Russia can export natural gas motor fuel to the EU

3 december 2018

There are potential markets for compressed natural gas fuel according to Victoria Gimadi, Head of the Department for the Energy Sector of the Analytical Center, who spoke during a round table that discussed the EU as an example of the impact of regulation on the consumption of natural gas in transport.

Analytical Center experts analyzed the development of compressed natural gas as a vehicle fuel in the EU and concluded that in recent years its consumption there increased by 60%. The increase was mainly due to passenger cars. Italy and Germany are leading the way in the use of CNG in cars. This is happening, among other things, as a result of state incentives, the development of CNG filling stations and the introduction of ever stricter environmental protection laws. It has been forecast that the demand for CNG in the EU's transport sector (including pipelines) will be growing at an average of 5% per year until 2040.

Demand for natural gas is also on the rise in shipping sector. The main incentive there is stricter regulations of contaminant emissions in water transport. According to the experts, currently there are around 120 marine vessels that use CNG as fuel with over half of them operating out of Europe. By 2020 the number of vessels running on CNG may have increased by 400-500 units, which should drive the demand for CNG for bunkering to 35 million tons per year. The increase in consumption is limited by a poorly developed infrastructure and the significant upfront costs of converting vessels to CNG.

According to Alexander Amiragyan, Deputy Head of the Department for the Energy Sector of the Analytical Center, in terms of pure economics CNG offers significant advantages to owners of heavy duty trucks as well. "Due to the large annual mileage of commercial trucks the significant costs of converting them to CNG can be recouped within 2-5 years," Mr. Amiragyan explained.

At the same time experts note that the priorities of state energy policy in Europe with regards to alternative fuels are shifting towards the development of electric vehicles. There is a lot of support for this trend among the consumers as well. "Even though they make less economic sense, electric vehicles are being purchased a lot more in Europe than CNG vehicles," said Head of the Department for use of the global and Russian Energy Sector at the Energy Research Institute of Russian Academy of Sciences Vyacheslav Kulagin. "Thus in the past 5 years the number of CNG cars has gone up by 1 million while the number of electric vehicles has gone up by 6 million."

Mr. Kulagin went on to add that major automakers believe the future is in electric vehicles. Over the past four years the automakers operating in Europe have expanded the range of electric vehicles by 14 models while the range of CNG vehicles has only been expanded by 3 models with some companies actually dropping CNG offerings from their lineup altogether.

CNG is a good alternative to petroleum products but it's not the only one, the experts concluded. If it's positioned correctly CNG can carve out niches for itself in the European market. "We can hardly expect natural gas to be proclaimed the priority fuel. For the moment it seems obvious that electricity is the future," concluded Head of Research at the Department of the Energy Sector of the Analytical Center Alexander Kulagin. "So if we manage to successfully position natural gas as a green fuel that is far more environmentally friendly than oil, it can gain from the measures the EU has been introducing to protect the environment. There is some promise in heavy duty vehicles and maritime bunkering."