Ride to lower costs for LNG-run trucks rockier than expected

Wed Apr 9, 2014 5:02am EDT
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By Julie Gordon

VANCOUVER (Reuters) - Just over a year ago, Canadian trucking firm Bison Transport took a bet on a potentially game changing technology, buying 15 big rigs powered by liquefied natural gas.

The privately-held company was attracted by the promise of a cheap and abundant fuel source and lower greenhouse gas emissions. If all went well, it would be the first step toward converting more of its 1,250-strong fleet to a type of fuel that costs about $1.50 less per equivalent gallon than diesel.

After 14 months on the road, though, the Winnipeg-based company has found that the reality - at least initially - is less rosy. The savings on fuel have been offset by other costs that are much higher than expected.

Bison is not alone. There are already signs that broader adoption is falling short of initial expectations, particularly in off-road sectors like locomotives and mining vehicles.

While the lack of fueling infrastructure remains the largest hurdle, other operational teething pains are now tempering some of the growth in LNG use that was expected to further reduce oil demand in North America, as well as carbon emissions, according to interviews with industry experts and officials from five transport companies.

Bison had anticipated that LNG, which generates fewer miles per unit than diesel, to be 10 percent less efficient; instead, the drop was closer to 18 percent. Maintenance costs were about double that of a diesel tractor, more than budgeted.

While Bison is not considering abandoning its investment, it now expects to take at least four years to break-even on the rigs - which cost roughly $75,000 more than standard engines - rather than the two-year pay-off it had hoped for.

"We just wanted to be clear that when you first look at LNG, it can look like there's a potential windfall for carriers, and the reality is not that," said Lionel Johnston, corporate marketing manager with Bison, a top Canadian carrier known for its large, modern trucks that haul two trailers.   Continued...