Apache works to promote natural gas as transportation fuel

Like many of its energy-producing peers, Houston’s Apache Corp. is trying to spur what it hopes will become a sweeping shift in the nation’s transportation fuel from black gold toward shale gas.

In an effort to increase demand for the natural gas it produces by making the fuel more accessible to potential consumers, Apache paid about $1.3 million for a compressed natural gas station near Bush Intercontinental Airport, which began fueling the Houston Airport System’s fleet
of 30 CNG-powered parking shuttles last month.

The one-pump station on Greens Road is being operated and maintained under contract with the city by Clean Energy Fuels. The company, co-founded by Texas billionaire and natural gas champion T. Boone Pickens, builds natural gas fueling stations and advocates for the expansion of natural gas as a vehicle fuel.

The arrangement with the city resulted from a 2009 meeting between Apache CEO G. Steven Farris and Houston’s then-mayor, Bill White, who launched a host of environmental initiatives.

At the time, Apache was converting its fleet to run on clean-burning natural gas, and Farris offered to build the fueling station for the city if it began converting, too.

Late last year, the city retired its diesel-powered shuttles, purchased an all-new CNG-powered fleet and renamed its shuttle service EcoPark — a $2.7 million investment.

Airport System Director Mario Diaz said that using CNG rather than diesel will save about $360,000 a year because at current prices, natural gas costs about a third less than diesel for equivalent energy. It also will reduce emissions and shuttle maintenance costs, he said.

But what’s in it for Apache?

“Our industry became very, very good at finding natural gas,” said Robert Dye, Apache’s senior vice president of global communications. “The question is, ‘How do you deal with that supply?’?”

In the past few years, hydraulic fracturing, horizontal drilling and other technologies have unlocked once-inaccessible gas in dense shale rock, resulting in a natural gas glut and the lowest prices in a decade.
Apache and other producers are trying to turn the tides of supply and demand in their favor by encouraging the infrastructure changes necessary to make more use of the fuel.

Because natural gas is plentiful and emits less greenhouse gas than coal, its use for electricity generation is growing.

But using it to fuel the growing transportation market is plagued by a classic chicken-and-egg conundrum, especially with private passengers cars and trucks: Most vehicles still run on gasoline or diesel. Consumers don’t want natural gas-powered cars if there aren’t plenty of fueling stations, and businesses don’t want to invest in fueling stations without more gas vehicles.

The United State has just over 1,000 CNG stations and only about 50 liquefied natural gas stations, and many of them are for private fleets and aren’t open for general use.

Dye of Apache acknowledged it would take a lot of infrastructure but said he is optimistic about the potential for natural gas to become the “transportation fuel of choice.”

“I think you just have to do it one station at a time, which is what we’re doing,” Dye said.

Apache is focusing primarily on converting fleets of buses or other vehicles that drive many miles a day, but start and finish in the same place so they aren’t dependent on fueling stations in multiple locations.
“The most obvious people who would want to use the CNG would be the fleet managers, so I think that’s the first group that we’ll build out,” he said, noting the next target would be auto manufacturers.

Many major companies that operate large fleets, including AT&T and UPS, have converted a portion of their vehicles to run on natural gas. In May, Houston-based Waste Management announced plans to convert its 18,342-truck fleet from diesel to CNG.

“This is sort of like the beginning of, I think, a three- to four-year really big ramp-up,” said Frank Chapel Jr., Apache’s director of natural gas transportation fuels.

He cited a collaboration between Love’s Travel Stops & Country Stores and Chesapeake Energy to build 10 CNG stations in Oklahoma, and Shell Oil Co.’s recent announcement of plans to supply liquefied natural gas stations at 100 interstate highway fueling stations next year.

Liquefied natural gas provides greater range but is more costly to use.

Apache has converted more than a quarter of its own domestic fleet of about 1,000 vehicles and hopes to reach 80 percent by 2015.

“I think we all really believe that conventional gasoline retailers will start to get involved in this,” Chapel said.


Cheaper and cleaner

Compressed and liquefied natural gas burn cleaner than gasoline or diesel and provide the same amount of energy at lower cost. Price for a gallon of diesel or its equivalent this week:
Diesel — $3.65
Gasoline — $3.02
Compressed Natural Gas (CNG) — $2.27
Liquefied Natural Gas (LNG) — $2.86
Sources: Clean Energy Fuels; U.S. Energy Information Administration.