A picture of the GE natural gas fueling station.

Efforts to find a use for America’s glut of shale gas got a boost on Wednesday when Chesapeake Energy announced an agreement with GE to increase the availability of compressed and liquid natural gas as a transportation fuel.

GE will build about 250 units of a technology it calls “CNG in a Box” which turns natural gas from a pipeline into CNG at an industrial location or filling station where CNG-powered vehicles can fill up.

The technology, which already exists but is being adapted to the new facilities, will be brought to market by Peake Fuel Solutions, a Chesapeake Energy subsidiary.

The agreement combines GE’s oil and gas technology with the experience of Chesapeake, the second-largest US natural gas producer, which is trying to stimulate natural gas demand as booming domestic supply and an exceptionally mild winter have driven prices to their lowest for a decade.

Read more about an earlier technology partnership between natural gas companies and technology firms on Breaking Energy here, and discuss the future of natural gas partnerships here.

Chesapeake is trying to lower the ownership and operational costs of filling stations for the natural gas vehicles (NGVs) – mostly in commercial fleets – that currently use the fuel.

“With the development of shale resources dramatically increasing the amount of low-cost gas in North America, the GE-Chesapeake collaboration can help incentivize operators to put more NGVs on the nation’s highways,” the companies said in a joint statement.

Chesapeake spokesman Jim Gipson said the agreement aims to make it easier for existing NGVs such as buses, vans and municipal fleet vehicles to fill up, while encouraging the conversion of vehicles that currently run on gasoline.

The addition of 250 public filling facilities represents a significant addition to the current national total of fewer than 450, Gipson said. The largest operator is T. Boone Pickens’s Clean Energy Fuels which operates 238.

Technology Advances Meet Mutual Needs

Sean Gannon, a spokesman for GE Energy, said the technology inside the CNG box has been made smaller and more efficient for the new application. He called the collaboration with Chesapeake a “mutual agreement” that meets the needs of both companies. Both declined to specify the size of the investment.

“They are a perfect launch customer for this,” Gannon said.

The GE units come in containers measuring 8 feet by 20 feet or 40 feet, depending on the need of the location; they are credit-card compatible, and dispense fuel at a rate equivalent to seven gallons of gasoline a minute, the company said.

Other current efforts to stimulate natural gas demand include an initiative by 10 gas-producing states to convert their vehicle fleets to natural gas in an attempt to persuade U.S. automakers that there can be a mass market for NGVs. Read more about that partnership on Breaking Energy in the coming days.

In February, Chesapeake announced an agreement with 3M for the company to manufacture a new generation of NGV fuel tanks which would be safer and less costly than existing models.

In response to natural gas prices that have fallen almost $1.50 per mmBtu in the last year, Chesapeake and other producers have sharply cut production of dry gas and diverted resources to oil and natural gas liquids where prices are more resilient.

Natural gas vehicles are cheaper to run and emit fewer greenhouse gases, the companies said. They estimate that CNG at $2.09 a gallon of gasoline equivalent reduces fuel costs by 40% a year and can save fleet operators up to $1,500 a year per vehicle. CO2 emissions are 24 percent lower in NGVs than in gasoline-powered vehicles, according to their calculations.