Broadcast: 28/08/2006 Natural gas overlooked in fuel market
Reporter: Matt Peacock
KERRY O'BRIEN: Few motorists need to be told about the escalating price of petrol. In the past year it has soared and the experts say there are almost certainly more price hikes to come. It's become such a political hot potato that the Federal Government this month even announced a subsidy, you might remember, for motorists to convert their cars to liquid petroleum gas, a by-product of petrol refineries that costs about a third the price of petrol.
But in all the debate, one fuel seems to have been overlooked - a fuel that's even cheaper, less polluting, has a proven track record and one that Australia has in abundance. It's natural gas, the kind that fuels your stove at home.
Matt Peacock reports.
PHIL WALKER, BUILDER: I just come home each night, just pull out the lead, take that over to the car, and this is where we fill it up. Just take the cap off. Click it on. Turn it on and turn it on at the pump.
MATT PEACOCK: For decades now, Phil Walker's run his Holden ute on gas, not LPG - liquid petroleum gas - but CNG - compressed natural gas.
PHIL WALKER: I've done half a million kilometres in the last 20 years at about a fifth of the cost of petrol.
SEAN BLYTHE, CHIEF EXECUTIVE, ADVANCED FUELS TECHNOLOGY: We're seeing a lot of governments around the world now invest in policy and time and money to develop the infrastructure to see this very viable alternative fuel come to market.
MATT PEACOCK: But not, it seems, in Australia, where few motorists have even heard of it. There's something missing from this picture. We've got petrol, and we've got diesel. And they're both going up. And then we have liquid petroleum gas, a by-product of petrol. What we haven't got is CNG, compressed natural gas.
MARK MCKENZIE, RARE CONSULTING: Australia's a very good fit, because we've got an indigenous supply of natural gas. We're exporting it to China in huge quantities at the moment. There's really a case of saying, well, why aren't we using that some of here in our transport fleet? It's a real opportunity to offset some of the rising fuel prices that we're seeing here, in fact, across the world.
MATT PEACOCK: Mark McKenzie is an independent consultant advising both government and industry on transport options.
MARK MCKENZIE: There's huge potential in this fuel and if I was to pick a winner out of all the alternatives that are available at the moment I would be banking on natural gas in the next 10 years in our fleet.
LAURIE MAHER, GOSFORD MAYOR: Turn the tap on, fill your truck up and away you go.
MATT PEACOCK: For some, the secret is out. Like Gosford City Council on the New South Wales central coast. The switch to natural gas last year, buying five new Isuzu gas-powered trucks, and it now wants more. Rising petrol prices don't bother Mayor Laurie Maher any longer.
LAURIE MAHER: We're laughing at the moment but we will be absolutely over the moon with the way petrol is going. Natural gas will remain. It's ours. It's Australian. We don't have to depend on world oil prices.
MATT PEACOCK: Gosford Council's one of a handful of local government authorities that have discovered natural gas. It's not only cheaper than petrol, it's cleaner, and greener. That's one reason why a third of Sydney's buses run on it.
JOHN LEE, CHIEF EXECUTIVE, NSW STATE TRANSIT AUTHORITY: They run about 50 per cent quieter than a regular bus, and also in terms of air pollution, they're very, very greenhouse-friendly and there is very few particulars in terms of those health gases.
MATT PEACOCK: The gas buses have been so successful that Sydney Buses wanted to put on hundreds more to the north and west, but the energy supplier AGL wanted State Transit to pay for the pipelines, something CEO John Lee found a bit rich.
JOHN LEE, CHIEF EXECUTIVE, NSW STATE TRANSIT AUTHORITY: We're paying just over $600,000 for one gas bus. When you're buying hundreds of them there is a big cost for infrastructure. We would expect utility companies around Australia would be happy to be doing the business, to be selling the gas and therefore they'd pay for the mains.
MATT PEACOCK: AGL had its fingers burnt a decade ago when it was an enthusiastic backer of natural gas-powered vehicles. The company now says it will still support future CNG opportunities but only if they're viable based on market demand.
SEAN BLYTHE, CHIEF EXECUTIVE, ADVANCED FUELS TECHNOLOGY: In the late 1980s and early 90s the gas companies in Australia spent a lot of money on natural gas vehicles, millions of dollars. Then we saw the re-regulation and deregulation of the industry. It's fair to say the gas industry was probably ahead of its time.
MARK MCKENZIE: The economics really weren't there to favour alternative fuels. We had a fuel price that was down around $US20 a barrel. Today we're now talking $US60, $US65, $US70 a barrel, these fuels, the economics of the fuels is very strong. And this is the time that we should go back and revisit some of strategies we talked about almost five years ago.
MATT PEACOCK: Sean Blythe's Melbourne workshop converts diesel and petrol vehicles to natural gas. He's got no doubt that CNG is about to take off.
SEAN BLYTHE: What we're seeing now, due to the increasing oil prices, the differential is such that people are getting a payback by converting to natural gas and most importantly we're also seeing companies like Iveco and Cummins and Isuzu and Caterpillar and the like bringing natural gas technology full warranted, factory approved technology to market.
MATT PEACOCK: Already in Argentina, one-fifth of the vehicles are powered by natural gas.
SEAN BLYTHE: Natural gas vehicles are used in all continents around the world. There is over 4.5 to 5 million vehicles currently using natural gas.
MATT PEACOCK: Overseas, public refuelling stations are commonplace. In this country, they're rare, meaning that enthusiasts like Phil Walker have to pay around $3,000 for a home kit. It takes about eight hours to fill a tank, which he does overnight. And when the gas runs out, he can switch to petrol.
PHIL WALKER, BUILDER: I get 200 kilometres out of my tanks. On top of that, I have a petrol still running, so ...
MATT PEACOCK: What happens, you can just flick it across?
PHIL WALKER: Yes, a simple flick of the switch, just change across as you run out of gas back on to petrol and when you get home, just fill up your gas again.
MARK MCKENZIE, RARE CONSULTING: There is a real opportunity to use dual-fuel vehicles in the interim, that is, a vehicle that runs on both petrol and natural gas. But in the long-term, what I expect to see is that the heavy vehicle fleets will lead the way in terms of their own depot-based refuelling, and there's more and more of those fleets going to natural gas, then we'll start to see a public refuelling network appear.
MATT PEACOCK: That process isn't helped, though, by this month's Federal Government announcement of a subsidy to convert to LPG, with no mention of CNG.
PHIL WALKER: I couldn't believe that the Government was going to spend $680 million subsidising virtually the oil companies. And they're doing nothing to assist the compressed natural gas industry.
MARK MCKENZIE, RARE CONSULTING: There is a short-term imperative in terms of providing some relief and LPG is probably one of the ones that we'd roll off now. But really, if you're looking for leadership and long-term direction for this country, then we've got to invest in the fuels that are a bit harder to get to the market. Just simply because they're going to give us better returns in the long term.
MATT PEACOCK: The Government does provide a subsidy for heavy vehicles switching to natural gas, but even that runs out in three years. A spokesman for the Prime Minister says that just as with LPG, it will respond when the market develops a viable infrastructure. The rising price of oil may encourage just that, prompting both governments and utilities to take another look.
SEAN BLYTHE: It's not a technological question, it's purely a commercial question. From an Australian perspective, we should almost look at natural gas as our insurance policy.
MARK MCKENZIE: There's a real opportunity there. The biggest issue though is while having big returns, there is also a big start-up investment required. And that's what's stopping it at the moment.
JOHN LEE: We're seeing people use their motor vehicles less and they're starting to come back to public transport and we're using more gas because of that. And I hope those sorts of attitudes then translate to the major boardrooms of utility providers, that they look in a positive way to develop this technology and to expand their network so we can have more gas buses not only running in Sydney but other parts of New South Wales and Australia.
MATT PEACOCK: And in the meantime, Phil Walker and a growing band of converts will continue to save their money and the air we breathe.
KERRY O'BRIEN: A story that would, I should think, spark a lot of interest. For most Australians, a strangely well-kept secret.
