David Demers | BCBusiness
"China is building LNG infrastructure like there's no tomorrow," says Demers, "so should B.C. be moving quickly to look at the opportunity to export our gas to Asia? Absolutely."
Having preached the gospel of natural gas for nearly 20 years, Westport Innovations CEO David Demers believes his told-you-so moment has finally arrived
After Westport was spun out of UBC research in 1995, David Demers had a vision of natural gas displacing oil as the world’s transportation fuel—not as the solution to climate change or dependence on a finite resource, but as a transition fuel. (Sure, he says, fuel cells, or solar-powered jet packs would be nice, but how do we get there from here?) Since then he has overseen the company’s growth from five to more than 1,000 employees as it develops and manufactures components for natural-gas engines. With markets awash in cheap natural gas, and even the president of the U.S. extolling its virtues, Demers believes patient investors still waiting to see a profit will finally be rewarded.
Westport got a lot of publicity in 2012 when President Obama announced his support for truck fleets converting to natural gas. Did that have an impact on Westport?
We’re always happy to hear support from the president of the United States, but has there been any tangible change? No. I’ve seen lots of technology transitions that get really messed up when governments jump on the bandwagon and then they jump off the bandwagon. I have no doubt we’re going to see a massive changeover from oil to natural gas in the transport sector. It’s going to happen; let’s just let it be driven by economics.
Would the development of an LNG industry in B.C. have any impact on Westport?
That’s exactly what I’m talking about. China is building LNG infrastructure like there’s no tomorrow, so should B.C. be moving quickly to look at the opportunity to export our gas to Asia? Absolutely. It creates a whole bunch of participants in the LNG business, which allows us to start using LNG in our own economy. Let’s let the industries develop, and develop our resources and our capability around that.
Do you mean you expect to see benefits in local transportation as well as in export markets?
We’re going to cut energy bills in half and we’re all going to see the benefit. If people take a look at B.C. Ferries expenses, number one is fuel. Can we instantly cut the price of fuel in half? No. It’ll take some work to rebuild the fleet and build up the supply, but in 10 years could we be doing that? Of course. The rail industry is all over this and I’m really surprised at how fast that’s taking off in the U.S. People are starting to understand this is a prize worth chasing.
The economics are obvious now: natural gas is more plentiful and cheaper than oil. But what are the projections: will that be true in another 10 or 20 years?
We’ve been at this for a while, and until the big fuel price spike that we saw in early 2008, most analysts were projecting that oil prices were being driven by speculators and in the long term the price would come down. But it was really in ’08 that people gave up on cheap oil and started to look around seriously at what we could do. And that was also the time that this flood of unconventional gas assets started to really hit its stride and we saw lots of gas supply hitting the market at very low prices. So I’d say 2012 was when everybody said, OK, this is real and let’s get going.
You said at the end of 2013 that 2014 would be a year of transition for Westport. Can you expand on that?
It’s been a long time coming. We came out of UBC in ’96 with this thesis that we’re going to get off oil, and a lot of people laughed and said it was a fantasy. We said the only way to make this work is if we get the original-equipment manufacturers behind it and we’re going to position ourselves to help them launch new products that incorporate natural gas.
We’re now pretty much at the point where half of the car companies around the world and half the truck companies either have launched or are launching factory-built natural gas products. We are just seeing this year the first full year of everybody who makes heavy-duty trucks in North America promoting natural gas, and we’ve got a 100-per-cent share of that.
So 2014 is going to be a year where we see a lot more of these products hit the road. It’s also where we at Westport are going to see operating profits for the first time and we can focus on making money as opposed to promoting the idea.
You’ve been at this for almost 20 years. Do you still find it exciting?
It’s still pretty exciting. The rail business has been a real blast and it’s a classic business story, where diesel locomotives were invented by a company that was the electro-motive division of General Motors. Here they are 60 years later; they are now a part of Caterpillar and they are saying this is the biggest thing since steam; we can reinvent ourselves using natural gas.
The really exciting thing, frankly, is that this is a big deal for the Lower Mainland. There is no automotive engineering of this scale in Canada, and here we are and we’re working with everybody in the business, from Ford up through Caterpillar. It’s a lot of fun and we are going to put Vancouver on the map in the automotive engineering business.