Forbury Investment Network

Sustainable Road Transport: Future Perspective

The Implications of the

Golden Age for Gas on the Road Transport

Market

17th July 2013

John Baldwin Managing Director CNG Services Ltd

john.baldwin@cngservices.co.uk

www.cngservices.co.uk 07831 241217

The Golden Age for Gas

• CNG Services Ltd

• Role of natural gas and other alternative fuels

• Running trucks on natural gas

– NG Trucks

– CNG v LNG

– Renewable gas options

• Shale gas developments and potential

• Biomethane

– Market Forecast

– Green Gas Certs

• Conclusions

CNG Services Ltd

• Supports projects to inject biomethane into the gas grid

– Developer of Didcot and Poundbury biomethane to grid projects

– Working on 40 further biomethane injection projects in UK

• CNG as a fuel for trucks

– Operator of UK’s largest CNG station in Crewe

– Winner of £2M funding for 3 CNG projects including 2 supplied from LTS

– Support Qatar Petroleum – move to CNG in Qatar

• Supporting development of onshore gas fields and gas storage projects

– Wingas Gas Storage Project at Saltfleetby

– Ryedale Gas Field Project

We focus on innovation in gas

Crewe CNG Station

• Official opening of our Crewe CNG filling station on 8th March 2013 – largest ever collection of CNG vehicles

• Filling dual fuel trucks for GIST/M&S, Brit European

• http://www.youtube.com/watch?v=orxBtoXyjos

Largest grid supplied CNG station in UK – now selling biomethane via Green Gas Certificates

HGV Sector Provides the Best Opportunity for Natural Gas

Cars are not the target for natural gas – trucks are relatively few in number but use a lot of diesel and cause significant GHG emissions

Fuel options in each sector

Prices today

DECC Energy Price Forecasts

Natural gas has diverged from Oil price due to world-wide LNG trade and US Shale gas production and this underpins NGV for trucks – UK imports of oil by

2025 expected to cost >£25 billion a year.....we have to reduce this

NG for HGV Transport

• 100,000 HGVs = 59TWh/a (10% throughput of annual non power gas demand)

• Cost of natural gas is 40% of cost of oil on an energy basis

• Dual fuel trucks are available – Mercedes Benz, Volvo, DAF

• Use 6,000 km of 30 bar grid to supply trucks

• Most distribution can be 40 tonnes with no range issue on CNG

• LNG attractive for 6 x 2

7

Dual Fuel Technology – Key Components

There is a worldwide dash for dual fuel technology underway driven by abundant world-wide gas resources

Hardstaff OIGI system exhaust including methane catalyst

250 bar CNG storage or LNG storage

Westport HPDI injector

Clean Air Power ‘Genesis’ ECU

The Euro 6 Challenge

• From 2014, trucks need to meet the Euro 6 Standard

• Dedicated LNG can do it

– Westport HPDI

• Dedicated CNG/LNG in spark ignition can do it

– Scania 350 bhp tractor

– Mercedes Benz Econic

– Iveco Stralis

• Can dual fuel meet it

– Has to meet diesel standard and gas standard

– Difficult to do, temperature of methane catalyst

– May be possible with 40% gas, 60% diesel

No such thing as Chicken and Egg in UK – its all about the truck

CNG v LNG

• Gas can be stored on the truck in compressed or liquefied form

– CNG ideal for back to base operations

• Brit European 6 x 2 tractors, 400 mile range

– LNG good for 6 x 2 tractors, 44 tonnes

• Compressed comes out of the gas grid – ideally the 30 bar grid to give very high flow rate, low electricity, low maintenance

• LNG comes from Avonmouth (via Qatar and Milford Haven)

– Made into LNG twice

– Or imported fro Zeebrugge (at present due to Avonmouth technical issues)

– Avonmouth to close in 2016-17

• LNG in a Westport HPDI engine has diesel efficiency which is very attractive

Renewable Gas

• Compressed biomethane (CBM) used directly in a truck

– Not in the UK, 2 small plants in Germany, widespread in Sweden (no gas grid)

• CNG with biomethane injected into the grid and a Green Gas Certificate model used

– 300 CNG stations in Germany, widespread in EU

– Crewe in UK

• Liquid biomethane delivered by road tanker

– One plant in UK (GasRec) and one plant in Sweden

• GasRec LBM from flared landfill gas is a premium product

– Economics generally not attractive for LBM from AD

• Small scale LNG capex very high, also high opex and losses

• Value of biomethane into grid or CHP is worth double in most countries

UK oil production UK oil demand

This is the Elephant in the room... Question - How does UK plc afford this extra import bill of around £25 billion/year?

DECC forecasts that by 2025, UK will be importing around 1 million barrels of oil per day, almost all for road transport

UK Oil Production and Demand 1990 - 2020

Answer – Don’t Import It!

• BGS huge estimate of Bowland shale gas resource...

• Drilling programme 2014 – 15 to find likely reserves

• Centrica 25% equity

BGS say that Bowland shale gas resources could be 1,300 TCF -

assume 20% recoverable = 3 TCF (84 BCM)/annum for 80 years (UK annual demand around 80

BCM)

Lancashire 350 million years ago

Imagine an inland sea where Preston is today... is this going to be one of the top 10 largest gas fields on planet Earth?

A bit of the gas leaked out and was captured in different strata... we call this gas “South Morecambe” – our largest gas field to date, mostly produced

Bowland shale at 4,000 feet thick

Most US shale at 300 feet thick

Largest Gas Fields

Who knows where Bowland shale will fit?

Bowland shale probably 2nd largest gas field on earth

Shale Gas Locations and the UK Gas Grid

The National Transmission System appears to be wherever there is shale gas which is a stroke of luck (and saves UK around £15 billion)

UK Gas System – Local Transmission System

LTS is a vital national asset - ideal for CNG – it would cost >£15 billion to build NTS/LTS – these assets can help reduce diesel demand and reduce

CO2 from trucks

We make biomethane from organic material in an AD (waste food etc)

What is Biomethane?

• Biogas from an anaerobic digester contains typically 65% methane, 35% CO2

– Lager shandy

• Natural gas contains around 90% methane, with ethane, propane, butane, CO2 and nitrogen making up the rest

– Blended whisky - made from dinosaur poo in a prehistoric AD, contaminated over the millennia

• Biomethane is biogas without the CO2, containing around 98% methane

– Malt whisky, the elixir of life, we all want to drink it

Prince Charles opened it in Nov 12– a great project

Poundbury

• UK’s first commercial scale biomethane to grid project

• 500 m3/hr into grid (around 1 million therms)

• Membrane CO2 removal plant

• Development is a JV between Duchy of Cornwall and some of its tenants

Biomethane Market

• From Jan 2006 – May 2013 lots of work on this

• At last it’s sorted; now less than a year from start to finish for a new biomethane injection project

2013 – sorted, dynamic market, 20 projects by end 2014 100 million kg into grid in 2015

REAL Green Gas Certificate Scheme

• Designed to allow ‘tracking of biomethane from injection point to customer”

– Integrity - no ‘double counting’

• Separate from the gas to provide flexibility

• Can only be used once

Gas Supplier

Gas Consumer

AD Developer Organic Material

Gas Distribution

Network

Sale of ‘Certificates’

Normal grid gas

Purchase of biomethane

energy

Inject gas into grid

Processing via Anaerobic Digesters

Clean-up plant and grid injection

Gas can be used to fuel

trucks on CNG

Sale of gas

AD Developer Sells Direct to Gas Consumer

Green Gas Certificates - Value at the Customer End?

• Green Bus Fund - does allow 6 p/km subsidy for CNG Buses with grid gas and Green Gas Certificates

• Supermarkets - arguing for low carbon reporting of CNG and Green Gas Certificates

• EON - arguing for use of CHP District Heating with natural gas fuel and Green Gas Certificates (eg Elephant and Castle redevelopment)

• Poundbury - arguing for use of biomethane injected into local gas grid and Green Gas Certificates to count towards low carbon homes

REA has asked the Govt to look into all the options for Green Gas Certs as part of review of RHI in 2015, with some pilot projects approved now to

develop the market

Conclusions

• LNG a good fuel to start the market

• CNG can be long term fuel for UK

– Small country, extensive Local Transmission System

– Low Well to Wheel CO2

• Biomethane is ideal way for hauliers to reduce their carbon footprint

– 60% CO2 reduction using Green Gas Certs

• Shale gas offers CO2 reduction compared to fossil natural gas/imported LNG

– Jobs and more wealth that can remain in UK

– Taxes to fund insulation and renewables

The development of trucks that can run on gas is the key issue together with DfT support to Green Gas Certs