Imagine this: Back when Henry Ford started pumping out record numbers of Model T's for the everyman to buy, you bought shares of the only company providing Ford with engines running on petroleum-based products.

While doing so would require a revisionist's view of history tinged with hyperbole, this image gives you the view of a best-case scenario for Westport Innovations (Nasdaq: WPRT). The company designs engines for cars, trucks, locomotives, and heavy machinery that can run on natural gas alone.

With natural gas quickly emerging as the country's most practical solution to a desire for energy independence, Westport is ideally positioned to benefit from long-term trends. They've had a good 2011, and I think 2012 could be even better.

Here's why:

Diversification of offerings
Westport isn't focusing on just one type of engine to bring to the market; it's aggressively developing engines that can run most of tomorrow's natural-gas-powered machines. Here's a breakdown of its three largest segments as of the third quarter.

  • Cummins-Westport: This segment, which is operated through a partnership with truck engine specialist Cummins (NYSE: CMI), accounts for 65% of total revenue this year. These are the types of engines that would be used for semi-trucks hauling goods over short distances.
  • Light-duty: If your car one day has a natural gas engine, it will likely come from this division, which also focuses on smaller machinery like forklifts. It has accounted for 29% of revenue in 2011 so far. The acquisition of Emer, an Italian fuel system provider that had partnerships with several automakers, helped boost this division significantly.
  • Heavy-duty: In contrast to the short-distance focus of engines produced in the partnership with Cummins, this division focuses on long-haul-trucking engines and relies heavily on the company's proprietary direct injection technology. So far this year, this division has only accounted for 6% of revenue.

Here's how each division has done through the first nine months of 2011, as compared to 2010.

Source: Westport release. Revenue figures in millions. Does not include negligible service revenue. Fiscal year has completed two reportable quarters thus far.

Not content to simply rest on its laurels, the company has also inked three additional partnerships that promise to pay dividends in the future:

1. Westport will be partnering with Weichei, China's largest trucking company, to bring its engines to Asia.

2. A partnership with Caterpillar (NYSE: CAT) promises to bring natural gas engines to the mining service truck industry.

3. Agreements have been reached that could bring natural gas engines to locomotive companies such as Heckmann (NYSE: HEK) and Canadian National Railway (NYSE: CNI).

What to watch in 2012
Despite all these partnerships, there's no absolute guarantee they will prove fruitful for Westport. In order for that to happen, customers need to be sold on the value proposition that natural gas offers.

Though energy independence sounds nice and patriotic, it's the long-term cost advantages of natural gas that will ultimately win over a broad base of industries. Consider these estimates, which show the cost for one gallon of petroleum-based fuels as opposed to a gallon-equivalent of natural gas fuels.

Source: U.S. Energy Information Administration, Annual Energy Outlook 2011. Natural gas assumes 7.9 gallons per 1,000 cubic feet.

Now, keep in mind that natural gas machinery usually costs more than your standard fare; but the long-term savings potential is absolutely massive.

With just more than $100 million in cash, Westport certainly doesn't have the cash to provide the infrastructure necessary for large-scale adoption. That's why its partnership with Royal Dutch Shell (NYSE: RDS-A) is so important, as Shell will be helping to market the practicality of natural gas.

The need for infrastructure build-out also has its own pure plays that are trying to help the situation along as well. Clean Energy Fuels (Nasdaq: CLNE) is working to ramp up the ability for vehicle fleets to fill up their natural gas tanks throughout the United States and Canada.

My plan for 2012
Westport's revenues can be very lumpy, as they rely on large orders from a bevy of different companies in varying industries. As such, I've already established a starter position (and a CAPScall on my profile) and will look to add to that position depending on how the company does in ensuing quarters.

I think it's possible that lower price points are possible, but I also appreciate the possibility that today's prices could be the lowest I'll be able to grab.

If you already own shares of Westport and are looking for further energy diversification in your portfolio, I suggest checking our special free report geared specifically toward energy investors: "3 Stocks for $100 Oil."

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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.