Oil giant Royal Dutch Shell is set to invest more than $300 million to build out a series of liquefied natural gas filling stations at America's biggest chain of truck stops. According to James Burns, Shell's manager of LNG transportation fuels, the oil and gas giant will pay the costs of setting up 200 LNG pumps at 100 locations in the Travel Centers of America chain. Burns wouldn't say where Shell intends to set up these pumps, but insisted that Shell aims to create an tempting value proposition for the owners of trucking fleets who are thinking about investing in trucks that run on the super-chilled natural gas.
"They want to have some comfort that the fuel is available," says Burns. "We want to be the company that provides that comfort." In a statement, Travel Centers said the locations will be chosen with the objective of enabling LNG trucks to travel across the entire country.
Burns says Shell will entice truck fleets to buy LNG-powered trucks and to pump their LNG by selling long-term contracts that guarantee the price they pay for the natural gas derived fuel will be at least 30% cheaper than diesel (on an energy-equivalent basis) for the lifetime of their trucks. "They can lock in their fuel savings for however long they keep that truck," which is often as long as five years.
Shell set up its first network of LNG filling stations in Canada last year after building a small LNG plant in Calgary that makes the equivalent of 300,000 gallons of diesel a day. The Canadian venture installed the pumps at Flying J truck stops. Burns says Shell doesn't yet have any set plans to build one of these small LNG chillers to supply the U.S. network as it's secured supply from a third-party LNG producer. "We see a future where infrastructure for LNG is not a concern," says Burns.
With its deep pockets, Shell shouldn't have much trouble growing its LNG network bigger than early mover Clean Energy Fuels, which maintains 300 fueling locations in the U.S. and Canada. Publicly traded Clean Energy Fuels lost $31 million in the last quarter, up from a loss of $9 million a year ago. The company has received $150 million in loans from Chesapeake Energy's venture capital arm.
I've written recently about the oddity of cash-poor Chesapeake investing in such risky ventures as Clean Energy Fuels and "green" gasoline maker Sundrop Fuels. Chesapeake's high cost of capital can't justify such moves, nor does it have any experience in operating filling stations. Shell, however, is a very different beast. It's been operating gas stations for decades, it's developed its own LNG technology, its market cap is about 20 times Chesapeake's, and its bond rating is AA versus Chesapeake's BB-.
Shell is precisely the kind of company that should be investing in fueling trucks with LNG.
