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Natural Gas Vehicles Already Big in Italy, Pakistan

Geoffrey Styles's picture
GSW Strategy Group, LLC

Geoffrey Styles is Managing Director of GSW Strategy Group, LLC, an energy and environmental strategy consulting firm. Since 2002 he has served as a consultant and advisor, helping organizations...

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  • Mar 21, 2013

CNG vehicles in PakistanThe sudden abundance of natural gas in the US triggered a startling divergence of crude oil and natural gas prices that, in turn, has energized the advocates of using more gas in transportation. Yet despite the availability of wholesale natural gas at less than $0.60 per gasoline gallon equivalent (GGE), and with retail compressed natural gas (CNG) prices under $2.00/GGE in many locations, natural gas accounted for less than 3% of US transportation energy consumption in 2011–most of it attributable to pipeline compressors. The picture is very different in countries like Italy and Pakistan, where CNG has a significant market share in motor fuels. As the US looks ahead to greater reliance on secure domestic gas for road transport, it’s worth considering why other countries have such a big head start.

The obstacles to greater market penetration by natural gas in transportation are well known. CNG and LNG (liquefied natural gas) require new infrastructure. Many more retail gas facilities would be needed to assure motorists of convenient access at service stations. CNG takes a separate dispenser and compressor on the forecourt, while LNG requires both a new pump and insulated storage. Where pipeline gas is unavailable, such as in parts of the northeast, additional investments in the local “gas grid” may also be necessary.

Vehicle conversion costs represent another significant barrier. Engine modifications and crash-resistant fuel tanks add significant costs for both new vehicles and retrofits. Even with gas priced well below gasoline or diesel fuel, the payback for these costs can be lengthy. That’s one reason that gas has made greater strides in bus, truck and delivery fleets in the US than for personal cars, since the more intensive use of such vehicles substantially shortens the resulting payout periods. Countries with high gas-vehicle penetration typically have government policies and incentives in place to promote the use of gas by mitigating these obstacles.

Italy leads the EU in CNG vehicle adoption, with more than 11% of new passenger cars equipped for natural gas last year. That compares to 0.01% for the US in 2012, where only one CNG model, a Honda, was sold. The Italian government promotes natural gas use in vehicles both directly and indirectly. The country provides a subsidy of €700 ($945) to purchasers of CNG automobiles, while manufacturers like Fiat offer discounts to expand their market for CNG cars. Incentives were even larger a few years ago. The government also makes retail petroleum products extraordinarily expensive with high taxes. So even though Italy is a large net importer of natural gas, CNG is much cheaper than gasoline or diesel at the pump.

Fuel availability may also have something to do with the disparity in adoption rates. Despite having an 83% smaller overall vehicle population , Italy has over 40% more CNG or “Autogas” refueling stations than the entire US, at around 900. This is due in part to state-level incentives, with 50-70% of the cost of a new CNG filling station reimbursed by regions such as Liguria, Lombardy, and Piemonte.

In terms of market penetration, Pakistan, which appears to be self-sufficient in gas, leads the world in natural gas vehicles, at 80%. That translates into over 2 million CNG vehicles, the result of a determined effort on the part of the government to reduce imports of petroleum by shifting to domestic fuels, with gas as its best option. This is a common theme in the non-oil-exporting developing world, where oil imports impose a large drag on national trade balances. CNG use in Iran is even higher than in Pakistan, as an unintended consequence of protracted international sanctions.

For the US, where oil production is increasing and oil imports declining, a shift to natural gas for transportation is likely to remain an opportunity, rather than a matter of necessity. The “NATGAS Act“, a bill proposing incentives for CNG and LNG along the lines of the Italian model has languished in the US Congress for several years. It remains to be seen whether this will become a higher priority in the new Congress, which has shown early signs of interest in breaking the recent logjam on energy legislation.

In the meantime, adoption of natural gas vehicles in the US will proceed based on market forces, supported by a small advantage in the way CNG cars are counted in manufacturers’ fleets under the stringent federal fuel economy regulations issued last summer. That could lead to natural gas fueling 3% of US vehicles –mostly trucks–by 2020, based on the analysis of a partner at McKinsey & Co. Much like the case for energy efficiency investments, the available savings indicate a much larger potential, but funds for CNG/LNG transport must compete with other priorities.

A slightly different version of this posting was previously published on the website of Pacific Energy Development Corporation.

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John Miller's picture
John Miller on Mar 21, 2013

Geoffrey, as you are aware the primary incentive to use natural gas in Italy has been cost.  In Italy today gasoline is over $10/gal.  In the U.S. the infrastructure, fuel tank size-wt.and limited vehicle travel range between fuelings has been a major constraint.  These factors are generally why natural gas conversions are more common in medium/heavy duty commercial vehicles and public bus transportation.  These larger vehicles normally operated within local cities or smaller county regions and are stationed-fueled from centralized facilities.  One recent and potentially very promising conversion to natural gas is the BNSF Railway Co.     They plan to test operate their Railroad Engine’s on natural gas to replace petroleum 'railroad' diesel (the least clean form of on-land motor fuel in the U.S. today).  If successful, this option could lead to substantial reduction in petroleum diesel motor fuels consumption in the future.  Added benefits are substantially reduced PM, SOX, VOC’s, etc. Railroad Engine emissions.

Jesse Parent's picture
Jesse Parent on Mar 21, 2013

Great piece, Geoffrey. Do you suppose increased domestic supply of natural gas, in Europe (should fracking take off) would significantly impact natgas vehicles? Or merely, at best, seem slightly more domestically / regionally appealing than Russian gas?

I won't be expecting any robust devlopments in the US in the near future:

"For the US, where oil production is increasing and oil imports declining, a shift to natural gas for transportation is likely to remain an opportunity, rather than a matter of necessity. The "NATGAS Act", a bill proposing incentives for CNG and LNG along the lines of the Italian model has languished in the US Congress for several years. It remains to be seen whether this will become a higher priority in the new Congress, which has shown early signs of interest in breaking the recent logjam on energy legislation. "

... but we'll see.

Geoffrey Styles's picture
Geoffrey Styles on Mar 21, 2013


How motor fuels are taxed relative to each other plays a big role and underpins the Italian example.  Wholesale gasoline costs about the same there as here, and natural gas from import pipelines and LNG can't be much cheaper.  But the after-tax retail price difference is huge, as a matter of policy.  So at least there, CNG facilitates avoiding taxes.  If those taxes pay for road maintenance, then that creates other problems, as I've noted elsewhere.

As for range and convenience, if the comparison is to gasoline or diesel cars I agree.  However, among alternative fuels (including electricity) 200 miles between refills isn't bad, and <5 minutes at a fast-fill station beats even level 3 EV fast-charging (480 V, 400 Amps). 

I'll be watching the results of BNSF's test--not their first experiment with LNG--with great interest.


Geoffrey Styles's picture
Geoffrey Styles on Mar 21, 2013


Thanks. I'm not sure the source of the gas would matter as much as how governments choose to tax it, as noted below.  Would other European countries besides Italy keep fuel taxes on CNG low, as some have chosen to tax diesel less than gasoline to promote its use? 

I K's picture
I K on Mar 24, 2013

LNG use for passenger aircraft is VERY interesting

LNG is about 80% cheaper in the states than jet fuel. Plus very importantly LNG has ~25% more energy per unit of weight than jet fuel. A fully fueled 747 would be about 50,000kg lighter if it was carrying the same amount of energy in the form of LNG instead of jet fuel.

That would result in a ~$200,000 saving in fuel cost per long haul trip
The aircraft could also carry 50 tonnes more cargo customers which means more income too.
Assume the extra cargo could be charged just $1/kg that is $50,000 extra income

Each plane could do two long haul trips per day.
So an operator with a fleet of 100 planes could potentially earn an extra $18B annually in savings/profit if it used LNG craft instead.

Boeing, this should probably be your top priority right now.
You would have the worlds largest market willing to pay you a fortune

Ron Wagner's picture
Ron Wagner on Mar 28, 2013

Pickup trucks are one of the largest and most popular types of vehicles in the USA. The Big Three now offer them as CNG/gasoline bifuel models. Vans are also available, and these are commonly used for business and liesure.Chrysler/ Fiat is presently driving a Chrysler 300 CNG vehicle vehicle around the country to test for reaction. I expect new Chrysler/Fiat models to be coming soon. See for a complete array of  natural gas vehicles that are available in Europe already. Mercedes, Volkswagens, Audis, Fiats,Opels etc. Chevrolet, Ford, Hyundai all make CNG/gasoline vehicles in other countries. We are being left out because of pressure from the big oil companies, and poor infrastructure. Our infrastructure is now much better however. See for an interactive map of stations and prices. 

Ron Wagner's picture
Ron Wagner on Mar 28, 2013

LNG is a sure thing for locomotives, and eventually for purpose built aircraft. Russia already uses LNG locomotives:

Boeing has a plan for LNG aircraft:

See my blog for 5,900 natural gas story links.

Ron Wagner

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