The Oilspot News: "Driving Gains for Propane NPGA says Propane Poised to Increase Market Share with Autogas"

 

The Oilspot News 
 
Driving Gains for Propane 
 
Myke Feinman
10/29/12

 

The U.S. propane industry is poised to increase its market share of vehicle fuel, known as autogas, according to the National Propane Gas Association.
 
“Propane is the third most prominent fuel used in the world today,” Rick Roldan, president and CEO of the NPGA told Telvent DTN on Oct. 25.
 
“It’s the number one alternative fuel with 25% more propane vehicles on the road today than natural gas vehicles,” Roldan added.
 
He said propane, which has been around for 100 years primarily as a heat source, has also been used as a liquid vehicle fuel for at least half a century. But what makes a difference today is that propane can be purchased for about $1 a gallon less than gasoline or diesel fuel, he said. Propane’s price advantage also has been seen as generating more propane exports.
 
“For those also concerned about the environment, propane is 20% cleaner than gasoline,” he added. Based on the governments models from well to fuel tank, some applications are as high as 50% better than gasoline, Roldan said.
 
The costs to install a propane refueling station is much less than a natural gas fueling station, and the cost for new propane-powered vehicles compared with those powered by natural gas is lower, favoring autogas fleet conversions, Roldan believes.
 
Today’s propane markets are split up 59% for residential heating use amounting to six million customers nationwide, 16% commercial use, 10% industrial use—for fueling forklifts for example, autogas at 5%, grain drying at 5% and 5% for resellers.
 
In gallons, nine billion each year are sold as odorized propane for retail, and nine billion is non-odorized for the petrochemical industry.
 
Propane exports were 1.9 billion gallons last year, NPGA said.
 
While NPGA is encouraging home heating use to displace more expensive heating oil, it is the autogas market that the NPGA sees as the larger market potential.
 
Examples of autogas applications include: the Rouche engineering company partnering with Ford Motor Company for pickup trucks powered with propane; the Freightliner Company producing cargo-tank vehicles for propane transportation used in home deliveries; commercial mowing operations converting to propane powered mowers due to the smaller conversion costs involved, a billion gallons a year market; buses have had a long history of propane-powered engines and Bluebird, a school bus manufacturer, continues to produce school buses for propane fuel.
 
Commercial fleets are typically centrally-fueled, so those are the target markets for autogas conversions in the United States, Roldan said.
 
“If you centrally fuel, we knock the doors off the competition,” Roldan asserted.
 
He said to install infrastructure for central fueling of a fleet, the cost is between $20,000 and $65,000. By comparison, a natural gas central fueling station for a fleet can cost $500,000 to $1 million.
 
It cannot compete with gas and diesel for consumer vehicles, however, because motorist demand a fueling station “on every corner,” Roldan said.
 
In addition, such applications as diesel-fueled portable generators used in construction, or other diesel non-over-the-road machinery applications are markets the NPGA is trying to penetrate.
 
“I think everyone of those markets, over the road and off road are our greatest potential for growing gallons,” Roldan said. “I’m just convinced of it.”
 
The price advantage versus gasoline and diesel is a relatively recent phenomenon thanks to the shale oil and gas boom, with gas liquid wells generating 70% of U.S. propane production. Ten years ago, the oil refineries generated 50% and natural gas the other 50%, Roldan said. But due to increasing shale production he sees as lasting for decades, Roldan sees the U.S. propane price advantage continuing for years to come.
 
“We spent first century (of propane applications) talking about burners,” Roldan said. “To grow we need to think about things like fuel injectors and spark plugs. Any place that run on diesel and give dollar price advantage, we need to look at those markets.”
 

 



 

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