BEAR TRAP

March 31, 2014 § 3 Comments

George Soros was recently quoted as suggesting that the US use the Strategic Petroleum Reserve (SPR) as a deterrent to Russian aggression in the Ukraine. No details were given but I thought we could examine the validity of the premise. Certainly it was more promising than the knee jerk suggestion by others that we export LNG to the Ukraine, which too we will debate.

The SPR was created following the Arab Oil Embargo in the early seventies. It is currently near capacity at about 700 million barrels. The intent had been primarily to guard against a disruption of imports. In some ways shale oil has changed much of that. Domestic production has catapulted in the last few years, with the prospect for much more. These are relatively shallow wells drilled quickly compared to offshore wells. A supply disruption would require SPR help for a much shorter period than was envisioned back when the capacity was designed. The country is also using significantly less oil now. Finally, cheap shale gas is going to steadily displace oil.

Strait of Bosporus

All of the above argues for the release of the SPR if a national imperative dictates. It could be drawn down significantly without affecting the original mission. One such imperative could be to dampen the expansionist ardor of Russia. Oil represents more than half of all Russian budget revenues and 30% of the GDP. If we were to release 1 million barrels per day for a month, that 30 million barrel deficit would be wiped out by new production (in addition to the current rate) from the Bakken and Eagle Ford in pretty short order. This is, of course, if we want to top up the SPR. In my view that is not necessary. Also, the SPR was filled up at an average cost of a bit under $30 per barrel. A little profit will be made as well by the Treasury. History has shown that a million barrels a day will cause a serious drop in the price of oil.  The size of the SPR backing up the threat would also be a factor.  The result would be a dramatic impact on the economy of Russia, hopefully just in the short term to change behavior.

This action could not be taken without the active cooperation of the Saudis. Their buffer capacity could make it up in no time. US relationship with the Saudis is at ebb right now due to the Syrian situation. However, in their eyes Russia is a worse actor in Syria than are we. So they may just go along. Also the mere threat may be enough. But it has to be credible. Release for a week may be necessary, much as Russia did in cutting off gas through the Ukraine in 2009 for ten days.

Now for the knee jerk suggestions regarding exporting LNG to the Ukraine to help out. First, could LNG ships navigate the Bosporus Strait? The answer is probably a reluctant yes from Turkey. But LNG goes wherever there is the best price. US sourced LNG would likely go to Asia. Admittedly, however, any US sourced LNG going to Asia now releases Middle East LNG for the Ukraine. The clincher on this whole argument is that any new permits would take at least two years to start export and even that only if the permit was given to an existing LNG import terminal. A brand new terminal would take four to five years. So if curbing Russian aggression in the short term is the intent LNG makes absolutely no sense, even as sabre rattling.

A scant five years ago who would have thought that the US may be in a position to use hydrocarbons as a weapon of political will? Shale oil and gas achieved that single handedly. This is another reason why we have a duty to produce it responsibly.

Vikram Rao

The Chemicals Disclosure Conundrum

January 21, 2014 § 6 Comments

The trade secret exclusion in the requirement to disclose all chemicals in fracturing fluids is one of the most contentious issues surrounding shale oil and gas.  The public appears concerned that under the veil of trade secrecy industry could use chemicals harmful to human health.  Some of the concern is as simple as the need of the public to know what goes in the ground.

methanol structurestructure of methanol molecule

Why should there be trade secret exclusion?  This question comes up a lot.  One reason is that legitimate trade secrets are protectable under the NC Trade Secrets Protection Act embodied in Article 24, Section 66-152 of the North Carolina General Statutes.  The other reason concerns the public desire for the industry to create means to use green chemicals.  If a company succeeds it ought to be afforded intellectual property protection rights available to all citizens.  One means for such rights is patents.  The neat feature about patents is that   18 months after filing, all the contents are published whether or not the patent is eventually granted.  Rarely would an invention make it to commercialization within that period.  So the public will in effect be informed in good time.

Sometimes a company may choose not to patent and to merely hold the innovation as a trade secret.  An example is the Coca Cola formula for the syrup.  This constitutes intellectual property and it would not be fair to require disclosure which would enable their competitors to copy them.  This appears to be the basis for Section 66-152.  In these cases companies have stringent procedures to prevent inadvertent public disclosure.  Any company claiming the trade secret exclusion ought to be required to submit an affidavit asserting that the claimed item received that same care and that the details had not already been made public.  This requirement could be expected to limit the exclusion claims to genuine trade secrets.

So, what are these trade secrets anyway?  Without exception the trades secret exclusions are sought by the service company or a supplier to them, not the oil and gas company who will use the products in the well completion process.  In many cases the oil company is in the dark regarding the precise formulation.  But increasingly the medium to larger oil companies are asserting their purchase power rights to demand fuller disclosure.  Apache Corporation, for example, now requires the “elimination of diesel, BTX, endocrine disruptors, and carcinogens” as constituents in fracturing fluid.  This is important because service companies know that the customer has choice.  This is especially so in shale gas operations, which use “slick water” formulations containing fewer chemicals.  Everybody pretty much uses the same chemicals.  They may use somewhat different formulations to assert differentiation.

So, the recipe may be the secret.  If that is the case it is not a public health issue because the ingredients themselves are fully disclosed.  Why is the non-disclosure of the recipe not a public health problem?  It is not an issue because the proportions of what went into the ground are not terribly relevant.  What goes in is not what comes out.  Some constituents are consumed, such as biocides, some are partly reacted and some return in the form introduced.  So, more important is to analyze the water that flows back and not worry too much about the proportions of what goes in.  The ingredients that are going in inform us on the reaction products that may emerge and we can analyze for those in the return fluid (flowback water).

The way forward:  The use of standard chemicals allows for high quality shale gas wells.  Companies are becoming increasingly open on this point because of public concern with non-disclosure.  Halliburton has posted the precise ingredients it uses.  I examined the Marcellus list and each of these has a Chemical Abstracts Service (CAS) number.  This number uniquely identifies the chemical and the properties are easily discerned.  Virtually all service companies use some variant of these very chemicals.  There is no pressing need for substitution of these with others except to make them greener; more on that below.  The trade secret exclusion would apply only to substitutes with use advantages.  Such a claim will be very hard to substantiate in shale gas wells; the standard chemicals work just fine.  However, I recognize that this fast moving sector will be in continuous improvement, especially in recovering a higher fraction of the hydrocarbon in place.  This is particularly the case in liquids rich plays and also shale oil wells in the Bakken and elsewhere.  But the improvements must not compromise the environment or public health.  Full disclosure of the CAS numbers for substitutes ought to be the goal.  Oil and gas companies have a lot of choice when it comes to service providers and ought to be discerning on this point.

Greener chemicals are desirable and innovation in this area ought to be granted trade secret status so long as the requirements of the North Carolina General Statutes are met.  But since by their very nature these ingredients will be environmentally benign, the secrecy will almost certainly be in the recipe.  As discussed above the recipe ought not to be of concern to the public especially when benign ingredients are involved.  To the extent the secret is in the green chemical ingredient, it ought to receive trade secret status after some verification.

In conclusion, oil and gas companies ought to strive to employ only those service companies prepared to fully disclose the chemicals used, including the CAS numbers of each.  In every case the recipe ought to be accorded trade secret status by the state if claimed, without subjecting it to any process for verification of claim.

Vikram Rao

January 21, 2014

PARTICULATE MATTERS

December 29, 2013 § 1 Comment

As they say, size matters.  Nowhere is this more critical than in inhaled particulate matter.  The fate of these particles in the human body is distinctly different depending upon size.  Above 10 microns (micrometers) the particles tend to be captured in the nose and throat. Below that they are apt to enter the lungs.  The truly small particles, less than 2.5 microns, are designated PM2.5 and go deep into the tissues.  They are implicated with all manner of morbidity and mortality related to respiratory and heart disease.  In some estimates 75000 premature deaths annually are attributed to this cause in the US.  The numbers are greater in Europe.  The worst hit are rural areas of India and Africa where the cause is biomass combustion for cooking.  Women doing the cooking, often in enclosed huts, and the children in proximity, are the worst affected.  In fact, in general, respiratory damage short of mortality is much greater in growing children.

One of the major sources of PM2.5 is combustion in general and of coal in particular.  Natural gas substitution of coal, done for economic reasons, will have a direct positive effect on particulate emissions.  The impact on carbon dioxide reduction is well known and contributed in part to the fact that the US, a non-signatory to the Kyoto Protocol, has made the most progress of any nation in carbon mitigation.  But the positive effect on public health through reductions in PM10 and PM2.5 are less well known and need better airing.

The EPA has gone back on forth on regulations regarding condensable particulate matter.  First some definitions are in order.  Particulate matter from processes such as combustion comes in two varieties.  The first is material that is already solid and in the size range of under 10 microns and somewhat amenable to filtering out.  The second is particulate matter or liquid droplets that form outside the process due to the condensation of vapors such as sulfuric acid mist and metal vapors, either directly or upon reacting with something.  This last is almost exclusively in the PM2.5 class and hence the most deleterious.

In 2008 the EPA added condensable PM to the regulatory compliance list.  In October 2012, they issued a “clarification” removing condensable PM from the list of measurements required, seemingly because it is not PM in the smoke stack.  Producers are still required to calculate the value.  This regulatory confusion aside (at least I am confused) PM2.5 is a killer that needs monitoring and reduction.

DME moleculeDME molecule: no carbon to carbon bonding means no soot on combustion

Diesel Displacement:  A less obvious consequence of the shale gas bounty is the emerging area of diesel displacement.  Diesel has a lot to recommend itself.  The higher energy density (than gasoline) and higher efficiency engine makes it the fuel of choice for heavy duty vehicles, locomotives and ships.  Advances continue to be made in particulate filtration.  However, there is the question of massive legacy fleets, especially in China and India.  Tens of Indian cities have converted to CNG for public transport, with well documented reductions in mortality and morbidity.  So, the public health value of displacing diesel is not in dispute.

In the US shale gas has entered the debate from two angles.  On the one hand the cheap gas allows for economical displacement of diesel; more on that below.  But not to be forgotten is the fact that shale gas operations are often in areas proximal to homes and businesses.  These operations use diesel copiously.  All fracturing pumps run on the stuff.  Every truck hauling water and sand runs on diesel.  While it is true that trucks are a part of the existing commercial enterprise, the trucks associated with shale gas operations are additive and comprise short but intense bursts of activity.  As a first step all fracturing pumps ought to switch to alternatives with low or no particulate emissions.  Apache Corporation is already piloting the use of LNG in place of diesel, so feasibility is not the issue.  Although the pumps belong to a service company and they are manufactured by yet another such as Caterpillar, championship by the oil company customer gets things done.

Diesel Alternatives:  Stationary equipment such as described above and backup power generators are the simplest targets because the logistics of supply of alternative fuels is more straightforward.  The substitutes most likely to take a hold are compressed natural gas (CNG), liquefied natural gas (LNG) and dimethyl ether (DME, pictured above).  Each of these has lesser energy content per gallon than diesel, but is economical even within that constraint for stationary applications.

For motive applications the energy density penalty pretty much makes the choice of alternative.  For short haul applications with well-designed refueling hubs the least dense and cheapest CNG makes the most sense.  The Waste Management trucks in the Research Triangle area are an excellent example.  For medium haul DME make the most sense and LNG for long haul and trains and boats.  DME and LNG are essentially interchangeable (engine modifications are slightly different) and the choice will depend on factors such as refueling infrastructure.  This last has strongly been enabled for both by recent advances in distributed production of the fuel.  This is critical for LNG because long distance supply is less practical when the container has to be maintained at -161 degrees C.

The public health imperative relative to PM2.5 needs more public activism.  Displacing coal fired electricity and diesel fueled engines are worthy objectives and ought to be accelerated.  The first is happening purely as a consequence of shale gas being cheap.  Diesel displacement will take more effort, including policy action by cities and states.  Those opposed to shale gas production on environmental grounds would do well to consider the positive impact on PM2.5 reduction.

Vikram Rao

BIG DATA MEETS BIOFUELS

December 26, 2013 § Leave a comment

The next Big Thing in biofuels has always been just around the corner (the “are we there yet” refrain never far from the public mind).  A recent news story raises my own optimism significantly.  So, first the road we have travelled.  In the beginning there was ethanol from switchgrass and the like (the beginning after the ethanol from corn policy debacle).  Clean energy investors dived into that pool, led largely by Vinod Khosla, who made his money with the famed Kleiner Perkins investment firm.  Biochemical methods such as those used with corn have to date proven stubbornly resistant to cost reduction.  Then the wonder seed crop that did not compete with food, jatropha, burst into our consciousness.  The early excitement produced a review in the prestigious journal Nature.   Most recently there has been jet fuel from algae.  We discuss below each of these newer developments, including the latest piece of excitement linked above.

Jatropha plant

Fuel from Algae:
When I first heard of this source I was captivated. It grew in salty water useless for other purposes. It consumed carbon dioxide. Many varieties contained quantities of lipids, the building block of hydrocarbons. So, what was not to like? Just two characteristics: shallow ponds took up a lot of land and more importantly economical harvesting was challenging. Into this world stepped Craig Venter and his San Diego startup Synthetic Genomics. Venter led the successful mapping of the human genome and is quite possibly the best known gene sequencing expert. He targeted genetic manipulation of algae to directly attack the harvesting issue. The public details are sketchy but my take is that they are targeting producing the lipid precursor to hydrocarbons without going through the plant formation stage. More than likely this is intended to be a continuous process as in a chemical reactor. As of 2011 ExxonMobil, arguably the most conservative oil company had invested $300 million in the venture. The biofuels grapevine indicates that commercial scale operations are still in the future.
Jatropha:
The promise of Jatropha (pictured above) has largely been centered on two considerations. One is that it is an oily seed, with as much as 40% oil depending upon the strain. Unlike corn, soy beans, canola and other seeds, jatropha is not also a food source. The second point may however be the key. It can grow in non-arable soil with very little water usage. But the fact that it is drought resistant does not mean that it does not grow better with more water. It does. But optimal water consumption is not known and likely varies with species. Consequently, a farmer with access to water will use it, especially because in most countries, including the US, water for agriculture is priced very low. In India there is a push to grow it in non-arable areas without irrigation, coincident in many cases with poverty.

Against this backdrop is another problem.  All strains currently being grown are wild type; none has been domesticated.  Therefore the yields are unpredictable.  It is hard to size a conversion plant to uncertain yields.  This is the problem being addressed by SGB in San Diego.  According to the linked story they are trying to create a strain with predictably high yields and other valuable characteristics.  In so doing they are using a relatively new and powerful technique known as High Throughput Screening (HTS).  This robotically controlled process allows tens of thousands of experiments to be conducted very rapidly.  It also allows one to zero in on the promising subset and quickly perform further optimization on just that subset.  The technique has been around for a while but has recently become dramatically cheaper.
But HTS has caused an explosion in data generated and needing rapid analysis. Fortunately, this happened coincidentally with new computational schemes to handle this onslaught. The associated field of Data Analytics is fast growing and the colloquialism Big Data applies to it in many fields including drug discovery and rapid diagnosis of genetic defects.
SGB claim to be zeroing in on productive strains. They conduct HTS mediated deciphering of strains with known phenotypes (the physical manifestation of a genetic propensity) such as yield and drought tolerance. While wild type bushes produce only about 6 to 8 fruits to a cluster, some SGB strains produce over 35. The varieties with the best phenotypes are combined to produce new strains. These strains are produced with standard grafting techniques, so would not fall in the class of Genetically Modified crops.
India has always welcomed jatropha because it is indigenous and because the country is incredibly diesel dependent. The country burns 325 million barrels of diesel, compared to only 95 million barrels of gasoline. Much of this is in public transport, especially trains. The significance of this statistic is that jatropha is most easily converted to diesel or jet fuel using the process known as transesterification. This is the same process used for processing canola oil to diesel. Interestingly, this can be done economically on a small scale, practically a garage operation. This has considerable appeal for producing fuel in each village cluster for local consumption. Currently a high fraction of villages have no electricity grid; any meagre electric power is from burning diesel. A viable local fuel has huge significance.
Some processes are uniquely suited to small scales. Photovoltaic solar is one such. We need to embrace these for what they are and resist the temptation to scale up. Sometimes smaller is simply better. In any case where energy is concerned the small scale and large scale will coexist, one is not necessarily better than the other. Horses for courses. Some horses run some courses better than others. Ask Kentucky Derby winners about the Belmont.
Vikram Rao

LNG USER COUNTRIES STRIKE BACK

December 4, 2013 § 1 Comment

Japan and India are collaborating to fight back against high LNG prices.  In the Reuters report the countries are stated as strategizing to keep costs down.  Both these countries, and others in Asia, Korea in particular, depend upon LNG for critical needs such as power production.  This is especially the case in Japan, where the post Fukushima Daiichi disaster decision to shut down nuclear plants has caused natural gas to be a preferred fuel option.  India and China continue to use coal in large measure.

lng tanker

The problem faced by Asian buyers is that the delivered price is completely out of kilter with actual costs involved. First there is the pricing mechanism.  LNG price is pegged to the price of oil.  This harkens back to the days when oil and gas were at parity on the basis of energy content.  That went by the boards a while back and today oil is five times as expensive as gas in the US and about twice as expensive in Europe.  So the pegging to oil prices is simply a windfall for LNG producers. The users are striking back, and new options for sourcing, such as the US and new capacity in Australia, are helping.  Australia is particularly advantaged.  Their location allows for relatively low shipping costs and yet they enjoy the pricing dictated by other more distant producers.  This also applies to their export of iron ore to Asia.

The Japan collaboration with India is interesting in part because the collaboration is not with the near neighbor Korea, the second largest importer in the world next to Japan.  Clearly shipping logistics are not in play here, but more so diplomacy and the willingness to cooperate.  The mechanisms mentioned include coordinated purchasing.  Landed prices in India are already lower than in Japan, in something of a nod to the shorter distance from the Persian Gulf sources.  But these are still over 3 times the controlled price that domestic producers are allowed to charge.  This sort of disparity is evident in Argentina as well, where Bolivian gas is imported at a higher price than paid to domestic producers.

Although alternate pricing mechanisms are inevitable, this is still something of a sellers’ market.  Shale gas in the US has disrupted that balance to some degree.  Certainly LNG destined for the US is no longer needed.  That capacity is now going elsewhere, temporarily depressing prices in part because it all happened with such rapidity.  Eventually this will return to a supply demand balance that existed prior to the shale gas event.  The only disruption to this scenario would be significant shale gas production in importing countries.  All the indications are that this is unlikely any time soon.  Europe was the best bet but results in Poland to date have been disappointing.  The UK is making noise in this area but not much in the form of tangible results as yet.

 

Russia has every incentive to retain the current mechanism because it artificially raises the price they can charge for their pipelined gas to Europe and China.  Furthermore, highly variable pricing, such as based solely on Henry Hub may always be impractical.  This is because LNG production facilities are multi-billion dollar undertakings that rely upon predictable pricing for raw materials and product.  At least that is the argument that producers are vociferously making in the cited piece above.  No matter that similarly capital intensive industries such as iron and steel have survived, albeit barely in some years, with variable pricing on the product.

The slowness of federal permitting of US LNG exports is raising the issue as to whether this is in contravention of WTO regulations.  Some believe it smacks of protectionism.  Another interesting wild card is the expected explosion in the domestic use of LNG in transportation in displacing diesel.  Likely, however, is the scenario that much of the LNG will be from miniLNG sources and not the massively idled import terminal capability currently applying for export permits.

Vikram Rao

TWIN PEAKS

August 19, 2013 § 2 Comments

A recent issue of the Economist has a piece predicting a peak in oil demand.  Until recently all the noise has been around the theory of peak oil production.  Much ink has been put on paper on this topic and it even has variants.  The version that I subscribe to is not peak oil in the sense of declining resources, but rather peak ability to produce.  While this may seem like hair splitting, the difference lies in what is available versus what is economically available.  Necessarily, therefore, these numbers depend heavily on a forecast of price.  The higher this is, the more viable certain resources.

Peak oil demand dinosaur

This is why the discussion of that other peak, that of demand, is crucial.  If in fact that turns out to be the case, oil price may well remain at levels that are unprofitable for some resource bases such as the Arctic.  The Economist article even depicts oil as a dinosaur (reproduced above from the article).  Lovely imagery notwithstanding, dinosaurs were wiped out by a cataclysmic event.  Oil will be eroded away steadily and may never ever become extinct.

In our previous discussion on peak oil, we referred to the phenomenon as a plateau not a peak.  The two studies upon which we premised that blog, both came in with their plateaus in the low to mid nineties million barrels oil per day (bpd).  The lower number, that of the French Petroleum Institute, IFP was 92 million bpd.  Notably, and almost certainly coincidentally, the Economist citation of two studies is precisely that number, this time for demand.  The Twin Peaks, as it were, if they were to materialize, would produce immense price stability.  In the absence of a demand plateau we had theorized that a flattening of supply would lead to a continual rise in oil price.  This was a partial basis for our belief that the oil/gas spread would remain large, at least in North America.

Implications of a Demand Peak:  Worldwide about 60% of oil usage is for transportation.  That percentage is much higher in the US.  But the point is that the non-transportation uses are probably the most vulnerable to substitution by natural gas.  The largest two sectors are as a fuel (heating, electricity, other industrial processes) and in chemicals production.  The degree of substitution will be driven by the spread in oil/gas price and the longevity of the same.  Unlike in the past, the newer shale gas sources are abundant and forecasted to have predictably low prices for natural gas for decades.  If this forecast holds it will cement the substitution and thus lower the peak oil demand.

Easy to understand is the conclusion that the coincident peaks will put supply and demand in balance, thus stabilizing the price of oil.  In that case the price of natural gas alone will determine the spread.  Arguably all of the oil to gas substitution will put some upward pressure on natural gas price.  LNG notwithstanding, gas is dominantly a regional, not world, commodity.  The upward pressure will be less in North America, with shale gas resources that will unleash in response to demand.  Eventually other countries will have that capability, notably China and Argentina.  In the meantime higher local prices could slow some of the oil substitution.

Will a peak in demand cause a reduction in the ability of the Saudis to manipulate oil prices?  Probably not; if anything it could increase the urgency to prevent serious dips in price.  The cost of their social programs dictates the need for stable high prices.  But if reduced output is needed to prevent dips, this could have a net negative impact on their economy.  But in an odd twist, the current move to switch from oil to other means for electricity production could come under review.  If surplus oil were available due to export curtailment it could be burnt for power without a deleterious impact on revenues.  In any case, diversification away from oil as the dominant source of income will be a key.

We have in our columns here discussed the displacement of oil based products with natural gas sourced fuels and chemicals.  Certainly the displacement of coal by gas in electricity production has been at a high rate, almost single handedly lowering CO2 emissions to 1994 levels.  But this Economist article is the first I have seen that discusses energy efficiencies combined with substitution of oil to the point that demand plateaus.  Dinosaurs are cool.  But the accurate imagery is that of Luft and Korin, turning oil into salt.

Vikram Rao

DEIFYING AND DEFYING DIESEL

August 12, 2013 § 1 Comment

Diesel rightly deserves a place of pride in the world of transport fuels. The high density fuel combined with a high efficiency engine provides fuel economy which is a full third over that of gasoline. This is why it is the sole fuel of choice for long haul and heavy duty trucks, and off-road equipment that are the backbone of agriculture. 95% of school buses run on diesel. But diesel carries environmental baggage. For that reason, and because it is by and large a product of oil, it invites substitution, especially in urban areas.
Rudolf-Diesel
Diesel fuel and its use have seen significant advances over the last twenty years. The principal of these is the utilization of low sulfur fuel. While this has been mandated for on-road vehicles, the off-road regulation has been left to the states and is variable. Also, there are nearly a million diesel generators in the US performing a variety of functions. In places like India which are subject to regular electricity shut offs, virtually all the generators use diesel. A high concentration of these is in urban areas.
The other major advances have been in the implementation of particulate filters and urea injectors. Oxides of nitrogen (NOx) are formed at the relatively high temperatures of combustion in a diesel engine. Urea injection removes nearly 90% of the NOx by converting them to nitrogen and water. But despite efforts to date, the preponderance of evidence suggests that the fine particulates from diesel combustion (PM 2.5) are serious contributors to mortality and morbidity.
All of the above has caused diesel displacement, initially by compressed natural gas (CNG) particularly in urban areas. In 1998 the Indian Supreme Court mandated the switch on all public vehicles in Delhi and full implementation took several years. The World Bank reported on significant improvements in mortality and morbidity. Since then Kuala Lampur has done the same, as have many other Indian cities. In the US the pace of adoption has been much slower but is picking up, mostly due to the low cost of natural gas. But, except for the Honda Civic, no passenger vehicle has been designed to run on CNG. The daunting aspect is that the volumetric density is nearly one fourth that of gasoline. But numerous research efforts, many of these funded by the DOE’s ARPA E, are targeting a doubling together with 500 psi storage pressure versus 3500 psi in conventional systems. This last will allow faster and cheaper filling stations and will be an enabler for home filling.
The substitutes are many. They start with diesel produced from natural gas. This is sulfur free and ought to be devoid of any aromatics. Even the appearance is benign: a whitish somewhat translucent fluid. At a meeting I spoke at in Qatar Shell showed off their product by dispensing from a transparent pump. This substitute of course is a simple drop-in and should actually sell for a premium. Biodiesel was much in vogue for a while. It too is a drop-in but the raw material for its production tends to be in pockets of availability. Crop based biodiesel, from Canola, for example is very easy to make; practically a garage operation. But sources such as soy bean have drawn fire for using excessive water in the cultivation. On balance this avenue is likely to remain a boutique.
All the other substitutes come with degrees of difficulty in the engine or the infrastructure and dispensing. The aforementioned CNG is the current leader, and is most applicable to short haul fleets because of the ease of filling logistics. The other candidates are liquefied natural gas (LNG) and dimethyl ether (DME), in that order at this time.
LNG is believed to be more viable for long haul transport than is CNG, simply for reasons of range. Until recently I was bearish on the distribution costs. LNG production plants are large, with even a modest size one having production of about 5 million gallons of diesel equivalent per day (about 9 million gallons of LNG). Given that each truck carries 180 gallons, that plant will need to deliver considerable distances in refrigerated containers at -163 degrees F. But recent reports of a relatively new refrigeration technology, the nitrogen expansion cycle, offer the promise of small footprint production at reasonable cost. These would be in the range of just 30,000 gallon diesel equivalents per day.
The latest entrant is DME, emboldened by the low production cost driven by the current and projected low cost of natural gas. It is clean burning, with reduced NOx emissions due to the lower temperature burn and zero particulates. This last is the big driver. Volvo, and their subsidiary Mack Trucks, have announced the 2015 launch of a standard 13 liter engine running solely on DME. DME is stored and transported much like propane and the viability of economic infrastructure will likely be reliant on small footprint production.
Even methanol is entering the derby, albeit at a research stage for the present. Professor Cohn at MIT has designed and built prototype engines running on a diesel blend with methanol. In his concept methanol is injected at discrete intervals during the piston stroke. The evaporative cooling allows for higher compressions. He claims that his 9 liter engine with these features will do the job of the standard 13 liter diesel engine. A lot of the benefit comes from the reduced weight.
The diesel engine was one of the early internal combustion engines devised and named after the inventor Rudolf Diesel. Gasoline displaced it over the years. Yet, the modern diesel engine is the workhorse of commercial transport, and for good reason. But the health ramifications of fine particulate emissions are driving the desire for substitutes. This is especially the case in non-attainment areas. Cheap shale gas, at least in North America, is a significant enabler. Displacing powerful incumbents is hard. The reasons must be compelling. Here in the US we may have those.
Vikram Rao

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