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Alberta Extends Oil Production Cuts

Alberta Extends Oil Production Cuts

Alberta has announced an extension…

LNG Locomotives to be Common in the US by 2016

In 2011, US railroad companies consumed a little over 3 billion gallons of diesel, nearly 5.5% of the total consumption for the entire country.

Oil is currently much more expensive than natural gas, which thanks to the shale boom, is at record low prices in the US. Switching engines to run on LNG instead of diesel is expected to help operators drastically cut their costs. Yet whilst most energy experts have predicted that LNG will not be ready for widespread consumption across the rail industry for a decade or more, the Railway Age has stated that LNG powered locomotives will be common on US railroads by 2016.

Fuel currently accounts for 30% of operating expenses on major Class 1 railroads in North America, dwarfing all other operating costs. Every three months Burlington Northern Santa Fe (BNSF), the railroad company owned by Warren Buffett, spends over a billion dollars on fuel alone. It is calculated that switching to LNG could help save $200,000 a year per locomotive.

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BNSF has begun to experiment with LNG powered locomotives with an idea of switching most of its train fleet to cheaper and cleaner LNG. Railway Age wrote that “test programmes at BNSF and Union Pacific are expected to start in the fourth quarter.”

It is expected that the first trains will use a combined fuel of 80% LNG and 20% diesel, which would require few engine modifications, and allow for the motor to be reverted to full diesel if any problems arose with the LNG supply. The share of LNG could be boosted to 95% mixed with just 5% diesel, but this would require much heavier modification to the engine, and prove much more difficult and expensive to switch back to pure diesel.

It is thought that if the large gap between the price of oil and the price of natural gas continues, then it could allow LNG to capture a significant share of the transport market before the end of the decade.

LNG is already becoming more popular as a fuel source for large horsepower engines, and oilfield operators have begun to use heavy-duty, dual-fuel engines for drilling and pumping operations in order to slash the costs of running a well, and increase profits. Major road transport companies have also begun to prefer LNG trucks rather than the traditional diesel.

By. Charles Kennedy of Oilprice.com



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