Entrepreneurs have fashioned a way to get natural gas to consumers awaiting a proper pipeline: Build them a "virtual pipeline" instead.
Around the country, a few small businesses have found gas-hungry consumers who can't get what they need from the grid, either because their local pipelines are too small or because they don't have any at all.
While residents debate whether to build pipelines, these small businesses happily transfer gas by truck. In some regions, they've become matchmakers for gas supply and demand because pipelines can't be.
It may be a temporary arbitrage. Or it might not.
"It could be six years out or it could be never," said Mary Evslin, co-founder of NG Advantage, referring to a proposed pipeline extension in North Vermont.
The local gas utility, Vermont Gas Systems Inc., argues that the pipeline would help factories, homes and businesses by letting them switch from pricey oil to natural gas. But some residents have objected -- to either the fossil fuel, the pipeline routing or its cost.
The impasse has opened an opportunity for NG Advantage LLC. It buys gas at hubs connected to the grid in Vermont and New Hampshire. Then it hauls the gas to customers up to 200 miles away, using half-million-dollar big rigs.
The bigger the gas consumer and the closer it is, the more money there is to be made. NG Advantage wants customers replacing a minimum of $750,000 worth of fuel oil.
Evslin, who calls herself a "serial entrepreneur," identified paper mills, food processors, breweries and universities as prime targets. NG Advantage recently inked a deal with Middlebury College and two nearby factories -- three customers that will soon be linked by their own "island" pipeline network.
Customers have to be willing to convert equipment to natural gas, of course. But many are.
"A lot of these stranded industries are really clamoring for a way to save on their energy bills, and not pollute so much," she said. "In this case, we're letting them pretty immediately have access to gas. ... The customers will feel that they're on a pipeline."
Interestingly, these "virtual pipelines" may flow shale gas -- or they may not.
NG Advantage currently sources its gas from Vermont Gas' connections in Canada, which trace back to Alberta. The company hopes to build another terminal in New York state, which would allow it to also tap into the Marcellus Shale's prodigious supply.
Also building in New York: rival firm Xpress Natural Gas, which is expanding from its core business in the New England market.
Boston-based XNG is currently launching trucks from two natural gas hubs. The firm buys gas at a wholesale rate off interstate pipelines, then sells it to customers with minimal markup. By the beginning of next year, it hopes to expand this model to six hubs in the eastern U.S. The focus will be remote factories, like those in timber, mining and agriculture.
Each region will watch pricing and demand trends -- and buy the gas from wherever it's cheapest, whether it's from shale or not.
"Honestly, gas is gas is gas. Nobody who gets gas can tell you it's Marcellus gas. They're molecules," said Matt Smith, the company's executive vice president of sales and marketing. "We can really locate anywhere. Where the molecules came from in that pipe is nothing we're really associated with. We just get it off the line."
Bigger markets to come
Still, the megatrend of cheap shale gas has some entrepreneurs thinking even bigger.
"Any market that's using liquid fuel has the opportunity to convert to CNG or an equivalent solution," said Pedro Santos, founder and CEO of OsComp Systems Inc., referring to compressed natural gas.
"The biggest growth opportunities are -- the first is propane replacement," he said. "There's a heck of a lot of propane demand in the U.S. market right now that could be replaced by natural gas, but the economics for a pipeline for natural gas don't make any sense."
Santos grew up in the Dominican Republic, where his father was a distributor for compression technology. Santos was his hands-on assistant from an early age -- even assembling an engine at age 6 -- and held the job every summer through high school.
Santos came to the states for college, getting an engineering degree and then a business degree at MIT. He decided to start his own compressor business stateside.
One of his first challenges came in 2010, when he learned about huge gas volumes being flared in the Bakken Shale, due to a lack of pipelines.
It was a different kind of compressor than he'd grown up with, Santos said, but some principles were the same. He and his partners devised a plan that could grab the Bakken's "rich" gas, compress it and truck it to someone who wanted it, like a chemical facility or a driller that could use it in a rig.
Now, Santos is competing with the likes of General Electric Co. and Statoil ASA (EnergyWire, June 9).
"Our primary target right now is in the oil fields," he said. "We have a couple of setups for industrial customers, but our primary opportunity right now is in the oil fields both for flare-gas capture and drilling rigs."
Solutions like these, combined with pipelines, have helped ease flaring in the Bakken. The industry captured three-quarters of gas in July, compared to 64 percent at the worst point in 2011, regulators said last week (EnergyWire, Sept. 15).
What's next for Santos? He said his investors -- which include a division of Chevron Corp. and a Norway private equity shop -- want ideas "that enable major markets ... reaching those users that nobody else can reach economically."
One idea, which OsComp and others are trying, is to deliver fuel supply to stations so they can refuel their fleet of CNG trucks as they please. This could work for a remote Canadian town, for instance, or even a suburb that doesn't want the disturbance and cost of new pipelines.
Asked how many competitors are in the "virtual pipeline" business, Santos said it depends how you count.
"There's some credible parties, and there's some fly-by-night outfits," he said with a chuckle.
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