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Featured Articles
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Jun 2010
| Source: Oilweek Magazine
| | | On a mission
| | | In an effort to create markets for growing shale gas production in North America, Encana is pushing to build out our natural gas vehicle infrastructure
| | | by Dale Lunan
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| By most accounts, emerging shale plays in North America offer a resource in excess of 2,600 trillion cubic feet-a century of supply at a modest 70 billion cubic feet per day of production and 70 years at a more aggressive 100 billion cubic feet per day.
That´s a lot of "bridge fuel" to a carbon-constrained future, and as global economies emerge from a 30-month recession, more and more discussion is swirling concerning a shale-induced gas glut in North America-and indeed around the world.
Clean-burning natural gas-whether from shales or more conventional reservoirs-is clearly a fuel of choice for power generation, and in the current low-price environment, many jurisdictions are following Ontario´s lead to back out coal-fired generation in favour of gas-fired units.
But while power generation offers a significant market for natural gas, now and in the future, Canada´s largest natural gas producer has embarked on a mission to make the fuel the foundation of North America´s energy portfolio.
"The way we look at it is that over the last four or five years, we have seen a phenomenal renaissance in the natural gas industry," says Eric Marsh, Encana´s executive vice-president, Natural Gas Economy. "I´ve spent 28 years in the industry, and I believe that in no time during that 28 years has there been more change than in the past three or four years."
The shale gas revolution, he says, is driving the renaissance by making vast volumes of natural gas available to North American consumers-at prices that are cheaper than they were a decade ago, even as global oil prices are again heading higher. It is that disconnect-and daily production of some 3.6 billion cubic feet per day-that is driving Encana´s push to put more natural gas vehicles on North American roads, and it´s launching its mission from its own back alley.
"With that decoupling, it´s pretty apparent that it is significantly less expensive to run a company vehicle on natural gas," Marsh says.
Cost savings at retail compressed natural gas (CNG) prices are between 20 and 40 per cent, and even greater if a company´s own produced gas is used as a fuel, while overall emissions reductions are on the order of 20 to 25 per cent, with major reductions in emissions of volatile organic compounds, nitrogen oxides, and sulphur dioxides. "So we save money, we improve the environment-we think it makes a lot of sense."
As with most initiatives of this nature, the build-out of natural gas vehicle (NGV) infrastructure in Canada lags that in the United States, where 150,000 NGVs are on the road, refuelling from a network of 1,100 retail sites. But the United States is but a speck in the global NGV universe, with nearly 10 million vehicles on the road today fuelled by natural gas, including some 4.5 million in Asia, another 3.5 million in South America, and more than a million in Europe.
In Italy, 600,000 NGVs are on the road now, a 37 per cent increase in just three years, and seven per cent of all new vehicles that are sold are dedicated NGVs. Marsh says the incentives to switch are much greater in Europe than they are in North America, starting with the fact that CNG is up to 60 per cent less expensive than gasoline or diesel.
NGV vehicles sold in Europe attract about a 10 per cent premium over their gasoline or diesel cousins, a difference that can be paid out very quickly, Marsh says, because of the higher gasoline costs in Europe. In North America, by comparison, a gasoline Honda Civic that sells for US$25,000 would be priced at about $32,000 decked out in NGV colours, a 30 per cent premium that is coming down a bit and will fall even further as more models are offered by more manufacturers.
"In Europe you can buy 40 different models that run on compressed natural gas," he says. "In North America, we have just the Honda Civic GX, although Fiat is close to rolling out a small CNG car, while GM has recently announced it will offer its 2500 series pickup and some of its vans in natural gas versions, and those will be coming out in two years."
With limited original equipment manufacturer (OEM) offerings, the North American NGV landscape is pretty much left to the after-market industry, and there are a few companies that offer conversion kits, and a few others that offer lightweight composite tanks.
"The Achilles heel on this, in a new industry, is that you don´t have lots of different companies that do conversions, you´ve got conversion kits available from two or three manufacturers, but you don´t have lots of competition in it," Marsh says. "Tanks, for the most part, come from just a couple of companies, and so overall, we just need a little more competition to make this more efficient."
Encana has already converted several of its fleet pickup trucks to natural gas and by the end of this year will be running 150 vehicles on CNG. It´s developing corporate CNG fuelling stations in western Canada (two in its core Palliser Triangle area east of Calgary, near Strathmore and Drumheller, another at Fort Nelson, in northeastern British Columbia), Colorado, and Louisiana; is in the process of converting its drilling rigs to run on natural gas; and is in discussions with various other natural gas producers on the potential for joint-venture fuelling facilities elsewhere.
"We´re trying to do partnerships-another company might locate their natural gas station at one place, and we would locate ours at another, we´d use each other´s, fill out the forms at the end of the month, and know that way what we owed each other and go that way," Marsh says. "That way, we all save and at the same time, we use the product we produce and we help the environment."
One of those producers Encana has talked with about joint venturing is Devon Canada, which is running an NGV pilot out of its Red Deer office using retail supplies. The company hopes to expand the program to one of its gas plants later this year to use its own produced gas, which improves the economics quite a bit over using retail CNG.
"The cost of retail CNG is surprisingly high-about 75 cents per Litre Gasoline Equivalent [LGE], not much cheaper than gasoline," says Bryan Helfenbaum, Devon Canada´s exploitation leader, northwest region, who was instrumental in implementing the NGV pilot. "A company supplying its own CNG is looking at a cost as low as 10 cents per LGE."
On a wider front, Encana is working with various provincial, state, and federal governments to develop natural gas corridors in western Canada (linking Vancouver, Calgary, and Edmonton), eastern Canada (from Windsor in southern Ontario through Toronto, Ottawa, and Montreal to Quebec City), and Colorado.
In an ideal world, those two Canadian corridors would be built out east and west, to meet somewhere in the middle, but right now, Marsh says, it makes more sense to build U.S. corridors up in such a way that they can be linked to the Canadian corridors at the border. In that scenario, you could have a corridor extending from California into Utah and Colorado and on into Montana and Billings, where it would link to the Calgary corridor.
"What we have to do is think about where can we build these corridors where we can get the most success up front, get things happening, get the movement occurring, and then start to pick off the things to connect the corridors," he says.
Within the planned Canadian corridors, Encana is working with civic officials in Edmonton, Calgary, and elsewhere on a Clean Cities program involving the conversion of high-idle fleet vehicles to CNG use and the development of public refuelling sites, Marsh notes.
"We´re actually working with quite a number of cities right now to help them look at natural gas as a solution for their buses, for their garbage trucks, for their street sweepers," he says. "You can really start to move the needle on those things."
Unlike light-duty vehicles, transit and highway transport fleets are better served running on liquefied natural gas (LNG) as opposed to compressed natural gas, since the higher density of LNG gives the range a transport truck needs.
"Our little Honda Civics will travel 200 miles or so on CNG, but an 18-wheeler needs to be able to travel three or four hundred miles," Marsh says. "The tanks on an LNG truck are double-wall tanks that will actually allow that liquefied natural gas to stay in there for between 7 and 10 days without heating up to a point where it becomes gaseous. When you look at trucking, those guys are filling up every day, so it really isn´t as big an issue as you might think."
And capturing the 18-wheeler market for LNG, he says, is where the environmental gains really start to appear, he says, since "one 18-wheeler creates the emissions of between 200 and 300 cars." Put another way, converting just one garbage truck from diesel to natural gas is the same as taking 325 cars off the road.
The brass ring, Marsh says, is a new Canadian industry serving the natural gas transportation needs of the country. By 2025, Encana´s national vision is for 145,000 trucks fuelled by LNG, 2.4 million light-duty vehicles running on CNG, upwards of 50 LNG plants scattered across the country, and a network of more than 900 CNG and LNG fuelling stations stretching coast to coast.
That will provide a market for about 1.4 billion cubic feet per day of natural gas, reduce annual CO2 emissions by between four million and six million tons and create more than 50,000 new jobs.
"Our challenge is that the trucking industry and other industries may choose not to invest in a natural gas-powered [vehicle] if there´s no infrastructure, but the people building the infrastructure aren´t going to guild infrastructure until there are some vehicles," Marsh says. "We need to work with government and business to break that cycle so we can do what´s good for Canada."
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