Thanks to new developments from natural gas companies, fuel costs might soon be falling by as much as 25% for some individuals.
Royal Dutch Shell PLC (NYSE: RDS:A, RDS.B) plans to spend $250 million on a liquefied natural gas (LNG) plant and filling stations in what is the biggest single investment yet in making frozen gas a transport fuel.
LNG has been a hot topic of late as an overabundance of fuel from North America's shale rocks has made the U.S. the world's largest natural-gas producer and led to decade-low natural gas prices.
Chad Porter, the COO of Ferus, a Calgary-based oil services company, tested the savings of running vehicles on LNG compared to diesel and liked what he saw.
Porter told Bloomberg News that he estimated switching from diesel to LNG as a transport fuel will lower his fuel bill by 22%, or $1 a gallon at the tank.
That helps make the case for switching to engines that run on liquefied natural gas.
"LNG holds great potential as a transport fuel," Mark Williams, Shell's director for downstream, said in a speech this month. "North America, for example, now has a century of gas supplies at current consumption rates. So gas is likely to gain market share in transportation."
Natural Gas Companies Changing Future of Energy
Natural gas now accounts for more than 50% of Shell's production, and overtook crude oil for the first time this year.
"Gas in our view will be the fuel of the future," Shell Chief Executive Officer Peter Voser told shareholders yesterday (Tuesday).
Shell, based in the Netherlands, plans to develop LNG as a transport fuel in areas beyond North America, like Europe, China, Latin America, and Australia. It also plans to use LNG technology for fuel for trains, ships, and mining industry vehicles.
Shell's Green Corridor project in Canada will make 300,000 tons of LNG a year. It plans to start production at its first small-scale gas liquefaction plant at a gas complex west of Calgary.
Besides being cheaper than diesel, LNG is also better for the environment.
Natural gas burned in trucks emits as much as 25% less carbon dioxide, as well as almost eliminating particulate matter and sulfur dioxide produced by diesel-powered vehicles, according to the Calgary-based Van Horne Institute.
About 30% of U.S. "classic trucks" can be converted to run on LNG, according to James Burns, Shell's general manager for LNG in Transport, Americas.
Natural gas use in vehicles has support in Washington and has been a big topic of election 2012. U.S. President Barack Obama in January supported tax breaks for natural-gas powered trucks, saying they'll encourage U.S. energy independence and reduce the country's reliance on foreign oil producers.
"We, it turns out, are the Saudi Arabia of natural gas," President Obama said.
Can Australia Be the Next U.S.?
The United States has already started preparing for LNG exports, and now another country is following suit.
In his latest Oil & Energy Investor report, Money Morning Global Energy Strategist Dr. Kent Moors highlights Australia's emergence as the next global leader in liquefied natural gas.
Projections now put the country on schedule to displace Qatar as the major LNG exporter worldwide. Rising from nothing at the beginning of this decade, the country will be exporting at least 80 million tons of gas each year by 2020.
It seems that Australia has significantly more shale gas than originally thought. It remains too early to estimate how much of this will find its way onto the market, or the time it will take to construct the necessary infrastructure, develop the field systems, extract, and process the gas.
Whether or not Australia can have the kind of success that North America is currently experiencing remains to be seen.
Nonetheless, whether the gas will be coming from abundance offshore or locked within rock onshore, one thing is becoming quite clear. Low natural gas prices are triggering massive changes in the global energy market.
Related Articles and News:
- Money Morning:
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- Oil & Energy Investor:
Here Comes the Aussies
- Bloomberg News:
Shale Glut Means $1-a-Gallon Savings at the Pump