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The Last Hurdle for the Nat Gas Revolution

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Natural gas is an abundant resource, but natural gas fueling stations are surprisingly scarce. Currently, regular gas stations outnumber compressed natural gas stations approximately 100-to-1. And the shame of it is CNG sells at a fraction of the cost of regular gasoline.

For natural gas to become the energy "game changer" that many proclaim, the infrastructure problem must be addressed. And it appears many companies are prepared to answer the call.

The station builders
Clean Energy Fuels (Nasdaq: CLNE  ) is the largest provider of natural gas fueling infrastructure in North America. The company operates 224 CNG stations across the United States and Canada. To this point, Clean Energy Fuels has faced little competition. However, it appears the natural gas producers are preparing to enter the CNG infrastructure market.

Valero Energy (NYSE: VLO  ) recently announced plans to offer CNG at newly built fuel station locations. The first CNG station will be built near company headquarters in Texas, and others will be added based on market demand.   

Chesapeake Energy (NYSE: CHK  ) is partnering with OnCue Express in building a natural gas fueling station network across Oklahoma. Initial plans call for CNG fueling stations in six locations across the state. 

The state of Pennsylvania could be next. Chesapeake is currently searching for a partner in building its first CNG station in the Keystone State.  

Questar (NYSE: STR  ) is firmly committed to CNG as a transportation fuel. The company currently operates 23 natural gas stations spanning the state of Utah and two stations in Wyoming. Over the last 18 months, Questar has substantially increased natural gas refueling capacity, and the company plans to remain committed to natural gas as a transportation fuel.

Investment opportunities
The big winners of this trend will be the natural gas explorers and natural gas transportation companies. Natural gas explorers such as Chesapeake, Southwestern Energy (NYSE: SWN  ) , and Newfield Exploration should see a spike in demand as natural gas competes with oil for a place in your tank.

Companies that convert vehicles to run on natural gas will benefit as well. Fuel Systems Solutions (Nasdaq: FSYS  ) and Westport Innovations (Nasdaq: WPRT  ) are the dominant companies in this industry. The two face limited competition, putting the companies in prime position to take advantage of the shift to natural gas.   

The bottom line
Natural gas appears to be ready for prime time as the lack of a fueling network is being addressed. Now could be the time, as one congressman put it, "to prepare for the upcoming revolution."

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Fool contributor Adam J. Crawford owns shares of Fuel Systems Solutions but does not own shares in any other company mentioned in this article.

Westport Innovations is a Motley Fool Stock Advisor selection. Alpha Newsletter Account LLC has written puts on Southwestern Energy and owns shares of Chesapeake Energy. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (2) | Recommend This Article (17)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 03, 2011, at 9:38 PM, jimmy4040 wrote:

    Nat gas is perfect for fleet vehicles that make round trips to the same location such as buses. That why almost 70% of the nat gas vehicles in the country ARE buses. Large Postal locations might be another alternative. However ordinary consumer use of vehicular nat gas is unlikely. Before you invest, make sure you know which area the company is focusing on.

  • Report this Comment On May 04, 2011, at 10:55 AM, wyrdmage wrote:

    I'm an ordinary consumer using vehicular nat gas at $1.27/gal here in Utah compared with gasoline approaching $4.00/gal. I was appalled that after we bought the vehicle 2 years ago when CNG was 62 cents per gallon...the price doubled to $1.27! Natural gas vehicles are not perfect, but I am mystified that the public refuses to embrace this cheaper/cleaner no-brainer. Perhaps it really is the infrastructure that is the only thing preventing widespread use.

    I have a bi-fuel, so I can use either gasoline or CNG: it costs me $50 to fill the gasoline tank (range of 400 miles) and only $15 to fill the natural gas tank (range of 300 miles).

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