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Shell to produce LNG for heavy-duty trucks

Royal Dutch Shell PLC hopes to fuel the trucks powering Canada's oil sands with natural gas as it works to build a network of new fuelling stations across Alberta.

Sometime next year, Shell plans to open a liquefied natural gas pump at a Shell Flying J truck stop in Alberta, the first in a series of new refuelling facilities the company intends to build.

It's part of a broad-based effort that will also see Shell build a new liquefied natural gas (LNG) manufacturing plant outside of Calgary and work with the makers of natural gas truck, rail and marine engines to promote the technology. The plan is among the most ambitious attempts to date by an energy company to push natural gas into the transportation sector, which has become a key aim for an industry mired in low prices.

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Natural gas holds the promise of reducing tailpipe emissions in heavy highway trucks, relative to the diesel fuel that powers virtually the entire trucking industry.

"We've looked at natural gas in transport, and we see a real opportunity in heavy duty transport for LNG," said Bob Taylor, Shell's Canadian manager of commercial fuels, business development and marketing.

The plan remains in its early stages. Shell has not, for example, yet decided how many LNG fuelling stations to build. But "our goal ultimately is to be able to have coverage basically from Fort McMurray down through Edmonton, Calgary, and then along to Vancouver," Mr. Taylor said.

"We're looking at the Calgary-Red Deer-Edmonton corridor to be the first sites," Mr. Taylor said.

LNG offers several advantages for truckers. It's a cleaner-burning fuel, and features a 20- to 30-per-cent reduction in carbon emissions. At current prices, it's also cheaper, in part because it's not subject to the federal and provincial fuel taxes that add 13 cents to the cost of a litre of diesel in Alberta.

But it also comes with a potentially serious downside: installing an LNG engine into a truck tractor adds $50,000 to $60,000 to the cost of a $150,000 vehicle. A report by the Natural Gas Use in Transportation Roundtable found that it would take between 1.8 and three years to pay back natural gas engines on different kinds of heavy trucks. In a five-year period, the investment would produce an internal rate of return of 20 to 50 per cent, the report found.

Industry, however, has been more skeptical. Robert Transport, the Quebec-based firm that has ordered 180 LNG trucks, has said it expects a six-year payback, in part because maintenance costs are expected to be a fifth higher. And Robert benefits from a generous Quebec tax writeoff allowance for LNG vehicles.

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In Alberta, where no such tax benefit exists, the trucking industry believes LNG is a losing proposition.

"Right now, there's zero incentive," said Carl Rosenau, president of Edmonton-based Rosenau Transport Ltd., which runs a fleet of 300 trucks. By his calculation, "the payback is not even close."

Don Wilson, executive director of the Alberta Motor Transport Association, said LNG technology is "kind of neat but I think I'd be staying with the old diesel for a little while." Among the association's membership, Mr. Wilson has heard from no one "that says they're even in to trying it at this point."

Still, the new fuelling sites are a potential boon to Westport Innovations Inc., the Vancouver-based maker of LNG truck engines. Part of the Shell plans include a co-marketing program with Westport, which sees substantial benefits to working alongside a major global energy player work.

"It's very clear someone with Shell's stature, size and scale provides a great deal of credibility and confidence to any major fleet that LNG infrastructure will be available," said Darren Seed, Westport's vice president of investor relations and communications. "This helps answer the infamous question: 'Where do I fill up?' "

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About the Author
Asia Bureau Chief

Nathan VanderKlippe is the Asia correspondent for The Globe and Mail. He was previously a print and television correspondent in Western Canada based in Calgary, Vancouver and Yellowknife, where he covered the energy industry, aboriginal issues and Canada’s north.He is the recipient of a National Magazine Award and a Best in Business award from the Society of American Business Editors and Writers. More

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