Shell to Steer Clear of US CNG

on June 04, 2013 at 2:00 PM

Oil Prices Continue To Rise With Demand

Shell says its investments in North American natural gas fueling infrastructure are focused solely on liquefied natural gas, citing greater infrastructure challenges for compressed natural gas (CNG) vehicles and greater in-company expertise in producing LNG.

Shell has announced several initiatives to supply LNG to the North American transportation sector. These include a joint venture with TravelCenters of America to add LNG fueling stations for long-haul trucks at TravelCenters retail stations, as well construction of small-scale liquefaction units that will form the basis of LNG transport corridors in Alberta, Canada, and the US Great Lakes and Gulf Coast regions.

The substantial price spread between cheap North American gas and costlier petroleum products has led to a surge in interest – and even some investment – in converting at least a portion of the US transportation fleet to run on gas instead of gasoline or diesel.

While Shell sees supplying LNG for transport as a promising growth market, the company is steering clear of efforts to supply fuel to vehicles that run on CNG. LNG is better suited to fueling heavy-duty trucks, while CNG is more often used for passenger vehicles or fleet vehicles, such as taxis and buses.

CNG is “one part of the business that we analyzed that we think is best left to others”, said Ken Lawrence, Vice-President of Investor Relations for North America at an event hosted by the New York Society of Securities Analysts this morning. “We’ll focus on what we would call basically the LNG business opportunity.”

Lawrence stressed that the opportunity in North American LNG transport fuel is not limited to long-haul trucking, but includes barges and other marine vessels that service the offshore industry, as well as vehicles that support the company’s oil sands mining operations in Canada. “We hope to be able to work our way into those industries,” he said.

LNG is more attractive to Shell in part because it will require less infrastructure build-out. “The infrastructure requirements aren’t as great,” Lawrence said. “You don’t need as many refilling stations when you’re dealing with those industries.”

He added that Shell’s experience with LNG will enable it to efficiently execute fueling capacity expansions. “We already have the expertise in LNG,” Lawrence said. “We have the micro-scale LNG plants that we can get built and set up fairly quickly.”