunity, and some – but by no means all – rail operators, such as BNSF in the United States, seem to be looking at the conversion with a favourable eye. GE Transportation and Caterpillar have both announced plans to work on new technology for railways, which could be available within months. Because trains move from one network to another, the technology will need to be mature before rail operators can switch.

In the maritime sector, very few ships now use gas (the Baltic Sea region being a notable exception), but new environmental rules on sulphur emissions mean that gas use in maritime transport could take off, too, albeit later than for road transport and at a slower rate. Technology is not an issue, but rather the need to develop infrastructure at ports, as well as the availability and price of natural gas.

This article was written in 2013 by former IEA Senior Gas Analyst Anne-Sophie Corbeau and originally appeared in IEA Energy: The Journal of the International Energy Agency. Anne-Sophie Corbeau has since left the IEA, joining the King Abdullah Petroleum Studies and Research Center as a gas expert. Befor the IEA, she had worked at Cambridge Energy Research Associates and in Peugeot’s fuel cell and hydrogen department. In 2014, the Agency has ceased publication of IEA Energy.