The road to hell is paved with discarded business models

15 years ago, North America was any LNG seller’s wet dream. It was the biggest payday ever. North American gas production was going down. The market needed Natural gas like a breath of fresh air. A huge number of LNG import terminal project proposals were on the drawing boards. So many of them up and down both coasts of the continent that the coastlines were invisible out on most maps. and prices were so high that there were talks of the new El Dorado.

Look this year, and not only is the US a net gas exporter. The US gas market is on its way to becoming the first true 1 tcm/a gas behemoth on Earth. Emissions are at the lowest point in living memory. And the price of Natural Gas is so low for so long that there is talk of a new industrial revolution. This low priced clean energy attracts plenty of energy-hungry industry. They all flock back to the lower 48.

What we have been looking at was only the last 15 years of US gas history though. The full story goes on for much longer. There have been shifts, sudden developments and all kinds of surprises. None of them have been quite as significant as shale gas though.

But this shale revolution has not played all its cards. There are a lot more surprises in the store. Buckle down for the ride as you might be in for a massive surprise. Yes, most people did not see shale coming when it was in its early years. There were quite many of those that could see the lone rednecks. They tried to make shale work but most observers thought that it would never amount to anything.

Because as crazy as it sounds, shale was not a surprise at all. It did not sneak up in the dark when no one was looking. It did not jump out of a dim back alley to scare its victims into instant stasis. Rough men and hard-hitting innovators were working the shale cudgel for many years. What do I say – even decades as this is not a new thing at all.

We know about the existence of shale oil and gas for a long time. Almost as long as we know about the use of oil as a feedstock for energy applications. Kerogen wells (the precursor stage of crude oil) were drilled in Austria in the late 19th century. 

People knew it was there. They knew that it might be made commercial to exploit. And they tried to prove their assumptions wrong. The resource was there. But could anyone find a way to make this a money-spinner?

Most radical innovations don’t spring out like a Jack in the Box to take the world in a storm. Innovators go through a veritable Spiessrutenlauf (running the gauntlet) for many years. Sometimes even decades until the day when their idea gains critical mass. Or when it takes on a momentum that allows it to grow exponentially finally comes around.

One such idea is the use of LNG as a fuel. It would be an ideal replacement for pretty much anything diesel does today. It does already happen in the shipping world. With the advent of the new IMO 2020 rules, HFO becomes unusable for those vessels. Or only under the penalty of very large financial investments.

Where the LNG revolution is still in its infancy is as a fuel for trucking. Oh yes, it is there, there is a rough network of LNG fuelling stations in parts of the US right now. Yet, in the grand scheme of things, it’s still a pretty exotic option for truckers. And it has been for many decades. LNG was used as a vehicle fuel for more than 50 years now. There is a thick body of expertise and knowledge that comes with it. If you go down the LNG route, you are not looking into a black hole of unsolved issues. You are looking at a well-trodden path with pretty much all important issues resolved.

Early believers, innovators, and entrepreneurs have gone down this path. Most notable of all, Mr. T. Boone Pickens and his company Clean Energy. They have resisted the devils of failure for a very long time.

They are on the right side of history.

Like with shale, the groundswell of LNG as a fuel is building up until the moment is right for it to go big. But why has that not happened so far? In the end, gas has been cheap for years now. The technology is beyond mature. Many different Natural Gas vehicles are available to choose from. Not to forget, the environmental credentials of Methane are rock solid. Some die-hard enviro-ultras will never be happy. They prefer plastering entire regions with bird, bat, and insect shredding windmills. Or transform them into glistening beryllium deserts instead.

As so often, its the rulebook that still disadvantages LNG as a fuel.

One of those non-sensical rules is the interdiction to transport LNG is railway tank carriages. Those carriages are designed and manufactured to transport cryogenic fuels. LNG can always be transported in road trailers. Or even in ISO containers on flatbed rail carriages. So, in the end, it does not seem to be the fact that LNG gets moved around that arouses the ire of those with the rulebook. Its the fact that it couldn’t be done in rail tank cars. Those are built for this purpose. They have stood up to more stringent safety tests than any gasoline or diesel railcar ever has. Or indeed many petchem railcars that rumble through neighborhoods all the time. Those are, contrary to LNG, dangerous.

Another example it the impossibility of retrofitting a diesel engine into a gas-diesel engine. Many trucks that are built and rated for diesel could be adapted. They would run with a diesel/methane mixture. Methane would constitute a much bigger part. And only a small fraction of diesel that is required for ignition.

These trucks would become dual-fuel vehicles that use LNG. At least wherever it is available. They would do so for about 90% of its fuelling requirements and revert back to full diesel when no LNG is available. Plus, the conversion is pretty cheap. That takes care of a lot of problems in long-distance trucking with class 8 trucks for example.

Those are examples where quick and decisive action by the administration would achieve rapid results. Results that would make life in the US better in many ways.

How that? Read on next week.

Image by rodrigobittencurt from Pixabay