LNG to power locomotives in North America

As LNG prices drop, it is foreseeable that more railroad operators around the world will start looking at LNG as an alternative fuel for their locomotives.
According to a recent report by Frost and Sullivan, North America is in the midst of completely revolutionizing freight rail operation. Several Class 1 railroad operators have announced plans to test Liquefied Natural Gas (LNG) on power locomotives. Initial test results show that LNG-powered trains have a longer range than diesel-powered ones while having comparable towing power.

Several Class1 operators have toyed with the idea of using LNG as a fuel in the past. Canadian National (CN) announced in September 2012 that it was testing two EMD DS40-2 locomotives using LNG as the principal fuel. With BNSF Railway Company (BNSF) announcing its pilot project of testing LNG on six locomotives (three GE and three EMD) last week, it becomes the second Class 1 railroad to announce LNG as a serious alternative for diesel as the fuel of choice for rail.

LNG is the preferred medium for freight locomotives compared to compressed natural gas (CNG). A container can hold up to five times more LNG as it can CNG, and LNG requires less frequent refuelling. CNG also requires bulky tanks that increase the deadweight of the locomotive, thereby increasing maintenance costs and reducing payload capacity.

A gallon (3.79 l) of diesel fuel currently costs an average of USD 3.94. A diesel gallon equivalent of LNG costs between USD 2.5 and 2.8 in the United States. Besides significant savings, the other benefit of using LNG is the possibility to reduce emissions. Preliminary tests show emission reductions of 40% lower NOX, 70% lower particulate matter (PM) and more than 20% lower greenhouse gasses.

With an excess of 9 trillion m3, the United States ranks sixth in the list of countries with a proven LNG reserve, with approximately 3% of the global LNG reserves in the world. The United States also ranks second on the list of countries with recoverable shale gas reserves - more than 862 trillion m3. Advances in hydraulic fracturing and horizontal drilling allow for economical extraction of natural gas from shale formations. By 2030, more than 40% of US natural gas supply is likely to be from shale gas. By 2020, USA is expected to start exporting LNG globally and this will reduce the price of LNG in markets such as Europe.
As LNG prices drop, it is foreseeable that more railroad operators around the world will start looking at LNG as an alternative fuel for their locomotives.

Prototype mainline locomotives are expected to be ready as early as 2014. If the results are successful, the low price of fuel is expected to be the biggest driver prompting Class 1 railroads to switch to LNG. A 4.1% share of the installed base of locomotives is likely to be LNG capable by 2018. The cost of retrofitting a diesel locomotive for LNG operation and adding a tanker is expected to increase the price of a new locomotive by as much as USD 1 million. However, this cost is predicted to be very easily recoverable.

As North American railroads take advantage of the boom in domestic natural gas production, it is expected to induce global widespread industry implementation of LNG as major alternative fuel for locomotives.

More information: Adrien.Bellachen@Frost.com , Tel. +33 4 93 00 61 89