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September 27th, 2012

Compressed Natural Gas (CNG)

by Andrew Price, President & COO

Trucked natural gas can take the form of either Liquefied Natural Gas (LNG) or Compressed Natural Gas (CNG). Both LNG and CNG have a relatively short history as a fuel used by the end-use sector. To date, LNG has been used mostly by natural gas utilities as a distributed peaking fuel to serve regional load pockets with insufficient pipeline capacity to meet peak period demand. CNG has been used mostly in the fleet transportation sector including the municipal bus system in Portland Maine. Both LNG and CNG are experiencing a broadening of interest due to the very low cost of natural gas commodity relative to both propane and oil.

Despite continual expansion, natural gas pipeline networks bypass many rural parts of the US. Many mid to large size end users with thermal demands greater than 30,000 MMBtu per year - and no access to pipeline natural gas - are increasingly looking at CNG as an alternative. CNG cannot compete with pipeline natural gas on price, but it can be an attractive alternative to oil and is worth considering along with biomass, propane and LNG alternatives. 

CNG is natural gas compressed to about 3,500 psi to increase energy density. Even at this pressure, CNG has a much lower energy density than LNG or oil. Each CNG truck can carry (approximately) between 200 and 400 MMBtu. This compares to about 900 to 1,000 MMBtus per LNG tanker truck and 1,200 to 1,300 MMBtus for a #2 oil tanker. As a result CNG requires between 2 and 5 times as many truck deliveries of LNG and necessitates careful consideration of where to place CNG production facilities.

There are currently very few major CNG production facilities (and even fewer CNG end-users), but many are in various stages of development. Several companies, including Global, Irving Oil, NG Advantage and Xpress Natural Gas (XNG) are looking to establish CNG production facilities in New England in the near term to service end-users who have no access to pipeline natural gas. The first of this wave of CNG stations may be in place by December of 2012 with more coming online during the first quarter of 2013.

A high-volume compressed natural gas facility would need to be established someplace along an interstate natural gas pipeline (like the Maritimes and Northeast Pipeline in Maine or the Portland Natural Gas Transmission Pipeline in New Hampshire). A new greenfield CNG facility could cost in excess of $1 million dollars. It is very unlikely to be located behind a local distribution utility due to the need to avoid local distribution charges.

The introduction of a CNG production facility would be a positive development for end users. CNG may be a viable alternative to oil and it would also introduce a competing source of natural gas. This competition may help to put pressure on LNG prices. At least one of the suppliers in the trucked natural gas space, XNG, envisions a future where it could deliver either LNG or CNG depending on price and availability.

CES is frequently asked to help clients evaluate the merits of CNG. Robust competition appears to be developing for trucked natural gas in general and CNG in particular. CNG promises to be a dynamic fuel that bears close attention in the coming months.  

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