Is CNG going up?

[topher]

I live in Tulsa and I use CNG religiously. I sometimes buy cng from Tulsa Gas Technologies. Typically they are about 15 cents higher than ONG. So usually I pay around $1.23 a gallon to fill up at TGT and $1.08 to fill up at ONG stations. The location for TGT is a great location so I don't mind paying the surcharge.

I stopped by yesterday to get fuel from TGT and the price was $1.41 a gallon, so I'm wondering if ONG is about to raise the price of CNG as well or if it's just this one location. I know that TGT is privately owned etc. It's not much money but I about had a heart attack when I saw $1.41. I didn't even finish my fill, I stopped, drove to 15 & Sheridan and finished there. (I'm cheap). I realized I would not have saved much, but prices do things with my head.

Don't get me wrong, I love filling at TGT... much faster than ONG but I also like saving at least $1.00 per gallon on CNG compared to regular fuel. I'm hoping ONG isn't about to raise prices.

[BobBaldwin]

Re: Is CNG going up?

Here is my two cents worth on this:

I am concerned that the lower price that ONG offers is really holding us back from moving forward with CNG. Here is my reasoning. I have been working hard to put together a business plan to install CNG filling stations all over the country so that anyone can drive across the entire country on CNG. While the prices that ONG offers is really great for consumers of CNG, it is not really good for CNG as a whole because it takes away the incentive for competitors to install CNG filling stations in Oklahoma because payout of filling stations takes so long. If ONG is going to continue installing filling stations around the state at their lower price, then OK wins big. However, for consumers to convert in significant numbers, the CNG filling stations need to have all the advantages that gasoline/diesel consumers have. Most filling stations that I have looked at across the country, I would not recommend to my wife to fill there after dark. Even TGT's location is lonely at night.

Most filling stations that are going to be publically reliable require between $750,000 to $1,000,000 to get installed and ready for service. This is just for the equipment and installation not to mention any costs of marketing or amenities that might be installed.

There is a balance between providing CNG at a motivating price and paying back the investors of the filling station. If we are going to turn this country around and get off of foreign oil, we need to have thousands of CNG filling stations offering CNG at a price that is financially compelling for fleets and individuals at locations that attractive.

Just to let you know, natural gas prices fell below $2/MCF (1000 cubic feet) two years ago and is now at $5.57/MCF yesterday. It has surprised me that CNG has not fluctuated more than it has. In Houston, the price is $1.99.

As consumers, we need to cheer on TGT to install as many filling stations as possible. This can only happen because TGT has the financial incentive to do so.

Very interested in feedback!!

Bob

[Lakewood90712]

Re: Is CNG going up?

Bob:

About how many gge would need to be sold per year at a station to make a fair profit ?

Asumptions:
1. $1,000,000 station cost ( 2 3600 hoses, 2 3000 hoses ),
2. Original equipment and construction cost paid off on a 10 year note,
3. Stations maintained with contractor for service , and
4. Automated payment method ( credit card ).

Thank's

[jblue]

Re: Is CNG going up?

Asumptions:
1. $1,000,000 station cost ( 2 3600 hoses, 2 3000 hoses ),
2. Original equipment and construction cost paid off on a 10 year note,
3. Stations maintained with contractor for service , and
4. Automated payment method ( credit card ).

5. New infrastructure tax credit.
6. Per gge tax credit of .50 cents.

[BobBaldwin]

Re: Is CNG going up?

Right now with the current price of natural gas and electricity, we believe we can sell CNG for $1.50 and pay off the equipment in 48 months. We would have to sell 30,000 GGE/month to do that. After 48 months, we can put that investment back into more filling stations and we will all benefit from more filling stations faster. If we cannot get a pay back on the capital within 4 years, we don't believe we will attract many investors. If there are investors out there that will take a longer payback, I want to speak to you right away!!

Our numbers include the GGE credit for one year but I cannot rely on that credit to be included in my numbers for long term.

Does this answer your question?

[Gerben]

Re: Is CNG going up?

30,000 GGE/month is a lot of CNG.

A small station as you see in Germany (single hose) usually doesn't sell more than a tenth of that each month in the first few years.
Those stations are a lot cheaper (~US$ 150k), so payback is still acceptable at about 10 years.
I wouldn't mind putting a small amount of money in a sceme that had a 4 year pay-back - but I doubt it's realistic to expect that (do you have a business plan?). It takes a long time for people to replace their vehicles with CNG vehicles - most companies only replace a fraction of their fleet each year. So you'll start with a handfull of customers (vehicles) a day.

For expansion you don't wait for stations to be paid back. Start one or several stations with equity capital. Once you have a postive cash flow (enough to survive higher NG prices or lower gasoline prices) create a plan to expand the business and borrow what you need for the expansion - if you find locations with similar potential.

edit: I'd like to add that I mostly agree with Bob about the price. Price is important, but without sufficient infrastructure people still will not switch to CNG. A possible strategy is to get fleet owners to sign a letter of intent or even a contract, where you sell a certain amount of CNG at a certain price. If you can find a few local companies that together will purchase 10,000 GGE/month at a 10% discount, you're in business.

[freedml]

Re: Is CNG going up?

It seems to me that building even 1000 standalone stations won't make CNG take off. The key is visibility, and I think the best way to do that is to find places to locate smaller installations (one dispenser, two hoses) at EXISTING gasoline stations/minimarts. They already have all of the amenities, are conveniently located, and are safe for anyone to use.

I know of two recent such installations in SoCal (LA Olympic/La Cienega and 5 at Avery Pkwy) and think they are the way to go. Drivers are curious and envious when you hook-up to the $1.60 pump while they are paying $3 (note: this is obviously NOT a CE dispenser San Diego has two older installations -- Person Fuels and the Shell station near Lindberg Field. Service station dispensers in downtown LA and Agoura Hills are, sadly, long gone.

[BobBaldwin]

Re: Is CNG going up?

Yes, we have a business plan put together and we are testing the waters with it now. Our plan is public locations but only where fleets will sign letters of intent with us prior to installation. After working in the oil and gas business for 30 years, we believe we have the contacts necessary to get this funded as well.

[Lakewood90712]

Re: Is CNG going up?

Bob Thank you for the info.

[jblue]

Re: Is CNG going up?

Drivers are curious and envious when you hook-up to the $1.60 pump while they are paying $3 ...

Agreed. I think envious is the key word here. Fundamentally, people are nosy and when something is going on outside of the ordinary and it's cheaper, that is something that will be remembered.

OnCue has a very nice marquee in Oklahoma City advertising $1.23 in big bright RED lights. On several occasions while fueling there I've seen people whip in at the last second. My hypothesis is, they see $1.23, they need gas and they think "no way! $1.23?!". Next, they sit at a pump for a bit trying to make sense of the hoses, look at me a couple times (I just smile and wave) and then drive off.

The ONG Stroud station is nice that it is close to gasoline dispensers, but it tucked on the back side of the station and it does not have any signage.

[TOMTGT]

Re: Is CNG going up?

CNG is going up a little

NYMEX Natural gas is right now is 5.54 and contract for Feb- April is 6.91. last summer it was 2.8 per 1000 cf ( mcf) 1000cf = 8 GGE

Also every one needs to call your senator tomorrow. They did not extend the federal Alternative Fuel Excise Tax Credit for 2010 so all gas is going up.32 per GGE if they we discounting it at the pump.

We are in winter gas right now so it normally goes up a little. You can normally take .80 + NYMEX/8 + .18( Tax) and that is about our price give or take just a little at our pump. We are trying to hold our price as long as we can before we change it. Any one that is interested in the econmics of a CNG station stop by I will open my book and show you.

We still want to thank every one for usiing our station it would be nice to have a little praise when it was 1.08 just like every one is griping now about 1.46. I feel your pain we buy our own fuel. but even at break even I would rather use natural gas than Arab gasoline. It will come back down some day. Be ready for oil to go up as well.

Tom
918-665-2641

[BobBaldwin]

Re: Is CNG going up?

Our goal for a public and fleet fueling station would be 100 vehicles per day at 10 GGE each. That would amount to 30,000 GGE/month. Is that unreasonable to expect?

[jblue]

Re: Is CNG going up?

Is that unreasonable to expect?

The OnCue station in Oklahoma City is getting ready to have it's 10k transaction soon, if it has not already happened.

The station had a quasi-start time of the first of August 2009. If you just look at the raw numbers (10k/5 months) that would be ~2,000 transactions per month. The delta here is how much of those transactions were for testing, etc and what is the overall average gge dispensed per transaction.

Compare that to the CE station that opened at the end of January 2009. The receipt that I got last week showed mid 8500's (IIRC) which translates into ~770 transactions per month. The delta for the CE station is how much have the cross-country delivery of transit buses affected the transaction per gge ratio.

Obviously, none of this is based upon empirical data, but I think it does show that, given the right mix of fleet and personal use, an average of 100 transactions per day could be achievable.

[DavidP]

Re: Is CNG going up?

I see that most ONG pumps are $1.46 as of 1/4/10. Will the ON-CUE Express follow suit?

[John Mitton]

Re: Is CNG going up?

Might have to do with the 50 cent excise tax credit having expired Dec 31st?
We all need to contact our Senators to pass the extenders approved in the House before the break. Anyone have the reference?