By John Kemp
LONDON, Nov 1 (Reuters) - Warren Buffett's BurlingtonNorthern-Santa Fe (BNSF) railroad captured headlines earlierthis year when it announced it would start trialling trainspowered by liquefied natural gas (LNG).
But even a pilot programme is still some way off. BNSF muststill convince U.S. rail regulators trains powered by highlycombustible natural gas can be operated safely.
North of the border, however, Canadian National Railways (CN) has been successfully running an LNG-powered trainon the 480-kilometre line between Edmonton and Fort McMurray inthe oil sands region of Alberta since September 2012.
CN's train has a specially strengthened LNG tender,manufactured by Chart Industries in Minnesota, placed betweentwo locomotives. The engines run on a blend of around 90 percentLNG and 10 percent diesel, which provides the ignition.
In June, CN ordered four more LNG tenders from WesportInnovations to expand the testing programme. The first of thesenew tenders will be delivered in the fourth quarter of 2013.
The Westport tenders will each be able to hold over10,000 gallons of LNG, providing a longer range than an ordinarydiesel locomotive and reducing the need for refuelling stops.
Each tender can support two locomotives, reducing thecapital investment required, and utilises a standard vehicledesign and conventional 40-foot LNG ISO tank, avoiding costlydesign, testing and manufacturing work.
ACCELERATION
Two years ago, the idea that natural gas could capture asubstantial portion of the transport market seemed outlandish.
But compressed natural gas (CNG) and LNG are being used in agrowing number of public transit systems and waste collectionservices which have their own dedicated central refuellingsystems.
Delivery services such as UPS and FedEx andlarge haulage firms are trialling LNG-powered tractor-trailerson selected long-distance routes in the United States.
An entire eco-system of engineering companies is developingto supply the compressors, small-scale liquefaction units,storage tanks and dispensing facilities to allow LNG and CNG tobe used on roads, railways, barges and ships, as well as in thepowerful engines used to drill and pressure pump new wells inthe oil and gas fields themselves.
Chart Industries announced on Thursday it has beenawarded a contract by an unnamed "major oil company" to buildand commission 20 retail LNG fuelling stations across NorthAmerica "built at existing truck stop sites with the intentionof adding dispensers alongside existing diesel fuelling lanes."The entire network should be rolled out by June 2015 accordingto the company.
Chart has already announced a series of contracts to providesmall-scale liquefaction plants, capable of producing around100,000 gallons per day, including one in Texas to supply LNGfor high horsepower oilfield applications in the Eagle Fordshale play.
In Canada, Westport has teamed up with locomotivemanufacturer Caterpillar Inc to demonstrate the firsthigh-pressure direct injection (HPDI) locomotive in 2014.Funding is being provided by the federal government'sSustainable Technology Development Canada agency as well as CNand other rail operators.
CN's trains are fuelled from a small-scale liquefactionplant operated by gas-producer Encana. Earlier this year, Encana commissioned a small liquefaction plant producing4-5,000 gallons of LNG per day 34 miles east of Calgary, whichsupplies LNG to the railroad, among other customers.
The company is also developing a much larger plant, capableof producing around 50,000 gallons per day near Grande Prairie,to supply LNG fuel for drilling companies, mines, trains andtrucks in the oil patch.
U.S. RAIL TRIALS
BNSF and rival railroad Union Pacific have bothstated they plan to test LNG-powered locomotives on their routenetworks. Both are among the largest diesel buyers in the UnitedStates. While LNG locomotives would require costly retrofits andnew, specially designed tenders, using natural gas rather thandiesel would significantly cut their operating costs.
But despite the hype, the concept remains at a very earlystage. New locomotives and tenders must be approved by the U.S.Federal Railroad Administration (FRA) which must certify theyare "in proper conditions and safe to operate withoutunnecessary danger of personal injury" (49 USC Chapter 207).
The railroads must make a safety case to the FRA beforerunning any tests on their networks. On August 26, the FRA wroteto the major trade associations representing the rail industryoutlining its conditions before granting approval for any tests.
"Recently, a number of railroads, vendors and otherinterested parties have requested meetings with FRA staff todiscuss potential plans and testing programmes related to theuse of natural gas ... as an alternative fuel source by therailroad industry," the agency's chief safety officer wrote.
"FRA is supportive of all efforts to use more efficient,less polluting, and domestically produced fuel in railoperations," he went on.
But "prior to initiating the testing of new dual-fuellocomotives or tender vehicles, railroads and vendors mustconduct a comprehensive safety analysis that must be provided toFRA for approval. This analysis must identify the risks of theoperation and any measures to mitigate those risks," the letterwent on.
In addition, the FRA will insist pilot programmes identifyany highway crossings at which there have previously beenincidents, and require additional safety measures to be taken atthem, such as flagging, meaning a person or other safetymechanism will provide additional traffic control.
Tenders will have to be engineered to ensure they canwithstand the forces between the two locomotives as well asavoid rupturing in the event of a crash.
Approval for the trials, let alone the trials themselves,still appears some way off.
LNG could be a rolled out to a significant share of thetrucking fleet before it is in widespread use on the railways,which would be ironic, because railroads with their centralisedfuelling facilities were thought to be more suited to using gas.
But there appears to be no insurmountable barrier to rollingout dual-fuel locomotives across a large part of the NorthAmerican rail network if gas prices remain at a deep discount todiesel.
TIPPING POINT
Following the oil shocks in 1973-74 and 1979-80, diesel andresidual fuel oil derived from crude lost much of their share ofthe market for heating and power generation. Now the 2003-2011oil shock threatens their last remaining dominant position inthe market for transport fuels.
Many oil analysts and exporting countries stillunderestimate the risk, and assume it will never happen. But itis the same blinkered thinking that confidently predicted shalegas and oil production would never amount to much.
In 2012, the United States consumed almost 8.7 millionbarrels of gasoline per day and 3.7 million barrels ofdistillate fuels, most of them used in transportation, accordingto the U.S. Energy Information Administration.
Much of that diesel fuel was used in trucks, locomotives andhigh horsepower industrial engines, where its market share isnow threatened by LNG and CNG.
The equipment needed to compress and liquefy natural gas,dispense it safely, store it on board, and use it in dual-fuelengines is being rapidly developed and installed across NorthAmerica.
LNG as a transport fuel enjoys powerful backing frompetroleum producers like Shell as well as majormanufacturers and suppliers like Caterpillar and GE andoilfield services companies like Schlumberger and BakerHughes.
The fuel market appears to be nearing a tipping point. Ifthe present gap between natural gas and crude oil prices remainsfor another 2-3 years, it should be enough for natural gas toestablish a major beach-head in the transport market, pittingcrude oil in direct competition with natural gas.
