While the US natural gas resource base continues to grow exponentially, the problem continues to be what to do with all that gas year round. Unfortunately, the utility market is mainly a winter and summer seasonal peak period. That leaves the spring and fall as the "shoulder" period with less demand. The unrelenting hype on US LNG exports will fill up much of the noise space, but the reality is that global LNG markets are under long term supply contracts and there will be limited opportunity for US LNG exports into Europe and even less into Asia. Gas to Liquids (GTL) is very expensive at $17 to $19 billion per unit with two being built on the US Gulf Coast. So, that leaves with the enticing option of the US transportation sector. Here natural gas has some advantages such as its 130 octane number and lower greenhouse gas emissions.
However, the problem continues to be one of infrastructure. In 1988, I attended a US natural gas seminar in Washington DC held by the Sierra Club and the American Gas Association, the trade association for the gas industry. At that time, there were 50,000 natural as vehicles in the country. Today, there are about 150,000 natural gas vehicles (NGVs). That compares with over 250,000 cars and trucks that run on oil and an insignficant amount that runs on electricity at the present time. The solution is to build out the infrastructure for refueling with both compressed natural gas (CNG) and liquefied natural gas (LNG). This really fits a profile of urban fleet such as taxis and delivery vans. If we move upscale to the 18 wheeler trauck market, there is going to be a need to build out refueling stations for CNG or supply depots for LNG. It is really a chicken and egg problem, but with rising stringency on air quality regulations in the offing in California being in 2015 with the implementation of AB 32 (the climate change law) focusing on mobile sources of pollution (cars and trucks), there is a unique opportunity to build out a US natural gas fleet.
The benefits of cleaner air quality from natural gas over diesel fuel and gasoline coupled with the energy security benefits would seem to make this the proverbal "win win" for both environmental and energy security reasons. The key will be to unlock the capital markets to start deploying billions of dollars to make this a reality. I hope that this happens sooner rather than later as a natural gas fleet build out will take until the end of the decade. But the time to start is now!
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