The recent inauguration of the construction of the first LNG plant in the country should be applauded. This project adds to the launch of the plant in Rio Grande last month that would have begun to separate the liquid components of Bolivia`s rich natural gas.
So long as we would now have a natural gas primarily consisting of methane, the next obvious step by the state oil and gas company (YPFB, in Spanish) was (and is) to see how to reach the farthest corners of the country with relatively inexpensive fuel that contributes to boosting their economy. And it appears that YPFB found a way to realize the desire of at least 26 populations of Bolivia that will benefit from this project.
No doubt, the above is a milestone in the desired change in the country`s energy mix that is necessary to highlight. However, there is still a long way to go. This article is part of a search for additional options that hopefully can be considered by the government in general and by YPFB in particular. It has to do with the analysis of the possibility of using LNG as a vehicle fuel in different classes of diesel vehicles of the national fleet.
In recent years, one of the major challenges faced by the government relates to the urgent need to replace diesel in the country's energy mix which, according to official data for the first seven months of 2013, accounted for 9.3 % of Bolivia`s imports.
While in recent years some progress has been evident as far as changing the energy mix is concerned, it has not yet resulted in a substitution of diesel, considered today also the most consumed fuel in Bolivia.
Following a latest report from leading newspaper El Deber:
"Out of 1.1 million vehicles of the national fleet, only 24.4 % (268,561 vehicles), was converted into compressed natural gas (CNG), according to figures provided by the Implementing Gas Conversion Entity. As for the diesel to gas conversion, the work has just started and by the end of the year it is expected to turn 400 diesel-vehicles into CNG ones in the city of Santa Cruz de la Sierra."
In a previous article (published only in Spanish) I referred to "the impossibility of introducing CNG gas kits similar to those used in petrol vehicles to those powered by diesel, which would be forcing the government to seek alternatives - indeed, much more expensive - such as changing the entire diesel engine to CNG in thousands of vehicles."
This comment was most timely as the day of its publication (September 10, 2012), the government issued Supreme Decree (SD) 1344 authorizing the Ministry of Hydrocarbons and Energy precisely "the purchase and installation of CNG engines" under "the implementation of the Oil Diesel-CNG Vehicle Transformation Pilot Plan in the city of Santa Cruz with a range of up to four hundred (400) vehicles."
However, more than a year after the enactment of that legal instrument, as El Deber indicates, the conversion work has just started. What happened?
Apparently, when it was decided to purchase CNG engines at least two issues were not adequately visualized: 1) that the change of a diesel engine to a CNG one was no simple task also involving the replacement of a number of accessories not included in SD 1344, and 2) that, possibly due to the first finding, the implementation of the Pilot Plan turned out to be much more expensive than originally thought.
This explains why (almost nine months later), the government was forced to enact a new SD, 1598, on June 5, 2013, which, among other things, includes in the definition of the legal framework applicable to this case not only the "CNG dedicated engine" but also their "accessories" and - again - a "Diesel Oil-CNG conversion kit" while calling for expansion of the Pilot Plan "to one hundred (100 ) Diesel Oil-CNG vehicle transformations, through other certified technologies."
So considering the exorbitant cost of the CNG engine, including accessories (transmission, bell tank, pump, electronic brain, air filter assembly, air duct, carburetor, starter, alternator, flywheel, support motor and box, intake and exhaust manifold, exhaust pipe, engine cable harness and dash, accelerator pedal, air flow sensor, gear box and clutch disc release, clutch fork , lift help clutch bearing shifter, brake booster, brake master cylinder, tank brackets, fuel filter, radiator, radiator hoses and out, blade radiator, air intake, exhaust center and rear, tube protector exhaust belt, spark plug wires, spark plugs, distributor, injectors, pressure regulator, pulsation damper, the injection hose reels and pulley), the Bolivian authorities would have had to resort again to some diesel-CNG appropriate kit to transform vehicles from diesel to CNG, although by the number of new technologies approved (100), they don´t seem to be very convinced of its effectiveness.
In sum, it is possible to argue that this set of difficulties had an impact not only in delaying the implementation of the original Pilot Plan but also in the need for trying again a "conversion kit " (whose details and/or technical specifications are still unknown ) much more cost-efficient than purchasing new CNG engines with accessories. Needless to say, the last point is especially relevant if one considers that the results of these efforts will gravitate on the definition of the way forward to replace the 35,565 public transport diesel vehicles existing only in the city of Santa Cruz de la Sierra.
In any case, the actions taken so far contrast with the importance of diesel in Bolivia´s energy mix, more in terms of its consumption than in relation to the number of diesel vehicles existing in the country. In fact, according to "Automotive Park Stats: Bolivia 1998-2010" published by INE (the Bolivian Statistics Office), in 2010, the country had a total of 961,221 vehicles, of which only 176,731 (18, 39 %) were diesel ones. As expected, I found also that there is a marked concentration of this type of vehicles in the three most important departments of Bolivia: Santa Cruz (37.21 %), Cochabamba (21.98%) and La Paz (16.66 %), which together constitutes about 76 % of the total.
In contrast, according to the Statistical Bulletin of YPFB for the first quarter of 2013, diesel fuel was most in demand in the domestic market, marketed an average of 25,902 barrels per day, with the following breakdown of the data: Santa Cruz (35.83 %), La Paz (19.93 %) and Cochabamba (17.17%).
For reasons of space, this analysis does not include information on the types of vehicles that would have helped to show that in general high tonnage or larger passenger capacity vehicles are the ones which consume more diesel, although it is clear that this fuel is also used in other areas of economic activity, such as electric power generation and industry.
However, all the efforts made so far by the government to replace diesel would have been directed only to one party involved in the problem: public transport. To my knowledge, the Bolivian authorities have not yet been able to propose a settlement mechanism to substitute the diesel used by the largest agribusiness entrepreneurs in eastern Bolivia, heavy transport or even private drivers, for example, of large SUVs which, according to data for 2010, constituted a total of 26,953 units, or 15.25 % of the diesel fleet of the country.
In my search for optimal alternatives for a real transformation of the energy mix in Bolivia, I have found a non-trivial debate on the use of CNG versus LNG for high tonnage and/or long-haul trucks. The discussion takes place in the U.S. and has arisen as a result of the unusual interest in the exploitation and consumption of the huge amounts of gas produced from shale deposits in several regions of the country.
In principle, the analysis published just a couple of months by the Energy Collective establishes that to compare CNG and LNG with diesel we first need to consider aspects related to the relative energy density and associated cost, as well as weight and size of on-board fuel storage of the new energy technology.
Regarding the first point, the article reveals that LNG contains 2.4 times more energy per gallon of diesel equivalent (GDE) than CNG. In addition, it states that to the extent that LNG is a liquid - just as diesel and gasoline - it permits achieving a comparable refueling speed whereas to meet the same goal with CNG a high compression level is required which would have an impact on the overall cost of the energy technology.
On the second point, the study shows that the relatively low energy density of CNG with respect to LNG leads inexorably to an increase in the size of the storage tank and therefore the weight of the vehicle. In this sense, LNG would have long been seen as a more viable attractive option, particularly for the heavy transport sector.
Moreover, in order to show the specific nature of the debate in question, the contribution examines the opposing views of the two main natural gas suppliers in the United States, Clean Energy Fuels (NASDAQ:CLNE) and Trillium CNG, Integrys Energy Inc's (NYSE:TEG) operating wing:
First, whereas to produce CNG it is necessary to take natural gas from a pipeline, to obtain LNG natural gas must be cryogenically converted into liquid at -260 degrees F and often transported to stations distant from the liquefaction point, usually in tankers.
Secondly, on-site, CNG is immediately compressed and loaded into a vehicle in much the same way as in the case of diesel or gasoline, while refueling LNG requires the driver to use a mask and gloves to protect himself/herself against cryogenic burns.
Thirdly, CNG requires much more energy/electricity to achieve the necessary compression at a refueling station, resulting in a higher cost of operation than in the case of LNG, while the cost of transporting LNG is significantly higher and requires greater technical expertise.
Finally, LNG has greater flexibility as to where a refueling station can be established, while for a CNG one it´s essential to have access to a pipeline.
In this context, it should be clarified that although the debate in the United States is not completely resolved, Clean Energy Fuels would seem to hold the more convincing position on the subject: Use CNG for private light cars and public transport vehicles (i.e., buses and trash trucks), and LNG for heavy transport and long-distance haul trucks. Coincidentally, as shown in Figures 1 and 2, CLNE seems to have by and large outperformed TEG both in the short and long run in the stock market and may indeed be a better investment option right now.
CLNE vs. TEG over the last 6 months
CLNE vs. TEG over the last 7 years
Now in the course of this investigation, I have wondered whether this strategy would be applicable to the case of Bolivia, having arrived at the following conclusions:
(1) Conversion to CNG would be a good bet for gasoline light cars and gasoline buses and trucks because these vehicles - in which space and weight are critical factors - require relatively small tanks and/or appropriate petrol-CNG conversion kits for them are available.
(2) LNG would be the best choice for diesel heavy machinery as well as diesel buses, trash trucks and heavy transport trucks because in general these vehicles are high tonnage ones with reduced weight and on-board space requirements that can take advantage of the relatively high energy density of LNG and/or there would be no suitable diesel-CNG conversion kits for them in the market.
However, within the framework of the new strategy to transform the energy mix, there remains to perform an economic evaluation of the following fuel supply options for each type of vehicles to be converted to LNG:
(a) Get the LNG from the new plant in Rio Grande and transport it by trucks to different stations strategically distributed across the country, and
(b) Install liquefaction plants for the production of LNG connected to the natural gas distribution network likewise located at strategic locations in the country.
In conclusion, the present analysis should not be seen as the last word on the subject but rather as the beginning of a thorough analysis of different alternatives that can be advanced to address one of the most pressing problems of the current national energy system not only in Bolivia but in other countries with similar problems as well.
 No updated official information is available. However, using the number for the Bolivian automotive park provided by El Deber (1.1 million vehicles) and a percentage of 18.8% obtained from the average corresponding to the period 2008-2010 it was possible to estimate a total of 207,680 diesel vehicles in the country.
 Similarly, based on the 207,680 diesel vehicles estimated for 2013 as well as average growth rates for diesel vehicles in the period 2008-2010, the following percent shares were obtained for the largest departments of the country: Santa Cruz, 35%, La Paz 17% and Cochabamba 21%. Note that the fall in the percentages of Santa Cruz and Cochabamba were due to a slight downward trend identified in the data referred to those departments in the last 3 years.
 Note that the energy density of CNG is only about a quarter that of diesel while the energy density of LNG is just 60% that of diesel. Thus "either option requires greater fuel storage capacity to achieve a comparable range, which means more and/or larger tanks."
 It is important to emphasize that while Trillium CNG considers CNG as the optimal solution for all kinds of vehicles including Class 8 trucks, Clean Energy Fuels suggests using CNG for light cars, buses and trash trucks and LNG for the heavy and long haul.
 These security measures would be applicable only to the U.S. and other developed countries where the refueling operation is performed by the driver.
 With respect to these vehicles, my recommendation would be to incorporate them only after an analysis of the results of the above mentioned Pilot Plan.
 One exception would be the previously identified private diesel SUVs, whose inclusion in this proposal would be decided after a special evaluation where it is determined whether the country is willing to continue importing this type of vehicles.
 Following a recent study published by the leading journal Energy Policy (See: A. Arteconi y F. Polonara, 2013, "LNG as Vehicle Fuel and the Problem of Supply: The Italian Case Study", August), LNG heavy duty vehicles typically use dual fuel engines. They are based upon diesel technology: the primary fuel is natural gas with diesel as a 'pilot' ignition source. When the vehicle is at full load performance, natural gas replaces diesel fuel up to a percentage of 80% or more." As a first approximation, therefore, the new Bolivian strategy to transform its energy mix would not require complex modifications to the existing diesel vehicles which would guarantee its economic viability.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.