The world is in the midst of a power transition – away from our gasoline, our high powered diesel engines, and harmful pollutants and toward a cleaner-burning, abundant fuel.
It’s the age of natural gas. You may not see it yet. You may not want it to be so, but in a lot of ways it’s already upon us.
While things still seem relatively normal, the U.S. is already the world leader in natural gas production; it rose to 2.198 trillion cubic feet in August, according to Bloomberg, the highest since 1973, and that number should grow 1.1 percent to 71.03 billion cubic feet per day in 2014.
Now what the industry needs are big time players to come in and build infrastructure to support the kind of production that will allow U.S. demand to grow into the future.
In the process, the potential to save significant amounts of money while burning a cleaner fuel that curbs greenhouse gas emissions will come to light.
So just where is it happening now?
Counting the Ways
Royal Dutch Shell (NYSE: RDS-A), General Electric (NYSE: GE), and Clean Energy Fuels (NASDAQ: CLNE) all have plans to make natural gas and shipping synonymous, as Bloomberg reports.
We could see whole fleets of merchant ships switch to natural gas in the very near future. Shell has announced its plan for LNG plants in the Great Lakes and the Gulf Coast areas. GE says it is looking at various locations to build plants for ships, trains, mining, and trucks. And Clean Energy will construct the country’s first fuel station for cargo ships running on natural gas in Jacksonville, Florida beginning next year.
In all, the U.S. is going to need between 50 to 100 plants to see this plan actualized by the year 2025. The hundreds of millions of dollars required to see it happen are nothing compared to what natural gas could save us in the long haul.
With an overabundance of cheap natural gas and tighter emissions standards for the maritime industry, the switch is necessary. The global fleet of 42 LNG-powered ships today will triple by next year, according to Bloomberg, reaching as many as 1,800 vessels by 2020.
Today, these ships use almost exclusively oil-based products for fuel, but that won’t be the case tomorrow. Depending on how fast infrastructure moves, we could see numbers fly past that 1,800 mark by 2020.
One big problem drilling companies face right now is the use of diesel fuel. It is often trucked into remote drilling sites from far away, involving a lot of unnecessary time and money. Instead, companies are looking to natural gas engines. Natural gas runs cheaper and cleaner, and it’s right here at our fingertips.
Ensign Energy Services Inc. (TSX: ESI) and Patterson-UTI Energy (NASDAQ: PTEN) will tell you the same thing: natural gas is the answer.
An exploration & production (E&P) company can save $600,000 on a single engine per year by switching to natural gas from diesel, according to Reuters. That translates to a rough estimate of about $1.8 million in fuel savings per rig just by using field gas over diesel.
You can’t deny those kinds of savings. And Caterpillar (NYSE: CAT) holds the majority of the current market, providing as much as 80 percent of the diesel engines that are in use today, followed by small numbers of Cummins Inc. (NYSE: CMI) and MTU Detroit Diesel engines.
Caterpillar is going to have to ready itself for natural gas, especially as strict diesel regulations from the U.S. Environmental Protection Agency take effect in 2015. Filling stations are going to need to go up too, and these new natural gas engines are going to need to be set up so they can burn gas from the very wells for which they are working.
GE is one company vying for a piece of Caterpillar’s market share with a gas engine of its own; both contend that their new engines could also run on gas produced at local wells. The two companies are used to going head to head, already competing in the locomotive engine market.
While those two battle it out on various fronts, CSX Corp (NYSE: CSX), a division of GE, announced last month that it will explore technology that would have locomotives running on liquefied natural gas (LNG).
In the coming months, diesel-powered locomotives will be outfitted with a kit that also is capable of powering the locomotive on LNG.
This is something we haven’t yet heard from Caterpillar. If it works, natural gas-powered trains could travel greater distances, make fewer stops, and be more economical and beneficial to the environment.
This train would revolutionize the industry.
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And it all circles around to the rigs they’re working for – the 1,700 or so oil and gas rigs that are actively drilling around the U.S.
The next step is to get rigs to be fully operational and run on natural gas – that is, the trucks to the rails and through the sea. Ensign, which has about 300 rigs globally, according to Reuters, says about 20 of them can be run on natural gas, with four of those running on dual fuel engines.
Using trucks with natural gas, we’re creating far less damage to our roadways and saving countless dollars to our local and federal governments. Those same savings extend to all aspects of an operation.
Playing the Part
There’s no way we can deny it now. Why would we want to? Even our passenger cars are being equipped to run on natural gas now. And the simple truth is that it works. BETTER.
We live in a world today where we must think of our future, and with that future, we have to think about the energy of today. The cleaner the better. Is natural gas perfect? No, but it’s a hell of a start.
It’s good to see these companies and others doing their part, no matter what the reasoning may be behind it.
As long as infrastructure keeps going up, we’ll be sitting pretty domestically; natural gas production will continue to soar; we’ll be exporting; and the U.S. economy will flourish once again. And investors will see massive profits.
It starts today.
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