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Cleaner, Cheaper

Australian Fuels

A Vision for Energy Security,

Prosperity and Environmental

Advantage for Australia with

Compressed Natural Gas

CoNSultAtioN DrAFt

ContentsDisclaimer

1. eXecUTiVe sUmmarY 6

2. NaTUral Gas Vehicles – WhaT are TheY aND WhaT caN TheY Do? 7

natural Gas engine types 12

Dedicated, Mono-Fuel or Monovalent 14 Bi-fuel or Bivalent 14 Dual-fuel 14 tri-fuel 14 High Pressure Direct Injection, HPDI 15 CnG Hybrid 15 turbine-electric 15 natural Gas Fuel storage and transport 15

CnG – Compressed natural Gas 15 LnG – Liquefied natural Gas 15 HDCnG™ – High Density CnG 16 But It’s still natural Gas 16 other Delivery options for natural Gas 17 safety Characteristics of CnG Vehicles 17

natural Gas Vehicles Making Inroads around the World 18

Chapter summary 19

3. The chaNGiNG Face oF TraNsporT eNerGY iN The 21sT ceNTUrY 20

What’s driving change and what makes natural gas a compelling alternative to oil? 20

Increasing Demand for oil 20 energy security 21 Carbon Imperatives 22 oil Displacement 22 Chapter summary 25

4. The aUsTraliaN coNTeXT 26

Compressed natural Gas Vehicles in Australia – History and Current status 26

Policy Changes Affecting CnG Vehicle Use 26 Current CnG Vehicles and Refuelling station numbers 27 Current product availability 28 Australia’s transport energy status 28

economic 28 energy security – the elephant in the Room 30 environmental Impacts of transport in Australia 32 Compressed natural Gas Vehicles – Good for Australia 34

Good for Australian Business 35 Chapter summary 37

Gas Energy Australia

ACN 002 703 951 ABN 11 002 703 951

Incorporated in New South Wales as

a Public Company limited by guarantee

Inaugurated 1958 Incorporated 1984

Suite 7, 16 National Circuit,

Barton ACT 2600 Australia

Phone 02 6176 3100

Fax 02 6176 0207

Email mail@gasenergyaustralia.asn.au

www.gasenergyaustralia.asn.au

www.poweredbygas.com.au

www.autogas.org.au

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Consultation Draft - Page 5 of 59

Disclaimer

The!information!contained!in!this!report!is!in!summary!and!provided!for!discussion!purposes!only.!

The!information!is!presented!in!good!faith!and!has!not!been!subject!to!an!audit.!NGV!Network!and!

Gas!Energy!Australia!and!its!members!do!not!accept!any!liability!for!any!damage!or!loss!suffered!as!a!

result!of!any!action!taken!or!omitted!on!the!basis!of,!or!in!reliance!on,!this!publication.!It!is!the!

individual’s!responsibility!to!ensure!that!professional!advice!is!sought!before!relying!on!any!

information!in!this!document.!!

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Executive Summary

Introduction*

This!paper!has!been!developed!to!provide!the!reader!with!background!information!on!compressed!

natural!gas!(CNG)!vehicles!and!an!up!to!date!analysis!of!the!current!status!of!CNG!for!transport!in!

Australia!and!prospects!and!barriers!for!their!use!in!the!coming!years!and!decades.!

Natural!gas!as!a!fuel!can!be!utilised!in!any!class!of!vehicle!using!an!internal!combustion!engine!

including:!!cars,!vans,!lightHduty!and!heavyHduty!trucks,!buses,!forklifts,!locomotives,!and!marine!

vessels!such!as!ships,!ferries!and!barges.!!

Natural!gas!vehicle!technology!is!mature,!proven!in!real!world!applications!and,!apart!from!diesel,!is!

the!only!technology!that!has!commercially!available!product!in!all!of!the!applications!noted!above.!

Benefits!of!using!natural!gas!for!transport!in!Australia!include:!!

! Reduced!fuel!costs!

! Reduced!carbon!emissions!

! Reduced!air!pollutants!

! Reduced!noise!levels!

! Reduced!imports!of!refined!or!crude!oil!

! Increased!energy!security!for!Australia!

! Australian!‘value!add’!via!the!use!of!an!indigenous!fuel!

As!at!the!end!of!2012!there!were!16.7!million!natural!gas!vehicles!(NGVs)!in!operation!worldwide.!

Australia!accounts!for!a!little!more!than!2,000!of!these.!Australia!is!ranked!45th!in!the!world!and!17

among!OECD!nations!in!terms!of!numbers!of!natural!gas!vehicles!on!the!road.!

Increasing!wealth!around!the!world!is!creating!ever!increasing!demand!for!crude!oil.!BP!Energy!

Outlook!(2014)!predictions!indicate!that!the!numbers!of!vehicles!on!the!road!globally!will!more!than!

double!from!1.1!billion!today!to!2.35!billion!in!2035.!India!and!China!are!major!contributors!to!this!

growth!with!vehicle/population!densities!expected!to!rise!from!2:100!to!13:100!and!8:100!to!36:100!

respectively.!As!a!net!importer!of!fuel,!Australia!will!be!affected!by!increased!demand!for!fuel!in!the!

region.!

Crude!oil!resources!are!limited!geographically!with!control!dominated!by!OPEC!member!nations.!

Based!on!data!from!the!end!of!2012,!72.6%!of!known!reserves!are!controlled!by!the!12!OPEC!nations!

with!the!Russian!Federation!controlling!another!5.2%.!This!situation!places!almost!80%!of!global!

reserves!of!crude!oil,!the!dominant!transport!fuel,!in!the!hands!of!a!few.!Australia!has!only!0.2%!of!

the!world’s!oil!reserves!but!2%!of!the!world’s!proven!natural!gas!reserves.!

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Long!term!certainty!of!availability!and!the!more!widespread!distribution!among!the!high!demand!

nations!makes!natural!gas!a!compelling!candidate!for!providing!increased!global!transport!energy!

security.!

While!natural!gas!is!also!primarily!a!fossil!fuel,!its!low!carbon!ratio!(one!part!carbon!to!four!parts!

hydrogen)!lends!itself!to!significantly!lower!carbon!emissions!than!oil!based!fuels,!usually!in!the!

range!of!10H20%.!!

Of!all!the!fuels!and!technologies!currently!available,!natural!gas!is!available!in!quantities!worldwide!

to!meet!a!significant!part!of!the!world’s!transport!energy!demand.!No!other!fuel!has!the!capacity!or!

the!capability!to!displace!oil!on!a!scale!that!matches!natural!gas.!

CNG*Vehicles*in*Australia*Australia!was!one!of!the!pioneers!in!the!use!of!natural!gas!with!Sydney!and!Adelaide!both!among!the!

first!in!the!world!to!introduce!CNG!urban!buses!to!their!fleet.!!

Up!until!2011,!natural!gas!had!excise!free!status!in!Australia.!This!changed!with!the!introduction!of!a!

scaled!program!to!introduce!excise!over!a!four!year!period!commencing!in!2011.!The!intent!of!this!

program!was!to!establish!a!new!status!quo!where!natural!gas!and!LPG!are!excised!at!50%!of!the!rate!

of!diesel!or!petrol!on!an!energy!equivalent!basis.!!

As!the!price!advantage!has!been!a!key!driver!for!fleet!operators!converting!to!natural!gas,!the!

imposition!of!excise!has!had!a!significant!impact!on!the!viability!of!and!uptake!of!CNG!heavyHduty!

vehicles.!The!reintroduction!of!indexation!of!fuel!excise!in!the!May!2014!budget!erodes!this!further,!

with!natural!gas!to!be!effectively!taxed!at!64%!of!the!rate!of!diesel!from!August!1!2014,!due!to!the!

continuation!of!the!Diesel!Road!User!Charge!at!the!2013H4!rate!for!2014H15.!

Historical!government!support!for!natural!gas!vehicles!has!included!conversion!and!infrastructure!

programs!but!these!have!met!with!limited!success,!primarily!due!to!technology!being!immature!at!

the!time!the!programs!were!implemented.!

Current!suppliers!of!mediumHduty!and!heavyHduty!trucks!and!engines!in!Australia!include!Dennis!

Eagle,!Isuzu,!Iveco,!MercedesBenz!and!Cummins.!Iveco!and!MercedesBenz!both!also!supply!lightH

duty!vans!and!trucks.!DualHfuel!conversions!are!also!possible!for!heavyHduty!vehicles!using!systems!

supplied!by!Clean!Air!Power.!!

Energy*Costs*and*Security*in*Australia*

Australia!is!now!a!net!importer!of!crude!oil!and!refined!crude!based!fuels!and!is!85%!reliant!on!

imported!fuels!amounting!to!net!oil!imports!of!533,000!barrels!per!day!in!2012H13.!

The!total!annual!cost!of!crude!and!refined!petroleum!product!imports!(incl!LPG)!in!2012H13!billion!

was!$AU38.3!billion.!Exports!over!the!same!period!of!$AU15.9!billion!give!Australia!a!net!import!cost!

of!crude!based!fuels!of!$AU22.4!billion.!This!equates!to!more!than!$AU61!million!per!day.!

Average!prices!for!2012!for!LNG!exported!from!Australia!amount!to!$10.57/Gj!vs!approximately!

$20.39/Gj!for!crude!oil!imports!and!$26.80/Gj!for!refined!fuel!(diesel!and!petrol)!imports.!

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In!other!words,!we*are*buying*energy*from*overseas*at*more*than*twice*the*price*that*we*are*selling*it.*This!can!be!reduced!by!displacing!imports!of!refined!fuels!with!locally!sourced!natural!gas.!!

Currently!51%!of!our!imported!transport!fuels!are!sourced!from!Singapore!which!sources!40%!of!its!

crude!supplies!from!the!Middle!East.!To!date,!this!has!proved!to!be!a!dependable!source!and,!if!

market!and!political!conditions!continue!as!they!are,!there!is!no!reason!to!suggest!that!this!would!not!

continue.!However,!market!and!political!conditions!can!and!very!likely!will!change!and!any!

disruptions!to!incoming!supplies!puts!Australia’s!fuel!and!economic!security!at!risk.!!

Concerns!about!fuel!security!are!shared!by!other!stakeholders!in!the!transport!sector.!The!NRMA!has!

released!two!reports,!authored!by!Air!ViceHMarshall!John!Blackburn!(Ret’d)!that!outlines!clearly!how!

at!risk!Australia!is!due!to!our!precarious!fuel!supply!chain.!This!could!potentially!leave!Australia!

totally!reliant!on!local!sources!of!crude!oil,!which!at!best!could!supply!up!to!15%!of!local!needs.!!

Australian!government!obligations!to!the!International!Energy!Agency!(IEA)!require!us!to!maintain!at!

least!90!days!of!net!imports!in!stock.!These!obligations!are!currently!not!being!met!but!are!secondary!

to!the!obligations!to!the!Australian!people.!Our!stockholdings!should!be!based!on!worst!case!

scenarios!and!need!to!ensure!that!the!nation!could!function!for!an!extended!period!of!time!without!

access!to!fuel.!

We!are!currently!in!a!position!where!the!only!way!to!keep!functioning!in!a!fuel!crisis!would!be!to!buy!

our!way!out!of!a!hole!at!prices!determined!by!international!markets!in!crisis.!

Increasing!the!use!of!natural!gas!vehicles!would!increase!our!energy!independence!and!security!but!

this!cannot!be!left!to!market!forces!alone.!At!the!very!least,!government!leadership!and!stimulus!is!

required!to!set!the!stage!upon!which!market!forces!operate.!

The*Environmental*Imperative*

Australia!is!one!of!the!highest!emitter!of!carbon!on!a!per!capita!basis.!With!transport!currently!

accounting!for!14%!of!Australia’s!carbon!emissions,!efficiency!in!this!sector!is!critical!to!achieving!our!

reduction!goals.!

Currently!there!are!few!policy!based!initiatives!in!place!in!Australia!to!contribute!to!reducing!carbon!

emissions!from!transport.!Auto!manufacturers!continue!to!make!efficiency!improvements!in!vehicles!

and!fleet!operators!are!using!telematics!and!satnav!to!improve!routing!efficiency!but!further!gains!

can!be!made!through!the!use!of!lower!carbon!fuels!such!as!natural!gas.!!

In!Australia,!air!quality!is!impacted!by!our!ageing!heavyHduty!fleet,!especially!vehicles!older!than!

1996.!Data!indicates!that!the!average!age!of!Australia’s!heavyHduty!fleet!vehicles!is!13.7!years.!This!is!

considerably!higher!than!most!OECD!countries!of!which!14!have!an!average!heavyHduty!vehicle!age!

of!less!than!10!years.!!

Incentivising!the!replacement!of!older!heavyHduty!vehicles!in!Australia!with!newer!cleaner!burning!

and!more!efficient!natural!gas!vehicles!would!increase!the!rate!at!which!carbon!and!air!pollutants!

emissions!are!reduced.!

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The*Way*Forward*for*Australia*

Where!CNG!is!used!by!above!average!fuel!users,!fuel!price!savings!increase!Australia’s!productivity!

on!a!local!level!and!competitiveness!on!an!international!level.!

Businesses!operating!CNG!vehicles!also!have!the!opportunity!to!enhance!the!triple!bottom!line!

benefits!of!lower!costs!and!reduced!environmental!impacts.!

Based!on!estimated!fuel!pricing!as!at!July!2014!and!fuel!use!in!2013,!displacing!10%!of!diesel!used!

annually!in!Australia!in!heavy!onHroad!transport!with!natural!gas!could!potentially:!

! Reduce!imports!of!imported!diesel!by!1,018.3!million!litres!per!annum!

! Reduce!import!costs!by!$AU869.6!million!per!annum!or!$AU2.4!million!per!day!

! Reduce!transport!operators’!fuel!costs!by!$AU319.2!million!per!annum!or!$AU875,000!per!

! Reduce!CO2He!emissions!by!597!thousand!tonnes!or!17.9%!compared!with!diesel!

Barriers!to!the!increased!use!of!CNG!vehicles!in!Australia!include:!

! Pioneer!status!as!an!‘alternative!fuel’!vs!long!established!fuels!in!the!market!place!

! CNG!vehicle!or!conversion!affordability!

! Limited!CNG!refuelling!infrastructure!

! Earned!reliability!reputation!of!diesel!and!petrol!

! Confusion!regarding!alternative!fuels!and!technologies!

! Small!size!of!the!Australian!market!

! Uncertainty!regarding!future!Road!User!Charges!and!excise!arrangements!

! Weight!and!length!‘penalties’!for!CNG!vehicles!

Solutions!to!these!barriers!can!be!applied!with!the!joint!effort!and!leadership!of!stakeholders!in!the!

energy,!transport!and!government!sectors.!

Gas!Energy!Australia!is!committed!to!the!increased!use!of!CNG!as!a!transport!fuel,!not!just!for!the!

benefit!of!our!members,!but!also!for!the!benefit!of!the!nation.!The!economic,!environmental!and!

energy!security!benefits!for!Australia!are!wellHproven!but!have!not!been!fully!utilised.!!

Our!vision!is!for!Australians!to!have!a!choice!of!fuels!available!to!them.!To!date!this!has!been!possible!

only!to!a!very!limited!degree,!due!to!the!barriers!and!conditions!outlined!in!this!paper.!Market!forces!

have!been!proven!to!work!slowly!and!have!not!developed!the!use!of!natural!gas!vehicles!to!a!scale!

that!makes!community!benefits!significant.!

This!was!highlighted!in!the!Department!of!Resources,!Energy!and!Tourism!Strategic)Framework)for)Alternative)Transport)Fuels!report!released!in!December!2011.!

“The)Framework’s)rationale)for)action)is)based)on)ensuring)alternative)transport)fuels)are)able)to)enter)the)market)when)they)are)cost>competitive)and)complement)imported,)

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conventional)fuel)products.)The)Australian)Government)can)facilitate)this)best)by)removing)barriers)to)the)uptake)of)alternative)transport)fuels)to)ensure)the)full)economic)benefit)of)a)switch)to)alternatives)is)realised)at)the)optimal)time.”))

The!Strategic!Framework!document!also!says!

“Even)in)situations)where)the)alternative)transport)fuel)may)be)cheaper,)the$dominance$of$conventional$fuels$in$the$transport$market$is$a$significant$market$entry$barrier$for$alternative$transport$fuels.)Delays)caused)by)the)strong)lock>in)effect)of)incumbent)fuels)and)technologies)in)the)transport)system)may)result)in)a)less)than)optimal)outcome)for)the)economy)due)to)foregone)opportunities)(and)options))to)fuel)switch)when)more)cost)competitive)fuels)and)fuel)technologies)become)available.”(bold)text)is)GEA)emphasis))

The!difference!between!market!forces!alone!and!the!combined!efforts!of!market!forces!and!

government!support!makes!a!significant!difference!to!the!vehicle!uptake.!International!experience!

indicates!the!need!for!such!support!to!be!scaled!back!over!a!period!of!time,!and!in!accordance!with!

milestones!of!achievement,!rather!than!on!the!basis!of!shortHterm!budget!goals.!Thus!the!full!

utilisation!of!the!benefits!of!CNG!vehicles!in!Australia!requires!a!strategic!and!partnered!approach!

between!government!and!industry.!In!essence,!this!involves!the!development!of!a!‘level!playing!field’!

where!CNG!can!compete!with!diesel!and!petrol!on!even!terms!and!under!even!conditions.!

This!requires!longHterm!vision!and!commitment!that!will!reap!benefits!to!Australia!as!a!whole.

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Natural Gas Vehicles – What are they and what can they do?

Natural!gas!as!a!fuel!can!be!utilised!in!any!class!of!vehicle!using!an!internal!combustion!engine!

including:!!cars,!vans,!lightHduty!and!heavyHduty!trucks,!buses,!forklifts,!locomotives,!and!marine!

vessels!such!as!ships,!ferries!and!barges.!!

Natural!gas!vehicle!technology!is!mature,!proven!in!real!world!applications!and,!apart!from!diesel,!is!

the!only!technology!that!has!commercially!available!product!in!all!of!the!applications!noted!above.!

Natural!gas!can!be!used!either!by!conversion,!using!an!existing!petrol!or!diesel!engine,!or!by!using!an!

engine!specifically!designed!to!operate!on!natural!gas.!

The!appeal!of!using!natural!gas!for!transport!comes!from!its!wide!range!of!benefits!including:!

! Lower!carbon!emissions!relative!to!diesel!and!petrol!(5H20%)!

! Lower!emissions!of!air!pollutants,!especially!particulates!and!NOx!(Nitrogen!Oxides)!

! Lower!fuel!cost!

! Widespread!global!availability!of!natural!gas!

! Mature!and!proven!technology!

! Suitability!for!a!wide!range!of!applications!

! Minimal!processing!or!refining!requirements!

! Safer!than!most!liquid!fuels!

! Variable!refuelling!infrastructure,!including!home!or!workHbased!refuelling!

! Lower!engine!noise!levels!H!as!much!as!50%!

! Reduced!engine!wear!

! Renewable!fuel!supply!(from!biogas)!

! and!more…!

Additional!benefits!applicable!to!Australia!include:!

! Reduced!costs!of!imports!of!crude!oil!based!fuels!

! Monetisation!of!an!indigenous!resource!

As!at!the!end!of!2012!there!were!16.7!million!natural!gas!vehicles!(NGVs)!in!operation!worldwide,!a!

more!than!tenfold!increase!over!the!1.29!million!operating!at!the!turn!of!the!century1.!

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Australia’s!NGV!population!during!this!time!has!remained!relatively!stagnant,!starting!with!2,100!at!

the!beginning!of!the!century!and!currently!estimated!at!the!same!number2.!

Australia!is!ranked!45th!in!the!world!and!17

th!among!OECD!nations!in!terms!of!numbers!of!natural!gas!

vehicles!on!the!road.!

Table*1*–*Top*5*OECD*Countries*Using*Natural*Gas*Vehicles3*

Country* Number*of*NGVs*

Italy! 746,470!

USA! 127,735!

Germany! 95,498!

Sweden! 44,319!

Japan! 42,590!

2,000,000!

4,000,000!

6,000,000!

8,000,000!

10,000,000!

12,000,000!

14,000,000!

16,000,000!

18,000,000!

©NGV!Global!2013!www.iangv.org!

Figure*1*J*Total*Natural*Gas*Vehicles*(Worldwide)*1991*J*2012*

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Natural Gas Engine Types

For!the!most!part,!natural!gas!is!used!in!internal!combustion!applications,!usually!in!one!of!the!

following!formats:!

Dedicated, Mono-fuel or Monovalent

A!dedicated!engine!operates!only!on!one!fuel,!natural!gas!in!this!case.!Operating!a!dedicated!natural!

gas!engines!offers!the!advantage!of!being!able!to!optimise!the!engine!for!natural!gas.!A!dedicated!

natural!gas!engine!is!sparkHignited.!

In!some!markets,!an!additional!reserve!petrol!tank!is!fitted!as!a!backup!in!case!the!natural!gas!fuel!

runs!out.!

Bi-fuel or Bivalent

BiHfuel!engines!are!also!spark!ignited!and!can!operator!on!two!fuels,!usually!natural!gas!or!petrol,!but!

on!only!one!of!these!at!a!time.!Some!manufacturers!also!offer!biHfuel!natural!gas!vehicles!but!most!

biHfuel!vehicles!on!the!road!around!the!world!are!converted!engines.!BiHfuels!usually!need!petrol!

when!starting!so!must!always!have!petrol!on!board.!!

Dual-fuel

DualHfuel!engines!operate!on!a!mix!of!natural!gas!and!diesel,!with!natural!gas!injected!or!introduced!

to!the!air!intake.!This!is!a!compression!engine!and!relies!on!diesel!for!ignition!in!the!combustion!

chamber.!The!engine!can!also!run!on!diesel!alone!which!means!the!vehicle!can!remain!mobile!even!if!

gas!runs!out!on!board.!

The!ratio!of!natural!gas!to!diesel!use!changes!depending!on!the!activity!of!the!vehicle!and!can!range!

between!0H80%.!

DualHfuel!systems!can!be!offered!either!as!a!conversion!of!an!existing!diesel!engine!or!supplied!in!

that!form!from!the!vehicle!OEM.!

Tri-fuel

Used!on!a!very!small!scale!overseas!(mostly!Latin!America)!a!triHfuel!vehicle!is!a!flexHfuel!vehicle!with!

an!additional!natural!gas!option.!FlexHfuel!vehicles!operate!on!petrol!or!ethanol,!together!or!

separately.!!These!are!not!expected!to!be!seen!in!the!Australian!market.!

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High Pressure Direct Injection, HPDI

HPDI!is!a!system!developed!in!Canada!by!Westport!Innovations.!Like!a!dualHfuel!system!it!operates!

on!both!diesel!and!natural!gas.!While!it!cannot!operate!on!diesel!alone!it!offers!a!much!higher!diesel!

substitution!rate!(90%+).!!

Both!fuels!are!injected!at!highHpressure!directly!into!the!combustion!chamber.!This!delivers!higher!

torque!and!engine!efficiency!than!other!natural!gas!engines!and!some!diesel!engines.!

1st!generation!HPDI!engines!are!no!longer!available!and!2

nd!generation!engines!are!currently!under!

development!and!expected!to!come!to!market!within!the!next!two!years.!

CNG Hybrid

Similar!to!a!petrol!or!diesel!hybrid!vehicle,!a!CNG!hybrid!uses!an!internal!combustion!engine!as!the!

primary!motive!source,!supplemented!by!electrical!storage!on!board!(produced!either!by!capturing!

excess!motive!energy!of!the!vehicle!or!by!plugin!means).!

Turbine-Electric

Traditionally!used!for!heavy!horsepower!applications!such!as!rail!and!marine,!turbine!electric!

vehicles!using!both!diesel!and!CNG!are!now!in!use!for!onHroad!vehicles!as!well.!A!small!internal!

combustion!engine!drives!a!turbine!generator!to!charge!batteries!that!drive!an!electric!motor!onH

board.!As!the!electricity!produced!onHboard!is!‘cleaner’!than!standard!grid!electricity,!this!produces!

lower!emissions!than!a!standard!plugHin!electric!vehicle.!!

Natural Gas Fuel Storage and Transport

Because!a!gas!is!inherently!low!in!density!it!isn’t!practical!for!transport!in!its!natural!form!and!must!

be!stored!for!vehicular!use.!Storage!forms!include:!

CNG – Compressed Natural Gas

Natural!gas!is!compressed!and!stored!onHboard!the!vehicle!at!20!MPa!(25!MPa!in!some!countries).!

This!is!the!most!common!form!of!storage!on!NGVs!worldwide.!Storage!vessels!for!CNG!are!defined!by!

a!type!depending!on!their!construction!which!can!include!steel,!or!a!steel,!aluminium!or!plastic!liner!

with!a!composite!wrap.!

LNG – Liquefied Natural Gas

LNG!is!cryogenic!natural!gas!‘frozen’!to!a!temperature!of!H162°!Celcius!(H212°!Fahrenheit)!or!below!to!

liquefy!it.!This!has!higher!density!energy!content!than!CNG,!meaning!more!fuel!can!be!stored!in!the!

__________________________________________________________________________________!

Diesel! Petrol! CNG!(200!

HDCNG!(350!

LNG! LPG!

same!space.!LNG!storage!vessels!resemble!a!vacuum!flask!and!are!designed!to!keep!the!fuel!cold!for!

extended!periods.!LNG!is!typically!used!for!long!distance!heavyHduty!applications!with!high!fuel!

usage,!including!marine!and!rail.!!

HDCNG™ – High Density CNG

High!Density!CNG!is!a!new!technology!developed!in!Australia!by!the!IntelliGas™!Group!and!uses!Type!

4!composite!cylinders!to!store!fuel!onHboard!at!a!nominal!service!pressure!of!35!MPa!(350!bar).!

HDCNG™!uses!a!combination!of!patented!components!and!processes!to!deliver!a!density!

approximately!midway!between!that!of!conventional!CNG!and!LNG!(See!Figure!2!below).!!This!

technology!improves!refuelling!and!maximises!the!amount!of!fuel!on!board!at!each!fill,!with!storage!

cylinders!being!filled!to!nameHplate!capacity!every!time.!For!the!purposes!of!this!document,!most!

references!to!CNG!include!HDCNG™.!

But It ’s Sti l l Natural Gas

The!different!storage!methods!used!depend!on!the!final!application!or!duty!cycle!of!the!vehicle!but!

all!of!them!deliver!the!same!fuel,!methane,!to!a!natural!gas!engine.!The!choice!of!the!storage!method!

is!ultimately!determined!by!the!required!driving!range!of!the!vehicle,!with!higher!density!fuels!

offering!greater!driving!range!on!a!per!volume!basis.!

Figure!2!below!shows!the!relative!fuel!densities!of!the!natural!gas!options!compared!with!current!

fuels!in!the!market!place.!

Figure*2*J*Comparative*energy*densities*of*gaseous*and*liquid*fuels*

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Other Delivery Options for Natural Gas

ANG – Adsorbent Natural Gas

Not!yet!commercially!available,!this!utilises!the!storage!of!natural!gas!in!an!‘adsorbent’,!a!

nanoporous!material!(usually!made!from!carbon!based!materials).!Adsorbed!natural!gas!is!usually!

stored!on!board!around!3.5!MPa!(35!bar)!and!allows!for!higher!density!storage!than!CNG.!

Renewable Natural Gas

Natural!gas!is!a!naturally!occurring!gas!that!exists!in!vast!quantities!underground!but!which!can!also!

be!produced!as!a!‘biogas’!by!various!means!from!renewable!sources.!These!include!purpose!built!

crops!or!waste!matter!from!other!crops,!animal!waste,!or!even!garbage!dumps!(landfill!waste)!

among!others.!Removing!impurities!from!the!biogas!makes!it!suitable!for!natural!gas!vehicle!use!and!

can!effectively!produce!a!carbon!neutral!fuel.!

Renewable!natural!gas,!often!called!bioHmethane!when!used!for!transport,!is!growing!in!popularity!

internationally!but!has!not!yet!been!tried!here!in!Australia.!

Gas to Liquids - GTL

GTL!processes!can!be!used!to!transform!natural!gas!to!a!synthetic!form!of!petrol!or!diesel.!This!is!an!

energy!intensive!process!requiring!expensive!infrastructure!and!is!currently!not!used!in!Australia.!

Vehicles!running!on!GTL!fuels!are!not!considered!natural!gas!vehicles!as!such!thus!GTL!is!excluded!

from!the!scope!of!this!paper.!

Safety Characteristics of CNG Vehicles

Natural!gas!is!one!of!the!safest!fuels!available.!It!has!no!toxic!or!poisonous!effects!and!is!the!same!

fuel!piped!to!millions!of!homes!and!businesses!in!Australia!where!it’s!used!for!cooking,!heating!and!

power!generation!(among!others).!

It!has!a!very!narrow!flammability!range,!needing!temperatures!of!600°+!Celsius!(compared!to!315°!

for!petrol)!and!concentration!between!5H15%!in!air!to!ignite.!Because!it!is!lighter!than!air,!it!rises!in!

the!event!of!‘spillage’!thus!dramatically!reducing!the!risk!of!fire!at!the!scene!of!an!accident.!!

In!its!compressed!form!it!is!under!intense!pressure,!thus!additional!safeguards!are!required!to!ensure!

optimum!safety.!These!include!the!integrity!of!the!storage!cylinders!themselves,!which!are!either!

traditional!steel!pressure!vessels!designed!for!purpose,!or!composite!cylinders!based!on!designs!used!

by!NASA!for!hydrogen!and!other!high!pressure!gases.!These!are!subjected!to!stringent!tests,!

including!bullet!tests!to!confirm!their!strength.!Additional!safeguards!include!the!use!of!pressure!

relief!devices!(PRDs)!to!provide!an!escape!route!in!the!event!that!internal!pressure!is!too!high!

(usually!the!result!of!a!fire).!

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As!with!all!fuels,!which!are!essentially!concentrates!of!energy,!compressed!natural!gas!must!be!

treated!carefully!and!with!respect.!The!industry!has!extremely!high!standards!worldwide!which!are!

reviewed!on!a!regular!basis.!!

Natural Gas Vehicles Making Inroads around the World

As!noted!earlier,!there!are!currently!more!than!16.7!million!NGVs!on!the!road!around!the!world!

operating!in!more!than!85!countries.!Though!natural!gas!was!used!in!early!experimental!vehicles!it!

became!more!common!place!as!a!fuel!during!and!after!World!War!2!as!a!response!to!fuel!rationing.!

Most!countries!discontinued!its!use!after!the!war,!with!Italy!being!the!exception!where!a!small!

number!of!NGVs!remained!active.!Vehicle!numbers!there!have!since!grown!to!more!than!700,000,!

ranking!Italy!7th!in!the!world!in!terms!of!numbers!of!NGVs!on!the!road.!!

The!Arab!oil!crisis!of!the!1970s!saw!a!resurgence!of!interest!around!the!world,!with!New!Zealand!and!

Argentina!adopting!CNG!on!a!large!scale.!At!its!peak,!more!than!100,000!CNG!vehicles,!or!more!than!

10%!of!the!vehicle!population,!were!on!New!Zealand’s!roads!before!a!fuel!excise!policy!change!saw!

the!fuel!fall!out!of!favour.!!

Argentina’s!interest!in!NGVs!has!continued!and!the!country!is!currently!ranked!3rd!in!the!world!with!

more!than!2.1!million!CNG!vehicles!on!the!road.!

Initial!drivers!for!the!uptake!of!natural!gas!as!a!fuel!were!cost!and!reduction!in!air!pollutants.!This!

made!the!fuel!attractive!mostly!in!developing!nations!for!small!cars!and!for!urban!bus!applications!in!

some!developed!nations.!

In!the!past!fifteen!years,!developed!nations!have!been!

adopting!NGVs!outside!of!the!bus!niche!in!increasing!

numbers.!This!has!largely!come!about!due!to!the!maturation!

of!heavyHduty!technologies!and!sustained!high!oil!prices,!

making!natural!gas!an!attractive!fuel!for!high!mileage!

applications.!The!appeal!is!further!enhanced!for!commercial!

operators!by!the!triple!bottom!line!benefits!delivered!

through!lower!carbon,!air!pollution!and!noise!emissions!and!

other!community!benefits.!

While!in!the!past!most!natural!gas!vehicles!used!converted!

petrol!or!diesel!engines,!most!vehicle!manufacturers!(OEMs)!

now!produce!exHfactory!models!in!at!least!one!market!

around!the!world.!!

The!increasing!importance!of!natural!gas!as!a!fuel!led!the!United!Nations!to!endorse!the!use!of!CNG!

and!LNG!fuelling!station!signage!(see!Figure!3!above)!on!highways!in!2009!and!2010!respectively.!

Figure*3*J*UN*Approved*CNG*Highway*Signage*

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Chapter Summary

Natural!gas!as!a!fuel!can!be!utilised!in!any!class!of!vehicle!using!an!internal!combustion!engine.!

Benefits!of!using!natural!gas!for!transport!in!Australia!include:!!

! Reduced!fuel!costs!

! Reduced!carbon!emissions!

! Reduced!air!pollutants!

! Reduced!noise!levels!

! Reduced!imports!of!refined!or!crude!oil!

At!the!end!of!2012!there!were!16.7!million!natural!gas!vehicles!(NGVs)!in!operation!worldwide!

Australia!accounts!for!a!little!more!than!2,000!NGVs.!

Natural!gas!is!one!of!the!safest!fuels!available.!!

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!1!NGV!Global!Statistics!H!http://www.iangv.org/currentHngvHstats/!

2!Gas!Energy!Australia!estimates!

3!NGV!Global!Statistics!as!at!December!2012.!http://www.iangv.org/currentHngvHstats/!

__________________________________________________________________________________!

The Changing Face of Transport Energy in the 21st Century

The!20th!century!represented!the!rise!of!the!automobile!and!along!with!it,!the!rise!of!the!use!of!

liquid!fuels.!This!represented!a!shift!from!the!century!before,!when!coal!fired!steam!locomotives!

made!high!speed!transcontinental!transport!possible!for!the!first!time.!If!we!were!to!follow!the!trend!

from!solid!fuels!(coal)!to!liquid!fuels!(oil)!a!natural!progression!would!be!to!move!towards!gaseous!

fuels.!

!While!liquid!fuels!will!certainly!be!with!us!for!some!time!to!come,!gaseous!fuels!are!already!making!

their!presence!felt!in!the!fuel!energy!mix.!Natural!gas!and!LPG!vehicles!are!already!on!roads!around!

the!world!in!large!numbers.!Not!only!is!this!progression!natural,!it!is!also!necessary.!

Global!demand!for!fuels!is!increasing!and!the!environmental!consequences!of!oil!use!are!too!great!to!

ignore,!especially!when!lower!impact!alternatives!are!available!for!use!today.!

While!improved!vehicle!and!transport!efficiency!is!the!first!line!of!attack,!governments!worldwide!are!

leading!the!charge!to!establish!a!more!diverse!fuel!portfolio!that!is!less!dependent!on!oil!and!with!a!

lower!environmental!impact.!These!initiatives!by!necessity!include!a!mixture!of!fossil!and!renewable!

fuel!sources.!

What’s driving change and what makes natural gas a compelling alternative to oil?

Increasing Demand for Oil

Increasing!wealth!around!the!world!is!creating!ever!increasing!demand!for!crude!oil.!While!OECD!

countries!show!steady!demand,!NonHOECD!countries!are!displaying!rapid!demand,!a!result!of!

growing!economies!and!emerging!middle!classes!who!are!trading!in!traditional!local!modes!of!

transport!for!private!motor!cars!(See!Figure!4!for!NonHOECD!vs!OECD!growth!in!fuel!consumption).!

__________________________________________________________________________________!

Data)source)>)BP)Statistical)Review)20134)

BP!Energy!Outlook!(2014)*predictions!indicate!that!the!numbers!of!vehicles!on!the!road!globally!will!

more!than!double!from!1.1!billion!today!to!2.35!billion!in!20355.!86%!of!the!growth!is!expected!to!

come!from!developing!nations.!India!and!China!are!major!contributors!to!this!growth!with!

vehicle/population!densities!expected!to!rise!from!2:100!to!13:100!and!8:100!to!36:100!respectively.!

Energy Security

Crude!oil!resources!are!limited!geographically!with!

control!dominated!by!OPEC!member!nations.!Based!

on!data!from!the!end!of!20126,!72.6%!of!known!

reserves!are!controlled!by!the!12!OPEC!nations!with!

the!Russian!Federation!controlling!another!5.2%.!

This!situation!places!almost!80%!of!global!reserves!

of!crude!oil,!the!dominant!transport!fuel,!in!the!

hands!of!a!few.!Australia!has!only!0.2%!of!the!

world’s!oil!reserves!but!2%!of!the!world’s!proven!

natural!gas!reserves.!

One!of!the!primary!mechanisms!for!maintaining!crude!oil!supplies!during!times!of!crisis!are!stockpiles!

(strategic!petroleum!reserves)!held!by!member!nations!of!the!International!Energy!Agency!(IEA).!

10000!

20000!

30000!

40000!

50000!

60000!

70000!

80000!

90000!

100000!

NonHOECD!

Total!World!

Australia)has)only)0.2%)of)the)world’s)oil)reserves)but)2%)of)the)world’s)proven)natural)gas)reserves)

Figure*4*J*Global*Oil*Consumption*1965J2010*(million*barrels/day)*

__________________________________________________________________________________!

These!supplies!are!adequate!for!shortHterm!disruptions,!with!a!total!IEA!stockpile!of!200!days7.!

Australia!is!currently!the!only!country!with!less!than!the!90!day!stockholding!of!net!imports!required!

as!part!of!its!member!obligations!to!the!IEA,!with!holdings!at!as!at!January!2014!of!60!days,!none!of!

which!are!‘owned’!by!government.!

Though!these!reserves!provide!a!welcome!buffer!in!the!event!of!shortHterm!disruptions,!the!

stockpiling!arrangement!has!its!shortcomings.!Emergency!reserves!have!been!called!upon!three!

times!during!the!40!year!history!of!the!IEA:!!First!in!1991!during!the!Gulf!War,!second!in!2005!in!the!

aftermath!of!Hurricanes!Katrina!and!Rita,!and!again!in!2011!as!a!result!of!supply!disruptions!in!Libya8.!!

The!most!recent!drawdown!shows!how!vulnerable!global!oil!supplies,!and!consequently!the!world!

economy!is.!Libya!only!accounts!for!2%!of!world!oil!production!yet!the!disruption!there!was!enough!

to!require!the!release!of!60!million!barrels!from!global!strategic!reserves.!!

Natural!gas!reserves!on!the!other!hand!are!more!widely!distributed!globally!and!not!subject!to!the!

price!machinations!of!a!cartel!such!as!OPEC.!In!short,!long!term!certainty!of!availability!and!the!more!

widespread!distribution!among!the!high!demand!nations!makes!natural!gas!a!compelling!candidate!

for!providing!increased!global!transport!energy!security.!

Carbon Imperatives

Transport!is!a!major!contributor!to!atmospheric!carbon!emissions,!accounting!for!a!total!of!13%.9!

Most!of!these!emissions!originate!from!crude!oil.!!

While!natural!gas!is!also!primarily!a!fossil!fuel,!its!low!carbon!ratio!(one!part!carbon!to!four!parts!

hydrogen)!lends!itself!to!significantly!lower!carbon!emissions,!usually!in!the!range!of!10H20%.!!

The!level!of!reduction!depends!on!a!number!of!variables,!including!the!source!of!the!fuel!and!the!

type!of!engine!and!vehicle!the!fuel!is!combusted!in!and!the!duty!cycle!of!the!vehicle.!Commonly!

referred!to!as!Well!to!Wheel!emissions!(WTW)!these!will!vary!depending!on!the!supply/use!

scenarios.!!

With!IPCC!targets!of!a!40H70%!reduction!in!carbon!emissions!by!midHcentury,!natural!gas!vehicles!

offer!an!opportunity!for!immediate!contributions!towards!this!target.!

Oil Displacement

As!noted!above,!most!transport!energy!initiatives!are!centred!on!the!need!to!displace!the!use!of!

crude!oil.!While!many!fuels!are!capable!of!this!task!and!while!natural!gas!is!not!a!‘silver!bullet’,!the!

suitability!of!natural!gas!for!heavyHduty!applications!allows!it!to!displace!more!oil!on!a!per!vehicle!

basis!than!other!fuels!and!technologies!currently!available.!

This!is!reflected!in!operational!data!from!the!US!Department!of!Energy!Clean!Cities!program!as!

indicated!in!the!following!charts!which!show!levels!of!oil!displacement!(Gasoline!Gallon!Equivalent)!

__________________________________________________________________________________!

for!the!population!of!vehicles!included!in!the!program!and!oil!displaced!on!a!per!vehicle!basis!for!

2012!(See!Figure!5!and!Figure!6!below)10.!

Data)Source)–)US)DOE)Alternative)Fuels)Data)Center)

Data)Source)–)US)DOE)Alternative)Fuels)Data)Center!

2004! 2005! 2006! 2007! 2008! 2009! 2010! 2011! 2012!

Million*GG

Biodiesel!

Propane!

Electric!

Figure*5*J*Clean*Cities*Petroleum*Savings*by*Alternative*Fuel*Vehicle*Type*

E85! Biodiesel*! CNG! Propane! Electric! LNG!

Figure*6*J*US*Clean*Cities*Gasoline*Gallon*Equivalent*Displacement*per*Vehicle*2012*

__________________________________________________________________________________!

Of!all!the!fuels!and!technologies!indicated,!natural!gas!is!available!in!quantities!worldwide!to!meet!a!

significant!part!of!the!world’s!transport!energy!demand.!No!other!fuel!has!the!capacity!or!the!

capability!to!displace!oil!on!a!scale!that!matches!natural!gas.!

No)other)fuel)has)the)capacity)or)the)capability)to)displace)oil)on)a)scale)that)matches)natural)gas.)

__________________________________________________________________________________!

Chapter Summary

Numbers!of!vehicles!on!the!road!globally!will!more!than!double!from!1.1!billion!today!to!2.35!billion!

in!2035.!!

86%!of!this!growth!is!expected!to!come!from!developing!nations.!!

Australia!will!be!affected!by!increased!demand!for!fuel!in!the!region.!

Almost!80%!of!global!reserves!of!crude!oil!are!in!the!hands!of!a!few.!!

Australia!has!only!0.2%!of!the!world’s!oil!reserves!but!2%!of!the!world’s!proven!natural!gas!reserves.!

Australia!is!currently!the!only!country!with!less!than!the!90!day!stockholding!of!net!imports!required!

as!part!of!its!member!obligations!to!the!International!Energy!Agency.!

Natural!gas!is!a!compelling!candidate!for!providing!increased!global!transport!energy!security.!

While!natural!gas!is!the!lowest!carbon!fossil!fuel,!typically!offering!reductions!in!carbon!emissions!of!

between!10H20%.!

No!other!fuel!has!the!capacity!or!the!capability!to!displace!oil!on!a!scale!that!matches!natural!gas.!

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!4!BP!Statistical!Review!2013!H!http://www.bp.com/en/global/corporate/aboutHbp/energyHeconomics/statisticalH

reviewHofHworldHenergyH2013.html!5!BP!Energy!Outlook!2014.!http://www.bp.com/content/dam/bp/pdf/EnergyHeconomics/EnergyH

Outlook/Energy_Outlook_2035_booklet.pdf!6!BP!Statistical!Review!2013!

7!International!Energy!Agency!(IEA)!H!http://www.iea.org/netimports/!as!at!January!2014!

8!IEA!statement!H!https://www.iea.org/topics/energysecurity/respondingtomajorsupplydisruptions/!

9!Intergovernmental!Panel!on!Climate!Change!(IPCC)!Assessment!Report!4!

10!US!Department!of!Energy!Alternative!Fuels!Data!Center!H!www.afdc.energy.gov/data/.!Biodiesel!data!

excludes!B20!blends!

__________________________________________________________________________________!

The Australian Context

Compressed Natural Gas Vehicles in Australia – History and Current Status

Australia!was!one!of!the!pioneers!in!the!use!of!natural!gas!with!Sydney!and!Adelaide!both!among!the!

first!in!the!world!to!introduce!CNG!urban!buses!to!their!fleet.!This!sparked!interest!among!gas!

industry!and!automotive!stakeholders!in!Australia!to!the!extent!that!Sydney!hosted!the!first!

international!natural!gas!vehicle!conference!in!1988,!an!event!that!has!since!been!held!

internationally!every!two!years!(by!NGV!Global).!

This!interest!and!growing!interest!in!reducing!carbon!emissions!led!to!the!establishment!in!1999!of!

the!Alternative!Fuels!Conversion!Program!(AFCP)!and!the!Compressed!Natural!Gas!Infrastructure!

Program!(CNGIP).!These!programs!targeted!heavyHduty!vehicles!and!were!administered!by!the!

Australian!Greenhouse!Office!as!part!of!an!overall!carbon!reduction!strategy!under!the!stewardship!

of!the!then!Minister!for!Environment,!former!Senator!Robert!Hill.!!

Due!to!a!number!of!factors,!these!programs!met!with!limited!success.!Contributing!factors!included:!

• Limited!availability!of!mature!technology!suited!for!heavyHduty!vehicles!operating!in!

Australia’s!unique!operating!environment!(heavy!loads,!long!distances!and!high!

temperatures)!

• Inadequate!funding!to!establish!infrastructure!sufficient!to!build!a!refuelling!network!

• Insufficient!education!of!fleet!operators!on!the!operational!nuances!of!natural!gas!

• A!gas!industry!distracted!by!deregulation!and!privatisation!issues!

Though!the!programs!did!not!achieve!their!original!objectives,!one!positive!outcome!was!the!

opportunity!to!test!and!develop!engine!and!conversion!technology!for!heavyHduty!applications!under!

the!harsh!Australian!driving!conditions.!Most!notable!were!the!testing!and!development!of!dualHfuel!

conversion!technology!by!UK!based!Clean!Air!Power!and!of!High!Pressure!Direct!Injection!(HPDI)!by!

Canadian!based!Westport!Innovations.!

Policy Changes Affecting CNG Vehicle Use

Up!until!2011,!natural!gas!had!excise!free!status.!This!changed!with!the!introduction!of!a!scaled!

program!to!introduce!excise!over!a!four!year!period.!!

The!intent!of!this!program!was!to!establish!a!new!status!quo!where!natural!gas!and!LPG!are!taxed!at!

50%!of!the!rate!of!diesel!or!petrol!on!an!energy!equivalent!basis11.!This!policy!was!extended!to!other!

alternative!transport!fuels!–!locally!produced!ethanol!and!biodiesel!–!in!the!May!2014!Federal!

Budget.!

__________________________________________________________________________________!

As!the!price!advantage!has!been!a!key!driver!for!fleet!operators!converting!to!natural!gas,!this!policy!

has!had!a!significant!impact!on!the!viability!of!and!uptake!of!CNG!heavyHduty!vehicles!(see!page!39!

for!details).!!

The!reintroduction!of!indexation!to!fuel!excise!in!the!May!2014!Budget!erodes!this!further!because!

heavyHduty!diesel!vehicles!will!not!be!affected!by!indexation.!As!shown!in!Table!2!below,!the!50%!

energy!equivalent!limit!will!be!breached,!rising!to!64%!from!August!1!2014!due!to!the!continuation!of!

the!Diesel!Road!User!Charge!at!the!2013H4!rate!for!2014H15!and!indexation.!!*

Table*2*J*CNG*Excise*and*Diesel*Road*User*Charges*(cents)**

2010J11* 2011J12* 2012J13* 2013J14* 2014J15** 2015J16**

CNG/kg!! 0! 5.22! 10.45! 15.67! 21.14! 27.05!

CNG/Diesel!litre!equivalent! 0! 4.13! 8.27! 12.40! 16.73! 21.41!

Diesel!RUC/l! 21.7! 22.6! 25.5! 26.14! 26.14! 26.60!

Eroded!price!advantage!since!

CNG!excise!introduced!

(cents/litre!diesel!equivalent)! 0! H3.23! H4.47! H7.96! H12.29! H16.51!

CNG!Excise!as!%!of!Diesel!

RUC!(energy!equivalent!basis)! 0%! 18%! 32%! 47%! 64%* 80%*

*!Estimates!as!at!1!August!2014!based!on!inclusion!of!fuel!excise!indexation!and!estimated!road!user!charges!

Current CNG Vehicles and Refuell ing Station Numbers

Despite!these!conditions!a!small!number!of!CNG!vehicles!remain!on!Australia’s!roads!and!a!small!

number!of!CNG!fuelling!stations!(mostly!private)!are!in!operation!servicing!them.!!

Current!estimates!are!shown!in!Table!3!below:!

Table*3*J*CNG*Vehicle*and*Fuelling*Station*Population*Estimates*

Compressed*Natural*Gas*Vehicles* CNG*Fuelling*Stations*

LightHDuty! HeavyHDuty! Buses! Total! Private! Public! Total!

20! 250! 1969! 2213* 25! 3! 28*

AGL!has!recently!announced12!a!commitment!to!establish!a!network!of!CNG!fuelling!stations!in!

metropolitan!and!onHhighway!locations!in!the!coming!years.!!

As!well!as!onHroad!vehicles,!natural!gas!forklifts!are!in!frequent!use!for!offHroad!and!warehouse!

applications,!due!to!the!low!fuel!cost!and!air!quality!benefits.!

__________________________________________________________________________________!

Current product availabil i ty

Current!suppliers!of!mediumHduty!and!heavyHduty!trucks!and!engines!include!Dennis!Eagle,!Isuzu,!

Iveco,!MercedesBenz!and!Cummins.!Iveco!and!MercedesBenz!both!also!supply!lightHduty!vans!and!

trucks.!Recent!changes!to!engine!availability!have!seen!the!withdrawal!of!some!heavyHduty!prime!

movers!but!at!least!one!of!these!is!expected!to!reHenter!the!market!in!the!coming!months.!

DualHfuel!conversions!are!also!possible!for!heavyHduty!vehicles!using!systems!supplied!by!Clean!Air!

Power.!!

Australia’s Transport Energy Status

Economic

Transport!currently!accounts!for!38.2!%!of!Australia’s!overall!energy!demand13!and!our!freight!task!is!

set!to!double!by!203014!

Australia!continues!to!rely!heavily!on!crude!derived!fuels!to!meet!out!transport!needs.!In!the!last!

three!decades!of!20th!century,!these!needs!were!predominantly!met!by!indigenous!supplies,!which!

were!sufficient!in!quantity!to!meet!the!bulk!of!Australia’s!demand.!!

Since!2000!however,!rising!local!demand!and!dwindling!local!supplies!of!oil!have!shifted!the!balance!

dramatically.!Australia!is!now!a!net!importer!of!crude!oil!and!refined!crude!based!fuels!and!is!85%!

reliant!on!imported!fuels!amounting!to!net!oil!imports!of!533,000!barrels!per!day!in!2012H13.15!

The!total!annual!cost!of!crude!and!refined!petroleum!product!imports!(incl!LPG)!in!2012H13!was!

$AU38.3!billion.16!Exports!over!the!same!period!of!$AU15.9!billion!give!Australia!a!net!import!cost!of!

crude!based!fuels!of!$AU22.4!billion.!This!equates!to!more!than!$AU61!million!per!day.!

Variables!that!affect!this!cost!include:!

! Global!supply!

! Regional!supply!

! International!demand!

! Regional!demand!

! The!relative!value!of!the!Australian!dollar!to!the!US!dollar!

Supply!in!turn!is!affected!by!factors!such!as!international!weather!events!(e.g.!Hurricane!Katrina!in!

the!Gulf!of!Mexico),!political!and!social!conditions!(e.g.!Arab!Spring!or!military!activity).!Regional!

demand!and!supply!are!identified!separately!in!the!list!above!as!Australia!is!heavily!influenced!by!

demand!in!Asia.!!

This!demand!is!expected!to!increase!dramatically!in!coming!years!but!even!with!current!demand,!oil!

in!the!region!already!commands!a!premium!over!prices!paid!in!the!USA.!Tapis!and!Brent!fuel!prices!

are!used!as!the!regional!benchmark!with!both!commanding!a!premium!over!US!prices.!In!2012H13!

__________________________________________________________________________________!

average!prices!for!Tapis!was!$US114.50/bl!and!Brent!was!$US108.20/bl!with!West!Texas!

Intermediate!(WTI)!trading!at!$US91.8/bl.17!!

The!economic!burden!of!these!increased!imports!has!so!far!outstripped!the!benefits!of!Australia’s!

growing!LNG!export!trade!which!in!2012H13!amounted!to!$AU13.74!billion18.!While!the!LNG!exports!

have!rightly!been!celebrated!both!by!governments!and!in!the!media,!this!has!not!been!matched!by!

growing!concern!about!imports!of!oil!based!fuels.!While!LNG!exports!increase!overall!Australia’s!

wealth,!oil!imports,!especially!imports!of!refined!fuels,!decrease!our!overall!wealth.!!

*Our*demand*for*oil*based*transport*fuels*requires*us*to*spend*$22.4*billion*on*imports*each*year.!This!represents!1.46%!of!GDP

19!and!means!less!money!circulating!in!the!

Australian!economy.!

On!an!energy!equivalent!basis,!the!LNG!exported!is!at!a!

relative!‘discount’!to!the!imported!crude!based!fuels.!

Average!prices!for!2012H13!for!LNG!exported!amount!to!

$10.57/Gj20!vs!approximately!$20.39/Gj!for!crude!oil!

imports!and!$26.80/Gj!for!refined!fuel!(diesel!and!petrol)!

imports.!

Despite!this!imbalance!and!despite!the!cost!to!the!nation!of!our!dependence!on!crude!based!fuels,!

Australia!does!not!have!specific!policies!that!set!out!targets!for!the!implementation!of!a!diversified!

fuel!portfolio.!While!there!is!passive!support!in!the!form!of!excise!concessions!for!some!fuels!

(including!natural!gas)!Australia!is!one!of!the!few!OECD!countries!that!do!not!have!stimulus!programs!

in!place!to!encourage!the!increased!uptake!of!fuel!alternatives.!The!prevailing!position,!usually!on!

both!sides!of!the!house,!is!that!the!government!remains!‘technology!neutral’!with!respect!to!

transport!fuels.!

!This!effectively!means!that!transport!energy!policy!in!

Australia!is!currently!in!the!hands!of!‘the!market’.!!

As!players!in!the!market!generally!act!in!their!own!

interests,!there!is!little!to!suggest!that!users!(with!the!

exception!of!some!pioneers)!will!switch!fuels!without!

sufficient!benefit!to!do!so.!This!is!evidenced!by!projections!

that!show!minimal!use!of!fuel!alternatives!in!the!coming!

decades.!

Transport)energy)policy)in)Australia)is)currently)in)the)hands)of)‘the)market’)

Our)demand)for)oil)based)transport)fuels)requires)us)to)spend)$22.4*billion*dollars)on*imports)each*year.)

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Energy Security – The Elephant in the Room

Australia!has!been!blessed!with!relatively!few!interruptions!to!supplies!of!crude!based!fuels.!Until!

recent!years,!this!has!largely!been!due!to!reliable!sources!of!local!crude!oil!and!an!abundance!of!

refineries!to!process!the!oil!into!fuel.!

However,!this!ready!availability!of!fuel!has!isolated!most!Australians!from!the!reality!of!our!increased!

reliance!on!imported!fuel.!This!import!reliance!issue!has!been!covered!in!the!previous!section!under!

Economics!but!this!situation!has!energy!security!implications!as!well.!

Even!if!reliable!sources!of!crude!could!be!guaranteed,!our!capacity!to!process!those!supplies!is!

reducing!every!year!with!the!progressive!closure!of!local!refineries!(see!Table!4!below).*

*Table*4*J*Australian*Refinery*Status*May*201421*

Refinery* Location* Capacity*(ML/annum)*Continuing*

* *Altona! VIC! !!!!!!!!!!!!!4,950!!

Geelong! VIC! !!!!!!!!!!!7,470!!

Kwinana! WA! !!!!!!!!!!!8,470!!

Lytton! QLD! 6,300!

Total*capacity*continuing* !! ***********27,190**Shut*down*(or*pending)*

! !Bulwer!Island! QLD! !!!!!!!!!!!!!!!5,910!!

Clyde! NSW! !!!!!!!!!!!4,990!!

Kurnell! NSW! !!!!!!!!!!!7,820!!

Total*Withdrawn*(or*pending)* !! ***********18,720**

crude!supplies!from!the!Middle!East22.!To!date,!this!has!proved!to!be!a!dependable!source!and,!if!

market!and!political!conditions!continue!as!they!are,!there!is!no!reason!to!suggest!that!this!would!not!

continue.!!

However,!the!fact!that!we!haven’t!had!a!supply!problem!does!not!provide!adequate!guarantee!that!

there!won’t!be!a!problem!in!the!future.!Such!possibilities!are!considered!regularly!in!the!government!

commissioned!Liquid!Fuels!Vulnerability!Assessment23.!!

This!report!is!due!to!be!updated!this!year!and!the!most!recent!report!(2011)!did!in!fact!consider!the!

scenario!of!a!complete!shutdown!of!supplies!from!Singapore!for!30!days!(in!accordance!with!the!

terms!of!reference!given!to!the!authors!of!the!report).!This!included!a!detailed!analysis!of!alternative!

fuel!sources!and!concluded!that!“…the!interruption!of!supply!from!Singapore!to!Australia!could!last!

for!45!to!60!days”24.!This!contributed!to!an!overall!conclusion!that!“Australia’s!liquid!fuels!energy!

security!is!assessed!as!high!trending!to!moderate!in!the!long!term.25”!

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While!the!assessment!is!valid!based!on!the!scenarios!presented!there!are!three!significant!omissions!

from!the!assessment:!

1. The!terms!of!reference!for!the!assessment!did!not!include!any!longer!term!scenarios,!such!as!

a!supply!disruption!for!60,!90!days!or!even!longer!

2. The!Singapore!shutdown!scenario!did!not!include!details!of!why!such!a!scenario!might!arise.!

Assuming!it!was!due!to!military!activity,!what!other!situations!in!the!region!could!there!be!

that!would!impact!the!scenario?!How!would!such!activity!affect!overall!demand?!(i.e.!military!

activity!generally!requires!high!fuel!demand)!

3. The!assessment!does!not!review!the!vulnerability!of!our!internal!storage!and!distribution!

network.!ShortHterm!fuel!shortages!have!arisen!in!recent!years!due!to!weather!and!refinery!

maintenance26!and!the!unforeseen!temporary!withdrawal!of!trucks!used!for!fuel!distribution.!

Though!relatively!shortHterm,!these!incidents!highlight!the!vulnerability!of!the!‘just!in!time’!

nature!of!our!fuel!distribution!network!and!our!need!to!develop!a!‘Plan!B’.!Transport!fuel!

distribution!needs!to!be!given!equal!consideration!to!that!given!our!telephone,!broadband!

and!electricity!networks.!

Concerns!about!fuel!security!are!shared!by!other!stakeholders!in!the!transport!sector.!

The!NRMA!has!released!two!reports27,!authored!by!Air!ViceHMarshall!John!Blackburn!(Ret’d)!that!

outline!clearly!how!at!risk!Australia!is!due!to!our!precarious!fuel!supply!chain.!The!reports!indicate!

that!in!the!event!of!a!supply!disruption,!Australia!has!only!23!days’!supply!of!liquid!fuels!on!land!

before!stocks!would!run!out.!While!additional!supplies!would!be!at!sea!and!inHbound!at!the!time!of!a!

disruption,!these!are!excluded!from!the!NRMA!assessment!as!their!arrival!may!not!be!guaranteed.!

This!could!potentially!leave!Australia!totally!reliant!on!local!sources!of!crude!oil,!which!at!best!could!

supply!up!to!15%!of!local!needs.!Caltex!CEO,!Julian!Segal,!confirmed!this!in!a!statement!reported!in!

the!media!in!September!201328!H!“So!really!the!security!of!supply!in!the!context!of!a!military!situation!

boils!down!to!the!15!per!cent!of!crude!that!we!produce!locally.”!

Though!a!military!situation!that!leads!to!total!shutdown!of!supply!is!unlikely,!it!is!however!possible!

and!thus!worthy!of!adequate!preparation!should!such!an!event!arise.!As!Mr!Blackburn!noted!in!his!

first!Liquid!Fuel!Security!Report!for!the!NRMA,!“While!the!probability!of!supply!interruptions!may!be!

low!in!the!majority!of!cases,!the!consequences!of!such!interruptions!may!be!so!severe!as!to!warrant!

the!same!contingency!preparations!we!apply!in!other!areas.!One!example!is!Defence.!We!spend!in!

excess!of!$25!billion!per!annum!to!build!a!Defence!Force!which!is!capable!of!addressing!what!are,!in!

many!cases,!low!probability!but!high!consequence!risks”29.!!

Ironically,!our!complacency!about!fuel!security!could!in!fact!render!the!defence!forces!incapable!of!

doing!the!job!they!are!intended!to!do.!Mr!Blackburn!sums!this!and!other!consequences!up!with!the!

definitive!statement,!“Essentially,!our!society!as!we!know!it!would!cease!to!function.”!

As!noted!earlier,!Australia!is!the!only!member!nation!of!the!International!Energy!Agency!currently!in!

breach!of!its!obligations!to!maintain!strategic!reserves!of!90!days!or!more.!Our!stockholdings!are!in!

__________________________________________________________________________________!

“Baseline!transport!emissions!are!

projected!to!average!85!Mt!CO2He!

per!year!in!the!Kyoto!period,!37!per!

cent!above!1990!levels.!In!2020,!

transport!emissions!are!projected!to!

be!97!Mt!CO2He,!29!per!cent!higher!

than!in!2000.!

Road!transport!accounts!for!the!

largest!proportion!of!emissions!in!

this!sector,!averaging!73!Mt!CO2He!

per!year!over!the!Kyoto!period!and!

83!Mt!CO2He!in!2020.!

Indicative!modelling!suggests!

baseline!transport!emissions!will!be!

around!104!Mt!CO2He!in!2030.”!

Department!of!Climate!Change!and!Energy!

Efficiency!

fact!falling!and!government!estimates!suggest!it!would!take!a!$AU6.8!billion!investment!over!the!

next!ten!years!to!bring!the!stockholding!up!to!IEA!levels30.!Reducing!our!reliance!on!imported!fuels!

could!reduce!our!stockholding!requirements!and!thus!reduce!this!cost!burden.!

It!should!be!noted!however!that!the!Australian!government’s!obligations!to!the!IEA!are!secondary!to!

the!obligations!to!the!Australian!people.!Our!stockholdings!should!be!based!on!worst!case!scenarios!

and!need!to!ensure!that!the!nation!could!function!for!an!extended!period!of!time!without!access!to!

fuel.!In!determining!what!that!stockholding!should!be,!expert!analysis!would!need!to!consider!that!

Australia!is!a!remote!island!nation!at!the!far!end!of!a!vulnerable!supply!chain!which!currently!

originates!primarily!in!the!Middle!East.!Even!if!alternative!sources!of!petroleum!fuels!could!be!found!

(e.g.!Africa),!the!route!to!Australia!would!be!vulnerable!in!times!of!crisis.!

Even!putting!extreme!military!crises!aside,!the!question!remains,!do*we*want*to*leave*ourselves*in*a*position*where*the*only*way*to*keep*functioning*in*a*fuel*crisis*is*to*buy*our*way*out*of*a*hole*at*prices*determined*by*international*markets*in*crisis?!

Griffith!Asia!Institute!Research!Fellow,!Vlado!Vivoda!thinks!not!and!said!recently,!“While!Australia!

remains!faithful!to!the!basic!principles!of!freeHmarket!economics,!if!they!are!wrong!the!consequences!

could!be!dire.!A!bipartisan!“handsHoff”!approach!and!general!public!complacency!regarding!

Australia’s!energy!future!may!not!serve!the!nation’s!best!interest!in!the!long!term.”!31!

As!with!environmental!policy,!energy!security!cannot!be!left!to!market!forces!alone.!At!the!very!least,!

government!leadership!and!stimulus!is!required!to!set!the!stage!upon!which!market!forces!operate.!

Environmental Impacts of Transport in Australia

Australia!is!one!of!the!highest!emitters!of!carbon!on!

a!per!capita!basis32.!With!transport!currently!

accounting!for!14%!of!Australia’s!carbon!emissions33,!

efficiency!in!this!sector!is!critical!to!achieving!our!

reduction!goals.!

Currently!there!are!few!policy!based!initiatives!in!

place!in!Australia!to!contribute!to!reducing!carbon!

emissions!from!transport.!Auto!manufacturers!

continue!to!make!efficiency!improvements!in!

vehicles!and!fleet!operators!are!using!telematics!and!

satnav!to!improve!routing!efficiency!but!further!gains!

can!be!made!through!the!use!of!lower!carbon!fuels!

such!as!natural!gas!or!bioHmethane.!!

As!well!as!carbon!emissions,!the!growing!transport!

fleet!continues!to!emit!air!pollutants.!The!Bureau!of!

Infrastructure!Transport!and!Regional!Economics!

(BITRE)!estimates!that!heavy!vehicles!were!

__________________________________________________________________________________!

responsible!for!approximately!31%!of!NOx!and!47%!of!PM10!emissions!from!motor!vehicles!in!

201034.!!

In!Australia,!this!is!exacerbated!by!our!aging!heavyHduty!fleet,!especially!vehicles!older!than!1996.!

Data!indicates!that!the!average!age!of!Australia’s!heavyHduty!fleet!vehicles!is!13.7!years.!This!is!

considerably!higher!than!most!OECD!countries!of!which!14!have!an!average!heavyHduty!vehicle!age!

of!less!than!10!years!(See!Table!5!for!details).!As!older!trucks!emit!considerably!more!pollutants!than!

newer!trucks,!this!is!having!a!substantial!effect!on!Australia’s!air!quality.!!

“Almost)every)truck)built)before)1996)emits)at)least)60)times)the)Particulate)Matter)(PM))of)a)comparably)powered)and)sized)new)truck.))At)31)January,)2013)(figures)from)the)latest)ABS)Australian)Motor)Vehicle)Census):)

There)were)571,035)trucks)(that)is,)with)GVM)>)3,500)kg))registered)in)Australia)

Of)these,)more)than)200,000)(~)35%))were)first)registered)in)1995)or)earlier)

These)older)model)trucks)were)not)required)to)meet)any)exhaust)emissions)standards)

These)older)model)trucks)are)not)fitted)with)the)safety)features)we)take)for)granted)today)

The)average)age)of)Australian)trucks)is)13.7)years,)a)figure)which)far)exceeds)the)average)in)other)developed)nations)

By)taking)action)to)replace)the)trucks)that)were)built)before)1996,)air)quality)and)safety)levels)in)Australia)would)improve)significantly.))The)productivity)of)the)nation's)fleet)would)be)enhanced,)and)total)carbon)dioxide)emissions)would)reduce.”)

Truck!Industry!Council!statement35!

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Table*5*J*Average*age*of*heavyJduty*vehicles*by*country36*

Country! Average!HD!vehicle!age!(years)!

Spain! 4.9!

Ireland! 6.1!

France! 6.4!

USA! 6.7!

Denmark! 7.0!

Netherlands! 7.2!

United!Kingdom! 7.8!

Switzerland! 7.9!

Germany! 8.0!

Austria! 8.1!

Sweden! 8.4!

Canada! 9.2!

Japan! 9.2!

South!Africa! 9.6!

Italy! 10.7!

Iceland! 11.4!

Australia* 13.7*

Another!increasing!problem!is!the!use!of!tunnels!for!inner!city!corridors.!This!is!creating!concentrated!

areas!of!toxic!air!within!the!tunnels!and!at!the!point!of!extraction!which!in!turn!is!reportedly!creating!

health!problems!for!citizens!nearby37.!Incentivising!the!use!of!natural!gas!for!vehicles!making!use!of!

these!tunnels!would!decrease!this!toxicity!problem.!

It!would!also!make!tunnel!travel!safer.!Studies!from!France!have!demonstrated!that!natural!gas!has!a!

safety!advantage!over!diesel!in!the!event!of!tunnel!accidents,!primarily!because!the!fuel!disperses!

naturally!rather!than!pooling!at!the!scene!of!the!event38.!CNG!buses!were!shown!to!have!a!‘global!

risk’!three!times!lower!than!diesel!in!the!first!ten!minutes!after!a!tunnel!accident!and!heavy!duty!

vehicles!(19H26!tonnes)!have!a!risk!level!87%!lower!than!diesel.!

Compressed Natural Gas Vehicles – Good for Australia

Combining!the!impact!of!the!preceding!factors!creates!a!compelling!case!for!the!increased!use!of!

CNG!vehicles!in!Australia.!

The!following!outlines!the!impacts!of!displacing!imported!refined!fuels!with!natural!gas.!The!scenario!

is!focussed!on!the!displacement!of!diesel!with!natural!gas.!

Based!on!estimated!fuel!pricing!as!at!July!2014!and!fuel!use!in!2013,!displacing*10%*of*diesel!used!annually!in!Australia!in!heavy!on!road!transport!with!natural!gas!could!potentially:!

__________________________________________________________________________________!

! Reduce!imports!of!imported!diesel!by!1,018.3!million!litres!per!annum!

This!target!could!be!achieved!with!a!mix!of!50,000!heavyHduty!natural!gas!vehicles!(including!buses)!

doing!‘average’!duty!cycles!each!year.!These!vehicles!could!comfortably!be!serviced!by!a!network!of!

200!fuelling!stations.!With!sufficient!commitment!and!coordination,!this!scenario!could!comfortably!

be!achieved!within!a!ten!year!time!frame.!!

Targeting!heavyHduty!vehicles!(including!buses)!with!50%!above!average!fuel!consumption!would!

only!require!32,000!natural!gas!vehicles!and!a!network!of!160!stations.!With!sufficient!commitment!

and!coordination,!this!scenario!could!comfortably!be!achieved!within!a!five!year!time!frame.!

Both!scenarios!would!be!sufficient!to!stimulate!a!vibrant!secondHhand!market!and!create!a!trickleH

down!effect!to!lighterHduty!vehicles!that!could!take!advantage!of!the!refuelling!infrastructure.!They!

would!also!result!in!immediate!air!quality!improvements!through!reduced!emissions!of!toxic!

pollutants.!

Good for Australian Business

At!street!level,!the!benefits!for!fleet!operators!are!equally!beneficial.!!

Cost*savings*

Fuel!price!savings!for!fleet!operators!vary!significantly!and!are!dependent!on:!

! Total!distance!driven!annually!per!vehicle!

! Duty!cycle!and!fuel!economy!of!the!vehicle!

! ‘Diesel!substitution!rates’!(for!dualHfuel!engines!only)!

These!savings!offset!the!initial!vehicle!or!conversion!premium!and!result!in!a!payback!for!the!

operator,!after!which!savings!can!be!accumulated!to!the!benefit!of!the!operator.!!!

As!noted!in!Table!6!(page!41),!most!fleet!vehicles!in!Australia!do!not!use!enough!fuel!to!accumulate!

sufficient!fuel!price!savings!within!a!reasonable!payback!period.!The!assessment!of!a!‘reasonable’!

payback!period!will!vary!depending!on!the!business!circumstances!of!the!operator!but,!in!general,!

most!operators!consider!a!period!of!less!than!two!years!as!being!‘attractive’,!with!anything!more!

than!three!or!four!years!being!difficult!to!justify!financially.!

However,!where!CNG!is!used!by!above!average!fuel!users,!fuel!price!savings!increase!Australia’s!

productivity!on!a!local!level!and!competitiveness!on!an!international!level.!

Additional!fuel!price!savings!can!also!be!obtained!by!fleet!operators!through!entering!into!term!

based!agreements!with!gas!suppliers,!usually!of!around!5!years.!As!well!as!offering!a!lower!fuel!price,!

__________________________________________________________________________________!

these!arrangements!can!also!offer!fleet!operators!with!longer!term!price!certainty!via!fixed!price!

(+CPI)!agreements.!This!eliminates!price!uncertainty!caused!by!international!oil!price!markets!and!

variations!in!the!value!of!the!Australian!dollar!relative!to!the!US!dollar.!

Enhanced*reputation*

Businesses!operating!CNG!vehicles!also!have!the!opportunity!to!enhance!the!triple!bottom!line!

benefits!of!lower!costs!and!reduced!environmental!impacts!by!leveraging!public!relations!angles.!This!

can!include!the!use!of!signage!on!vehicles!using!CNG!and!branding!the!business!as!sustainable!

through!the!use!of!a!naturally!occurring!indigenous!fuel.!

__________________________________________________________________________________!

Chapter Summary

Australia!was!one!of!the!pioneers!in!the!use!of!natural!gas!for!transport.!!

Up!until!2011,!natural!gas!had!excise!free!status!in!Australia.!!

Natural!gas!is!effectively!taxed!at!64%!of!the!rate!of!diesel!from!August!1!2014.!

Historical!government!support!for!natural!gas!vehicles!has!included!conversion!and!infrastructure!

programs!but!these!have!met!with!limited!success,!primarily!due!to!technology!being!immature!at!

the!time!of!the!programs.!

Fleet!buyers!can!currently!buy!light,!medium!and!heavyHduty!vehicles!or!conversions!from!a!range!of!

OEM!manufacturers!and!suppliers.!!

Australia!is!now!a!net!importer!of!crude!oil!and!refined!crude!based!fuels!and!is!85%!reliant!on!

imported!fuels!amounting!to!net!oil!imports!of!533,000!barrels!per!day!in!2012H13.!

The!total!annual!cost!of!crude!and!refined!petroleum!product!imports!(incl!LPG)!in!2012H13!billion!

was!$AU38.3!billion.!Exports!over!the!same!period!of!$AU15.9!billion!give!Australia!a!net!import!cost!

of!crude!based!fuels!of!$AU22.4!billion!per!annum!or!$AU61!million!per!day.!!

Average!prices!for!2012!for!LNG!exported!from!Australia!amount!to!$10.57/Gj!vs!approximately!

$20.39/Gj!for!crude!oil!imports!and!$26.80/Gj!for!refined!fuel!(diesel!and!petrol)!imports.!

crude!supplies!from!the!Middle!East.!!

Concerns!about!fuel!security!are!held!stakeholders!in!the!transport!sector.!

Australia!has!only!23!days’!supply!of!liquid!fuels!on!land.!

Australia!is!one!of!the!highest!emitters!of!carbon!on!a!per!capita!basis.!!

Currently!there!are!few!policy!based!initiatives!in!place!in!Australia!to!contribute!to!reducing!carbon!

emissions!from!transport.!!

The!average!age!of!Australia’s!heavyHduty!fleet!vehicles!is!13.7!years.!This!is!considerably!higher!than!

most!OECD!countries!of!which!14!have!an!average!heavyHduty!vehicle!age!of!less!than!10!years.!As!

older!trucks!emit!considerably!more!pollutants!than!newer!trucks,!this!is!having!a!considerable!effect!

on!Australia’s!air!quality.!!

__________________________________________________________________________________!

Based!on!estimated!fuel!pricing!as!at!July!2014!and!fuel!use!in!2013,!displacing*10%*of*diesel!used!annually!in!Australia!in!heavy!on!road!transport!with!natural!gas!could!potentially:!

! Reduce!imports!of!imported!diesel!by!1,018.3!million!litres!

This!target!could!be!achieved!with!a!mix!of!50,000!heavyHduty!natural!gas!vehicles!(including!buses)!

doing!‘average’!duty!cycles!each!year.!These!vehicles!could!comfortably!be!serviced!by!a!network!of!

200!fuelling!stations.!With!sufficient!commitment!and!coordination,!this!scenario!could!comfortably!

be!achieved!within!a!ten!year!time!frame.!!

Targeting!heavyHduty!vehicles!(including!buses)!with!50%!above!average!fuel!consumption!would!

only!require!32,000!natural!gas!vehicles!and!a!network!of!160!stations.!With!sufficient!commitment!

and!coordination,!this!scenario!could!comfortably!be!achieved!within!a!five!year!time!frame.!

Where!CNG!is!used!by!above!average!fuel!users,!fuel!price!savings!increase!Australia’s!productivity!

on!a!local!level!and!competitiveness!on!an!international!level.!

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!11!http://www.openaustralia.org/senate/?gid=2011H06H20.72.1!(Transcript!of!parliamentary!debate!confirming!

50%!energy!equivalent!intention)!12!http://www.agl.com.au/aboutHagl/mediaHcentre/articleHlist/2014/april/aglHunveilsHalternativeHfuelHvisionHatH

internationalHtruckHshow!13!Page!7!http://www.bree.gov.au/sites/default/files/files//publications/aes/2013HaustralianHenergyH

statistics.pdf!!14!http://www.truck.net.au/system/files/industryH

resources/Future%20strategy%20for%20road%20supply%20and%20charging%20FINAL%20FOR%20WEB.pdf!15!Bureau!of!Resource!and!Energy!Economics!–!Australian!Petroleum!Statistics!March!2014!(Excl!nonHtransport!

uses)!!16!BREE!H!Resources!and!Energy!Quarterly,!March!2014.!Table!16!

17!BREE!H!Resources!and!Energy!Quarterly,!March!2014.!Table!33!

18!IBID!Table!15!

19!http://www.abs.gov.au/AUSSTATS/abs@.nsf/mf/1345.0?opendocument?opendocument#fromHbanner=LN!

20!BREE!H!Resources!and!Energy!Quarterly,!March!2014.!Tables!14!&!15.!24!Mt!of!LNG!exported.!$AU13.741!

billion.!Quoted!energy!volume!of!approx.!1.4!billion!m3!of!natural!gas!per!Mt!of!LNG.!Assumed!energy!content!

of!38.7!Mj/m3!

21!Capacities!ex!Australian!Institute!of!Petroleum.!Downstream!Petroleum!2011!&!2013!

22!Australia’s!Liquid!Fuel!Security!Part!2!(Feb!2014)!

23!Acil!Allen.!http://www.acilallen.com.au/projects/4/resources/32/liquidHfuelsHvulnerabilityHassessment!

24!IBID.!Liquid!Fuels!Security!Assessment!P.!67!

__________________________________________________________________________________!

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!25!National!Energy!Security!Assessment!2011.!http://www.innovation.gov.au/energy/Documents/EnergyH

Security/nesa/NationalHEnergyHSecurityHAssessmentH2011.pdf!26!Geelong!&!Altona!2012!

27!Australia’s!Liquid!Fuel!Security!(Feb!2013)!and!Australia’s!Liquid!Fuel!Security!Part!2!(Feb!2014)!

28!http://www.afr.com/p/australia2H0/caltex_chief_denies_energy_security_w7ZwDwdflNOaO7746mERKM!

29!Australia’s!Liquid!Fuel!Security!(Feb!2013).!Page!5!

30!Dept.!of!Industry!Energy!White!Paper!Issues!Paper.!Dec!2013.!Page!12!!

31!http://theconversation.com/profiles/vladoHvivodaH1380/profile_bio!

32!http://data.worldbank.org/indicator/EN.ATM.CO2E.PC/countries/all?display=default!

33!2009!data.!Dept!of!Climate!Change!and!Energy!Efficiency!H!http://www.climatechange.gov.au/reducingH

carbon/reducingHaustraliasHemissions/australiasHemissionsHprojections/transportHemissionsHprojections!34!Review!of!Emissions!Standards!for!Heavy!Vehicles!–!Dept!of!Infrastructure!and!Transport,!2012!

35!http://www.truckHindustryHcouncil.org/!

36!Truck!Industry!Council!data!2009H10!

37!http://www.asthmaaustralia.org.au/NSW/M5_Tunnel.aspx#.U3s_RvmSzPw!

38!Bordelanne.!Gaz!DeFrance!Suez.!2012!

__________________________________________________________________________________!

Barriers and Solutions to CNG Vehicle Uptake in Australia

CNG!vehicles!have!to!date!failed!to!make!significant!inroads!into!the!Australian!transport!market.!

This!was!highlighted!in!the!Department!of!Resources,!Energy!and!Tourism!Strategic)Framework)for)Alternative)Transport)Fuels!report!released!in!December!2011:!

)“The)Framework’s)rationale)for)action)is)based)on)ensuring)alternative)transport)fuels)are)able)to)enter)the)market)when)they)are)cost>competitive)and)complement)imported,)conventional)fuel)products.)The)Australian)Government)can)facilitate)this)best)by)removing)barriers)to)the)uptake)of)alternative)transport)fuels)to)ensure)the)full)economic)benefit)of)a)switch)to)alternatives)is)realised)at)the)optimal)time.”))

Specific!factors!contributing!to!the!lack!of!market!penetration!follow.!

Pioneer Status vs Status Quo

The!‘competition’!for!natural!gas!as!a!fuel!is!the!traditional!fuels!of!diesel!and!petrol.!Despite!their!

imperfections,!these!are!both!well!established!with!a!longHstanding!reputation!for!affordability!

(usually)!and!widespread!availability.!!

This!was!also!given!mention!in!the!Strategic)Framework)for)Alternative)Transport)Fuels*report*mentioned!above:!

“Even)in)situations)where)the)alternative)transport)fuel)may)be)cheaper,)the$dominance$of$conventional$fuels$in$the$transport$market$is$a$significant$market$entry$barrier$for$alternative$transport$fuels.)Delays)caused)by)the)strong)lock>in)effect)of)incumbent)fuels)and)technologies)in)the)transport)system)may)result)in)a)less)than)optimal)outcome)for)the)economy)due)to)foregone)opportunities)(and)options))to)fuel)switch)when)more)cost)competitive)fuels)and)fuel)technologies)become)available.”)

CNG Vehicle or Conversion Affordability

Despite!the!longer!term!price!benefits,!most!alternatives!to!crude!based!fuels!carry!some!form!of!

initial!price!premium!prior!to!use.!This!is!true!for!natural!gas!and!CNG!vehicles.!Whether!buying!an!

OEM!natural!gas!vehicle!or!converting!an!existing!petrol!or!diesel!vehicle,!there!is!an!upHfront!cost!

that!is!currently!borne!by!the!fleet!operator.!

__________________________________________________________________________________!

This!has!an!immediate!impact!on!the!operator’s!business,!either!through!reduced!shortHterm!cash!

flow,!or!increased!liabilities!through!the!loans!showing!up!on!the!balance!sheet.!!

Added!to!the!upfront!burden!is!the!backend!burden!of!an!uncertain!resale!value!for!the!vehicle.!The!

resale!value!is!entirely!dependent!on!fuel!being!available!to!the!prospective!buyer.!With!the!current!

limited!availability!of!public!(or!even!semiHpublic)!refuelling!sites,!this!limits!the!buying!pool!for!an!

operator!selling!a!CNG!vehicle.!As!such!operators,!and!their!financiers,!are!often!forced!to!consider!a!

zero!dollar!residual!value!on!a!vehicle!when!making!a!buying!decision.!(DualHfuel!vehicles!are!the!

exception!to!this!as!these!can!be!changed!back!to!100%!diesel!operation).!

These!factors!have!a!very!real!impact!on!the!ability!of!an!operator!to!make!a!business!case!to!buy!a!

CNG!vehicle!(or!convert!an!existing!vehicle)!or!to!obtain!finance!to!do!so.!

In!addition!to!this!is!the!current!low!fuel!price!difference!between!CNG!and!diesel/petrol.!As!

demonstrated!in!the!table!and!chart!below,!for!most!‘average’!fleet!operators39,!the!use!of!CNG!as!a!

fuel!cannot!be!justified!due!to!payback!periods!exceeding!four!years,!with!the!situation!potentially!

worsening!in!2015!onwards!as!the!excise!margin!narrows.!This!limits!the!option!to!a!narrow!

spectrum!of!very!high!fuel!users!and!puts!CNG!out!of!reach!for!most.!This!in!turn!limits!choice!and!

maintains!the!virtual!monopoly!that!crude!based!fuels!currently!have.!

Table!6!following!shows!that!above!average!levels!of!fuel!consumption!are!required!for!most!classes!

of!vehicle!to!enable!payback!within!a!three!or!four!year!period.!With!the!exception!of!urban!bus!

operations,!these!are!generally!accepted!as!the!maximum!payback!period!that!most!fleet!operators!

consider!palatable.!(Urban!bus!operators!generally!tolerate!a!longer!payback!period!as!these!

purchases!are!usually!motivated!by!State!or!municipal!government!environmental!outcomes.)!!

(Note:!As!Australian!Bureau!of!Statistics!(ABS)!data!is!aggregated!for!rigid!and!articulated!trucks,!

average!annual!diesel!consumption!in!this!table!is!not!demonstrative!of!actual!divisions!within!the!

class).!

__________________________________________________________________________________!

Table*6*–*Indicative*Annual*Fuel*Consumption*Required*to*Pay*Back*CNG*Engine/Conversion*Premium*

Indicative!CNG!

vehicle/conversion!

premium!

Annual!diesel!

consumption!(litres)!

required!to!offer!

payback!less!than!3!

years!

Annual!diesel!

consumption!(litres)!

required!to!offer!

payback!less!than!4!

years!

Average!annual!

diesel!consumption!

(litres)!for!this!

vehicle!class!(ABS!

data)!

LCV! $8,500! 6442! 4832! 2028!

Rigid!Truck!(light!7)! $11,000! 8337! 6253! 5970!

Rigid!Truck!(midHsize!14)! $23,000! 17432! 13074! 5970!

Rigid!Truck!(heavy!26t)! $36,000! 27286! 20464! 5970!

Prime!Mover!(350!hp)! $25,000! 18948! 14211! 47891!

Prime!Mover!(DualHfuel!500hp*)! $60,000! 75793! 56845! 47891!

Bus**! $150,000! 113690! 85267! 16050!

Based!on!diesel!pump!price!of!$1.60/l,!CNG!of!$1.40/kg,!and!excise!rates!and!road!user!charges!@!1/8/14!

CNG!vehicle/conversion!premiums!are!estimates!based!on!currently!available!product!or!discussion!with!suppliers!

*Diesel!substitution!rate!assumed!60%!

!Assumed!efficiency!loss!for!CNG!5%!

Figure!7!below!demonstrates!payback!thresholds!graphically,!with!CNG!vehicle/conversion!premiums!

represented!on!the!X!axis!and!required!diesel!consumption!represented!on!the!Y!axis!(using!the!same!

fuel!price!assumptions!as!Table!6!above).!

Figure*7*J*Annual*Diesel*Consumption*and*Payback*Periods*to*Cover*CNG*Vehicle/Conversion*Premium*

20000!

40000!

60000!

80000!

100000!

120000!

al*Diesel*Con

on*(Litres)*

CNG*Engine/Conversion*Premium*

3!year!

payback!

4!year!

payback!

Payback!period!

assumes!

dedicated!CNG!

engine!(i.e.!

100%!diesel!

replacement)!

__________________________________________________________________________________!

Adding!to!the!affordability!barrier!is!uncertainty!about!midHterm!to!longHterm!gas!pricing!in!east!

coast!markets.!With!exports!of!LNG!to!commence!in!coming!years,!local!pricing!will!be!affected!by!

the!increased!profit!margins!offered!by!international!markets.!!!

Solutions*to*this*affordability*barrier*include:*

• Commitments!from!all!parties!at!the!Federal!level!to!ensure!that!any!upcoming!fuel!excise!or!

road!tax!arrangements!will!be!structured!to!maintain!a!fuel!price!advantage!for!gaseous!fuels!

no!less!than!applying!to!other!alternative!fuels!and!sufficient!to!foster!sustainable!growth.!

• Incorporating!the!initial!price!premium!into!the!fuel!price!so!that!fleet!operators!do!not!pay!

an!upHfront!cost!for!the!OEM!CNG!vehicle!or!conversion.!This!has!proven!successful!in!

Argentina,!with!private!car!and!taxi!owners,!and!the!United!States,!where!commercial!fleet!

operators!are!offsetting!the!initial!cost!in!return!for!‘take!or!pay’!fuel!purchasing!

arrangements!from!a!supplier!that!has!taken!on!the!initial!premium!cost.!

• Provision!of!government!grants,!or!tax!credits!or!accelerated!depreciation!arrangements!

allowing!for!fleet!operators!to!reduce!or!eliminate!the!upfront!initial!price!premium.!This!has!

proven!successful!in!many!countries!internationally,!especially!where!other!programs!are!in!

place!to!address!additional!barriers!to!uptake.!While!it!has!been!tried!in!Australia!before,!this!

has!met!with!limited!success!due!to!the!factors!mentioned!in!the!review!of!Australia’s!NGV!

history.!Any!such!arrangements!thus!need!to!be!considered!holistically!and!in!conjunction!

with!other!initiatives.!

Limited CNG Refuelling Infrastructure

Often!referred!to!as!the!‘chicken!and!egg’!problem,!the!lack!of!a!network!of!refuelling!stations!has!a!

very!real!impact!on!the!uptake!of!CNG!vehicles.!!

Even!where!a!very!compelling!case!can!be!made!for!fleet!operators,!a!business!case!also!needs!to!be!

made!for!the!infrastructure!that!services!it.!!

For!private!or!semiHprivate!depot!based!site,!this!can!mean!a!diversion!for!the!fleet!operator!from!

their!core!business!but!otherwise!does!not!prove!to!be!a!major!barrier.!

For!public!sites!however,!this!involves!competing!against!fuels!which!have!as!much!as!a!100!year!

head!start!on!claiming!prime!real!estate.!This!competition!exists!not!only!for!the!sites!themselves,!

but!also!for!space!within!the!sites.!

Service!stations!in!Australia!have!undergone!massive!rationalisation!in!the!past!20!years.!The!

introduction!of!a!new!fuel!to!a!site!is!a!major!undertaking!and!a!luxury!that!can!only!be!considered!

on!existing!sites!with!‘spare’!space!or!on!new!sites!sufficient!in!size!to!accommodate!the!additional!

equipment.!

__________________________________________________________________________________!

This!places!severe!limitations!on!the!CNG!fuelling!infrastructure!and!often!limits!it!to!sites!that!are!

away!from!main!routes!or!in!locations!without!additional!amenities!(e.g.!an!unmanned!site!without!

toilets!or!refreshment!facilities).!This!lessens!the!appeal!to!fleet!operators!to!take!up!the!fuel!and!

thus!slows!the!rate!of!market!penetration.!

The!infrastructure!issue!is!further!exacerbated!by!the!shorter!driving!range!of!natural!gas!vehicles!

compared!to!diesel!or!petrol.!As!CNG!and!HDCNG!have!lower!fuel!densities!than!petrol!or!diesel,!a!

vehicle!is!required!to!refuel!more!often.!This!effectively!means!more!fuelling!stations!are!required!to!

service!a!natural!gas!vehicle!population!than!a!diesel/petrol!population,!particularly!for!interHcity!

routes.!

This!issue!can!be!left!to!the!market!alone!to!address,!which!will!take!some!time,!or!it!can!be!done!in!

partnership,!with!government!taking!a!leadership!and!participatory!role.!For!example,!the!European!

Parliament!has!recently!recognised!this!problem!and!issued!a!directive!to!member!governments!to!

take!a!proactive!role!in!ensuring!infrastructure!for!AFVs,!including!natural!gas!vehicles,!is!put!in!

place40.!Components!of!this!directive!include:!

• Minimum*levels*of*infrastructure*across*the*EU.!A!requirement!on!Member!States!to!submit!

to!the!Commission!national!plans!for!minimum!levels!of!infrastructure!–!refuelling!and!

recharging!stations!–!for!alternative!fuels!such!as!electricity,!hydrogen!and!natural!gas.!The!

targets!and!objectives!will!be!published!by!the!Commission.!There!is!also!a!review!

mechanism!in!the!Directive!to!allow!the!Commission!to!assess!if!national!targets!are!

sufficient!to!deliver!a!critical!mass!of!infrastructure!or!if!mandatory!targets!at!EU!level!–!as!

had!been!originally!proposed!by!the!Commission!–!will!be!needed;!

• EU*wide*standards*for*the*infrastructure!–!including!a!requirement!for!standardised!

refuelling!equipment!for!hydrogen!and!natural!gas.!This!will!end!the!uncertainty!that!has!

been!holding!back!business!and!consumers.!

• Clear*consumer*information*to*facilitate*use!–!including!comparison!of!prices!for!the!

different!clean!and!conventional!fuels!based!on!a!methodology!to!be!developed!by!the!

Commission.!

In!other!markets,!governments!have!assisted!through!the!development!of!grants!and!tax!credits!to!

offset!the!cost!of!CNG!refuelling!infrastructure.!

Solutions*to*the*infrastructure*barrier*include:*

• Provision!of!government!grants,!or!tax!credits!or!accelerated!depreciation!arrangements!

allowing!for!the!establishment!of!CNG!refuelling!stations!(private!and!public).!This!has!

proven!successful!in!many!countries!internationally,!especially!where!other!programs!are!in!

place!to!address!additional!barriers!to!update.!While!it!has!been!tried!in!Australia!before,!this!

has!met!with!limited!success!due!to!the!factors!mentioned!in!the!review!of!Australia’s!NGV!

history.!Any!such!arrangements!thus!need!to!be!considered!holistically!and!in!conjunction!

with!other!initiatives.!

__________________________________________________________________________________!

• Government!and!corporate!leadership!in!the!uptake!of!natural!gas!vehicles.!A!commitment!

by!AT&T!in!the!United!States!to!introduce!8,000!CNG!vehicles!to!their!fleet!stimulated!the!

development!of!40!CNG!fuelling!stations!across!the!USA41.!

Earned Reliability Reputation

The!reputation!for!reliability!of!diesel!and!petrol!has!been!built!up!through!decades!of!use.!While!

CNG!could!hold!its!ground!against!both!fuels!in!this!area,!it!will!take!some!time!to!establish!a!

widespread!reputation!for!it.!!

In!fact!CNG!vehicles!currently!operate!at!a!disadvantage!in!so!far!as!they!are!under!heavier!scrutiny!

than!diesel!or!petrol.!Any!incidents!of!unreliability!involving!a!CNG!vehicle!will!be!discussed!more!

often!than!a!similar!incident!with!a!diesel!or!petrol!vehicle.!This!is!the!case!even!when!the!fuel!type!

has!no!relevance!to!the!event!itself;!e.g.!an!electrical!fire!on!a!CNG!bus!will!likely!be!reported!as!an!

electrical!fire!on!a!CNG!bus!whereas!a!similar!fire!on!a!diesel!bus!will!likely!be!reported!as!an!

electrical!fire!on!a!bus.!

Essentially,!despite!their!proven!technical!capabilities,!alternatives!to!diesel!and!petrol!have!to!work!

harder!to!prove!themselves!in!the!market!as!contenders!and!this!process!takes!time.!As!reliability!is!a!

key!factor!in!a!fleet!buyer’s!decision!making!process,!this!is!currently!a!barrier!to!increased!market!

penetration.!

Solutions*to*the*reliability*reputation*barrier*include:*

• Governments!including!operational!quotas!for!the!use!of!CNG!vehicles!(and!other!alternative!

indigenous!fuels)!in!government!fleets.!As!well!as!providing!operational!(and!reliability)!

experience,!this!will!give!fleet!operators!the!confidence!to!purchase!nonHtraditional!fuels!

also.!

• Corporate!leaders!including!operational!quotas!for!the!use!of!CNG!vehicles!(and!other!

alternative!indigenous!fuels)!in!their!fleets.!As!well!as!providing!operational!(and!reliability)!

experience,!this!will!give!small!to!midHsize!operators!the!confidence!to!purchase!nonH

traditional!fuels!also.!

• Higher!visibility!of!CNG!fleet!operations!through!PR!opportunities.!Industry!can!take!a!

leadership!role!in!ensuring!that!successful!fleet!operations!and!case!studies!are!

communicated!to!the!wider!community.!

Confusion Regarding Alternative Fuels and Technologies

An!important!trend!in!business!over!the!past!15!years!has!been!the!increasing!appeal!of!sustainability!

as!a!business!consideration.!While!this!has!broad!benefit,!it!has!also!led!to!confusion!in!the!

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marketplace!as!to!what!technologies!or!fuels!are!most!suitable!to!replace!or!supplement!diesel!or!

petrol.!

Choices!include!hybrid!vehicles,!plugHin!hybrids,!biodiesel,!natural!gas,!ethanol,!hydrogen!(though!not!

in!Australia),!and!LPG!among!others.!Within!these!categories!are!different!‘formats’!for!the!fuel!(e.g.!

CNG,!LNG,!HDCNG),!different!blends!of!fuels!(e.g.!E85,!B10)!and!the!option!of!first,!second!or!third!

generation!biofuels.!Even!among!gaseous!fuels,!there!is!often!confusion!over!the!difference!between!

LPG!and!natural!gas.!

Each!fuel!or!technology!has!its!strengths!and!weaknesses!and!fleet!operators!do!not!have!the!luxury!

of!being!able!to!experiment!or!trial!the!different!options!or,!in!some!cases,!even!to!research!them!to!

a!sufficient!degree!to!allow!them!to!make!an!informed!choice.!!!

Marketing!studies!have!demonstrated!that!often,!when!faced!with!too!many!choices,!let!alone!an!

uninformed!choice,!buyers!often!choose!the!option!of!‘none’.!This!is!summed!up!in!the!saying,!“a!

confused!mind!doesn’t!buy.”!In!the!transport!context!this!usually!leads!fleet!operators!to!the!status!

quo!fuels!of!diesel!and!petrol,!while!looking!to!other!measures!to!improve!fleet!sustainability.!This!

means!that!the!community!benefits!of!high!impact!alternatives!that!deliver!high!crude!displacement!

levels,!such!as!natural!gas,!are!not!realised!and!the!community!advantage!is!lost.!

Solutions*to*the*market*confusion*barrier*include:*

• Education!of!the!marketplace!by!industry!on!the!relative!strengths!and!weaknesses!of!the!

alternative!fuels!and!technologies!in!the!Australian!context!

• Government!sponsored!research!and!analysis!of!the!various!alternative!fuels!and!

technologies!in!the!Australian!context!(including!life!cycle!analysis!of!emissions)!and!the!

impacts!and!benefits!of!each!

Small Size of Australian market

With!only!23!million!people!the!Australian!vehicle!market!is!very!small.!This!is!evidenced!by!the!

recent!decision!of!lightHduty!manufacturers!to!cease!manufacturing!in!Australia.!

The!heavyHduty!vehicle!market!is!particularly!small,!amounting!to!only!27,900!vehicles!per!annum42.!

For!local!OEM!suppliers,!this!means!limited!opportunities!to!bring!alternative!technologies!to!market!

and!higher!incremental!costs!to!do!so!(e.g.!R&D,!fitHout!of!production!lines,!training,!etc.).!

Despite!a!willingness!and!desire!on!the!part!of!OEM!suppliers!to!supply!sustainable!alternatives,!the!

small!size!of!the!Australian!market!limits!their!ability!to!do!so.!The!critical!mass,!in!the!form!of!buyer!

demand!isn’t!there!in!sufficient!quantity!to!offset!the!additional!costs!of!supply.!

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Solutions*to*the*market*size*barrier*include:*

• Government!led!programs!to!stimulate!demand!of!CNG!vehicles!in!sufficient!quantities!to!

make!a!business!case!for!OEM!suppliers!

• Government!and!corporate!leadership!in!the!implementation!of!largeHscale!longHterm!buying!

commitments!of!CNG!vehicles!

• Government!incentives!for!OEM!suppliers!to!make!product!available!such!as!tax!credits!for!

the!import/manufacture!and!promotion!of!CNG!vehicles!and!engines!

Uncertainty Regarding Future Road User Charges and Excise Arrangements

The!heavy!transport!sector!has!seen!significant!changes!to!tax!arrangements!in!recent!years,!starting!

with!the!introduction!of!Diesel!and!Alternative!Fuels!Grants!Scheme!(DAFGS)!in!2000!and!subsequent!

programs,!including!the!introduction!of!fuel!excise!on!alternative!fuels!and!the!Road!User!Charge!on!

diesel!vehicles.!!

The!nature!and!levels!of!the!Road!User!Charge!are!currently!subject!to!wide!ranging!reviews.!!

This!uncertainty!is!putting!a!‘hold’!on!purchasing!decisions!of!some!fleet!operators!as!they!are!

currently!unable!to!make!longHterm!business!decisions!without!adequate!pricing!information.!

Solutions*to*the*excise*and*RUC*barriers*include:*

• Commitments!from!all!parties!at!the!Federal!level!to!ensure!that!any!upcoming!fuel!excise!or!

road!user!charge!arrangements!will!be!structured!to!maintain!a!fuel!price!advantage!for!

gaseous!fuels!that!is!sufficient!to!foster!sustainable!growth.!

Weight and Length ‘Penalties’ for CNG Vehicles

The!lower!energy!densities!of!CNG!and!HDCNG!and!their!unique!storage!requirements!add!an!

additional!burden!to!the!chassis!of!a!vehicle.!This!usually!manifests!as!a!weight!penalty,!in!that!the!

storage!tanks!are!heavier!than!diesel!tanks,!and!sometimes!in!a!length!penalty,!in!that!a!rigid!truck!or!

prime!mover!may!have!some!of!its!length!committed!to!fuel!storage.!

For!fleet!operators!who!are!sensitive!to!weight!and!length,!this!can!mean!a!tradeHoff!in!the!form!of!

lost!revenue!as!they!may!not!be!able!to!use!the!vehicle!to!the!same!capacity!than!if!it!were!operating!

on!diesel.!

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Solutions*to*the*weight/length*penalty*barrier*include:*

• The!introduction!of!concessions!for!operators!of!natural!gas!trucks!allowing!for!additional!

weight!and/or!length!of!a!vehicle!over!and!above!its!diesel!equivalent.!Such!schemes!have!

been!introduced!internationally!(e.g.!British!Columbia!in!Canada)!and!allow!fleet!operators!to!

maintain!a!payload!that!matches!a!diesel!equivalent.!An!AustraliaHwide!agreement!to!

implement!this!would!require!Federal!and!COAG!cooperation!but!would!return!a!community!

dividend!that!justifies!its!implementation.!

NB!–!the!weight!and!length!concession!may!not!always!be!required.!Some!manufacturers!rate!CNG!

versions!of!their!vehicles!with!a!higher!gross!vehicle!mass!(GVM)!than!the!diesel!version43!thus!they!

already!have!additional!load!capacity.!

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Chapter Summary

Barriers!to!the!increased!use!of!CNG!vehicles!in!Australia!include:!

! Pioneer!status!as!an!‘alternative!fuel’!vs!long!established!fuels!in!the!market!place!

! CNG!vehicle!or!conversion!affordability!

! Limited!CNG!refuelling!infrastructure!

! Earned!reliability!reputation!of!diesel!and!petrol!

! Confusion!regarding!alternative!fuels!and!technologies!

! Small!size!of!the!Australian!market!

! Uncertainty!regarding!future!Road!User!Charges!and!excise!arrangements!

! Weight!and!length!‘penalties’!for!CNG!vehicles!

Solutions!to!these!barriers!can!be!applied!with!the!joint!effort!and!leadership!of!stakeholders!in!the!

energy,!transport!and!government!sectors.!

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!39!Average!data!as!sourced!via!ABS!Vehicle!Statistics!2012!

40!http://www.ngvglobal.com/europeanHparliamentHapprovesHeuHrulesHforHbuildHupHofHrefuelingHpointsH0418

41!http://www.ngvglobal.com/attHbeginsHdeploymentHofHdomesticHfuelledHcngHvehiclesH0705!

42!Truck!Industry!Council!2011!

43!e.g.!Isuzu!NPR!

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A Vision for CNG Vehicles in Australia

Fuel Choice for Australians

Gas!Energy!Australia!is!committed!to!the!increased!use!of!CNG!as!a!transport!fuel,!not!just!for!the!

benefit!of!our!members,!but!also!for!the!benefit!of!the!nation.!The!economic,!environmental!and!

energy!security!benefits!for!Australia!are!wellHproven!but!have!not!been!fully!utilised.!!

Our!vision!is!for!Australians!to!have!a!choice!of!fuels!available!to!them.!To!date!this!has!been!possible!

only!to!a!very!limited!degree,!due!to!the!barriers!and!conditions!outlined!in!this!paper!so!far.!Market!

forces!have!been!proven!to!work!slowly!and!have!not!developed!the!use!of!natural!gas!vehicles!to!a!

scale!that!makes!community!benefits!significant.!

The!difference!between!market!forces!alone!and!the!combined!efforts!of!market!forces!and!

government!support!makes!a!significant!difference!to!the!vehicle!uptake.!International!experience!

indicates!the!need!for!such!support!to!be!scaled!back!over!a!period!of!time,!and!in!accordance!with!

milestones!of!achievement,!rather!than!on!the!basis!of!shortHterm!budget!goals.!!

Thus!the!full!utilisation!of!the!benefits!of!CNG!vehicles!in!Australia!requires!a!strategic!and!partnered!

approach!between!government!and!industry.!In!essence,!this!involves!the!development!of!a!‘level!

playing!field’!where!CNG!can!compete!with!diesel!and!petrol!on!even!terms!and!under!even!

conditions.!

This!requires!longHterm!vision!and!commitment!that!will!reap!benefits!to!Australia!as!a!whole.!

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Strategic Recommendations

Specific!initiatives!follow!but!are!built!on!the!two!following!core!strategies:!

1 – A Top-Down Approach

The!economic,!environmental!and!energy!security!benefits!of!CNG!vehicles,!or!any!alternative!fuel!or!

technology,!centres!on!the!displacement!of!oil.!More!specifically,!it!centres!on!the!displacement!of!

imported!refined!fuels.!

Currently!the!greatest!hope!of!attaining!significant!displacement!lies!with!the!use!of!natural!gas!

vehicles.!Not!only!does!the!fuel!produce!lower!CO2!emissions,!it!can!also!be!used!in!the!vehicles!that!

are!contributing!most!to!the!emissions!–!heavy!trucks,!commercial!vehicles!and!even!rail!locomotives!

or!marine!vessels.!These!vehicles!burn!the!most!fuel!and!create!the!most!pollution!on!a!per!vehicle!

and!per!kilometre!basis.!!

A!topHdown!approach!would!involve!targeting!the!heavyHduty!and!commercial!sectors!to!realise!the!

community!benefits!in!the!shortest!possible!timeframe!and!to!provide!the!stimulus!for…!

2 - A National Natural Gas Vehicle Refuell ing Network

Though!the!Australian!population!is!thinly!spread!on!a!large!land!mass,!our!transport!corridors!are!

very!narrow!and!concentrated,!making!a!national!refuelling!network!providing!access!to!the!majority!

of!vehicles!a!very!real!possibility.!The!Brisbane!–!Sydney!–!Melbourne!–!Adelaide!route,!

supplemented!by!networks!within!each!city,!would!provide!access!to!natural!gas!for!the!majority!of!

the!commercial!vehicle!population!(See!Figure!8!below).!!

Such!a!network!would!provide!a!‘Plan!B’!in!the!event!that!current!fuel!supplies!are!disrupted,!either!

locally!or!internationally.!In!due!course,!a!trickleHdown!effect!would!also!make!CNG!a!viable!

alternative!for!some!private!motorists!as!well.!!

Source)>)Bureau)of)Infrastructure,)Transport)and)Regional)Economics!

Figure*8*J*Assigned*InterJregional*Road*Freight*2005*

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Policy Statements

To!enable!transport!fuel!diversity!in!Australia,!Gas!Energy!Australia!makes!the!following!policy!

statements:!

• For!Australian!Governments!at!all!levels!commit!to!realising!the!economic!benefits!of!natural!

gas!as!a!fuel!–!to!reduce!unnecessary!spending!on!imported!fuels!and!to!provide!Australians!

with!a!locally!sourced!lowerHcost!fuel.!

• For!Australian!Governments!at!all!levels!commit!to!realising!the!environmental!benefits!of!

natural!gas!as!a!fuel!–!to!reduce!carbon!emissions!and!improve!air!quality!AustraliaHwide.!

• For!Australian!Governments!at!all!levels!commit!to!realising!the!energy!security!benefits!of!

natural!gas!as!a!fuel!–!to!reduce!our!dependence!on!imported!fuels!and!provide!Australians!

with!a!fuel!isolated!from!the!influence!of!international!conditions!and!currency!fluctuations.!

• For!Australian!business!takes!a!leadership!role!to!realise!the!economic,!environmental!and!

energy!security!benefits!of!natural!gas!as!a!fuel!by!including!natural!gas!vehicles!in!their!fleet!

Government Initiative Recommendations

These!recommendations!provide!possible!mechanisms!for!the!policy!commitments!mentioned!

above.!Some!of!these!would!incur!a!financial!cost,!which!may!or!may!not!be!‘passed!on’!and!others!

may!simply!require!leadership!and!coordination.!Some!would!apply!principally!at!the!Federal!level!

and!some!could!apply!to!all!levels!of!Government.!

Init iate Transport Energy Policy that Includes an Express Commitment to Fuel Diversity

Australia’s!continued!dependence!on!crude!

oil,!especially!imported!fuels,!is!not!

sustainable.!A!commitment!to!fuel!diversity!

requires!a!paradigm!shift!from!an!

‘alternative!fuel’!mindset,!where!

alternatives!are!available!on!a!small!scale!

and!in!niche!applications,!to!a!‘fuel!choice’!

mindset,!which!makes!a!range!of!fuels!

readily!available!to!all!users.!!

Under!such!a!policy!fuels!would!be!

available!in!the!marketplace!based!on!their!

merits!rather!than!historical!advantage.!The!merits!of!the!fuels!would!be!determined!by!thorough!

Figure*9*–*MultiJfuel*dispenser*incorporating*gaseous*and*liquid*fuels*(Image*courtesy*of*Gilbarco*Dispensers)

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analysis!such!as!the!review!of!the!Ethanol!Production!Grants!Scheme!by!the!Bureau!of!Resource!and!

Energy!Economics44,!which!found!that!subsidies!of!more!than!$AU100!million!annually!did!not!realise!

economic,!environmental,!energy!security!or!consumer!benefits!commensurate!with!the!subsidies.!

Such!a!policy!could!be!committed!to!at!all!levels!of!government!and!would!inform!budgetary!and!

other!broad!reaching!considerations.!

Facil i tate a National Natural Gas [or Alternative Transport Fuels] Vehicles Roundtable

Under!Federal!leadership!with!COAG!support,!and!including!stakeholders!across!the!transport,!

energy!and!environment!sectors,!the!Roundtable!would!outline!specific!targets!and!recommend!

specific!programs!designed!to!stimulate!the!establishment!of!CNG!refuelling!infrastructure!and!

vehicle!use.!These!programs!could!be!developed!into!a!Strategic*Road*Map,!implemented!under!

Federal!leadership.!

Consider Possible Avenues for Funding Natural Gas Vehicle and Infrastructure Programs

The!NGV!industry!seeks!to!compete!against!other!fuels!on!a!level!playing!field!and!rather!than!

seeking!‘handouts’!is!seeking!‘handHups’!from!government!bodies!in!establishing!this.!These!would!

be!returned!in!the!form!of!a!community!dividend!through!increased!energy!security,!reduced!oil!

imports!and!a!cleaner!environment.!Recognising!that!most!governments!are!under!budgetary!

pressure,!consideration!may!need!to!be!given!to!finding!alternative!means!of!funding!fuel!diversity!

programs.!!

Make a Stronger Commitment to Transport Energy Security

In!the!first!instance!this!would!require!the!consideration!of!more!challenging!scenarios!than!have!

been!considered!to!date!as!part!of!the!Liquid!Fuels!Vulnerability!Assessment!(e.g.!regional!longHterm!

military!conflict).!!

Such!a!study!should!also!determine!Australia’s!real!emergency!stockholding!requirements!as!

opposed!to!those!we!are!required!to!meet!as!part!of!our!IEA!obligations!(which!we!haven’t!been!

meeting!anyway).!

A!stronger!commitment!to!transport!energy!security!would!include!a!strategic!approach!to!displacing!

imported!fuel!and!ensure!that!‘critical’!vehicles!are!among!those!that!include!natural!gas!in!their!fuel!

mix.!These!include:!

! Garbage!fleets!

! Public!buses!

! LongHhaul!trucks!(ensures!the!transport!of!food!and!essentials)!

! Inner!city!trucks!(ensures!the!distribution!of!food!and!essentials)!

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! Emergency!vehicles!(ambulances,!fire!engines,!police,!etc.)!

! Taxis!(ensures!mobility!for!multiple!users!as!opposed!to!private!vehicles)!

Natural!gas!can!service!all!of!these!classes!of!vehicles!and!the!first!four!classes!in!fact!are!key!target!

vehicles!because!they!are!high!users!of!crude!based!fuels.!

Thus!in!targeting!vehicles!that!are!highly!dependent!on!crude!based!fuels!for!natural!gas!use!we!

ensure!that!those!same!vehicles!can!continue!to!operate!in!the!event!that!crude!supplies!become!

limited.!

Provide Stimulus for CNG Refuell ing Infrastructure

There!is!strong!commitment!from!gas!industry!and!other!stakeholders!to!establish!refuelling!

infrastructure!to!service!CNG!vehicles.!!However,!this!requires!large!scale!investment!($500,000!+!per!

site)!at!multiple!locations!over!a!long!term.!Industry!members!have!made!commitments!to!provide!

infrastructure!where!sufficient!demand!can!be!demonstrated,!however!this!is!expected!to!result!in!

slow!market!growth.!

International!experience!has!shown!that!infrastructure!stimulus!programs,!in!the!form!of!tax!credits!

or!grants,!accelerate!growth!and!give!fleet!operators!increased!confidence!to!purchase!CNG!vehicles.!!

Such!a!stimulus!program!should!take!a!longHterm!view!with!the!objective!of!establishing!a!national!

refuelling!network.!

Consider Stimulus Packages for Fleet Owners Buying CNG Vehicles or Systems

‘Pioneer!operators’!are!currently!bearing!the!risk!of!adopting!a!fuel!with!an!uncertain!future!but!

which!offers!considerable!community!benefit.!Stimulus!packages,!in!the!form!of!tax!credits!or!grants!

provide!an!opportunity!for!the!community!to!share!the!risk!and!enjoy!the!benefits!at!an!accelerated!

rate.!!

Mandate Use of CNG Vehicles in Government Fleets

Committing!to!specific!percentages!of!government!fleets!to!operate!CNG!vehicles,!including!lightH

duty!vehicles,!provides!a!form!of!active!leadership!and!stimulus.!This!helps!stimulate!demand!for!

fuelling!stations!and!provides!a!flow!of!vehicles!into!the!second!hand!market.!!

The!Natural!Gas!Vehicle!Roundtable!mentioned!above!could!coordinate!this!activity!to!ensure!fleet!

uptake!is!in!accordance!with!infrastructure!development.!

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Implement Weight and Length Concessions for CNG Vehicles

Either!on!a!State!by!State!basis!or!under!Federal!leadership!with!COAG!support,!a!national!

concessions!program,!allowing!for!additional!weight!or!length!to!accommodate!CNG!fuelling!storage!

equipment!would!overcome!a!current!market!barrier!for!some!operators.!

Provide Stimulus for Bio-methane Production and Use in Transport

As!a!potentially!carbon!neutral!renewable!fuel,!bioHmethane!offers!exciting!possibilities!for!Australia.!

Ideal!targets!for!these!types!of!programs!include!garbage!fleets,!using!bioHmethane!produced!from!

landfill!gas!and!urban!buses.!!

Introduce Exemptions or Reduced Tolls for CNG Vehicles on Roads and in Tunnels

Exemptions!or!reduced!road!tolls!for!CNG!vehicles!would!incentivise!the!use!of!CNG!in!areas!that!are!

typically!most!congested!and!most!at!risk!from!high!toxic!vehicle!emissions.!!

Corporate Leadership

While!government!leadership!is!welcome,!the!business!community!has!a!key!role!to!play!and!will!

benefit!considerably!through!the!increased!use!of!natural!gas!vehicles.!!

First!and!foremost,!as!users,!business!can!enjoy!lower!fuel!costs!and!reduced!carbon!emissions.!This!

in!turn!increases!productivity!and!provides!the!business!community!with!increased!energy!security.!!

Additional!responsibility!can!be!taken!on!by!gas!industry!members,!through!increasing!awareness!of!

natural!gas!vehicles!and!assisting!‘first!fleet!owners’!of!CNG!vehicles!with!disposing!their!vehicles!into!

the!secondHhand!market.!!

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Chapter Summary

Gas!Energy!Australia!is!committed!to!the!increased!use!of!CNG!as!a!transport!fuel!for!the!benefit!of!

the!nation.!!

The!economic,!environmental!and!energy!security!benefits!for!Australia!are!wellHproven!but!have!not!

been!fully!utilised.!!

This!requires!longHterm!vision!and!commitment!that!will!reap!benefits!to!Australia!as!a!whole.!

Two!core!strategies!are!required!to!achieve!this!outcome:!

1. A!topHdown!approach!targeting!the!heavyHduty!and!commercial!sectors!to!realise!the!

community!benefits!in!the!shortest!possible!timeframe!and!to!provide!the!stimulus!for…!

2. A!national!natural!gas!vehicle!refuelling!network!

Recommended!government!(Federal,!state!and!local)!initiatives!to!achieve!this!outcome!include:!

! Initiating!transport!energy!policy!that!includes!an!express!commitment!to!fuel!diversity!

! Facilitation!of!a!national!natural!gas!vehicles!roundtable!

! Considering!possible!alternative!avenues!for!funding!natural!gas!vehicle!and!infrastructure!

programs!

! Making!a!stronger!commitment!to!transport!energy!security!

! Providing!stimulus!for!CNG!refuelling!infrastructure!

! Introducing!stimulus!packages!for!fleet!owners!buying!CNG!vehicles!or!systems!

! Mandating!use!of!CNG!vehicles!in!government!fleets!

! Implementing!weight!and!length!concessions!for!CNG!vehicles!

! Providing!stimulus!for!bioHmethane!production!and!use!in!transport!

! Introducing!exemptions!or!reduced!tolls!for!CNG!vehicles!on!roads!and!in!tunnels!

While!government!leadership!is!welcome,!the!business!community!has!a!key!role!to!play!and!will!

benefit!considerably!through!the!increased!use!of!natural!gas!vehicles.!!

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!44!http://www.bree.gov.au/sites/default/files/files/publications/other/asssessmentHethanolHproductionHgrantsH

program.pdf!

__________________________________________________________________________________!

Glossary

ABS! Australian!Bureau!of!Statistics!

AFV! Alternative!fuel!vehicle!

AFCP! Alternative!Fuels!Conversion!Program!

ANG! Adsorbent!natural!gas!

BITRE! Bureau!of!Infrastructure!Transport!and!Regional!Economics!!

CNG!! Compressed!natural!gas!

CNGIP! Compressed!Natural!Gas!Infrastructure!Program!

COAG! Council!of!Australian!Governments!

CO2He!! Carbon!dioxide!equivalent!

CPI! Consumer!price!index!

DAFGS! Diesel!and!Alternative!Fuels!Grants!Scheme!!

DCC! Department!of!Climate!Change!

EU! European!Union!

GDP! Gross!domestic!product!

GEA! Gas!Energy!Australia!

GGE! Gasoline!gallon!equivalent!

GTL! Gas!to!liquids!

GVM! Gross!vehicle!mass!

HDCNG! High!density!CNG!

HPDI! High!Pressure!Direct!Injection!

IEA! International!Energy!Agency!

km! Kilometre!

LNG! Liquefied!natural!gas!

LPG! Liquefied!petroleum!gas!

ML! Megalitre!

MMBL! Million!barrels!

MPa! Megapascal!

__________________________________________________________________________________!

NGV! natural!gas!vehicles!

NOx! Nitrogen!Oxides!

OECD! Organisation!for!Economic!Co�operation!and!Development!

OEM! Original!equipment!manufacturer!

OPEC! Organization!of!the!Petroleum!Exporting!Countries!

PM! Particulate!matter!

WTI! West!Texas!Intermediate!

WTW! WellHtoHwheel!

__________________________________________________________________________________!

About Gas Energy Australia

Building!on!the!foundation!of!LPG!Australia,!Gas!Energy!Australia!was!established!on!15!October!

2012!–!as!the!national!peak!body!that!consolidates!the!advocacy,!policy!and!technical!development!

profile!of!the!downstream!gaseous!fuels!industry,!incorporating!LPG,!CNG!and!LNG!–!in!Australia.!

Gas!Energy!Australia’s!goal!is!to!provide!a!united!industry!voice!to!stakeholders!(i.e.!governments,!

state!authorities!and!the!community)!on!the!use!of!gaseous!fuels!in!Australia.!Gas!Energy!Australia’s!

interests!incorporate!all!aspects!of!the!downstream!gaseous!fuels!industry,!including!producers,!

refiners,!distributors,!transporters,!retailers,!vehicle!manufacturers,!equipment!manufacturers!and!

suppliers,!installers,!educators!and!consultants.!

The!Association!is!focused!on!achieving!energy!security!and!economic!prosperity!in!a!lower!carbon!

economy!by!advocating!the!value!and!benefits!of!gaseous!fuels.!Gas!Energy!Australia’s!stakeholder!

engagement!is!supported!by!progressive!policy!development!based!on!sound!research,!analysis!and!

expert!commentary,!the!ongoing!development!of!national!standards!and!innovative!products!and!

technology,!proactive!media!engagement,!and!the!development!of!the!industry’s!specialist!

workforce.!

Mike*Carmody*Director!and!Chief!Executive!Officer!

On!behalf!of!the!Board!of!Directors!

Gas Energy Australia

ACN 002 703 951 ABN 11 002 703 951

Incorporated in New South Wales as

a Public Company limited by guarantee

Inaugurated 1958 Incorporated 1984

Suite 7, 16 National Circuit,

Barton ACT 2600 Australia

Phone 02 6176 3100

Fax 02 6176 0207

Email mail@gasenergyaustralia.asn.au

www.gasenergyaustralia.asn.au

www.poweredbygas.com.au

www.autogas.org.au

Cleaner, Cheaper Australian Fuelscleanercheaperfuels.com/ccf-content/uploads/2014/11/Gas...Cleaner,...

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