Replies to post #6029 on The Rising Influence of Rising Affluence

[Democritus_of_Abdera]

Re: CNG in A Box...

Oakes do you have any comments regarding a related product for LNG; i.e. Vandor's Expansion Cycle (VX Cycle) small scale LNG technology for production of LNG from low-pressure pipeline gas by methane expansion (see: http://expansion-energy.com/yahoo_site_admin/assets/docs/Expansion_Energy_LLC_-_VX_Cycle_Summary_-_Small-Scale_LNG.168160758.pdf )?

Dresser-Rand (DRC) recently signed a worldwide exclusive license agreement with Expansion Energy for marketing this product. They think that it will have a $100-$200 million market over the next 2-3 years. Projected applications are flare gas, stranded natural gas fields, on-site supply for converted drilling rigs, and transport.

My interest resides in a long position in FSYS which would profit greatly if CNG/LPG vehicles became popular in the US. Something that is not likely to happen until after CNG/LPG fueling infrastructure is in place.

The VX cycle technology was a hot topic in Dresser's recent CC (Nov 2, 2012). For example, in his prepared remarks, CEO Vincent Volpe of DRC had the following comments:

The agreement also highlights new market opportunities for our equipment resulting from the low natural gas prices in North America. The agreement gives us exclusive rights to serve a new and large market opportunity with our legacy products as well as our recently acquired engine line. This is technology that we can bring to the market quickly to serve the burgeoning shale gas developments as well as the solutions for addressing global natural gas flaring and the rapidly expanding markets for LNG vehicle fueling.

Upstream applications include the monetization of flare gas or associated gas to increase revenues for oil companies and reduce their environmental impact, the production of stranded natural gas fields which are not close to existing pipeline infrastructure, and on-site fuel supply for drilling rigs converted to run on LNG. Downstream applications include the production of vehicle-grade LNG, allowing LNG to compete effectively with diesel fuel on a cost per energy content or BTU basis. The use of LNG fuel is increasing rapidly for long haul trucks, delivery fleets, buses, ships, barges and ferries, railroad locomotives, and construction and mining equipment.

Please turn to slide 10. Under the agreement, Dresser-Rand will design, package and sell the VX production technology which will incorporate our reciprocating compressors, Guascor engine generator sets, and associated control systems. As you can see, this represents a significant amount of Dresser-Rand equipment content, which is greatly enhanced by the addition of the Guascor engine offering. The technology is scalable from very small to the tens of thousands of gallons per day, either producing LNG or cold compressed natural gas, and thus extends our exposure to LNG across the entire capacity spectrum.

Driven by rapid expanding global shale gas development, we predict the market for small scale LNG production plants is in the thousands of units and growing. The U.S. is the most rapidly growing market, and the substantial price disparity between diesel fuel and low priced natural gas has oil field service operators, oil and gas companies, shipping and delivering companies, and downstream fuel distributors and marketers across the country converting drilling rigs, transportation fleets, and retail fueling stations along the U.S. interstate highway system to LNG fuel.

Once the facilities are built, this offering further builds the aftermarket franchise around our core products. We are already in contact with several prospective clients, and believe that there is a good opportunity to start serving this market in 2013, and over the next two to three years, grow this business significantly.