The Economics Of Switching From Diesel To LNG -- RBN Energy -- September 5, 2014
RBN Energy:
the economics of switching from diesel to LNG.
The shift from diesel to LNG (and sometimes CNG or field gas) as a
fuel for drilling rigs and hydrofracturing pump engines is underway, and
there is interest in having ships, locomotives and long-haul trucks run
on natural gas from LNG too.
But before investing in new or converted
engines that can run on natural gas or on a diesel-natural gas blend,
diesel and shipping fuel users need answers to three questions: What
will it cost? How much will we save? And—this is important, too--is the
LNG infrastructure sufficiently robust to support the switch?Today we
explore the economic ins and outs of converting from diesel to gas, and
describe the current state of domestic LNG supply infrastructure.
With US natural gas selling at roughly one-quarter the price
of crude oil on a per-BTU basis, it is not surprising that major
consumers of diesel (an oil-based fuel whose pricing is closely linked
to crude) are exploring the possibility of switching to natural gas from
LNG. As we said in our Series Opener
on the domestic use of LNG, diesel engines that power drilling rigs,
fracking pumps, locomotives and long-haul trucks can be converted to
dual-fuel operation or replaced with natural gas-only engines, as can
ship engines now fueled by marine distillate or bunker fuel.
LNG,
produced mostly with modest-size (less than 200 Mgal/d) plants sited
near major customers, is seen as a logical, cost-effective and
consistent quality source of gas. LNG also stores several times as much
gas per gallon volume as CNG (helping with weight and storage space).
But there are significant costs involved in making a switch, and even
some risk—the biggest of which is whether, after making the investment
to change to dual-fuel or all-gas engines, you can count on LNG to be
available when and where you need it. To help sort out the economics and
the risk, let us first look at what is involved in switching engines
from diesel (or shipping fuel) to dual-fuel or all-gas.
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