Gas vs Diesel Cost Analysis Fundamentals

1. Overview & Applications

Natural gas and diesel are the two dominant fuels for midstream compression, power generation, and drilling operations. Fuel selection and cost comparison require understanding energy equivalency, engine efficiency differences, capital costs, and operational factors beyond simple price per unit.

Pipeline compression

Gas vs diesel drives

Gas engines dominate transmission pipelines; diesel for remote portable units.

Power generation

Wellsite and facilities

Remote wellsites use diesel gensets; large facilities use gas turbines or engines.

Drilling rigs

Fuel switching economics

Drilling rig conversion to dual-fuel or gas-only saves $50-200k/well.

Emissions compliance

Air quality considerations

Natural gas has lower NOx, PM, and CO₂ emissions than diesel per Btu.

Key Concepts

Energy equivalency: Converting volume units (scf, gallons) to common energy basis (Btu, MJ)
Higher heating value (HHV): Total energy including water vapor condensation heat
Brake thermal efficiency: Ratio of shaft power output to fuel energy input
Fuel energy ratio (FER): Relative fuel consumption accounting for efficiency differences
Levelized cost of energy (LCOE): Total cost per unit energy delivered over asset life

Why fuel economics matter: A 2,000 HP compressor operating 8,000 hours/year at 80% load consumes $400,000-800,000 in fuel annually. A 5% fuel cost advantage saves $20,000-40,000/year. Over a 20-year asset life, this is $400,000-800,000 NPV at 8% discount rate.

2. Energy Content Equivalency

Natural gas and diesel have different energy densities. Direct cost comparison requires converting both fuels to a common energy basis, typically Btu (US) or MJ (SI).

Fuel Heating Values

Natural Gas (typical pipeline quality): Higher Heating Value (HHV): 1,020 Btu/scf (range: 950-1,150) Lower Heating Value (LHV): 920 Btu/scf (range: 850-1,050) HHV basis includes heat from water vapor condensation (standard in US) LHV basis excludes condensation heat (common in Europe) No. 2 Diesel Fuel: Higher Heating Value (HHV): 138,500 Btu/gallon (typical) Lower Heating Value (LHV): 130,500 Btu/gallon (typical) Range: 137,000-140,000 Btu/gal (HHV) depending on specific gravity Density and mass-based heating value: Diesel density: 7.0-7.3 lb/gal (specific gravity 0.84-0.87) Mass heating value: 19,000-19,500 Btu/lb (HHV)

Volumetric Energy Equivalency

Gas-to-Diesel Volume Ratio (HHV basis): scf gas per gallon diesel = HHV_diesel / HHV_gas For typical values: scf/gal = 138,500 Btu/gal / 1,020 Btu/scf = 135.8 scf/gal Rounded: ~136 scf ≈ 1 gallon diesel (energy equivalent) Or inverted: 1,000 scf gas ≈ 7.35 gallons diesel In practice, use rule of thumb: 1,000 scf gas ≈ 1 Mcf ≈ 7-8 gallons diesel (energy basis) This is approximate because: - Gas HHV varies 950-1,150 Btu/scf (composition dependent) - Diesel HHV varies 137,000-140,000 Btu/gal (grade dependent)

Energy Cost Comparison

Cost per Million Btu ($/MMBtu): For natural gas: Cost_MMBtu = (Price_$/Mscf / HHV_Btu/scf) × 1,000,000 For gas at $3.00/Mscf, HHV = 1,020 Btu/scf: Cost = ($3.00 / 1,020) × 1,000,000 = $2.94/MMBtu For diesel: Cost_MMBtu = (Price_$/gal / HHV_Btu/gal) × 1,000,000 For diesel at $3.50/gal, HHV = 138,500 Btu/gal: Cost = ($3.50 / 138,500) × 1,000,000 = $25.27/MMBtu Ratio: Diesel is 25.27 / 2.94 = 8.6× more expensive per Btu than gas in this example. However, diesel engines are more efficient, so delivered energy cost ratio is lower.

Natural gas vs diesel energy equivalency infographic showing 136 scf of natural gas at 1,020 Btu/scf equals 138,720 Btu, which is energy equivalent to 1 gallon of diesel at 138,700 Btu/gal, with practical example showing 500 HP engine needs 27,200 scf gas or 200 gallons diesel for 8 hours — Energy equivalency between natural gas and diesel fuel. Approximately 136 scf of pipeline-quality gas equals 1 gallon diesel on a heating value basis.

Heating Value Tables

Fuel Type	HHV (Btu/unit)	LHV (Btu/unit)	Equivalent to 1 Mcf Gas
Natural gas (lean)	950 Btu/scf	855 Btu/scf	1.00 Mcf (reference)
Natural gas (typical)	1,020 Btu/scf	920 Btu/scf	1.00 Mcf (reference)
Natural gas (rich)	1,150 Btu/scf	1,035 Btu/scf	1.00 Mcf (reference)
No. 2 Diesel	138,500 Btu/gal	130,500 Btu/gal	7.35 gallons
Propane (LPG)	91,500 Btu/gal	84,250 Btu/gal	11.1 gallons
Gasoline	125,000 Btu/gal	115,400 Btu/gal	8.16 gallons

International Unit Conversions

SI (Metric) Heating Values: Natural gas: HHV = 38-42 MJ/Sm³ (typical: 38.3 MJ/Sm³ at 15°C, 101.325 kPa) LHV = 34-38 MJ/Sm³ Diesel: HHV = 38.6 MJ/liter LHV = 36.4 MJ/liter Conversion factors: 1 Btu = 1.055 kJ 1 Btu/scf = 37.26 kJ/m³ 1 Btu/gal = 0.2789 MJ/liter Gas-diesel equivalency (SI): Sm³ gas per liter diesel = 38.6 MJ/L / 38.3 MJ/Sm³ = 1.008 Sm³/L Or: 1,000 Sm³ gas ≈ 992 liters diesel ≈ 262 gallons diesel

Worked Example: Energy Equivalency

A compressor requires 10 MMBtu/hr. How much fuel is needed?

Natural gas option (HHV = 1,020 Btu/scf): Flow rate = 10,000,000 Btu/hr / 1,020 Btu/scf = 9,804 scf/hr Daily consumption = 9,804 × 24 = 235,300 scf/day ≈ 235 Mscfd Annual consumption = 235.3 Mscfd × 365 days = 85,900 Mcf/year At $3.00/Mcf: Annual cost = 85,900 × $3.00 = $257,700/year Diesel option (HHV = 138,500 Btu/gal): Flow rate = 10,000,000 Btu/hr / 138,500 Btu/gal = 72.2 gal/hr Daily consumption = 72.2 × 24 = 1,733 gal/day Annual consumption = 1,733 gal/day × 365 = 632,500 gallons/year At $3.50/gal: Annual cost = 632,500 × $3.50 = $2,213,750/year Cost ratio (energy basis, ignoring efficiency): Diesel / Gas = $2,213,750 / $257,700 = 8.6× more expensive This assumes equal thermal efficiency (not realistic - see next section).

3. Engine Efficiency Differences

Diesel and natural gas engines have different brake thermal efficiencies due to combustion characteristics, compression ratios, and operating cycles. This significantly affects fuel consumption for the same power output.

Engine thermal efficiency vs load factor chart comparing diesel engines (blue curve, 30-42% efficiency) and natural gas engines (orange curve, 24-38% efficiency), showing diesel advantage of 7-8 percentage points, with optimal operating range at 75-90% load — Diesel engines maintain a 5-10 percentage point efficiency advantage over natural gas engines across all load factors. Both engine types peak in efficiency at 75-90% load.

Typical Engine Efficiencies

Engine Type	Thermal Efficiency (HHV)	Typical Size Range	Applications
Diesel engine (4-stroke)	35-42%	100-5,000 HP	Portable compression, remote power
Natural gas engine (4-stroke rich-burn)	28-35%	300-5,000 HP	Pipeline compression (older units)
Natural gas engine (4-stroke lean-burn)	32-38%	500-5,000 HP	Pipeline compression (modern)
Dual-fuel diesel/gas (80% gas, 20% diesel pilot)	33-40%	500-3,000 HP	Drilling rigs, flexible fuel sourcing
Gas turbine (simple cycle)	25-35%	3,000-40,000 HP	Large pipeline stations, LNG
Gas turbine (combined cycle)	45-55%	50+ MW electric	Power plants (not typical midstream)

Fuel Consumption Equations

Brake Thermal Efficiency: η_thermal = (Brake Power Output) / (Fuel Energy Input) η_thermal = HP_brake × 2545 Btu/hr per HP / (Fuel_rate × HHV) Or rearranged to find fuel rate: Fuel_rate = (HP_brake × 2545) / (η_thermal × HHV) For natural gas (scf/hr): scf/hr = (HP_brake × 2545) / (η_thermal × HHV_Btu/scf) For 1,000 HP engine, η = 35%, HHV = 1,020 Btu/scf: scf/hr = (1,000 × 2,545) / (0.35 × 1,020) = 7,126 scf/hr For diesel (gal/hr): gal/hr = (HP_brake × 2545) / (η_thermal × HHV_Btu/gal) For 1,000 HP engine, η = 40%, HHV = 138,500 Btu/gal: gal/hr = (1,000 × 2,545) / (0.40 × 138,500) = 45.9 gal/hr

Efficiency Impact on Fuel Ratio

Fuel Energy Ratio (FER): FER = (Gas consumption / Diesel consumption) × (efficiency adjustment) FER = (scf/hr / gal/hr) × (η_diesel / η_gas) × (HHV_diesel / HHV_gas) Simplifies to: FER = (HHV_diesel / HHV_gas) × (η_diesel / η_gas) Example: HHV_diesel / HHV_gas = 138,500 / 1,020 = 135.8 scf/gal (energy basis) η_diesel / η_gas = 40% / 35% = 1.143 FER = 135.8 × 1.143 = 155.2 scf per gallon diesel (efficiency-adjusted) Interpretation: On an equivalent work output basis, 155 scf of gas in a gas engine produces the same shaft power as 1 gallon diesel in a diesel engine. Or: 1,000 scf gas ≈ 6.45 gallons diesel (work equivalent) This is less than the 7.35 gallon energy equivalency due to diesel's higher efficiency.

Worked Example: Fuel Consumption Comparison

Compare fuel costs for a 2,000 HP compressor operating 8,000 hours/year at 85% average load:

Natural gas engine option: HP_avg = 2,000 × 0.85 = 1,700 HP η_gas = 35% (HHV basis) HHV_gas = 1,020 Btu/scf scf/hr = (1,700 × 2,545) / (0.35 × 1,020) = 12,118 scf/hr Annual consumption = 12,118 scf/hr × 8,000 hr = 96.9 MMscf/year At $3.50/Mscf: Fuel cost = 96,900 Mcf × $3.50 = $339,200/year Diesel engine option: HP_avg = 1,700 HP η_diesel = 40% (HHV basis) HHV_diesel = 138,500 Btu/gal gal/hr = (1,700 × 2,545) / (0.40 × 138,500) = 78.1 gal/hr Annual consumption = 78.1 gal/hr × 8,000 hr = 624,800 gallons/year At $3.50/gal: Fuel cost = 624,800 × $3.50 = $2,186,800/year Cost comparison: Diesel premium = $2,186,800 - $339,200 = $1,847,600/year Gas is 84.5% cheaper than diesel at these fuel prices and efficiencies. Fuel energy ratio verification: scf/gal = 12,118 scf/hr / 78.1 gal/hr = 155.1 scf/gal ✓ Matches FER calculated above.

Efficiency Degradation Factors

Ambient temperature: High altitude and hot weather reduce power output 3-5% per 1,000 ft elevation and 1% per 10°F above 60°F
Engine age and maintenance: Worn engines lose 5-10% efficiency over 20+ years without overhaul
Part-load operation: Engines are least efficient at <40% load; efficiency peaks at 75-90% load
Air-fuel ratio: Rich-burn gas engines (stoichiometric) have lower efficiency than lean-burn but simpler emissions control

4. Economic Breakeven Analysis

Breakeven analysis determines the natural gas price at which fuel costs are equivalent between gas and diesel, accounting for efficiency differences. This is critical for fuel switching decisions and contract negotiations.

Breakeven Gas Price Formula

Breakeven Equation ($/Mscf): P_gas_breakeven = P_diesel × (HHV_gas / HHV_diesel) × (η_gas / η_diesel) × 1000 Where: P_diesel = Diesel price ($/gallon) HHV_gas = Natural gas heating value (Btu/scf) HHV_diesel = Diesel heating value (Btu/gallon) η_gas = Gas engine thermal efficiency (fraction) η_diesel = Diesel engine thermal efficiency (fraction) Derivation: For equal cost per unit work: (P_gas / Mscf) / (scf/hr) = (P_diesel / gal) / (gal/hr) scf/hr = HP × 2545 / (η_gas × HHV_gas) gal/hr = HP × 2545 / (η_diesel × HHV_diesel) Solving for P_gas: P_gas = P_diesel × (HHV_gas / HHV_diesel) × (η_gas / η_diesel) × 1000 scf/Mscf

Breakeven Examples

Example 1: Modern lean-burn gas vs diesel Given: P_diesel = $3.50/gal HHV_gas = 1,020 Btu/scf HHV_diesel = 138,500 Btu/gal η_gas = 37% (modern lean-burn) η_diesel = 40% P_gas_BE = 3.50 × (1,020 / 138,500) × (0.37 / 0.40) × 1000 P_gas_BE = 3.50 × 0.007363 × 0.925 × 1000 P_gas_BE = $23.85/Mscf Interpretation: If natural gas costs less than $23.85/Mscf (very high!), gas is cheaper on a delivered energy basis. In practice, gas is almost always cheaper. Example 2: Older rich-burn gas vs diesel η_gas = 32% (older rich-burn), other parameters same: P_gas_BE = 3.50 × (1,020 / 138,500) × (0.32 / 0.40) × 1000 P_gas_BE = $20.62/Mscf Lower gas engine efficiency reduces breakeven price, making gas less economically competitive (but still far cheaper than diesel at typical prices).

Fuel cost breakeven analysis chart showing breakeven gas price vs diesel price for three efficiency scenarios (30%, 35%, 38% gas engine efficiency), with current Henry Hub range around $3.50/MMBtu and current ULSD range around $3.50/gal marked, indicating that above the lines gas is cheaper — Breakeven gas price chart showing at what natural gas price the fuel costs equal diesel. At typical prices ($3.50/gal diesel, $3.50/Mcf gas), natural gas is significantly cheaper.

Breakeven Table at Various Diesel Prices

Diesel Price ($/gal)	BE Gas (η=32%)	BE Gas (η=35%)	BE Gas (η=37%)	BE Gas (η=40%)
$2.50	$14.73/Mscf	$16.11/Mscf	$17.04/Mscf	$18.42/Mscf
$3.00	$17.68/Mscf	$19.33/Mscf	$20.44/Mscf	$22.10/Mscf
$3.50	$20.62/Mscf	$22.55/Mscf	$23.85/Mscf	$25.78/Mscf
$4.00	$23.57/Mscf	$25.78/Mscf	$27.26/Mscf	$29.47/Mscf
$4.50	$26.51/Mscf	$29.00/Mscf	$30.67/Mscf	$33.15/Mscf

Assumptions: HHV_gas = 1,020 Btu/scf, HHV_diesel = 138,500 Btu/gal, diesel η = 40%

Sensitivity Analysis

Breakeven gas price is sensitive to several parameters:

Sensitivity to efficiency: ∂P_gas / ∂η_gas = P_diesel × (HHV_gas / HHV_diesel) × (1 / η_diesel) × 1000 For P_diesel = $3.50/gal, η_diesel = 40%: ∂P_gas / ∂η_gas = 3.50 × (1,020 / 138,500) × (1 / 0.40) × 1000 = $64.55 per unit efficiency If gas engine efficiency improves from 35% to 37% (+2 percentage points): ΔP_gas_BE = 64.55 × 0.02 = $1.29/Mscf increase Sensitivity to gas heating value: ∂P_gas / ∂HHV_gas = P_diesel × (1 / HHV_diesel) × (η_gas / η_diesel) × 1000 For lean gas (950 Btu/scf) vs rich gas (1,100 Btu/scf): ΔP_gas_BE ≈ ±8% per 100 Btu/scf variation

Real-World Considerations

Fuel price volatility: Diesel prices are 2-3× more volatile than natural gas; gas provides more predictable operating costs
Infrastructure costs: Gas fuel requires pipeline connection (capital); diesel requires storage tanks and trucking (ongoing cost)
Emissions credits/penalties: Some jurisdictions tax diesel emissions or credit cleaner gas combustion
Dual-fuel flexibility: Dual-fuel engines allow switching based on real-time price, capturing price spreads

Typical market conditions: Natural gas prices range $2-6/Mscf while diesel ranges $2.50-4.50/gal. Even with diesel's efficiency advantage, gas is typically 70-85% cheaper on a delivered energy basis, making gas the economical choice when available.

5. Total Operating Costs

Fuel cost is only one component of total operating cost. Capital costs, maintenance, reliability, and emissions compliance all affect the economic comparison between gas and diesel prime movers.

Total Cost of Ownership (TCO) Components

Cost Category	Natural Gas Engine	Diesel Engine	Comparison
Capital cost ($/HP)	$300-500/HP	$250-400/HP	Gas +10-20% higher capex
Fuel infrastructure	$50k-500k pipeline connection	$20k-100k tank + containment	Gas higher upfront, lower ongoing
Maintenance ($/HP·yr)	$15-30/HP·yr	$20-40/HP·yr	Gas 25-40% lower maintenance
Overhaul interval	30,000-60,000 hrs	20,000-40,000 hrs	Gas longer life between overhauls
Emissions controls	$50-150k (catalyst, controls)	$100-300k (SCR, DPF for Tier 4)	Gas simpler emissions (lower NOx)
Fuel delivery	$0 (pipeline)	$0.10-0.30/gal trucking	Diesel has ongoing logistics cost

Levelized Cost of Energy (LCOE)

LCOE Formula: LCOE = (Capital + Σ(Operating Costs / (1+r)^t)) / (Σ(Energy Output / (1+r)^t)) Where: r = Discount rate (typically 8-12%) t = Year of operation Simplified annual cost approach: Annual_cost = Capital_annualized + Fuel + Maintenance + Other Capital_annualized = Capital × CRF Where CRF (capital recovery factor): CRF = [r × (1+r)^n] / [(1+r)^n - 1] For r = 10%, n = 20 years: CRF = 0.1175 Example: 2,000 HP compressor, 8,000 hr/yr operation Natural gas option: Capital = 2,000 HP × $400/HP = $800,000 Infrastructure = $150,000 (gas line connection) Total capex = $950,000 Annualized capital = $950,000 × 0.1175 = $111,600/yr Fuel = $339,200/yr (from Section 3 example at $3.50/Mscf) Maintenance = 2,000 HP × $20/HP·yr = $40,000/yr Total annual cost = $111,600 + $339,200 + $40,000 = $490,800/yr Diesel option: Capital = 2,000 HP × $350/HP = $700,000 Infrastructure = $50,000 (tank, pump, containment) Total capex = $750,000 Annualized capital = $750,000 × 0.1175 = $88,100/yr Fuel = $2,186,800/yr (from Section 3 example at $3.50/gal) Maintenance = 2,000 HP × $30/HP·yr = $60,000/yr Fuel delivery = 624,800 gal/yr × $0.15/gal = $93,700/yr Total annual cost = $88,100 + $2,186,800 + $60,000 + $93,700 = $2,428,600/yr Cost comparison: Diesel premium = $2,428,600 - $490,800 = $1,937,800/yr Gas saves 80% annually despite higher capital cost. Payback period for gas capex premium: ($950,000 - $750,000) / $1,937,800 = 0.10 years = 1.2 months!

Operational Factors

Non-fuel considerations that affect engine selection:

Availability and reliability: Gas engines typically achieve 95-98% availability; diesel 90-95% due to fuel system issues
Cold weather starting: Diesel better for extreme cold (< -20°F); gas requires preheating or glycol systems
Remote location fuel access: Diesel for areas without gas pipelines; gas for on-pipeline sites
Load cycling: Gas engines tolerate frequent starts/stops better; diesel prefers steady baseload
Portable vs stationary: Diesel dominates portable compression (drilling, workover); gas for fixed stations

Emissions Economics

Emissions Comparison (typical, lb/MMBtu fuel input): Natural Gas Diesel NOx (nitrogen oxides) 0.1-0.5 1.5-3.0 CO (carbon monoxide) 0.2-0.8 0.5-1.5 PM (particulate matter) 0.01-0.05 0.2-0.5 CO₂ (carbon dioxide) 117 163 SO₂ (sulfur dioxide) 0.001 0.3-1.0 NOx penalties (where applicable): Some air districts impose fees: $5,000-15,000 per ton NOx/year For 2,000 HP unit burning diesel at 2.0 lb NOx/MMBtu: Annual fuel = 2,186,800 gal × 138,500 Btu/gal / 1,000,000 = 303,000 MMBtu NOx = 303,000 MMBtu × 2.0 lb/MMBtu = 606,000 lb = 303 tons/year Penalty at $10,000/ton = $3,030,000/year This can exceed fuel cost! Emissions alone justify gas in these regions. Gas at 0.3 lb NOx/MMBtu: NOx = 97,000 MMBtu × 0.3 = 29,100 lb = 14.6 tons/year Penalty = $146,000/year (95% reduction vs diesel)

Industrial engine fuel selection decision flowchart starting with gas availability check, then load factor over 60%, gas price and diesel price comparison, environmental restrictions, leading to outcomes: Use Diesel, Favor Diesel, Favor Natural Gas, or Economic Analysis Required — Decision flowchart for selecting between natural gas and diesel fuel for industrial engines. Gas availability, load factor, fuel prices, and emissions requirements drive the optimal choice.

Capital Investment Decision Tree

Simplified decision framework for fuel selection:

Decision criteria: 1. Is natural gas pipeline available within 1 mile? - No → Diesel (gas infrastructure cost prohibitive) - Yes → Continue to step 2 2. Will unit operate > 3,000 hours/year for > 5 years? - No → Diesel (insufficient runtime to justify gas capex) - Yes → Continue to step 3 3. Is natural gas price < $10/Mscf? - No → Evaluate dual-fuel option for flexibility - Yes → Continue to step 4 4. Are NOx emissions regulated or penalized? - Yes → Strong preference for natural gas - No → Mild preference for natural gas based on fuel cost 5. Is unit portable or requires frequent relocation? - Yes → Diesel (mobility requirement) - No → Natural gas (lowest TCO for stationary) Result: In most midstream applications with gas availability and high utilization, natural gas is the economically optimal choice.

Industry trend: Midstream operators increasingly favor natural gas engines for fixed compression stations due to 70-85% lower fuel cost, 40-60% lower maintenance, and 90-95% lower NOx emissions. Diesel remains essential for portable units and gas-unavailable locations, but represents <15% of new midstream prime mover installations.

Common Pitfalls

Comparing $/gallon to $/Mscf directly: Must convert to $/MMBtu or account for energy density difference
Ignoring efficiency differences: Diesel's 5-10% efficiency advantage reduces (but doesn't eliminate) gas cost advantage
Overlooking infrastructure costs: Gas pipeline connection can cost $50k-500k depending on distance
Not accounting for emissions penalties: NOx fees can exceed fuel costs in non-attainment areas
Using HHV vs LHV inconsistently: US uses HHV; ensure both fuels on same basis for comparison
Neglecting fuel delivery logistics: Diesel trucking adds $0.10-0.30/gal to bulk fuel price

Natural Gas vs Diesel Fuel Economics

~136 scf ≈ 1 gal diesel

Diesel +5-10% thermal

$20-25/Mcf gas

Contents

Use this guide when you need to: