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Oil's sibling rival

Natural gas is slowly making its way into the transportation sector, although the marine-fuel segment looks most promising for now

Natural gas occupies a precarious niche among fuels in the transport sector. It offers a less polluting and sometimes cheaper alternative to gasoline and diesel. But in an era in which the choice is often polarised as one between oil on one hand and renewables-backed battery or fuel-cell technology on the other, gas can be portrayed as an unnecessary intermediate step, whatever the benefits.

This makes things tougher for gas producers and sellers seeking to expand this market, but the opportunities on offer could make it worth the effort. Maarten Wetselaar, Shell's integrated gas director, recently suggested that if the LNG sector could secure just 10% of the heavy-transport market, it would generate 70m tonnes a year of extra demand, almost as much as annual supply to Japan.

However, the collapsed oil price has done little to help the case for gas, reducing the price of petrol and the price advantage of gas, whether compressed (CNG) or LNG, so that the often-hefty upfront cost and inconvenience of a switch from oil to gas look even less appetising.

That is certainly the case in Western countries, where the use of natural gas in transport has tended to be restricted to heavy-duty vehicles and shipping, partly because regulations and incentives tend to favour electric vehicles over natural gas in the passenger-vehicle sector.

Limited refuelling infrastructure also remains an obstacle, leaving governments and industry with the chicken-and-egg conundrum of whether greater investment in vehicle sales or refuelling infra-structure should be the priority.

“The status quo is that we run on petrol. Two of the largest industries in the world are the vehicle industry and the oil industry”

And then there is the might of vested interests. "The status quo is that we run on petrol. Two of the largest industries in the world are the vehicle industry and the oil industry," says Jeffrey Seisler, head of Brussels-based Clean Fuels Consulting and a long-time advocate of natural gas vehicles. He says their clout makes it harder for rival transport fuels.

Not that anyone has given up arguing the case. Natural gas vehicles (NGVs) have two significant advantages over electric and fuel-cell cars in that they have been around for a long time and the gas is used to power widely employed existing technology, in the shape of the internal combustion engine. "It's been an easier transfer for the automotive and truck suppliers to develop NGV," says Seisler.

Long-haul, heavy-duty trucks also need more power and longer ranges than batteries can provide, so natural gas has no real competition from the electric sector at that end of the market.

In some developing countries, CNG has long been promoted as an alternative to gasoline, as a way of using relatively cheap local or imported gas supply to reduce dependence on oil imports at times when the oil price has been high or supply scarce.

China, Iran, India and several Latin American countries are among nations that have adopted this strategy. More than 20m vehicles around the world run on natural gas, a fraction of the total global vehicle fleet, but it is still a significant-and growing-number.

In Western countries, uptake has been slower, even in the US, where efforts have been made to promote the country's abundant shale reserves as a source of fuel for heavy-duty vehicles.

The lower environmental emissions of natural gas compared to petrol and diesel also weigh in its favour. In this regard, natural gas has the opportunity to become a major force in marine transport. Tighter emissions regulations around the US and EU coasts-and the imminent tightening up of rules elsewhere-have prompted the marine industry to increase the use of LNG as a transport fuel, taking advantage of its reduced sulphur oxide (SOx) and nitrogen oxide (NOx) emissions compared to marine oil.

Lighting the ether

So, while adoption of CNG and LNG as transport fuels may be patchy, demand should still rise. Natural gas used as a transport fuel could displace more than 1.5m b/d of oil demand by 2030, according to a 2015 report from consultancy IHS Markit. Serious inroads into the trucking, goods and public transports markets alone would be a big prize for the gas industry. In the UK, for example, diesel-fuelled heavy goods vehicles, light goods vehicles and buses account for around 40% of road transport fuel consumption, according to government data.

IHS Markit forecast global demand for both CNG and LNG from trucks by 2030 would reach 81bn cubic metres, while a further 17bn cm of LNG demand was forecast to come from the shipping sector. According to NGV Communications' database, global gas demand from NGVs in 2015 was around 26bn cm.

If the IHS predictions prove accurate, the truck and marine sectors could account for around 10% of all globally traded LNG in 2030.

"It's not a huge amount in terms of total demand for natural gas, but it's still a nice little earner, if you are looking for alternative markets" says Chris Le Fevre, senior visiting research fellow at the Oxford Institute of Energy Studies, who has written extensively on gas as a transport fuel.

This article is part of a report series on Gas in Transport. Next article: Floating fuel opportunities for LNG

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