Exploring the Opportunities for Natural Gas
LAS VEGAS — Natural gas participation is still low in the U.S. fuels market due mostly to consumers' refueling concerns, but the alternative fuel could see solid growth in several regional areas, according to participants in the "Fuels Outlook: Natural Gas" panel held during last week's 2014 NACS Show.
Currently, there are 751 public and 669 private compressed natural gas (CNG) fueling centers in the country, as well as 59 public and 42 private locations offering liquefied natural gas (LNG), reported Dr. Paulina Jaramillo, assistant professor at Pittsburgh's Carnegie Mellon University.
While several fleets have already taken to LNG, she said CNG has not yet reached its full potential with consumers because of the lack of available vehicles on the market. Only the Honda Civic NG and CNG-gasoline hybrid Chevy Impala are available for purchase by consumers.
Retrofits to natural gas tanks are possible, but come at a significant cost, noted Dr. Jaramillo.
Despite some drawbacks, CNG is selling very well in some areas. One retailer at the forefront is Stillwater, Okla.-based OnCue Marketing LLC. According to panelist Scott Minton, CNG business development manager at OnCue, the chain offers CNG at 15 of its 45 Oklahoma locations, with plans to soon offer CNG at 10 more locations.
"CNG is great because it's 100-percent American," said Minton. "It's locally produced here without any dependence on foreign oil."
CNG has sold extremely well at OnCue locations. The convenience store retailer recently sold its 8,000,000th gallon of the alternative fuel. CNG currently retails for $1.69 per gallon, a great cost savings for consumers, stated Minton.
"We saved Oklahoma customers about $5 million last year and expect to save an additional $6 million in 2014," he said. "Little of that money is going to savings accounts. Customers are going inside our stores and spending money on in-store items like Snickers bars."
IS IT WORTH IT?
Despite the great results OnCue has seen, Minton did caution other retailers that it took each OnCue CNG station two to three years to reach the desired sales results. He also pointed out that it costs $1.4 million to $1.8 million to build a CNG station.
Still, he believes the investment and time are worth it. "Why are we doing it?" Minton asked. "Because travelers are coming [and fueling up with CNG]."
On the East Coast, Wawa Inc. also recognizes the potential in CNG, but it took the retailer some time to buy in. Panelist William Compitello, senior director of fuel initiatives for the Wawa, Pa.-based company, said the chain needed to formulate a white paper before plunging into natural gas.
This document attempted to answer many questions, including if local government regulations support the fuel and if consumers and fleets will buy natural gas, and also included Energy Information Administration projections for the future of natural gas.
Image is another big issue. "We wanted to make sure our location wouldn't look like a truck stop," said Compitello.
After extensive research, Wawa decided to offer CNG at the pump, teaming up with utility company South Jersey Gas to do so. However, Wawa hit one unexpected snag for its first potential CNG site. A local Planning and Zoning Commission asked the operator of approximately 650 c-stores to make some changes to the layout of the CNG station, which would have cost $2 million in additional expenses. Hence, Wawa abandoned the project, Compitello revealed.
Even with this setback, Wawa is excited about the future of CNG. "We are moving forward with CNG at two other sites," he said. "We are in the process of developing these locations."