Subscribe to our free, weekly email newsletter!

PLS Logistics Services study examines benefits and obstacles of LNG usage in freight transportation

By Jeff Berman, Group News Editor
April 24, 2012

While United States-based natural gas production continues to flourish, with domestic production expected to increase 41 percent by 2020 and current prices at a ten-year low, transportation carriers remain slow to embrace natural gas for various reasons despite its myriad benefits, according to data from PLS Logistics Services, a Pittsburgh-based non-asset 3PL focused on the industrial sector.

In its report, entitled “Use of LNG-Powered Vehicles for Industrial Freight: Carrier survey results show high interest, but slow adoption,” PLS surveyed senior executives at 100 industrial freight carriers in an effort to determine the potential of Liquefied Natural Gas (LNG) vehicle usage for industrial freight, according to company officials.

While there are clear benefits of increased LNG usage for industrial freight carriers, including reduced fuel expenses; and reduced price volatility based on a use of a domestic freight source; reduced carbon emissions, among others, the report pointed a slow growth path to carriers actually getting on board with LNG in the short run.

This was exemplified in the data, with a cumulative 76.1 percent of respondents stating they were “either aware of LNG technology or were actively analyzing its use,” but no carriers said they were preparing to purchase LNG trucks in 2012 and another 1.6 percent said they expect to purchase LNG trucks at a later date. On the other end were 22.5 percent of surveyed industrial carriers that said they were not aware of LNG-related vehicles and technologies.

In an interview with LM, PLS Senior Vice President Jim Ruiz said that if LNG were to be adopted in a significant way in transportation, it would provide another demand outlet for the amount of natural gas being drilled. 

“If it stabilizes and provides a floor for the price of natural gas, that is going to allow people to make drilling decisions based on a little bit less of a cycle than we are seeing now,” said Ruiz. “When drilling is heavy, the bottom falls out on price. For us when we look at it in the key industries we focus on, increased natural gas drilling means more pipe, which means more steel, which means more iron ore, and more frack sand and equipment.”

And with more carriers experimenting with Compressed Natural Gas and LNG initiatives, Ruiz said when this survey was conducted in February it was conducted to see LNG awareness at a high level and not surprised to see low adoption levels, because the engine technology is not ready to be widely deployed yet.

In addressing the biggest obstacles of LNG adoption, leading the list at 53.6 percent was the inadequacy of the LNG refueling infrastructure, with only 46 public LNG stations in the U.S., according to United States Department of Energy data. As LM has reported, Clean Energy Fuels Corp., the largest provider of natural gas fuel for transportation in North America, has raised $450 million to build 150 LNG stations in a partnership with Pilot Flying J travel centers to develop “America’s natural gas highway” and establish stations 250-300 miles apart.

“This seems like an obstacle where there is going to be some investment to overcome this obstacle,” said Ruiz.

The second biggest adoption obstacle at 23.2 percent was the higher cost of LNG vehicles, which PLS pegged at $30,000-to-$50,000 more than diesel. The report noted that the ROI for this added expense is less than one year for high-mileage vehicles, and added there are other ongoing efforts to mitigate costs such as a partnership between Clean Energy and Navistar to provide leases that eliminate the equipment cost differential if a carrier inks a long-term fuel deal with Clean Energy. PLS also pointed out that there are also bills in the House and Senate promoting tax incentives for the purchase of LNG vehicles, which each have White House backing.

And the third obstacle based on respondent feedback was 14.3 percent indicating that the fuel savings potential was not clear. PLS said precise numbers for savings are not available, because a portion of the fuel savings may be reduced by performance degradation, maintenance costs, and other factors.

Even with a lack of numbers, T. Boone Pickens, founder and chairman of BP Capital Management and Clean Energy Chairman Emeritus, said at the 2011 Transplace Shipper Symposium that if the 8 million Class 8 vehicles on the road today in the U.S.  switched from diesel to natural gas, that would represent a reduction of 2.5 million barrels in imported oil per day and cut down on the 35 billion gallons of diesel consumed per day by the trucking industry, with a $1-$2 dollar per gallon decrease, too.

A leading green supply chain expert told LM that in increased drilling of LNG, green gasoline technology, and LNG truck refueling stations is certainly going to be met with interest from the trucking industry and shippers.

“I have no doubt that the use of LNG will increase in the years ahead,” said Brittain Ladd, global supply chain consultant for CapGemini Consulting. “However, what needs to be understood by all is that the demand for energy is so great in the US and the world that OPEC will continue to play a key role in meeting world energy needs. Additionally, OPEC is also investing heavily in alternative fuel technologies such as LNG, solar, and biomass so I would encourage the key players involved in the development of energy to make a commitment for collaboration and not confrontation.”

About the Author

Jeff Berman headshot
Jeff Berman
Group News Editor

Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. .(JavaScript must be enabled to view this email address).

Subscribe to Logistics Management magazine

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your
entire logistics operation.
Start your FREE subscription today!

Recent Entries

Seasonally-adjusted (SA) for-hire truck tonnage in October at 135.7 (2000=100) was up 1.9 percent compared to September’s 133.1, and the ATA’s not seasonally-adjusted (NSA) index, which represents the change in tonnage actually hauled by fleets before any seasonal adjustment was 139.8 in October, which was 0.9 percent ahead of September.

The average price per gallon of diesel gasoline fell 3.7 cents to $2.445 per gallon, according to data issued today by the Department of Energy’s Energy Information Administration (EIA). This marks the lowest weekly price for diesel since June 1, 2009, when it was at $2.352 per gallon.

In its report, entitled “Grey is the new Black,” JLL takes a close look at supply chain-related trends that can influence retailers’ approaches to Black Friday.

This year, it's all about the digital supply network. In this virtual conference, we will define the challenges currently facing supply chain organizations and offer solutions designed to transform linear operations into dynamic, automated networks that offer seamless communication, visibility, and the ability to respond and optimize processes at any given time.

In his opening comments assessing the economy at last week’s RailTrends conference hosted by Progressive Railroading magazine and independent railroad analyst Tony Hatch, FTR Senior analyst Larry Gross said the economy continues to slog ahead at a relatively tepid pace, coupled with some volatility in terms of overall GDP growth. And amid that slogging, Gross said there is currently an economic hand-off occurring between the industrial sector and the consumer sector.

Article Topics

News · 3PL · PLS Logistics Services · LNG · All topics


Post a comment
Commenting is not available in this channel entry.

© Copyright 2015 Peerless Media LLC, a division of EH Publishing, Inc • 111 Speen Street, Ste 200, Framingham, MA 01701 USA