The southwest of Victoria has the two key prerequisites for a successful micro-LNG operation – plentiful natural gas and substantial potential local demand for LNG as a transport fuel for dual fuel or dedicated LNG trucks.

The proposed Victorian micro-LNG plant is a joint venture between BOC and the South West Sustainability Partnership, and would have a capacity of 50 tonnes per day (t/d) of LNG.

The Victorian joint venture identified natural gas resources just off Port Campbell as having potential for a micro-LNG plant in the state. The gas primarily feeds into the SEA Gas pipeline system but there is adequate capacity to supply the needs of the proposed plant.

Mr Baker says that using LNG for southwest Victorian trucks would not require an extensive network of refuelling points. The region has heavy road transport activity associated with the dairy and logging industries, waste collection services and intra-regional transport of mineral sands. In addition, there is an extensive longer haul heavy transport system associated with aluminium, milk and dairy products, timber, livestock and other general freight operating out of the region, predominantly into Melbourne or Adelaide. Refuelling capacity at each end of the journey would be sufficient to provide secure fuel supplies for these longer haul vehicles.

Benefits of LNG as a fuel

The adoption of LNG as a fuel would also appear to have real benefits for the trucking operators.

“LNG is the perfect alternative to diesel for transport operators from an economic, environmental and fuel security perspective,” says BOC General Manager LNG Alex Dronoff.

“LNG has a very stable price, which makes it ideal for transport operators. This allows business to accurately budget for fuel costs, which is much more difficult to do with diesel due to its volatile price.

He adds that LNG releases up to 20 per cent less greenhouse gas compared to diesel. Also, as LNG is produced locally, it is secure from both global financial challenges and the security concerns surrounding oil.

In addition, other benefits of LNG over diesel include quieter running and lower maintenance costs.

“Trucking operators who choose LNG will experience a clean, reliable and cheaper fuel than those operators who choose diesel,” says Mr Dronoff.

Not all smooth running

Despite this confluence of potential supply and demand, and a significant level of interest among both transport operators and LNG suppliers, Mr Baker reports difficulty in getting the project off the ground.

“Getting that first commitment is the problem,” he says.

“The operators are juggling so many conflicting variables in their businesses that it is difficult for them to take a long-term view. Issues like fluctuating diesel prices, the complexities of having a mixed fleet, the uncertainties of a varying dollar value and the limited ability to take trucks off the road for conversion can all converge to make considering change difficult.

“There is also the ‘chicken or egg’ problem. Transport operators are uncomfortable about being the first to commit to conversion or purchase of LNG-fuelled trucks without LNG supply already being available. Conversely, it is unreasonable to get an LNG provider to set up refuelling points without committed users,” says Mr Baker.

Mr Dronoff says the major challenge in proposing BOC’s Westbury Micro-LNG Plant was to ensure there would be a market for the product. He says signing with transport operator consortium LNG Refuellers was the catalyst for the project.

He notes that cost can also be a barrier, adding “Engines that run on LNG are more expensive than conventional diesel engines. Trucks need to travel considerable mileages to justify the additional LNG engine cost.”

Seeking government support

Mr Baker believes that the Government needs to intervene, and has started discussions with both state and Federal governments to seek incentives.

“If we could get support for the capital cost of at least one, but preferably two, public refuellers – ideally one each at Warrnambool and Portland – and subsidies to assist with the conversion of up to 20 trucks to dual fuel, then I feel confident that we could bring relevant parties to the table simultaneously."

He says that less than $2 million would kickstart business once the gas is available and experience with its use can be seen by the local operators.

Mr Baker believes that the increasing use of LNG would then soon justify the construction of a package micro-LNG plant initially capable of producing enough to typically support 5–6 refuelling points and about 120 trucks. Such a plant would also be scalable through additional modules to allow for the establishment of further refuelling points and other users.

LNG for all The availability of LNG in the southwest region may lead to uses other than as a transport fuel, including power production and industrial uses in smaller communities.

“The economic and environmental advantages are all there, we just need the catalyst so that the transport industry can get the project started,” says Mr Baker.

Mr Dronoff confirms Australia’s potential for micro-LNG: “Due to our plentiful supply of natural gas, which can be converted to LNG, the transport industry can be assured of the long-term security of LNG as a transport fuel.”