2 Reasons Companies Are Switching to CNG

2 Reasons Companies Are Switching to CNG

What innovation could possibly satisfy environmentalists and economists? Natural gas vehicles, powered by compressed natural gas (CNG) or liquefied natural gas (LNG) engines, may be able to do just that.

Waste Management is part of the solution. With over 2,200 vehicles of its fleet powered by natural gas (mostly CNG), Waste Management is leading the switch from oil to natural gas.

On top of renovating its operations, Waste Management has added 50 natural gas stations to power up its vast fleet. By switching to vehicles powered by natural gas, Waste Management is able to save on fuel costs because gas is cheaper than oil.

Benefits of CNG
Natural gas produces 30% less carbon dioxide than oil, so a move to CNG helps out both the environment and the economy.

Beyond the moral ramifications of lower levels of pollution, natural gas is cheaper than oil. For the equivalent of a diesel gallon, a gallon of natural gas was 65% cheaper than a gallon of gas back in October. This spread has been quickly expanding since January 2009, and has been continuously growing ever since. Cheaper fuel alternatives offer a great way to save face while cutting costs.

Halliburton decided to make a move into CNG last year, rolling out 100 natural gas-powered trucks across America. According to Halliburton, those trucks will reduce emissions by 90% and save $5,100 per truck annually. Over the course of ten years, Halliburton will be able to save over $5 million from this small investment. Just imagine what could happen with more widespread adoption of CNG...

Start up your engines
One of the innovators in this market is Westport Innovations , which is situating itself for the future. By spending over $500 million, Westport Innovations has acquired over 300 patents related to CNG- and LNG-powered engines, which is over 100 more than the next competitor.

By being a market leader in an emerging industry, Westport Innovations has the potential to lead a multi-billion industrial shift. Westport Innovations partners up with the manufacturers to leverage their existing industrial capacity while Westport provides the intellectual property.

What is fueling the change
Back when the United States still imported LNG, natural gas prices were high and investment in the CNG engine space was small. Then the shale revolution swept in, depressing U.S. prices by so much that natural gas became significantly cheaper than oil (for the equivalent amount of energy). When industrial companies saw the potential to reduce fuel costs and be environmentally friendly they jumped on it, which fueled Westport's investment in the space.

As large companies switched thousands of vehicles to CNG/LNG, the market became cemented and economically viable. Halliburton is a good example of how demand has spread from garbage trucks to everyday trucks. This is a market positioned to keep growing.

Foolish conclusion
Natural gas can do more than just power our TV's and heat our homes; it can get us to work and make the air a little cleaner. We are on edge of a major shift in America toward cleaner, cheaper energy sources that can satisfy the demand of economists and environmentalists. Westport Innovations has one of the best patent portfolios in the industry, and investors could be on the cusp of something big.

The article 2 Reasons Companies Are Switching to CNG originally appeared on Fool.com.

Callum Turcan has no position in any stocks mentioned. The Motley Fool recommends Halliburton, Waste Management, and Westport Innovations. The Motley Fool owns shares of Waste Management and Westport Innovations. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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