Evolution or Revolution? LNG and the Railroads

Posted by Michelle Howard
Tuesday, April 15, 2014

Electro-Motive Diesel, the world's largest diesel locomotive manufacturer, has taken delivery of the first of four specially designed liquefied natural gas (LNG) tenders ultimately destined for use on the Canadian National railroad.

The remaining tenders, each equipped with a fuel tank capable of carrying 45,500 litres of LNG, are due to be delivered before the end of June, according to specialist industry publication "Railway Age".

The specially adapted engines and tenders will be put through stationary tests before being handed over to Canadian National for a pilot programme on the tracks starting in the summer ("Westport delivers first LNG tender to EMD", April 11).

It is the first small step in what could be a revolution. Just as diesel locomotives ousted steam trains in the middle of the 20th century, LNG could replace diesel in the 21st.

But despite the apparent cost savings from switching to gas from diesel, there are also "key uncertainties as to whether, and to what extent, the railroads can take advantage of this relatively cheap and abundant fuel", according to the U.S. Energy Information Administration (EIA).

Big Fuel Savings
The seven major Class 1 railroads in North America spent a combined $11 billion on diesel in 2012, which was about 23 percent of their total operating expenses, according to a fascinating research note published on Monday by Nicholas Chase at the EIA ("Potential for liquefied natural gas use as a railroad fuel", April 14).

The Class 1s accounted for 7 percent of all diesel consumed in the United States. Burlington Northern Santa Fe (BNSF) and Union Pacific, the largest railroads, each consumed more than a billion gallons. The others brought the total up to 3.6 billion.

With diesel expected to cost more than three times as much as natural gas on an energy-equivalent basis until at least 2040, according to the EIA, there is a strong financial incentive to switch.

The discounted value of fuel savings could be more than $1.5 million per engine, versus the more than $1 million incremental cost of an LNG-driven locomotive and its accompanying tender compared with a conventional diesel locomotive.

LNG's cost advantage is sustained over a wide range of discount rates, pay-back periods and future oil prices. Crude prices would have to slump for diesel to become cheaper, which no one is predicting.

Operational Issues

Set against the fuel savings, however, is the fact switching from diesel to natural gas would create significant operational challenges and costs for the railroads during the transition.

New fuelling stations and delivery systems would need to be built. For an extended period they would have to run alongside the existing delivery infrastructure for diesel, which would add considerably to costs, with duplication and extra maintenance.

Most of the new engines being piloted by Canadian National and the other railroads are designed to run on a mix of LNG and diesel, and would be able to run on diesel exclusively if necessary because LNG was unavailable in some areas.

The low-pressure LNG engines that Canadian National will start testing this summer are designed to run on a 60:40 or 80:20 mix of LNG and diesel, though they can switch to 100 percent diesel if needed.

Other high-pressure direct injection (HPDI) engines, some of which will also be tested by Canadian National, would run on up to 95 percent diesel.

But there are still concerns that running a mix of dual-fuel and diesel-only engines across the network could reduce interoperability, which is a major financial consideration for the railroads.

There are more than 25,000 locomotives in service with the Class 1 railroads. The capital cost of replacing all or a large part of them, equipping them with specially designed LNG tenders, and providing the associated fuelling infrastructure, would run into tens of billions of dollars, the EIA says.

"The financing requirement of large capital expenditures complicates the rather straightforward calculation of locomotive fuel economics," the agency explains.

"The amount of capital available to Class 1 railroads, either on hand or raised in capital markets, is an important factor in determining whether, or to what extent, railroads can take advantage of fuel savings over time."

Switch Precedents
Railroads have already made two major changes in engine technology. Between the 1920s and the start of the 1960s, steam was replaced by diesel as an engine fuel. Since the 1990s, parts of the fleet have switched from direct current (DC) to alternating current (AC) traction motors.

But while the switch from steam to diesel was rapid (under 30 years) and complete (the last steam engine retired from the fleet in 1961), the shift from DC to AC motors has been lengthy (20 years plus so far) and partial (only 17 percent of locomotives use AC motors).

"The advantages of using diesel locomotives over steam were numerous," says the EIA, which helped overcome the railroads' initial hesitation about switching given the vast amount of capital that was already invested in steam engines and their associated fuelling and watering infrastructure.

Diesel locomotives cost twice as much as steam ones, on a horsepower basis, but they could travel further, did not need constant refuelling and rewatering, and avoided a lot of costly maintenance. As a result, diesel locomotives could achieve twice the annual mileage of their steam counterparts.

Diesel engines were lighter and caused less wear on the track, reducing maintenance costs, and they could be switched on and off more easily (which is why they were first used in switchyards in the 1920s).

AC traction motors also have considerable advantages over their DC counterparts. They offer better adhesion to the track, so fewer locomotives can pull more railcars, with big savings on fuel.

But the shift to AC has been far less complete than dieselisation as railroads decided that other operating issues outweighed the savings from using fewer locomotives and cutting fuel bills.

The EIA explains: "In recent years, Union Pacific, Canadian Pacific and CSX have chosen AC traction locomotives because of locomotive unit reductions, reliability, interoperability and lifecycle costs. Canadian National and Norfolk Southern have stayed with DC traction because of the incremental cost and the inability to apply train unit reductions."

"BNSF has chosen AC locomotives for coal runs, where they can take advantage of unit locomotive reductions, and DC locomotives for intermodal runs, where they cannot."

The contrasting paths from steam to diesel and DC to AC demonstrate that fuel costs alone are not the only consideration for railroads considering whether to shift from diesel to LNG. Fuel savings will be weighed against other operational considerations.

The EIA has therefore produced a range of scenarios for the future uptake of LNG by North America's rail industry.

In the agency's High Rail LNG case, which corresponds to dieselisation in the 1940s and 1950s, all freight locomotives switch to LNG between 2020 and 2040. But in the Low Rail LNG case, which corresponds to AC motors, dual-fuel engines would be introduced into the fleet at a rate of just 1 percent per year from 2020.

The rail sector's fuel mix could change dramatically - depending on whether the uptake of LNG locomotives follows the high scenario, the low one, or somewhere in between.

Diesel consumption is set to fall in all scenarios from its current level of around 444 trillion British thermal units (BTUs) to anywhere between 348 trillion and just 20 trillion BTUs.

Gas use could rise from zero to anywhere between 64 trillion BTUs and as much as 392 trillion BTUs by 2040.

Under all scenarios, the impact on the gas market would remain small. Railroads would account for only a tiny share of gas use, even under the high-penetration dieselisation-type scenario.

The impact on the diesel market, where railroads account for 7 percent of total consumption, could be far higher, but only if a substantial proportion of locomotives switch to the new fuel.


Full EIA report can be downloaded from the agency's website:



(By John Kemp, Reuters market analyst; the views expressed are his own. Editing by Dale Hudson)

Maritime Today

The Maritime Industry's original and most viewed E-News Service

Maritime Reporter November 2015 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds


Canada to Aid Developing Nations Fight Climate Change

Canada will provide aid to developing countries to combat climate change, Prime Minister Justin Trudeau announced on Friday ahead of talks on global warming,

Sandra Weakens to Tropical Storm off Mexico's Coast

Hurricane Sandra weakened to a tropical storm on Friday and was expected to continue losing strength as it approached Mexico's Pacific coast, the U.S. National Hurricane Center (NHC) said.

Extended Warranty from Yanmar for Sailboat Engines

Yanmar Marine International B.V. has introduced an extended 3 years’ period of YANMAR Limited Warranty for Sailboat Engine Models. This extended warranty of

Fuels & Lubes

Dan-Bunkering Appoints Bara as Bunker Trader

Dan-Bunkering (Middle East) DMCC is pleased to announce that Lamin Bara has joined the office in Dubai as Bunker Trader as per 1 November 2015. Lamin was

Asia Fuel Oil-Cracks, Spreads Tight; Bunker Prices Climb

Asia's fuel oil crack for benchmark 180-centistroke rebounded to a discount of $6.79 a barrel on Wednesday, gaining as bunker prices firmed on the possibility of

Concordia Maritime Charters MR Tanker

Concordia Maritime has signed a contract for the charter of an IMO2/3 class MR tanker, the company announced today. The vessel will be chartered jointly with Stena Weco,


Deltamarin to Designs First LNG Handysize Bulk Carriers

Deltamarin Ltd proudly announces that it has signed a contract to design the world’s first LNG handysize bulk carriers, which will point the way towards greener shipping of commodities.

Swan Energy to Invest $845 mln for FSRU Terminal

Swan Energy Limited will invest around Rs. 5,600 crore ($845 mln) towards setting up of Jafrabad LNG Port project in Gujarat with one jetty-moored Floating, Storage and Regasification Unit (FSRU).

Alaska Buys TransCanada AK LNG Stake

The State of Alaska has finalized a deal with TransCanada to buy out the pipeline company's share in the proposed Alaska liquefied natural gas export project for nearly $65 million.


Panama-Registered Ship Sinks off Vigan City

A Panamanian cargo vessel MV Fortune Life sank off the coast 130 nautical off Vigan City in Ilocos Sur, Philippine Coast Guard (PCG), uthorities said.   The

IMO Assembly Elects New 40-Member Council

The Assembly of the International Maritime Organization has elected the following States to be Members of its Council for the 2014-2015 biennium:    Category

Windrock Names Kelleher Global Business Development Manager

Edward P. Kelleher will be assuming the new role of Global Business Development Manager – Diesel, effective December 1st.   In this role, Mr. Kelleher will be


Terex Cranes for ICTSI

Terex Port Solutions (TPS) has received an order from a subsidiary of International Container Terminal Services, Inc. (ICTSI) in Iraq for two Terex shiptoshore

Port of Bronka Prepares for Opening

Technical plant and equipment installation for the first stage of Bronka’s port facilities is now complete with the Liebherr LHM 800 mobile port crane installed at the end of September,

Maersk Looks to Raise Asia-Europe Box Rates

The world's largest container shipping company, Maersk Line, plans to raise spot freight rates sharply on main routes from ports in Asia to ports in northern Europe, with effect from Dec.

Maritime Careers / Shipboard Positions Maritime Contracts Maritime Security Naval Architecture Port Authority Salvage Ship Electronics Ship Repair Sonar Winch
rss | archive | history | articles | privacy | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.1396 sec (7 req/sec)