Caterpillar, Westport to co-develop natural gas engines for off-road equipment

VANCOUVER – Westport Innovations Inc. (TSX:WPT) has teamed up with Caterpillar Inc. (NYSE:CAT) to develop natural gas technology to power off-road heavy equipment such as mining trucks and locomotives that typically use diesel.

Caterpillar will fund the development program and Westport, a Vancouver-based specialist in engine technology, expects to supply key components for products developed under the initiative.

They say the there’s a potential to convert existing equipment using diesel engines to natural gas power.

Westport chief executive David Demers says the agreement is a significant opportunity – although the companies didn’t disclose financial details.

“We are working with the global leader in engines, locomotives and off-road equipment to develop an attractive natural gas offering for their customers,” Demers said in a statement.

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“The substantial price difference between natural gas and diesel fuel is resulting in a strong financial incentive to enable off-road applications to take advantage of low natural gas energy costs without sacrificing operational performance.”

Shares in Westport were up $3.49 or about 15 per cent on the news at $26.64 on the Toronto Stock Exchange.

In February, Westport signed a new agreement with Cummins Inc. that will see the company take a larger share of the profits at its 50-50 joint venture with the engine maker if it is able to grow the business faster than expected.

The renewed joint agreement will focus Cummins Westport on developing natural gas engines for customers in North America, where new drilling technology has made the cleaner burning fuel cheap and plentiful.

In addition to the deal with Cummins and now Caterpillar, Westport has a joint venture deal with Chinese heavy-duty engine maker Weichai Power Ltd. and Hong Kong Petersen (CNG) Equipment Ltd.

Interest in natural gas-powered vehicles in North America has increased as the price of natural gas fallen, making it more economical than gasoline or diesel in addition to being cleaner burning.

New drilling technology has unlocked massive new reserves in parts of Pennsylvania, Colorado and Wyoming that were previously unavailable because the gas was trapped in shale rock.