Natural gas takes center stage at energy conference

Posted Tuesday, Mar. 05, 2013  comments  Print Reprints

Have more to add? News tip? Tell us

HOUSTON -- It didn't take long for Craig Dickman to hear something interesting about natural gas in the transportation business at the CeraWeek energy conference, which kicked off Monday.

Dickman's company, Breakthrough Fuel, helps companies set up fleets for natural gas and other alternative fuels. What got his attention was a description of the Chinese trucking market by Xizhou Zhou, director of China Energy for IHS, the sponsor of CeraWeek.

Just four or five years ago, China had virtually no heavy-duty trucks running on natural gas, Zhou told the audience of energy executives from around the world. Now, he said, there are perhaps as many as 70,000 big rigs there running on natural gas. The Chinese fleets are using liquefied natural gas, not the compressed gas more commonly used in the United States by operators like The T, Fort Worth's transit operation, in city buses.

LNG is so much cheaper in China than diesel, Zhou said, that truckers can recover the added cost of converting to the fuel in less than a year. The transition is aided by between 300 and 400 LNG fueling stations built to supply those trucks.

"I think people here will be underestimating, not overestimating, gas in transportation," Dickman said. Use in the long-haul market has been limited by the lack of a large engine required by big rigs, he said. But a 12-liter version from Cummins expected by August should be a big boost. PACCAR, which produces Peterbilt and Kenworth brand trucks at its Denton plant, announced last year that it would use the engine.

CeraWeek is designed as an overall energy conference, covering oil, natural gas, coal, renewables, petrochemicals and electricity. But if the meeting's first day is any indication, natural gas is the center of attention, and it all comes back to the "shale gale" that started in the Barnett Shale in North Texas.

Natural gas in transportation doesn't start and stop with vehicles.

"We believe we are at a tipping point for gas in shipping," said Michael Stoppard, IHS managing director of research. Within 15 years, he said, LNG is forecast to replace about 20 percent of the fuel oil used by ocean-going ships.

Such optimistic outlooks are music to the ears of energy producers, which have been hammered in recent years by low natural gas prices driven down by the rush of supply into the U.S. market. And Stoppard had another comment that should cheer producers.

"2013 is going to be the starting year of a rebalancing in global gas markets," he said. U.S. prices are "unsustainably low," in the range of $3 to $3.50 per 1,000 cubic feet, Stoppard said, even as LNG in Asia sells for the equivalent of $20.

"It's an enormous price difference," he said, and it should work to raise the price of natural gas in North America. Assuming normal weather, IHS expects gas at Louisiana's Henry Hub, a benchmark price, to rise to about $4 this year and $5 next year.

The first LNG export terminal in the United States isn't scheduled to go into operation until late 2015 or early 2016, Stoppard said. But by the end of the decade he expects the nation to be exporting 6 billion cubic feet a day, or just a bit more than the Barnett Shale currently produces. While that will help narrow the price difference, he said, "It's a very, very long and slow process."

Jim Fuquay, 817-390-7552

Twitter: @jimfuquay

Looking for comments?

We welcome your comments on this story, but please be civil. Do not use profanity, hate speech, threats, personal abuse or any device to draw undue attention. Our policy requires those wishing to post here to use their real identity.

Our commenting policy | Facebook commenting FAQ | Why Facebook?