A new study by IHS forecasts significant growth and value in the market for natural gas as a fuel in the heavy-duty transportation sector. The report, ‘LNG in Transportation: Challenging Oil's Grip,’ says that the use of natural gas as a transportation fuel could displace more than 1.5 million barrels per day (mbd) of oil demand by 2030.
Despite the report's title, that figure and the study's findings include both liquefied natural gas (LNG) and compressed natural gas (CNG) for heavy-duty transportation.
The report says a combination of drivers – environmental, technological and commercial – will drive greater adoption of natural gas in transport. The highest level of adoption will be in high-fuel-consuming applications such as trucks and ships.
“The fall of oil prices has diminished much of the glow from what was an overly optimistic market opportunity for natural gas in transportation,” says Michael Stoppard, chief strategist for global gas at IHS Energy. “Nonetheless, the shift to greater use of gas in trucks is set to continue.
“It is widely accepted that power generation is the primary growth market for natural gas demand, but gas as a fuel offers a new market with potentially more value,” he adds.
The study says that worldwide oil consumption in trucks is almost as high as in cars but notes that it is often more economic for truck fleets to switch to alternative fuel sources. Truck fleets have a relatively quick turnover, which could lead to faster adoption of new technology, the report explains.
IHS forecasts that natural gas demand in trucks will reach 81 billion cubic meters (BCM) by 2030 and be split between LNG and CNG. An additional 17 BCM in LNG demand is expected to come from ships by that same year. LNG demand in the truck and marine sectors is expected to account for 10% of all globally traded LNG at that time.
“At a time of abundant LNG supply in search of insufficient markets, this extra demand could be critical for mitigating oversupply,” says Rafael McDonald, the study's project manager. “Companies will need to adapt their business models to take advantage of the market opportunity,”
The study examines the impact of lower oil and fuel prices on the adoption of natural gas. Utilizing a detailed analysis of IHS Automotive data of global truck fleets, it finds that lower oil prices may slow adoption in the short term but are unlikely to halt it. Much of the “launch pad for expansion,” such as critical infrastructure, is either in place or close to being so in key markets such as the U.S. and China, awaiting a rebound in diesel prices, the study notes. The report adds that China – the world leader in LNG vehicle adoption, with annual sales orders of magnitude higher than in any other market – will remain critical to continued growth.
Although the growth outlooks for natural gas demand in fuel are strong globally, the study does find big differences between drivers and outcomes in key regions. However, the report says that, in all regions, tax treatment of fuels will be critical in determining consumer choice, especially as oil prices fluctuate, and a minimum level of fueling infrastructure is essential to jumpstart adoption.
