Jan. 31 (Bloomberg) -- Royal Dutch Shell Plc may spend $2.5 billion on a natural gas plant in southern Iraq to meet energy demand in the Middle East, where economies are growing 5.9 percent a year, according to a person involved in the plan.
Shell met with Iraqi officials in The Hague last week to propose building a pipeline that would link the Basrah region to a new facility on the country's coast, the person said. Shell would also build a facility that could freeze 16 million cubic meters of gas a day and ship it to Kuwait and the United Arab Emirates, the person said.
Gas demand in the Persian Gulf grew 28 percent from 2003 to 2006 as the United Arab Emirates and Saudi Arabia developed steel, aluminum and chemical industries to curb their reliance on crude oil exports. Shell, based in The Hague, needs new energy sources after oil and gas production fell 14 percent in four years.
``The Gulf Arab states need extra sources of gas one way or another,'' said David Butter, a London-based senior Middle East analyst at the Economist Intelligence unit. ``And you'd expect Shell to be looking very closely at Iraq as it has unique potential.''
Iraq had 3.17 trillion cubic meters of gas in reserves at the end of 2006, according to estimates by BP Plc. The proposed project's daily output would be enough to supply about 14 percent of the U.A.E.'s demand, the BP figures show. Abu Dhabi National Energy Co., a state-run utility in one of the country's seven sheikdoms, plans to expand its power capacity by 78 percent, to 16,000 megawatts, over five years.
Iraqi Contracts
Shell may complete its proposal in about a week, the person said. Representatives in Shell's press offices in The Hague and in London couldn't be reached for comment. Calls to the Iraqi Oil Ministry spokesman weren't answered.
Middle East gas consumption has grown faster in the past decade than in the U.S., Europe and Asia, according to BP. Use of the fuel in the region almost doubled to 289 billion cubic meters annually in the 10 years through 2006, BP said.
Prices for Algerian LNG tripled in the five years through Sept. 30, according to Gas Strategies Group Ltd. Producers have charged more amid rising construction costs and a shortage of equipment and contractors.
LNG is natural gas that's chilled to a liquid, shipped by tanker and then turned back into gaseous form at its destination.
Thursday, January 31, 2008
Wednesday, January 30, 2008
LNG Projected in New Guinea Priced at $10 Billion
OIL SEARCH and its partners in a proposed liquefied natural gas project in Papua New Guinea expect to decide whether the project will proceed to the next stage - front-end design and engineering - by the end of March.
The partners, led by operator Exxon Mobil, last year said a 6.3 million tonne a year, two-train LNG development with an onshore plant near Port Moresby was likely to cost around $US10 billion ($11.25 billion), but that figure is under review.
JP Morgan has assumed the project cost will rise to $US11 billion, given capital cost decreases are exceedingly rare in the current heated market for skilled construction workers and raw materials. Oil Search said a financing review presented to the partners in December indicated "considerable market depth and capacity to provide the funding required to support the project".
Exxon expects to start marketing the LNG on behalf of the joint venture participants, including Oil Search, Santos, AGL Energy and Nippon Oil, once it has decided to proceed to the two-year front-end design and engineering phase.
After a site visit in November, a JP Morgan analyst, Mark Greenwood, said the length of the engineering phase appeared "quite staggering". The project is expected to start production in 2013 or 2014.
"We believe that a faster schedule could be achieved," Mr Greenwood said. "The fact that Exxon is setting such a conservative schedule is somewhat of a concern, because there is a tendency for project teams to meet conservative targets."
The Papua New Guinea project has been Oil Search's key growth initiative since the collapse of the proposed $8 billion PNG-Australia gas pipeline last year. "The gas project is the key thing for Oil Search, the only thing that matters, and that looks broadly on track," a Morgan Stanley analyst, Stuart Baker, told Bloomberg.
Oil Search shares closed 35c lower at $4.35 yesterday after it revealed production at its ageing PNG oilfields had fallen 2.2 per cent during the December quarter versus the September quarter.
Oil Search produced 9.78 million barrels of oil equivalent last year, giving it a record sales revenue of $US690.2 million due to the higher oil price. The company sold two of its three December cargoes at prices above $US100 a barrel.
Oil Search is undertaking a company-wide review which may result in it deciding to sell its interests in the Middle East. The projects contribute only a small amount of production and revenue. Oil Search expects to release the initial results of the review towards the end of this quarter.
The partners, led by operator Exxon Mobil, last year said a 6.3 million tonne a year, two-train LNG development with an onshore plant near Port Moresby was likely to cost around $US10 billion ($11.25 billion), but that figure is under review.
JP Morgan has assumed the project cost will rise to $US11 billion, given capital cost decreases are exceedingly rare in the current heated market for skilled construction workers and raw materials. Oil Search said a financing review presented to the partners in December indicated "considerable market depth and capacity to provide the funding required to support the project".
Exxon expects to start marketing the LNG on behalf of the joint venture participants, including Oil Search, Santos, AGL Energy and Nippon Oil, once it has decided to proceed to the two-year front-end design and engineering phase.
After a site visit in November, a JP Morgan analyst, Mark Greenwood, said the length of the engineering phase appeared "quite staggering". The project is expected to start production in 2013 or 2014.
"We believe that a faster schedule could be achieved," Mr Greenwood said. "The fact that Exxon is setting such a conservative schedule is somewhat of a concern, because there is a tendency for project teams to meet conservative targets."
The Papua New Guinea project has been Oil Search's key growth initiative since the collapse of the proposed $8 billion PNG-Australia gas pipeline last year. "The gas project is the key thing for Oil Search, the only thing that matters, and that looks broadly on track," a Morgan Stanley analyst, Stuart Baker, told Bloomberg.
Oil Search shares closed 35c lower at $4.35 yesterday after it revealed production at its ageing PNG oilfields had fallen 2.2 per cent during the December quarter versus the September quarter.
Oil Search produced 9.78 million barrels of oil equivalent last year, giving it a record sales revenue of $US690.2 million due to the higher oil price. The company sold two of its three December cargoes at prices above $US100 a barrel.
Oil Search is undertaking a company-wide review which may result in it deciding to sell its interests in the Middle East. The projects contribute only a small amount of production and revenue. Oil Search expects to release the initial results of the review towards the end of this quarter.
Tuesday, January 29, 2008
Natural Gas Prices Looking Good Long Term for Producers!
CALGARY -- Is natural gas on the rebound?
It has been such a long time since anyone warmed up to natural gas that we've grown accustomed to view it as a business in blow-down mode, particularly in high-cost Western Canada.
Yet some analysts are beginning to see an end to the two-year downturn that pushed many smaller companies out of business -- and bigger ones to other basins.
Richard Wyman, vice-president and senior oil-and-gas analyst at Canaccord Adams, said the encouraging signs for the Canadian sector include a Canadian dollar that has weakened from its high, a colder-than-expected winter, falling costs for oilfield services and land, and a flattening in drilling in the United States, which should moderate supplies.
"It looks to me that we may be rightsizing this whole thing this winter," he said. "The direction is definitely positive."
In a note Monday, UBS Securities Canada Inc. analysts said: "Sentiments toward natural gas weighted domestic producers appears to be improving, with many names rising off their lows."
"This winter may be the turning point for natural gas prices," Peters & Co. energy analysts said in their recently released North American energy outlook.
"Perhaps the tide is turning for natural gas weighted companies."
There have been some encouraging signs from producers, too.
Last week, BP PLC said it will re-enter the natural-gas business in Western Canada with a $1-billion unconventional gas play in British Columbia. El Dorado, Ark-based Murphy Oil Corp. had just revealed it spent $224-million in December buying up land in British Columbia.
Natural-gas prices have climbed nearly 50% since last year's third quarter, closing Monday at US$8.09 per million British thermal units on NYMEX, up US11.2¢.
Indeed, deep spending cuts by the Canadian sector, in which costs shot up as prices weakened, curbed supplies from Western Canada by more than 500 million cubic feet a day in 2007, and are set to drop by more than one billion cubic feet (bcf) a day this year, says Peters, which has boosted its natural-gas price assumptions for 2008 to an average of US$8.35 for NYMEX.
Brightening the picture for Western Canada is that drilling and completion costs have come down 25% from the peak in 2006, the brokerage estimated.
North American inventories, which for two years seemed to be stuck on full, are deflating.
Storage in the United States is now 221 bcf below last year and about 185 bcf above the five-year average, while a major withdrawal of 225 to 235 bcf is expected to be reported next, which would be well above the year ago the five-year averages, UBS said.
Supporting the optimisim is the LNG story, which is not unfolding as many expected. Imports have trickled down to one bcf/d, from a high of three bcf a day a couple of years ago, as cargoes respond to big demand and huge price spikes in such places as Japan and Spain rather than coming to North America.
"Landed prices into Japan have reached US$21 per million British thermal units in the past week," said FirstEnergy Capital Corp. analyst Martin King in a report Monday. "The global LNG market remains incredibly tight and still undersupplied."
Cameron Gingrich, lead project analyst at energy consultancy Ziff Energy Group, said gas prices in Europe and Asia are responding to the high price of oil. Gas prices in North America decoupled from oil prices two years ago.
Those markets are likely to remain tight in the winter because of heating demand. However, Ziff believes LNG supplies could come back in greater amounts to North America in the summer.
Longer term, LNG supplies to North America are likely to increase as new projects are built in places like the Middle East and Algeria. Meanwhile, Alberta producers are facing higher royalties in 2009, which could make this year's gas recovery short-lived.
It has been such a long time since anyone warmed up to natural gas that we've grown accustomed to view it as a business in blow-down mode, particularly in high-cost Western Canada.
Yet some analysts are beginning to see an end to the two-year downturn that pushed many smaller companies out of business -- and bigger ones to other basins.
Richard Wyman, vice-president and senior oil-and-gas analyst at Canaccord Adams, said the encouraging signs for the Canadian sector include a Canadian dollar that has weakened from its high, a colder-than-expected winter, falling costs for oilfield services and land, and a flattening in drilling in the United States, which should moderate supplies.
"It looks to me that we may be rightsizing this whole thing this winter," he said. "The direction is definitely positive."
In a note Monday, UBS Securities Canada Inc. analysts said: "Sentiments toward natural gas weighted domestic producers appears to be improving, with many names rising off their lows."
"This winter may be the turning point for natural gas prices," Peters & Co. energy analysts said in their recently released North American energy outlook.
"Perhaps the tide is turning for natural gas weighted companies."
There have been some encouraging signs from producers, too.
Last week, BP PLC said it will re-enter the natural-gas business in Western Canada with a $1-billion unconventional gas play in British Columbia. El Dorado, Ark-based Murphy Oil Corp. had just revealed it spent $224-million in December buying up land in British Columbia.
Natural-gas prices have climbed nearly 50% since last year's third quarter, closing Monday at US$8.09 per million British thermal units on NYMEX, up US11.2¢.
Indeed, deep spending cuts by the Canadian sector, in which costs shot up as prices weakened, curbed supplies from Western Canada by more than 500 million cubic feet a day in 2007, and are set to drop by more than one billion cubic feet (bcf) a day this year, says Peters, which has boosted its natural-gas price assumptions for 2008 to an average of US$8.35 for NYMEX.
Brightening the picture for Western Canada is that drilling and completion costs have come down 25% from the peak in 2006, the brokerage estimated.
North American inventories, which for two years seemed to be stuck on full, are deflating.
Storage in the United States is now 221 bcf below last year and about 185 bcf above the five-year average, while a major withdrawal of 225 to 235 bcf is expected to be reported next, which would be well above the year ago the five-year averages, UBS said.
Supporting the optimisim is the LNG story, which is not unfolding as many expected. Imports have trickled down to one bcf/d, from a high of three bcf a day a couple of years ago, as cargoes respond to big demand and huge price spikes in such places as Japan and Spain rather than coming to North America.
"Landed prices into Japan have reached US$21 per million British thermal units in the past week," said FirstEnergy Capital Corp. analyst Martin King in a report Monday. "The global LNG market remains incredibly tight and still undersupplied."
Cameron Gingrich, lead project analyst at energy consultancy Ziff Energy Group, said gas prices in Europe and Asia are responding to the high price of oil. Gas prices in North America decoupled from oil prices two years ago.
Those markets are likely to remain tight in the winter because of heating demand. However, Ziff believes LNG supplies could come back in greater amounts to North America in the summer.
Longer term, LNG supplies to North America are likely to increase as new projects are built in places like the Middle East and Algeria. Meanwhile, Alberta producers are facing higher royalties in 2009, which could make this year's gas recovery short-lived.
Monday, January 28, 2008
Iran Sending Natural Gas to Turkey - Again?
Iran on Sunday resumed shipping natural gas to Turkey, after cutting supplies during a cold snap almost one month ago, CNN-Turk television reported.
Iran cut gas supplies at the beginning of this month, despite having promised not to interrupt shipments again after a reduction last year due to another dip in temperatures.
The cut last year sparked debate over Turkey's need to reduce energy dependence on Russia and Iran, its two main suppliers. Turkey uses natural gas in industry and to heat homes.
After Russia, Iran is Turkey's second-largest supplier of natural gas, now providing around 20 million to 22 million cubic meters per day through a 2,580-kilometer pipeline.
Turkey also imports some liquefied natural gas from Nigeria and Algeria.
Iran cut gas supplies at the beginning of this month, despite having promised not to interrupt shipments again after a reduction last year due to another dip in temperatures.
The cut last year sparked debate over Turkey's need to reduce energy dependence on Russia and Iran, its two main suppliers. Turkey uses natural gas in industry and to heat homes.
After Russia, Iran is Turkey's second-largest supplier of natural gas, now providing around 20 million to 22 million cubic meters per day through a 2,580-kilometer pipeline.
Turkey also imports some liquefied natural gas from Nigeria and Algeria.
Jan 25 Summary - Natural Gas is $7.98/K
Oil futures jumped back above $90 a barrel, as recession worries that pulled prices lower in recent weeks faded some.
News that Chinese oil demand grew by 6.4 percent in December, the highest rate in months, contributed to oil's advance. The Fed's surprise rate cut this week probably helped support the price of oil as well, since rate cuts tend to send the dollar lower. Crude futures offer a hedge against a falling dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the greenback is falling.
Light, sweet crude for March delivery rose $1.30 to settle at $90.71 on the New York Mercantile Exchange after rising as high as $91.38.
February heating oil futures jumped 4.28 cents to settle at $2.5191 a gallon on the Nymex, while February gasoline futures added 3.54 cents to settle at $2.3182 a gallon. Heating oil and gasoline prices were supported by news that Valero Energy Corp.'s 255,000 barrel a day refinery in Aruba was shut down due to a fire.
Natural gas rose 18.1 cents to settle at $7.983 per 1,000 cubic feet.
Peabody Takes Stake in Coal-to-Gas Company
Coal producer Peabody Energy Corp. took a minority stake in GreatPoint Energy Inc., which licenses a technology to convert coal, petroleum coke and biomass into ultra-clean pipeline quality natural gas.
Peabody did not disclose the financial terms of the investment.
Peabody said GreatPoint Energy uses a single-stage catalytic gasification process to create natural gas that is 99.5 percent pure methane. It can be transported across North America using the existing natural gas pipeline infrastructure.
Cambridge, Mass.-based GreatPoint said it will develop coal-to-natural-gas facilities with Peabody near its Powder River mines in Wyoming, which produce more than 100 million tons of coal a year.
Coal Shares Stay Hot
Shares of coal producers climbed again, with Consol Energy Inc. hitting a new high of $76.25. The stock is up over 20 percent since Tuesday. Alpha Natural Resources has had a similar climb. Peabody Energy, Massey Energy and Arch Coal all gained around 15 percent over the last four sessions.
Investors are flocking to coal as spot prices rise, international demand heats up and supply concerns grow. Widespread flooding has slowed, even halted, production in Australia and South Africa _ major sources of coal for Asia and Europe. The Financial Times reported that BHP Billiton Mitsubishi Alliance, one of the world's biggest exporters of coal used to make steel, declared "force majeure" because of disruptions at its Australian operations. "Force majeure" is declared when extreme events prevent fulfillment of contract obligations.
Rio Tinto and Xstrata also reported coal production problems in Australia. Production losses are estimated in the hundreds of millions of dollars. Some analysts are also concerned the production delays will affect annual contract prices.
China Halts Coal Exports
Weather is causing coal problems in China as well. The government suspended coal exports after the coldest, snowiest winter in decades left millions of Chinese without heat and running water.
Friction between coal producers and utilities has just made matters worse.
China's domestic prices of coal and crude oil rose 14.2 percent and 35 percent year-on-year, respectively, in December, according to the country's central bank.
But electricity prices rose only 2.1 percent. Utilities have chafed at caps on rates that prevent them from passing the higher costs for coal on to customers. And coal suppliers are pushing for higher prices.
China exported 53 million tons of coal last year, down 16 percent from 2006. Coal imports rose 34 percent to 51 million tons, much of it going to the country's expanding steel industry.
Former Sinopec Chairman Faces Corruption Charges
The former chairman of China's No. 2 oil company, Sinopec Corp., was expelled from the Communist Party and charged with corruption and bribe taking.
Chen Tonghai "abused his position to obtain improper benefits for his mistress and others and led a corrupt life," state broadcaster CCTV reported on its main evening national news broadcast.
Chen resigned abruptly last June from his Sinopec post and as president of the company's state-owned parent, and immediately disappeared from public view.
Sinopec, also known as China Petroleum & Chemical Co., is Asia's biggest publicly listed oil refiner by capacity and China's second-biggest oil company after China National Petroleum Corp.
Petrohawk Offers Shares, Delays IPO
Independent oil and natural gas producer Petrohawk Energy Corp. plans a public offering of 15 million shares of common stock. The company expects to use proceeds to pay down part of its debt in a senior revolving credit agreement.
Petrohawk had 170.4 million shares outstanding as of Nov. 2.
Petrohawk also said it will delay a proposed initial public offering of units in a master limited partnership because of market conditions.
The company said in October that its HK Energy Partners LP unit planned to offer 9.3 million common units representing limited partner interests. The division was created by Petrohawk to acquire, develop and exploit oil and natural gas properties.
Petrohawk raised its 2008 production guidance and capital budget to $800 million from $700 million, because of recent acquisitions and positive drilling results.
More Rigs Operating in the U.S.
The number of rigs actively exploring for oil and natural gas in the U.S. rose by 15 this week to 1,747. That compares with a rig count of 1,699 a year ago.
Of the rigs running nationwide, 1,422 explored for natural gas and 318 for oil, according to Houston-based Baker Hughes Inc., which tracks operating rigs. Seven rigs were listed as "miscellaneous."
Colorado and Oklahoma each gained eight operating rigs, New Mexico three, and Louisiana one. California lost four, Texas lost three and Alaska dropped by one.
Total Will Pay Damages for Big Oil Spill
Total SA said it will appeal the guilty verdict against it in the 1999 sinking of the oil tanker Erika, which caused France's worst-ever oil spill.
But the French petroleum giant also said that whatever the outcome of the appeal, it will also pay court-ordered compensation for the spill.
The court ordered Total and three other defendants to pay $285 million in compensation to 101 civil parties; including the state, associations involved in the cleanup and ecology groups.
--Compiled by AP Business Writer Greg Stec. Questions or comments can be directed to gstec@ap.org.
News that Chinese oil demand grew by 6.4 percent in December, the highest rate in months, contributed to oil's advance. The Fed's surprise rate cut this week probably helped support the price of oil as well, since rate cuts tend to send the dollar lower. Crude futures offer a hedge against a falling dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the greenback is falling.
Light, sweet crude for March delivery rose $1.30 to settle at $90.71 on the New York Mercantile Exchange after rising as high as $91.38.
February heating oil futures jumped 4.28 cents to settle at $2.5191 a gallon on the Nymex, while February gasoline futures added 3.54 cents to settle at $2.3182 a gallon. Heating oil and gasoline prices were supported by news that Valero Energy Corp.'s 255,000 barrel a day refinery in Aruba was shut down due to a fire.
Natural gas rose 18.1 cents to settle at $7.983 per 1,000 cubic feet.
Peabody Takes Stake in Coal-to-Gas Company
Coal producer Peabody Energy Corp. took a minority stake in GreatPoint Energy Inc., which licenses a technology to convert coal, petroleum coke and biomass into ultra-clean pipeline quality natural gas.
Peabody did not disclose the financial terms of the investment.
Peabody said GreatPoint Energy uses a single-stage catalytic gasification process to create natural gas that is 99.5 percent pure methane. It can be transported across North America using the existing natural gas pipeline infrastructure.
Cambridge, Mass.-based GreatPoint said it will develop coal-to-natural-gas facilities with Peabody near its Powder River mines in Wyoming, which produce more than 100 million tons of coal a year.
Coal Shares Stay Hot
Shares of coal producers climbed again, with Consol Energy Inc. hitting a new high of $76.25. The stock is up over 20 percent since Tuesday. Alpha Natural Resources has had a similar climb. Peabody Energy, Massey Energy and Arch Coal all gained around 15 percent over the last four sessions.
Investors are flocking to coal as spot prices rise, international demand heats up and supply concerns grow. Widespread flooding has slowed, even halted, production in Australia and South Africa _ major sources of coal for Asia and Europe. The Financial Times reported that BHP Billiton Mitsubishi Alliance, one of the world's biggest exporters of coal used to make steel, declared "force majeure" because of disruptions at its Australian operations. "Force majeure" is declared when extreme events prevent fulfillment of contract obligations.
Rio Tinto and Xstrata also reported coal production problems in Australia. Production losses are estimated in the hundreds of millions of dollars. Some analysts are also concerned the production delays will affect annual contract prices.
China Halts Coal Exports
Weather is causing coal problems in China as well. The government suspended coal exports after the coldest, snowiest winter in decades left millions of Chinese without heat and running water.
Friction between coal producers and utilities has just made matters worse.
China's domestic prices of coal and crude oil rose 14.2 percent and 35 percent year-on-year, respectively, in December, according to the country's central bank.
But electricity prices rose only 2.1 percent. Utilities have chafed at caps on rates that prevent them from passing the higher costs for coal on to customers. And coal suppliers are pushing for higher prices.
China exported 53 million tons of coal last year, down 16 percent from 2006. Coal imports rose 34 percent to 51 million tons, much of it going to the country's expanding steel industry.
Former Sinopec Chairman Faces Corruption Charges
The former chairman of China's No. 2 oil company, Sinopec Corp., was expelled from the Communist Party and charged with corruption and bribe taking.
Chen Tonghai "abused his position to obtain improper benefits for his mistress and others and led a corrupt life," state broadcaster CCTV reported on its main evening national news broadcast.
Chen resigned abruptly last June from his Sinopec post and as president of the company's state-owned parent, and immediately disappeared from public view.
Sinopec, also known as China Petroleum & Chemical Co., is Asia's biggest publicly listed oil refiner by capacity and China's second-biggest oil company after China National Petroleum Corp.
Petrohawk Offers Shares, Delays IPO
Independent oil and natural gas producer Petrohawk Energy Corp. plans a public offering of 15 million shares of common stock. The company expects to use proceeds to pay down part of its debt in a senior revolving credit agreement.
Petrohawk had 170.4 million shares outstanding as of Nov. 2.
Petrohawk also said it will delay a proposed initial public offering of units in a master limited partnership because of market conditions.
The company said in October that its HK Energy Partners LP unit planned to offer 9.3 million common units representing limited partner interests. The division was created by Petrohawk to acquire, develop and exploit oil and natural gas properties.
Petrohawk raised its 2008 production guidance and capital budget to $800 million from $700 million, because of recent acquisitions and positive drilling results.
More Rigs Operating in the U.S.
The number of rigs actively exploring for oil and natural gas in the U.S. rose by 15 this week to 1,747. That compares with a rig count of 1,699 a year ago.
Of the rigs running nationwide, 1,422 explored for natural gas and 318 for oil, according to Houston-based Baker Hughes Inc., which tracks operating rigs. Seven rigs were listed as "miscellaneous."
Colorado and Oklahoma each gained eight operating rigs, New Mexico three, and Louisiana one. California lost four, Texas lost three and Alaska dropped by one.
Total Will Pay Damages for Big Oil Spill
Total SA said it will appeal the guilty verdict against it in the 1999 sinking of the oil tanker Erika, which caused France's worst-ever oil spill.
But the French petroleum giant also said that whatever the outcome of the appeal, it will also pay court-ordered compensation for the spill.
The court ordered Total and three other defendants to pay $285 million in compensation to 101 civil parties; including the state, associations involved in the cleanup and ecology groups.
--Compiled by AP Business Writer Greg Stec. Questions or comments can be directed to gstec@ap.org.
Sunday, January 27, 2008
Kenworth LNG Trucks Coming to California
Kenworth Truck Co. plans to begin large-scale production of heavy-duty trucks powered by liquefied natural gas at its Renton plant next year.
The move to LNG trucks is the latest by Kenworth and its parent company, Bellevue-based Paccar Inc., to look for alternatives to conventional diesel-fuel engines as a way to reduce operating costs and meet increasingly stringent air-emission rules.
Kenworth already has announced plans to market medium-duty hybrid trucks this year, and Paccar is developing a similar hybrid system for heavy-duty trucks, what most people refer to as semis.
How many LNG-powered units Kenworth's Renton plant will produce will depend on market demand, and initially it's not expected to have a big impact on employment, said Bob Christensen, Kenworth general manager.
But with California and other states writing tougher regulations on truck-engine emissions, "We think it's an emerging market," Christensen said.
In LNG systems, natural gas is held as a liquid at minus 260 degrees Fahrenheit. The truck itself doesn't require any special refrigeration equipment; instead, it relies on a vacuum-bottle cryogenic tank system to hold the fuel at that temperature.
Kenworth plans to use its T800, a model frequently used in such applications as regional freight hauling and dump trucks, in combination with a Cummins engine and an LNG fuel system developed by Westport Innovations Inc. in Vancouver, B.C.
Paccar has been researching natural gas as a truck fuel for more than a decade, comparing the merits and drawbacks of compressed natural gas and LNG.
Early on it was thought that natural gas couldn't deliver the horsepower of a diesel engine. Christensen said the gap has been narrowed, and Kenworth will offer 400- and 450-horsepower configurations. "The torque and drivability of the LNG truck has been very good," he said.
One major market for LNG trucks is hauling containers at ports. Kenworth noted that the ports of Los Angeles and Long Beach, Calif., have set up a fund to replace diesel-engine trucks with LNG vehicles and will remove all pre-2007 trucks by 2012.
Improving emissions from trucks through cleaner engines and fuels is also a goal of the Northwest Ports Clean Air Strategy approved recently by the ports of Seattle, Tacoma and Vancouver, B.C.
Kenworth and Westport already have put together fuel systems that can be retrofitted to existing trucks.
Although LNG trucks require specialized tank, fuel injector, pump and electronic systems, which boost the cost of the truck, federal and state programs may offset the cost, Christensen said. Meanwhile, the gap between the cost of diesel fuel and natural gas is widening, he said, giving natural gas an operating-cost advantage.
The move to LNG trucks is the latest by Kenworth and its parent company, Bellevue-based Paccar Inc., to look for alternatives to conventional diesel-fuel engines as a way to reduce operating costs and meet increasingly stringent air-emission rules.
Kenworth already has announced plans to market medium-duty hybrid trucks this year, and Paccar is developing a similar hybrid system for heavy-duty trucks, what most people refer to as semis.
How many LNG-powered units Kenworth's Renton plant will produce will depend on market demand, and initially it's not expected to have a big impact on employment, said Bob Christensen, Kenworth general manager.
But with California and other states writing tougher regulations on truck-engine emissions, "We think it's an emerging market," Christensen said.
In LNG systems, natural gas is held as a liquid at minus 260 degrees Fahrenheit. The truck itself doesn't require any special refrigeration equipment; instead, it relies on a vacuum-bottle cryogenic tank system to hold the fuel at that temperature.
Kenworth plans to use its T800, a model frequently used in such applications as regional freight hauling and dump trucks, in combination with a Cummins engine and an LNG fuel system developed by Westport Innovations Inc. in Vancouver, B.C.
Paccar has been researching natural gas as a truck fuel for more than a decade, comparing the merits and drawbacks of compressed natural gas and LNG.
Early on it was thought that natural gas couldn't deliver the horsepower of a diesel engine. Christensen said the gap has been narrowed, and Kenworth will offer 400- and 450-horsepower configurations. "The torque and drivability of the LNG truck has been very good," he said.
One major market for LNG trucks is hauling containers at ports. Kenworth noted that the ports of Los Angeles and Long Beach, Calif., have set up a fund to replace diesel-engine trucks with LNG vehicles and will remove all pre-2007 trucks by 2012.
Improving emissions from trucks through cleaner engines and fuels is also a goal of the Northwest Ports Clean Air Strategy approved recently by the ports of Seattle, Tacoma and Vancouver, B.C.
Kenworth and Westport already have put together fuel systems that can be retrofitted to existing trucks.
Although LNG trucks require specialized tank, fuel injector, pump and electronic systems, which boost the cost of the truck, federal and state programs may offset the cost, Christensen said. Meanwhile, the gap between the cost of diesel fuel and natural gas is widening, he said, giving natural gas an operating-cost advantage.
Saturday, January 26, 2008
Coal to Natural Gas Still a Growth Industry
BILLINGS, Mont. (AP) - Peabody Energy Corp. (NYSE:BTU) , the world's largest private coal company, announced Friday it has joined with a Massachusetts firm to develop multiple coal-to-natural gas plants in Wyoming's Powder River Basin that would produce cleaner-burning fuel and less pollution.
The basin, which straddles the Montana-Wyoming border, produces about 40 percent of the country's coal, primarily for electricity generation.
St. Louis-based Peabody and GreatPoint Energy of Cambridge, Mass., said they are in the early stages of jointly developing 'gasification' plants that would convert some of that coal into synthetic natural gas. Financial terms were not disclosed.
Coal-derived gas is considered a cleaner fuel than raw coal. It also has the potential to produce fewer greenhouse gases emissions -- a fundamental issue for the coal industry as it faces mounting pressure over climate change.
For Peabody and GreatPoint to be successful, they will have to buck a trend of coal plant delays and cancellations that have swept the country in recent months.
The companies said their plants would use a GreatPoint-licensed technology to capture some carbon dioxide, considered a contributor to global warming. If the synthetic gas was used for electricity generation, carbon dioxide emissions could be reduced by up to 40 percent compared to a conventional coal-fired power plant, Dan Goldman, GreatPoint vice president, said.
Rising construction costs and environmental worries -- coal plants are the nation's largest contributor of greenhouse gasses -- have led companies elsewhere to abandon or defer at least four dozen coal plants. Those included both conventional and gasification plants.
However, University of Wyoming economist Ed Barbier said Peabody and GreatPoint could overcome that trend through the economic advantages of building plants next to the Powder River Basin's abundant coal reserves.
A coal-to-gas plant near one of the basin's mines could tap into the region's extensive pipeline network and transport the fuel offsite at minimal expense. Peabody produced 138 million tons of coal from its three mines in the basin in 2006.
Barbier said another factor working in the industry's favor is a desire by state officials for projects that go beyond mining coal.
But he added that volatility in the industry -- in part due to global warming -- means even promising projects can stall.
Only a handful of gasification plants now exist.
'What we want to do is advance the technologies,' said Peabody's Beth Sutton. 'We see real opportunities there given the high cost of natural gas.'
GreatPoint's Goldman said his company also is exploring coal-to-natural gas projects in Montana, Alberta and the U.S. Gulf Coast, after building a successful pilot project in Illinois.
On Wall Street, Peabody shares added $4.12, or 7.9 percent, to $56.07 in Friday trading. The stock has ranged from $37.20 to $63.97 in the past year.
The basin, which straddles the Montana-Wyoming border, produces about 40 percent of the country's coal, primarily for electricity generation.
St. Louis-based Peabody and GreatPoint Energy of Cambridge, Mass., said they are in the early stages of jointly developing 'gasification' plants that would convert some of that coal into synthetic natural gas. Financial terms were not disclosed.
Coal-derived gas is considered a cleaner fuel than raw coal. It also has the potential to produce fewer greenhouse gases emissions -- a fundamental issue for the coal industry as it faces mounting pressure over climate change.
For Peabody and GreatPoint to be successful, they will have to buck a trend of coal plant delays and cancellations that have swept the country in recent months.
The companies said their plants would use a GreatPoint-licensed technology to capture some carbon dioxide, considered a contributor to global warming. If the synthetic gas was used for electricity generation, carbon dioxide emissions could be reduced by up to 40 percent compared to a conventional coal-fired power plant, Dan Goldman, GreatPoint vice president, said.
Rising construction costs and environmental worries -- coal plants are the nation's largest contributor of greenhouse gasses -- have led companies elsewhere to abandon or defer at least four dozen coal plants. Those included both conventional and gasification plants.
However, University of Wyoming economist Ed Barbier said Peabody and GreatPoint could overcome that trend through the economic advantages of building plants next to the Powder River Basin's abundant coal reserves.
A coal-to-gas plant near one of the basin's mines could tap into the region's extensive pipeline network and transport the fuel offsite at minimal expense. Peabody produced 138 million tons of coal from its three mines in the basin in 2006.
Barbier said another factor working in the industry's favor is a desire by state officials for projects that go beyond mining coal.
But he added that volatility in the industry -- in part due to global warming -- means even promising projects can stall.
Only a handful of gasification plants now exist.
'What we want to do is advance the technologies,' said Peabody's Beth Sutton. 'We see real opportunities there given the high cost of natural gas.'
GreatPoint's Goldman said his company also is exploring coal-to-natural gas projects in Montana, Alberta and the U.S. Gulf Coast, after building a successful pilot project in Illinois.
On Wall Street, Peabody shares added $4.12, or 7.9 percent, to $56.07 in Friday trading. The stock has ranged from $37.20 to $63.97 in the past year.
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