LNG is already being used as a transport fuel in Europe and the United States, and a recently completed six-year Federal Government-funded study into the use of natural gas for heavy vehicles found that it was also a viable fuel for Australia.

In the Tasmanian project, about 65 trucks will be converted to run on LNG. Half a dozen major forest contracting enterprises have banded together to form LNG Refuellers, which has initiated a tender process in order to have a mini-LNG plant built.

The plant would produce between 20 and 50 tonnes per day of LNG per day, according to Rare Consulting analyst Mark McKenzie, who acted as a consultant to the LNG Refuellers and the Tasmanian Government during the project's feasability stage.

In a statement, Tasmanian Premier Paul Lennon and Federal Minister for Forestry and Conservation Eric Abetz announced a $5.05 million grant to get the project moving.

“This is an exciting project that will look to dramatically reduce fuel bills for forest contractors,” Abetz said.

LNG for the LNG Refuellers truck fleet will be produced from gas accessed via the $A440 million connection to the DEI Eastern Gas Pipeline in Longford, Victoria.

Natural gas is available in two forms for transport – LNG and compressed natural gas (CNG). One cubic metre of CNG offers the same energy output as a litre of diesel, while 1.62 litres of LNG offer the same energy output as diesel.

In Western Australia, diversified corporation Wesfarmers has begun building a 175-tonne per day LNG plant in Kwinana, which will produce fuel for heavy trucks and regional power generation.

The $138 million LNG plant is due to be commissioned in the first quarter of 2008, and Wesfarmers estimates the facility will produce about 64,000t of fuel per year.