Thursday July 10, 2014

High Horsepower

CN riding the rails to a natural gas future
CN Photo

A lot of CN locomotives could soon be running on natural gas if a test project on their route between Edmonton and Fort McMurray, Alberta proves successful.

Typically the domain of diesel fuel, the world of high horsepower engines is now driving towards a future where the fuel of choice could be natural gas.

CN attracted considerable attention when they announced on September 27 that they would be testing locomotives partially powered by natural gas on their route between Edmonton and Fort McMurray, Alberta.

"CN launched this locomotive test to explore the use of natural gas as a potential alternative to conventional diesel fuel,” said Keith Creel, executive vice-president and COO at CN.

However, that was really just the tip of the iceberg.

During the first Natural Gas for High Horsepower Applications (HHP) Summit on September 27, Joel Feucht, director of gas engine strategy at Caterpillar, declared during his keynote address that his company has “decided to go all-in on gas” for engines used in marine and rail transportation, as well as applications for mining and other natural resource industries.

“We are going to invest because we see a global market long term,” said Feucht. “Large engines are going gas. It’s not debatable. It’s our conclusion.”

That was just one day after an announcement out of Saskatchewan that a number of the oil and gas drilling rigs in that province could soon be using compressed natural gas (CNG) to power their engines.

The announcement was that CanElson Drilling subsidiary CanGas Solutions had just signed an agreement to deliver natural gas to Bayhurst Energy Services Corporation (BESCO), a subsidiary of natural gas utility SaskEnergy, over the next three years.

As part of that deal, SaskEnergy will build a CNG facility in Weyburn, Saskatchewan to serve as a hub for a fleet of thirty CNG delivery trailers being built by CanElson at a cost of $9 million.

The company’s fourteen drilling rigs in Saskatchewan are presently powered by diesel engines, but this plan will allow them to convert to bi-fuel engines that can use both diesel and CNG.

"With this agreement, we can start rolling out our plan to substitute diesel fuel with clean and inexpensive natural gas in our own fleet of mobile drilling rigs in Saskatchewan," said W. Randy Hawkings, CanElson's president and CEO.

"We expect this agreement will serve as a regional model under which we can quickly expand our CNG road transport services business to supply drilling rig engines and other equipment in markets across North America,” he added.

So, the question is: why is all of this happening right now?

“We have lots of natural gas,” said Canadian Association of Petroleum Producers (CAPP) spokesperson Markus Ermisch.

“It’s abundant,” he continued. “We have about 100 years worth of supply. And it’s affordable.”

CN is also looking at the environmental impacts.

“We think that there are some clear sustainability gains here in terms of reduced carbon footprint,” said CN spokesperson Mark Hallman.

The engines involved in this pilot project are a pair of 3,000 horsepower SD40-2 locomotives built by Electro-Motive Diesel (EMD), which happens to be a subsidiary of a Caterpillar company, Progress Rail Services.

The locomotives have been retrofitted to run on 90 per cent natural gas – the remaining 10 per cent is diesel that is still used for ignition – using conversion kits from Energy Conversions (ECI).

According to ECI, carbon dioxide (CO2) emissions can be cut by 30 per cent and nitrogen oxide (NOx) emissions can be cut by 70 per cent over the lifetime of a locomotive by using these hybrid engines instead of conventional diesel engines.

“We think there’s potentially operational efficiencies as well,” Hallman added.

CN is already an industry leader in North America when it comes to fuel efficiency, currently using about fifteen per cent less fuel than the industry average.

The first step towards realizing their sustainability and efficiency goals, however, is to prove the viability of natural gas locomotives.

“This is like a test,” said Hallman.

“We’re just dipping our toes in the water here,” he added.

If this first foray into natural gas locomotives is successful, CN will then move into the second phase of the project to develop a state of the art natural gas railway engine and a railway tender to carry the fuel alongside the locomotive maker EMD, natural gas engine manufacturer Westport and Gaz Metro subsidiary Gaz Metro Transport Solutions (GMTS).

“Because the stuff that we’re dealing with now is essentially… a kit with technology for LNG (liquefied natural gas) conversion of these existing locomotives, which has been on the market for a number of years,” said Hallman. “So, we’re looking for the next step here in terms of not only the engine, but also a state of the art tender for the transportation of the LNG.”

The natural gas for the test project is being supplied by industry giant Encana, one company that is leading the charge on the use of natural gas as a transportation fuel.

Last year, the natural gas producer began providing natural gas fuelling for a fleet of LNG trucks belonging to Heckmann Water Resources, the water supplier for their Haynseville shale gas operations in Louisiana.

Encana has also been converting its fleet of light duty trucks to CNG.

“It fits right in our niche,” said David Hill, Encana’s vice president of operations for their natural gas economy group, discussing the decision to join CN on this venture.

“[We are] bringing our light duty fleet – pickup trucks out in the field – to natural gas,” he added. “We’re progressing on that as well as building infrastructure to fuel those. Because we know that there’s not a lot of infrastructure out there.”

That lack of fuelling infrastructure is often mentioned as an obstacle to using natural gas for transportation, as well as the considerable cost of converting fleets of vehicles to natural gas.

“In high horsepower applications,” Hill continued, “we’ve been testing natural gas in our operations for about five, six years now. And we’ve gained a lot of experience on using natural gas in high horsepower applications. And this is kind of a natural evolution for us, just to look beyond drilling applications and pressure pumping services, and look at these other very large markets that consume … large amounts of fuel.”

Encana began discussing this project with CN about a year prior to its launch.

“We were looking at the high horsepower applications for natural gas and we reached out to CN just to get their interest,” said Hill.

“What kind of attracted us to them was they definitely were innovative,” he added. “They’re definitely going to do more than talk about it.

“We were excited to work with them and actually take a project from the drawing board to execution.”

As a natural gas producer, particularly one with assets in the relatively remote northeast corner of British Columbia, Encana is also eager to diversify markets for the fuel at a time when the United States is shifting from importer to exporter thanks to their shale gas resources.

“[The] transportation segment is a very significant segment in fuel consumption,” said Hill, noting that the move to using natural gas for transportation has been led by city transit and return-to-base heavy truck fleets such as those operated by companies like Waste Management.

“We’re seeing significant movement today in the Class A market for trucking,” Hill continued. “And these new markets are important because of our supply story – our abundant supply story.

“But these new markets will take time. It’s really about adoption. It’s really about establishing credibility with the [fuelling] infrastructure and bringing this to market.

“It’s a longer term view.”

Encana is simultaneously working on other new projects, too.

“We’ve definitely got a few more of our suppliers that are contracting with us right now,” said Hill. “We’re early in the process for getting them up and running on natural gas in the U.S. And we have one of our real key suppliers up in Canada, Ferus Energy. We’re also working with them and fueling some of their trucks.”

Erik Neandross, CEO of Gladstein, Neandross & Associates, the company that brought the HHP Summit to life, is very encouraged by CN’s announcement to undertake this pilot project.

“Our firm has been working in the heavy duty natural gas vehicle arena for almost the last twenty years,” said Neandross, explaining their reasons for launching the HHP Summit this year.

“That has brought us, via a number of the projects that we work on, more intimately involved in this high horsepower segment,” he added.

As consultants, Gladstein, Neandross & Associates have been heavily involved in examining market opportunities for natural gas in marine transportation and oil and natural gas exploration and production (E&P), particularly the drilling and hydraulic fracturing aspects of that business. That has given them a view of the possibilities for other high horsepower applications.

“We saw this is definitely an up-and-coming emerging market,” said Neandross.

“By virtue of the fact that we’re involved in these markets every single day,” he continued, “we understand there’s one mine haul company that’s been testing natural gas, there’s one LNG locomotive project that has proved that the technology can work, there’s this whole emerging oil and gas E&P sector. And then we see this marine sector – something particularly overseas – that is becoming more and more prevalent.”

However, many of these initiatives have been what Neandross calls “one-off, demonstration projects.”

The goal for the conference was to demonstrate the larger opportunities that exist when it comes to natural gas and high horsepower engines.

“We saw a lot of things happening in these markets and we wanted to bring it all under one roof and showcase the opportunity, talk about what synergies there might be between these segments, and see where it leads us,” said Neandross.

“Hugely important,” he added, discussing the CN project.

“There’s a real inherent interest and, I believe, a deep belief that there’s opportunity here for them to use natural gas and reduce costs,” he continued. “And they’re being very aggressive. Their development project has happened relatively quickly. They’ve got technology on the rails today running on natural gas. And day one reports were very positive.

“There’s really no big technology hurdles here. Getting an engine to run on natural gas to then power a locomotive, that’s the easiest part in this whole trial… It’s all of the other things. It’s fuelling. It’s how do you connect the tender car of LNG to the locomotive? What are the issues there? What are the kind of logistical, operational issues of integrating a new fuel into a very, very finely tuned system?”

Those logistical hurdles were a hot topic of conservation during the HHP Summit.

“These were questions that were asked repeatedly throughout the conference,” said Neandross.

“How do we capitalize on this opportunity that the end users have to save tremendous amounts of money in their operations?” he proceeded. “And time and time again the message was: we need the supply chain. So, the fuel, the LNG fuel production, the transportation, the logistics to get that fuel to the end user. We need the infrastructure components, whether it be infrastructure that’s going to put gas into a power [generation] unit at the drill rig site or the fuelling infrastructure to put LNG in a mine haul truck at the bottom of a gold mine or a copper mine. Or the locomotive.

“It’s a very consistent message that we need all those other parts of the value chain to come together and keep pace with the deployment of the actual engines.”

Neandross suggested that the various users need to communicate effectively in order to discover the synergies that may exist that can help them conquer those logistical challenges.

“If they better understand what each other is doing, you can more quickly and more successfully bring that natural gas supply chain to all of them,” he explained. “If you have a vessel operator in the Gulf of Mexico and the locomotive operator down in Texas, as well as the drilling crew in the Haynesville or the Eagle Ford, they’re all relatively concentrated geographically.”

If they are all aware of their individual uses of LNG, they can coordinate on the logistical aspects.

Neandross added, “It’s only going to allow for that LNG production plant to be built that much sooner.”


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