HOUSTON ̶ On the Gulf Coast, Charif Souki of Cheniere Energy Partners LP builds LNG megaprojects to fuel the world. In New England, Jonathan Carroll of Gulf Oil LP builds an LNG plant to fuel his truck.

Make that trucks. Gulf operates a fleet of almost 200 in the Northeast. In 2012, seeking ways to cut both costs and emissions in this operation, the legendary oil company turned its attention to LNG.

“It was this fleet that got us involved with LNG in the first place,” Carroll, senior director of market and business development, natural gas, told attendees of Hart Energy’s recent World LNG Fuels Conference & Exhibition in Houston. “It is still the cleanest-burning fossil fuel. It is still a domestic and abundant resource, stable over the long term.”

LNG Or CNG? It Depends

Gulf, based in Framingham, Mass., is a major retail player, distributing around 3 billion gallons of fuel a year through 2,000 branded stations and 1,000 private label outlets in 27 states. It has incorporated 44 Peterbilt Model 386 LNG-fueled tractor-trailers into its New England fleet, supported by three LNG fueling stations and four cryogenic support trailers.

How committed is Gulf to LNG as a transportation fuel? In 2017, the company expects to start operations of its 100,000 gallon per day liquefaction plant in the northeast Pennsylvania town of Great Bend, just over the New York state line and a mere 20 minutes south of Binghamton, N.Y.

“LNG gives us the range and fueling experience that we like at Gulf,” Carroll said. “There’s a lot of debate in the transportation industry—CNG, LNG? Which is better for your fleet? The answer is: It depends.”

Variables include the make-up of a truck fleet, the routes to be traveled and payloads. Gulf found that CNG was available in New England, but as a result of a lack of regional infrastructure natural gas prices there were among the highest in the country and the pump price for CNG was quite high. For Gulf, LNG was the better choice.

“So how’s the fleet doing? Last year, we traveled over 5 million miles—this is just the LNG fleet,” he said. “We were able to displace over 1 million gallons of diesel and an estimated 2,800 metric tons of carbon dioxide. We saved about $1.8 million in our fuel costs and we’re eligible for a federal tax credit of over $800,000.

“Not too shabby, and we’re pretty happy with that.”

Opportunity Begets Opportunities

Projects like this tend to engender opportunities, and Gulf moved to exploit them. Its operations personnel soon began sharing expertise on LNG handling and storage with local firefighters, regulatory inspectors and curious owners of fleets in the area. The company opened dialogues with engine manufacturers to discuss ways to improve equipment.

Relationships established with regional suppliers led to hauling contracts. In 2014, Gulf moved more than 3.6 million gallons for customers. Finally, it made sense to take the next step.

“So, we had the means, we had the motive, we had the opportunity to commit the crime, and that’s build an LNG liquefaction plant of our own,” Carroll said.

“Our primary motivation was to improve the reliability of the LNG supplied for our fleet,” he said. “Up in New England, we’re surrounded by LNG tanks. There is over 16 Bcf of LNG storage in the region, but really none of it is available for long-term firm purchase. The facilities that do make it available are oftentimes interruptible. We wanted to be in control of our own destiny and take advantage of our close proximity to the Marcellus Shale region.”

The location also benefits from accessibility to the Laser Northeast Gathering Pipeline, which will transport some of the cheapest natural gas in the country to the plant. In its FERC application, Gulf estimates that the site will store between 600,000 and 3 million gallons and cost about $45 million.

LNG won’t work in every situation. Among the challenges:

  • Remote communities, where the population center is disconnected from the pipeline grid;
  • Rail and marine operations, which have long life-cycles for equipment and have difficulty fitting major changes into replacement timelines; and
  • Customer capability—not everyone can handle the switch and the supplier needs to provide an array of solutions, including transportation, distribution, permitting support, equipment selection, financing, price risk management and technical expertise.

“It all starts with the customer,” Carroll said. “You’ve got to get them savings, you’ve got to get them a payback that’s reasonable, that fits within their parameters.”