Replacing Natural Gas with TrueFuel

We believe that we may be in for a natural gas crisis. While supplies of natural gas are down, more natural gas is being used than is being produced.

In fact, the price of natural gas may double or triple by this Winter. The shortage of natural gas may continue for years because production and delivery increases will take time.

Serious safety concerns exist for natural gas, especially liquefied Natural Gas (LNG). One LNG tanker could wipe out Manhattan.

Fortunately, TrueFuel is superior to natural gas in gas turbines and for other uses.

Natural gas supplies about one-quarter of the energy consumed in the United States.

The price of natural gas is based primarily on the volume of gas delivered and consists of three main parts: (1) transmission Cost (to move the gas by pipeline from its source (e.g., the Gulf Coast) to the local gas company (or utility), (2) distribution costs (to bring the gas from your gas company to the customer residence and (3) commodity cost, the cost of the gas itself. The local gas company passes the commodity cost without any additional markup. On average, the largest portion of the delivered price to residential customers is the distribution cost, with the commodity cost contributing the second largest share of the total. Residential consumers pay more per unit of gas for local distribution than for interstate transportation of the natural gas over a longer distance. Interstate transportation pipelines require large capital investments, but the flow through each segment is quite large, which allows for lower unit costs. Local distribution of gas, on the other hand, is more costly because a massive network is required to deliver relatively smaller gas volumes at numerous delivery points. The large infrastructure required relative to the flow of gas results in higher capital and operating costs per unit.

Nearly a fifth of all U.S. electricity is now generated with natural gas. More than 85 percent of all new generating plants built in the past decade use natural gas. Many can only use natural gas. U.S. natural gas production has remained stagnant at 19 trillion cubic feet a year, about the same as a decade ago, while Americans consume about 22 trillion cubic feet. Imports, largely from Canada, have made up the difference. Canada is now running so low on natural gas that its U.S. exports are expected to remain flat or decline. Importing more liquid natural gas would be a good solution if the U.S. had enough LNG storage terminals. It does not.

At the end of May 2003, natural gas inventories were 29% below their five-year average. Natural gas in underground storage is 13% below the five-year average and even further behind last year's storage levels. There are only five months left before the traditional heating season begins.

For storage to reach the necessary 3 trillion cubic feet by winter, producers must pump about 13 billion cubic feet of gas daily between now and November. The last peak in natural gas production was in 2001. At that time, only 11 billion cubic feet per day was stored. So we need to find two billion cubic feet per day to have adequate supplies.

At the same time supply is decreasing, demand is increasing rapidly. Over 75% of new homes built in the last 15 years are heated and cooled by natural gas. About 53% of U.S. homes heat with natural gas.

This crisis is here to stay unless we use less natural gas, we produce a lot more natural gas or we import more liquefied natural gas (LNG).

Production from existing gas wells has dropped since 1991. New wells tend to be supplemental wells in lower yielding, high-percentage drilling areas to ensure adequate return on investment. Large potential deep-water natural gas wells are very expensive to drill (up to $50-$75 million per well) and carry substantially higher risk of failure. Environmental concerns prevent drilling in many prime locations.

Moreover, it will take years to increase the supply of natural gas. To find gas in Alaska and build a pipeline to the U.S. could take 10 years. The U.S. has not built a Liquefied Natural Gas (LNG) plant in 30 years. Pipelines take up to 12 years to permit.

Demand is growing 2%-3% a year. Supply was down 2.1% last year. Back-up storage is being consumed. This gap is very likely to turn into a national crisis in natural gas supply as soon as this summer or this coming winter, at the latest.

Natural gas must be transported and stored. Each year, there are a number of accidents with natural gas pipelines. Since 1986, there have been over 3,000 natural gas pipeline incidents, 1,407 injuries, and 322 deaths. Natural gas pipelines are also easy for terrorists to sabotage.

However, the biggest danger comes from LNG. LNG is a liquid and under pressure. If an LNG tank were to be punctured, a cloud of gas heavier than air will spread out and displace the air. This natural gas cloud will spread until it finds a spark. The spark will create a fire storm. The burning gas will rise vertically, leaving a vacuum that will suck more gas into the flame. The firestorm will thus expand horizontally. This will happen more easily if the LNG is on a ship. Please keep this information from your neighborhood terrorist as one LNG ship could take out a city.

The molecular weight of methane is 16, which is lighter than air. However, in an LNG ship, the escaping natural gas will be cold and therefore denser than air. The vertical dispersion of the natural gas will be controlled by solar heating during the day. If the ship is near a city, as in New York City, vertical mixing will not occur to the extent that vertical mixing will help reduce the disaster of sudden and complete rupture of a tanker. An on-shore breeze could create a huge disaster.

One LNG safety approach for some cities is to unload the LNG ship at a terminal about one mile off-shore. During the day, there is usually a local wind from the water toward the land. If the water temperature is less than the air temperature, there is no vertical mixing and the natural gas cloud might spread like a pancake and move towards the shore. Off-shore unloading may not a big safety feature unless the activity is done under conditions in which the wind is from land and toward the body of water, typically at night.

The National Fire Protection Association gives methane its highest hazard ranking for flammability (a 4 on a scale of 1 to 4), while diesel is rated as moderate (2 on the scale). Methane leaks and spills must be treated with great care. Methane vapors at low temperatures can cause clouds of flammable vapor concentrations. The extreme pressure or temperature condition of CNG or LNG poses a significant additional hazard. Compressed Natural Gas (CNG) is compressed to several thousand pounds per square inch. Liquefied Natural Gas (LNG) is stored at temperatures around -260^oFahrenheit. Very special care must be given to the transport, transfer and storage of CNG/LNG. Safety concerns about locating fueling facilities may be an obstacle to terminal locations.

Methane or natural gas also has significant performance issues. Range limitations result from lower performance combined with storage parameters. Complex refueling infrastructure limits routing. A gallon of LNG contains about 60% of the energy in a gallon of diesel. CNG contains even less energy than LNG. Maintenance costs are significantly higher.

Capital costs are significantly higher. For example, a diesel truck may cost about $75,000 while a methane truck would cost $35,000 more, or $110,000. Transit buses cost between $45,000 and $75,000 more. A fueling facility for 8 transit buses cost $350,000. One large bus fleet had capital costs of $2 million. Maintenance facilities must be upgraded to include ventilation improvements and leak detection.

TrueFuel is superior to natural gas for many uses. TrueFuel is better for gas turbines.

Because TrueFuel can be produced on-site and on-demand, TrueFuel is better for remote locations. Producing TrueFuel on-site and on-demand saves the time and expense of building pipelines and storage facilities for natural gas.

There are also certain safety problems associated with transporting and storing natural gas. Because TrueFuel can be produced on-site and on demand, TrueFuel is the Answer.

We believe that TrueFuel is a superior fuel for gas turbines. The following table shows the superiority of TrueFuel for gas turbines.

Needs	Problems with currently used fuel – Natural gas	Solutions offered by TrueFuel
Engine power performance	Flame may penetrate the combustion chamber	Faster flame speed than natural gas, slower than hydrogen Easy to contain in combustion chamber
Quick response to supplement or replace electrical service from utility	No	Yes, distributed production
Energy price is not as important as fuel availability, performance and air emissions	Facing fuel availability problems Turbines have not penetrated the 0.3 to 1 MW market because of fuel availability and costs Lack of distributed fuel contributes to the 0.3 to 2MW gap in turbine availability Micro turbines (less than 0.3 MW) are gaining acceptance	Has ideal flame speed for diesel and gas turbines. Feedstocks are readily available at low costs. Expect turbines in 0.3 – 1MW range to be designed for TrueFuel

Some say that rising demand and declining supply could push natural gas prices from the current $4.89 to over $10 per 1,000 cubic feet. This will create hardship for utilities, homeowners and industry.

TrueFuel is the Answer. TrueFuel is better for gas turbines and other uses. TrueFuel is the Answer.