CNG as a Transportation Fuel: A Fuel Manager’s Perspective

Since 2009, natural gas prices have followed a decidedly different path than gasoline and diesel prices. Natural gas prices have dropped 43 percent, while gasoline and diesel prices increased by more than 200 percent. These divergent price trends have created an opportunity to use compressed natural gas (CNG) as a transportation fuel.

Based on the value of natural gas as a transportation fuel, one would expect a rush to develop natural gas fueled vehicles and install natural gas refueling facilities. GM and Chrysler have both announced plans to roll out bi-fuel pickup trucks, and garbage disposal company Waste Management expects to increase its dedicated CNG fueled waste hauler fleet by at least 30 percent per year for the next several years. Most importantly in 2013, automotive natural gas engine developer Cummins Westport will release a commercially available dedicated 11.9-liter high load capacity engine. These developments point to the growing potential to utilize natural gas as a transportation fuel.

There are also positive developments for creating refueling facilities. Clean Energy Fuels, the largest U.S. provider of natural gas refueling stations, and Chesapeake Energy, an oil and natural gas producer, have announced a multi-year, $150-million project to install and operate liquid natural gas refueling facilities across the interstate highway system. Recent acquisitions by fuel company Mansfield Oil and energy supply solutions provider Integrys Energy will also give traditional refueling facility contractors access to capital — and likely more aggressive growth plans.

Now that the industry is advancing, it is important to consider fuel supply management activities. The success or failure of a facility rests, in part, on how well natural gas supplies are managed. The following three factors are central to successful fuel management.


  1. Fuel delivery management. Natural gas is delivered to CNG refueling facilities in a completely different manner than liquid fuels. Natural gas, as a transportation fuel, is delivered in a compressed form and metered as the fuel is dispensed into the vehicle tank. Determining the resale price can be challenging. The utility meter and dispensing meter likely will not match either volumetrically or in time sequence. In addition, the fuel (or inventory) price at the time transportation fuel is dispensed may not be known. Another aspect of fuel delivery management is the natural gas supplier. In most regions, an end user can purchase natural gas on the market, and have the local distribution company (LDC) deliver through its distribution system for a fee. Generally, it is less expensive to purchase supply on the open market and "transport" to the refueling facility. Securing third-party gas supply is complicated, however, and requires dealing with multiple parties, including natural gas producers, long-haul pipelines, and the LDC. Smaller facilities may decide that the time and effort required are not worth the savings.
  2. Price spread. There is significant interest in natural gas as a transportation fuel because of the massive spread between natural gas prices and traditional liquid fuel prices. Today, the wholesale price of liquid fuels is six times the wholesale price of natural gas. Will this spread continue or will we move back to more historic spread relationships?
  3. Data management and reporting. It is challenging to track energy use and costs, and interpret the data. What is your gas cost? What is your conversion cost (compression costs, lost gas)? How should you charge for your product? That baseline information is needed to set resale prices.

Benefits and Investments

In the future, there will likely be an increase in natural gas use as a transportation fuel. Costs for consumers will be reduced, the United States will reduce dependency on imported oil, and the environment will benefit from cleaner-burning natural gas. Using natural gas as a transportation fuel, however, requires multistep capital and operating considerations.

Leave a Reply

Your email address will not be published. Required fields are marked *