All the talk of natural gas as a cheap alternative fuel has some who make or use diesel products rolling their eyes.
Not so fast, say backers of diesel, the fuel of choice for the largest, most powerful and thirstiest engines on the planet. They say talk of natural gas replacing diesel is nonsense being propagated by those trying to sell the now-cheap resource.
“It’s hysteria,” said Allen Schaeffer, executive director of the Diesel Technology Forum, a nonprofit advocacy group backed by BP and several engine manufacturers and automakers, including General Motors, Chrysler, Ford, Mazda, Volvo and Volkswagen.
“There’s no doubt in my mind that we’re going to be using more natural gas and I think that’s a good thing for national energy policy,” Schaeffer said. “I don’t think that means, by any stretch of the imagination, that diesel is on its way out.”
The way some executives have talked lately, however, that’s exactly what it might sound like.
“Large engines are going gas,” Joel Feucht, general manager for gas engines at Caterpillar, said in September at the High Horsepower Summit in Houston.
Feucht said in a recent interview that Caterpillar, also a member of the Diesel Technology Forum, believes many of the world’s largest engines will continue running on diesel. But the price advantage and comparable capabilities of natural gas-powered engines will offer an undeniable economic benefit for heavy fuel users, he said.
Customers already are looking for large engines that run on natural gas, which has prompted Caterpillar to develop natural gas-powered products, from mining trucks to locomotive engines.
Caterpillar is still heavily invested in diesel engines and expects that market to grow. But the strong interest in engines that run on cheaper fuel was inspiration enough to begin offering such products, Feucht said.
“We don’t do things on a whim around here,” Feucht said of Caterpillar’s bet on natural gas – though he wouldn’t disclose the size of the company’s investment in developing the products.
“We’ve studied this and we’ve come to the conclusion that we are all in,” he said. “And we are all in because we think that is going to happen.”
Upbeat about growth
But diesel makers say they’re confident about betting on their fuel.
“Refiners like Valero are investing in expansions that will increase the amount of diesel that we’re making because demand for diesel is growing at a faster rate around the world than demand for gasoline,” said Bill Day, a spokesman for Valero, the world’s largest independent refiner.
The growth prospects for diesel also look strong because of challenges in producing and distributing natural gas in the liquid form necessary for use in vehicle tanks. Diesel, by contrast, has an existing delivery infrastructure and fuels a type of engine that – after decades in which it often was associated with smoky exhaust – has improved dramatically in efficiency and cleanliness.
“There’s a reason we’ve used diesel fuel for the last century,” Day said. “It’s been what has worked.”
Schaeffer pointed out that the cost advantage for natural gas – now about 30 percent to 40 percent less for the energy equivalent of a diesel gallon – also may be more temporary than natural gas supporters believe.
Declines in natural gas availability could change the economics, he said – if the lower prices lead to reduced production, for example, or new regulations on hydraulic fracturing make drilling more expensive.
“Anyone who thinks there is not going to be substantial state and federal regulation on hydraulic fracturing is maybe not in touch with reality,” Schaeffer said.
But with widespread projections of strong U.S. natural gas production for decades to come, many believe a substantial price spread will remain between diesel and natural gas fuels.
The difference already has created savings for some companies, including natural gas producer Encana Corp., which powers about 40 percent of its drilling rigs with the very product it’s seeking, said David Hill, the company’s vice president of natural gas economy operations.
Encana saved $11 mil-lion in 2011 by running rigs on natural gas instead of diesel, Hill said. The cost of converting a rig engine to run on natural gas ranges from $300,000 to $900,000, he said.
Although there are up-front costs in a switch to natural gas, fuel price savings can result in a payback period of two to three years, Hill said.
In addition, despite improvements that have made diesel engines’ emissions of particulate matter almost negligible, natural gas still burns with about 30 percent less greenhouse gas emissions, Hill said.
While up-front costs and infrastructure remain a challenge in supplying customers with natural gas for large engines, the cost and emissions advantage have the potential to make it an attractive option, Hill said. But he conceded that natural gas isn’t likely to completely replace diesel, long a fixture on construction sites and railroads.
“I think just the bottom line is there’s room and enough space for alternative fuels in the market,” he said. “And what we’re happy with is now the fleets actually have a choice.”