Pivotal LNG, a wholly owned subsidiary of AGL Resources (NYSE: GAS) will own and operate liquefaction facilities and sell liquefied natural gas (LNG) as a substitute fuel for transportation and other mechanical uses in the wholesale market.
LNG is natural gas cooled to the point of becoming a liquid making it much easier to transport for use where piped natural gas is impractical or unavailable.
Pivotal LNG is positioned to move increasing volumes of LNG into the liquid fuel market by capitalizing on AGL Resources' unique and strategic history of building, owning, and operating LNG facilities.
There are three fundamental factors encouraging the use of LNG as a substitute for diesel fuel within the U.S. They are: 1) large market potential for LNG, 2) wide and persistent price spread between diesel fuel and LNG, and 3) environmental advantages of LNG over diesel.
Fundamentally, three factors drive the opportunity for LNG to displace diesel as a fuel. First, the current price spread between diesel and LNG (and their precursors — crude oil and natural gas) is significant and sustainable across a range of fuel price scenarios. This price spread is sufficient to support required liquefaction and distribution infrastructure, including return on investment, with a significant margin left to protect against a collapse in oil prices and/or a run-up in natural gas prices. Massive new U.S. shale natural gas reserves have contributed to the decoupling of domestic natural gas prices with global oil prices and supporting the belief that the current price spread will be maintained. The current spread between diesel and LNG prices at the pump is over $1.75 per diesel equivalent gallon.
Crude Oil and Natural Gas Prices $/MMBtu
Source: Energy Information Administration â€“ AEO 2010
Second, the size of the diesel market, in excess of 35 billion gallons of on-highway consumption in 2010, represents an enormous growth opportunity. While commercially proven technology exists to penetrate this market, LNG vehicles represent less than 1% of all heavy duty trucks on the road today.
Annual U.S. Diesel Consumption by Market Segment
Source: Energy Information Administration - U.S. Sales of Distillate Fuel Oil by End Use â€“ Release Date 2/28/2011
Third, environmental restrictions have and will continue to increase on diesel emissions making the use of much cleaner natural gas very attractive as engines using natural gas already meet 2016 emission restrictions. Natural gas fueled combustion engines are environmentally much cleaner that diesel fueled engines as calculated by the EPA:
Source: Department of Energy: EERE
- Produce half the particulate matter
- Significantly reduce carbon monoxide emissions
- Reduce nitrogen oxide and volatile organic hydrocarbon emissions by 50% or more
- Potentially reduce carbon dioxide emissions 25% depending on the source of the natural gas
- Drastically reduce toxic and carcinogenic pollutants
For more information, please contact:
Tim Delay, Vice President, Fuels, 404-584-3622
David Jaskolski, Trucking, 404-783-3550
Paul Herrgesell, Marine/Rail, 404-859-3023
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