As natural gas production in the United States continues to grow, the benefits of reciprocating gas engines relative to gas turbines are being recognized in certain power generation applications. Sushmita Dutta, a Project Manager at Kline’s Energy Practice, explores the impacts this trend will have on the natural gas engine oil (NGEO) market.
The U.S. gas market is undoubtedly one to watch. Here, gas production has risen dramatically, recording nearly a 50% increase from 2000 to 2017, driven largely by the additional capacity coming on stream from shale reserves. For the first time in 2017, the United States moved from being a net importer of natural gas to a net exporter, if only by a small margin. Demand for gas locally and globally, for use in a broad range of applications, is forecast to increase. This will drive further growth in production, which is forecast to reach over 89 billion cubic feet per day in 2019.
One of the areas expected to grow in the United States is power generation. According to the Environmental Protection Agency, the power generation sector is the highest contributor to the country’s emissions, which combined with the transportation sector accounted for more than 50% of annual emissions in 2016. This has resulted in the U.S. government taking steps to control emissions from power generation sources. As a result, cleaner-burning natural gas is now emerging as one of the preferred fuels for electricity generation.
Good news for gas engines
This is all great news for natural gas engine producers, whose products are used in gas compression, gas transmission, and electricity generation. However, the anticipated growth does not necessarily apply equally right across their product range. The major electricity producers, for example, are still expected to favour larger gas turbines. This is mainly down to their higher power to weight ratio and longer maintenance intervals, which makes them more economical to operate - providing better financial returns for large power generation projects.
Replacing gas turbines is a major challenge for reciprocating natural gas engine manufacturers, a factor that could limit the growth and development of the NGEO industry.
However, growth in gas engine use will come from smaller users, for example, peak shaving plants and backup and emergency power generation, as they shift away from liquid fuels, such as diesel, towards natural gas.
The real benefits of natural gas engines over gas turbines in these applications include their shorter start-up times, higher efficiency over a wider range of output, multi-fuel capability, and better load flexibility. The areas expected to witness high natural gas engine demand are peak shaving power plants and backup/emergency power generation in industrial and commercial settings. To meet the needs of customers in these areas, original equipment manufacturers (OEMs) have developed advanced technology enabling natural gas engines to achieve peak power very quickly. Larger gas turbines, irrespective of the load requirement, are typically run close to full load capacity since altering the output impacts the turbine’s efficiency. This lack of flexibility makes turbines less attractive in these backup, emergency, or peak power production applications.
Another growth area for gas engines is in the growing number of combined heat and power (CHP) installations that provide electricity, hot water, and space heating, typically in commercial and institutional buildings. Here, reciprocating gas engines running on natural and biogas are gaining wider acceptance among commercial and industrial consumers due to their high utilization rates and efficiency.
A key advantage of reciprocating gas engines in the CHP segment is their modularity, which is an advantage for customers that need to adjust power output based on power demand (known as load following). In power plants, this flexibility is essential, enabling gas engines to be connected together to form generating sets, which at a time of peak load can all contribute to power output. However, during times of lower load, some engines can be turned off, helping to reduce operational and fuel costs.
The increased use of stationary reciprocating gas engines in smaller power generation applications will drive up demand for NGEO.
Kline Group expects NGEO in the power generation sector to experience a compound annual growth rate (CAGR) of 8.0% from 2018 to 2023. This is well above the growth forecast for the NGEO market as a whole.
Opportunities in the NGEO market
This presents NGEO suppliers and lubricant additive companies with good opportunities. As gas engine operators look to reduce operational and maintenance costs and keep their engines reliably in operation for longer, they need robust oils on which they can rely. To meet demands from their customers, OEMs have been developing more efficient engines, which have the capability to work for longer hours and withstand higher temperatures and pressures. In addition, today’s natural gas engines are able to use multiple gas types, such as landfill gas, biogas, and pipeline gas to produce power. All of these factors mean the latest gas engine oils must be carefully designed to work for longer durations and be tailored for specific engines and fuels in use.
However, despite the anticipated NGEO growth, the absence of industry-wide standards is a significant barrier to entry into this market. While the American Society for Testing and Materials and Society of Automotive Engineers have explored NGEO standards, no significant progress has been made due to the heavy investments required to achieve something that would be widely accepted. Instead, OEMs have developed their own standards, based on extensive research involving thousands of hours of field testing and collaboration with other key NGEO industry participants, such as additive and lubricant manufacturers. Lubricant companies with the resources to develop multiple products that meet multiple OEM standards will have an advantage going forward.
New global NGEO market analysis
Kline Group’s new report Natural Gas Engine Oils: Global Market Analysis and Opportunities explores the influences that improved gas engine technology and increased natural gas consumption will have on NGEO demand. Profiles of select country markets are provided, which enable readers to understand the factors on which NGEO demand depends and to evaluate the NGEO competitive landscape in non-transport applications. The report also provides information to help readers to develop business growth strategies, design appropriate products, and launch marketing and sales strategies targeting key end-use segments.
The global NGEO report provides a view of the key market, technology, and product trends to help companies target the most lucrative opportunities.