In 2019, TOTAL co-filed two patents with an airship-technology company, Flying Whales, aiming to lower the logistical costs of moving capital equipment into remote areas. An example is shown above. The LCA60T is envisaged to carry up to 60T of cargo (c4x the capacity of a truck), with a range of 100-1,000km. This short note assesses the opportunity, and whether these new airships could displace trucks, or lower diesel demand. We are most excited by the impact for onshore wind.
Gas demand could treble by 2050, gaining traction not just as the world’s cleanest fossil fuel, but also the most economical. The ascent would be driven by technology. Hence this note outlines 200MTpa of potential upside to consensus LNG demand, via de-carbonised power and shipping fuels. LNG demand could thus compound at 8% pa to 800MTpa by 2030, justifying greater investment in unsanctioned LNG projects.
Next-generation technology in small-scale LNG has potential to reshape the global shipping-fuels industry. Especially after IMO 2020 sulphur regulations, LNG should compete with diesel. Opportunities in trucking and shale are less clear-cut.
This note outlines the technologies, economics and opportunities for LNG as a transport fuel, following a three-month investigation.
- Why technology matters. Pages 2-4 of the note describe incumbent technologies in small-scale LNG, and the need for superior solutions.
- The cutting edge . Pages 5-7 draw on patents and technical papers to describe next-generation technologies, at the cutting edge of small-scale LNG. We model that they are economic. They can can provide LNG to the market at $10/mcf.
- Potential to transform shipping-fuels. Pages 9-13 find strong economic upside for novel LNG technologies in the shipping industry, with potential to create 40-60MTpa of incremental LNG demand, looking across the global shipping fleet.
- Less positive on LNG as a trucking fuel. Pages 14-15 explain why the economics are more challenging for LNG use in land-transportation, i.e., trucking.
- Less positive on LNG use in shale. Page 16 explains, similarly, why LNG is less advantageous in the shale patch than converting rigs and frac spreads to piped gas.
- Other technologies. Page 17 notes other companies with interesting offerings in small-scale LNG liquefaction, including advances by Exxon and Shell.
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We have assessed whether gas is a competitive trucking fuel, comparing LNG and CNG head-to-head against diesel, across 35 different metrics (from the environmental to the economic). Total costs per km are still 10-30% higher for natural gas, even based on $3/mcf Henry Hub, which is 5x cheaper than US diesel. The data-file can be downloaded here.
The challenges are logistical. Based on real-world data, we think maintenance costs will be 20-100% higher for gas trucks (below). Gas-fired spark plugs need replacing every 60,000 miles. Re-fuelling LNG trucks requires extra safety equipment.
Specially designed service stations also elevate fuel-retail costs by $6-10/mcf. Particularly for LNG, a service station effectively ends up being a €1M regasification plant (or around $250/tpa, costs below).
We remain constructive on the ascent of gas (below), but road vehicles may not be the best option.
To flex our input assumptions, please download our data-model, comparing LNG, CNG and other trucking fuels across 35 different metrics .