By Ersin Merdan
Natural gas as the next transportation fuel

- The Writer holds an MSc in Eurasian Political Economy & Energy from King’s College London and also an MA in European Studies from Sabanc─▒ University.

The possibility of abundant supplies of natural gas in various forms around the world as a transportation fuel has raised the question as to whether it can become an alternative fuel to oil, and if so, would oil demand falter in the coming years. The World Energy Outlook 2015, published by the International Energy Agency, stated that natural gas use has expanded rapidly in the transportation sector. An annual growth rate of 5 percent has been seen, reaching 43 billion cubic meters (bcm) in 2013 and is projected to increase to 160 bcm by 2040. With improved emissions performance supported with lower prices, the drivers of natural gas vehicles (NGV) would have advantages over transport with oil-based products.

Although lower oil prices have had a negative impact on the pace of expansion in the number of NGVs in recent years, the more than 22 million NGVs on the road in 2017 indicate that the upward trend will continue but at a slower rate. In particular, concerns over air quality as well as oil supply security have forced some governments to initiate policies to promote infrastructure development to increase the overall sale of NGVs.

However, some key factors need to be overcome to increase the global gas capacity in transportation, which would make the use of natural gas more attractive. Firstly, the switch to NGVs would mean higher upfront costs and possibly costly repairs and maintenance. Another obstacle is the shortage of refueling stations, which would hinder their deployment as the majority of drivers and manufacturers would be hesitant to buy or transfer over to a NGV with an inadequate refilling station network.

Furthermore, the deficient number of NGVs on the road is not encouraging for fuel providers to invest in the required infrastructure to promote this sector. This paradox creates a hurdle for the sector to flourish. And lastly, the well-established, old fuel supply chain in the oil sector, which has proven to be efficient and well responsive to the market needs, is in direct competition and creates challenges to the expansion of NGV’s since it is still a nascent sector with a relatively new network.

The consumer market appears to be a difficult market to break into, however, the commercial sector for NGV’s looks much brighter. A report written by the consulting company IHS CERA in 2013 indicates that by 2030, natural gas in the form of Compressed Natural Gas (CNG) and Liquefied Natural Gas (LNG) carries the potential to replace 1.5 million barrels of oil in the transportation sector. This would mean that oil’s dominance in the transportation sector would likely continue for decades to come, but competition in the sector could intensify to an extent that has not been seen in the history of transportation.

The IHS CERA report shows, with the exception of aviation fuel and lubricants, other remaining sub-sectors have room for the highest growth for on-road vehicles. Due to market dynamics and costs, medium-duty and heavy-duty vehicles are expected to expand market share in natural gas consumption.

Given the recent acquisition and mergers in the energy sector, especially Royal Dutch Shell ‘s recent acquisition of the BG Group, this turn of events could be interpreted that oil giants are becoming more interested in the production of natural gas, which in turn could increase the overall viability of gas consumption in the transportation sector.

The lack of consumer knowledge and awareness of the potential benefits that NGVs can provide hinders the NGV industry from making further progress in keeping pace with other sectors. Therefore, it is of the utmost importance to increase this awareness through existing and/or the creation of industry associations. Furthermore, government websites and industry stakeholders should promote the advantages of NGVs as advertisements made through manufacturers alone would not have the same impact as publicity from multiple stakeholders.

NGVs in countries rich in natural gas sources makes much more sense to diminish the overall dependency on oil imports, but the benefits of NGVs can filter down to other parts of the world once initial investments are made.

Therefore, for natural gas to take off in the transportation sector and to increase its overall share in the energy mix, the expansion of a gas infrastructure and fueling system is a must. Secondly, government incentives in the form of tax deductions on fuel prices as well as grants given for infrastructure would also increase the overall attractiveness of the NGVs in the years to come.

Consequently, improvements and harmonization in gas sector regulations and standards are vital for the natural gas industry to compete with its well-established rival - oil.  

The global transportation market offers potential new sources of natural gas demand. Given the recent technological developments in the engines of NGVs, fuel cost savings and the improvement in air quality this can be achieved in parallel with governmental policy directives. As an alternative choice for cleaner energy, natural gas provides a transitional path towards achieving up to 20 to 25 percent less CO2 emissions in comparison with other petroleum fuels. Although consumption of natural gas in the transportation sector has been increasing gradually in comparison with other alternative fuels, it should be noted that for NGVs to continue maintaining current levels of growth, a system that supports the growth of vehicle and supply infrastructure is needed.

- Opinions expressed in this piece are the author’s own and do not necessarily reflect Anadolu Agency's editorial policy.

20 Mar,2017
ANALYST