| LOS ANGELES
LOS ANGELES Jan 31 Blu LNG, one of the biggest
names in the move to wean U.S. trucks off diesel onto natural
gas, has laid off 20 percent of its staff, ousted several senior
executives and slowed down development of fueling stations as it
waits for more truckers to embrace the switch to the cheap and
The move, confirmed by the company's Chief Executive
Officer, Merritt Norton, and other people familiar with the
situation, marks an important pullback in a nascent sector that
is expected to improve U.S. energy security, lower
transportation costs and create jobs.
Just three days ago, President Barack Obama threw his weight
behind the industry in his State of the Union speech. "Congress
can help by putting people to work building fueling stations
that shift more cars and trucks from foreign oil to American
natural gas," Obama said.
Blu a year ago pledged to build dozens of liquefied natural
gas fueling stations along U.S. highways in 2013 with the help
of millions of dollars from ENN Group, one of China's largest
But fueling stations need customers, and trucks that run on
natural gas have been slower to hit the market than many
anticipated and are still far more expensive than their diesel
equivalents, making even the allure of far cheaper fuel
difficult to swallow for many fleet owners.
"This year is a year of trying to let the trucks catch up to
us," Blu CEO Norton said in an interview.
Regarding Obama's remarks this week, Blu said it appreciated
the president's comments and would like to see a federal effort
to bring the fuels tax on LNG in line with that of diesel, which
is far higher. The company also said it would like to see a cap
on the federal tax for new natural gas trucks, adding that any
incentives should be directed to vehicles.
Blu's retreat is coming to light months after Clean Energy
Fuels Inc, the market leader in natural gas fueling and
backed by Texas billionaire T. Boone Pickens, said it had slowed
development of LNG stations due to truck availability.
There are many reasons to believe in the market for natural
gas trucks. Companies like shipper United Parcel Service Inc
and consumer products giant Procter & Gamble are
amassing fleets of them during a boom in U.S. shale gas
production that has kept prices on the domestic fuel low.
Blu, formed in 2012 as a joint venture between ENN and a
small Utah company called CH4 Energy Corp, has built about 25
permanent stations where trucks powered by LNG can refuel -
about half the number it pledged to build in 2013, it said.
The company, whose legal name is Transfuels LLC, also
appears to have tempered its longer-term expectations.
Originally, it hoped to spend more than $1 billion to build 500
natural gas fueling stations within three years, according to
sources with knowledge of the company's plans at that time.
This week Norton predicted the company will have "in the low
hundreds" of both permanent and so-called terminal stations by
2017. Terminal stations are semi-portable, and Blu is in the
process of delivering 15 to 18 of them to customers so they can
refuel their fleets themselves.
But ENN, which has a majority stake in Blu and controls its
board of directors, last year grew increasingly impatient with
the slow pace of the market's development, according to sources
close to the company who said expectations were too high at the
home office in China. That led to the ouster over the last three
months of not only key executives in charge of finance, sales
and marketing, and business development, but also its Chinese
chairman, Jun Yang.
Norton would not comment on the dismissal of people from
specific positions, but said "there were some changes that our
board wanted to make around how we were going to market."
The company has identified a new chairman but would not say
who it is until the person's required working documents are in
order. The other vacant management positions are being filled,
ENGINES SLOW TO REV UP
Station development has slowed down, Norton said, in part
because of issues rolling out natural gas engines for trucks.
At the end of last year engine maker Westport Innovations
Inc pulled the plug on a 15-liter natural gas engine
that Norton said was the best option for trucks hauling heavy
loads across mountainous terrain in the Western United States.
To make matters worse, Cummins Inc this month put plans
for its own 15-liter natural gas engine on ice indefinitely,
saying "the timing of the adoption of natural gas in long haul
fleets preferring a 15-liter engine is uncertain."
An eagerly anticipated 12-liter engine by Cummins and
Westport's joint venture hit the market last year after some
delay, but it is better suited to haul somewhat smaller loads on
flatter terrain. As a result, Blu is refocusing on the Midwest
and Southeast markets, Norton said, and was therefore forced to
slash 20 percent of its staff. The Salt Lake City-based company
still has 170 employees.
In addition, Westport spokeswoman Nicole Adams said most of
the 12-liter engines that have been ordered so far are
configured for compressed natural gas (CNG) as opposed to LNG,
the fuel Blu and rivals Clean Energy Fuels and Royal Dutch Shell
Plc are banking will eventually be the fuel of choice
for heavy-duty trucks running on natural gas. LNG trucks are
faster to refuel, can go farther on one fillup, and have lighter
storage tanks than CNG trucks.
Clean Energy has built 80 public LNG fueling stations along
U.S. highways, and it too, has slowed down development to
account for a delay of about a year in its expectations for
natural gas truck availability. Only about 22 of those stations
are open for business, though the company opens a new one about
once every 10 to 14 days as fleets of LNG trucks are delivered,
spokesman Gary Foster said. Shell plans to open its first LNG
fueling station this year and is planning about 100 such
stations over multiple years, according to a spokeswoman.
The big issue long term, however, is cost, Norton said. A
natural gas truck can run between $40,000 and $80,000 more than
an equivalent diesel vehicle.
"Customers are saying the trucks need to cost less for them
to really purchase large numbers of trucks," Norton said. Within
three years he expects an LNG truck to cost the same as a diesel
truck. With equivalent truck costs and lower prices for natural
gas, Norton said, "it's pretty hard for diesel to compete."
(Additional reporting by Terry Wade in Houston; Editing by