Blue Gas Marine was inspired by founder Miguel Guerreiro’s passion for saltwater fishing during a period when fuel reached record highs. His solution? Develop technology that lets boats run on natural gas at about a third of the cost of gasoline or diesel.

Why did you start Blue Gas Marine?

I’ve always been a saltwater fisherman and when gasoline at the marina hit about US$6 per gallon in 2008, I realised how it was impacting my boating. I stopped doing long trips to the best fishing spots because of the costs. I also started looking around for alternatives − commercially available systems or fuels that would solve the rising costs of fuel.

Frankly, the options were bleak. There were small battery trolling motors, but they were for small boats. Now, there are bigger electric outboards but they’re often more expensive than the entire boat. At the time, there were really no other options besides gasoline and diesel. The cost of fuel was just too high.

So you saw an alternative with compressed natural gas?

At the time, I was trading in energy futures, so I knew the price swings of natural gas, with its lowest cost being from May through September. Basically, the summer boating months. I used my engineering background to do a detailed feasibility study on using natural gas in marine engines. I realised that CNG was not only feasible, but much more efficient than gasoline or diesel. CNG is 130 octane, so it releases energy for a longer period of time than diesel or gas. It’s also much, much cleaner.

Did you realise that the barriers to entry to the boating industry are significant?

Earlier in my career, I’d worked for a large company as the manager in charge of taking new products to market. I knew that just because technology is cool that it might not succeed on the market. I did a six-month market analysis on the CNG applications for boating, figuring costs, barriers to entry and what the infrastructure would have to look like.

It looked very exciting from the business side. We interviewed 100 potential customers in all spectrums of boating, ranging from many recreational designs to commercial from patrol boats to ferries, and so on. Every segment said that the number one issue for them was the cost of operating the vessel because of fuel prices and the high fuel volume used to propel the boat.

So you launched Blue Gas Marine?

In 2011, the company where I worked and I’d helped take public (IPO) was being acquired and I was looking for a new opportunity, so I started BGM in 2012. I knew it would take us a long time before we had anything to sell, but after three years, we had a good product that had gone through several product evolution iterations. By that point, we’d run marine engines on CNG for thousands of hours. We’d also established partnerships with Intrepid, Dusky and other manufacturers who build outboard fishing boats, and Suzuki Marine with their outboards.

These days, we’re working with pontoon boat manufacturers to run their products on CNG. We’ve also developed our system for inboard gas engines and are now working with diesel engines as well.

We started with the outboard market, partly because it’s the fastest-growing segment and it also gave us access to the largest workboat segment by number of boats. We’re now working with a builder on the world’s first natural gas-powered pilot boat and using inboard motors from Mercruiser for that project. On the commercial side, we’re working with Armstrong Marine and Ribcraft USA and other shipyards. Basically, we’re looking at anything in the marine industry to apply this technology.

Companies in Asia, Europe, Mexico and Canada are asking us to provide systems for ferry boats, cruise vessels and recreational boats.

Can you talk about the actual technology?

Natural gas is commonly used in other  industries. About 40% of city buses in the US run on CNG, and companies like Fedex and UPS are now using it on their truck fleets with more than 300,000 vehicles running on it in the US alone. Because this technology didn’t exist in the recreational boating industry, we have no competitors. Our system is not an engine conversion.

We created a technology that is plug and-play, and takes about two hours to add to an engine. So it’s easy to install. It requires just our equipment and a natural gas tank. Our secret sauce comes from the software and computers we’ve developed that directs the engines to run on natural gas. Our hybrid setup allows the engine to run on either gasoline or natural gas, or a combination of the two. You just push a switch at any speed to change the fuel source.

The BGM system isn’t a permanent modification, so if the owner wants to sell the boat he can leave the system or completely remove it without affecting the stock engine.

What are your greatest challenges?

It’s not the technology. We’ve been working with some of these boatbuilders for five years now, so they’re comfortable with the technology. The issue of price is not a big deal, either. We estimate that our system adds about 5%-10% to the cost of a boat for a refit. If you figure that marine fuel in the US is about $3.80 per gallon, and you can fill up with natural gas at 80 cents, our system pays itself back in maybe two or three months on a commercial boat.

On a recreational boat, the payback could be a year. Since the cost of labour is about half for an installation on a new build, it’s an even more affordable option for a new boat. Gasoline fuel prices are low now, but when they rise a year from now, as forecasted, the differences in price will be even greater than these payback figures account for so the value proposition gets even stronger.

What about access to CNG? Is that a challenge?

There are 3,000 public stations in the US that offer natural gas, so boats on trailers can fill up fairly easily. We also offer the ability to fill up the boats with our systems at tens of thousands of homes that use natural gas.

The real challenge for larger, non-trailerable boats is accessing the CNG. We’ve established beachheads with Blue Gas Marine fuelling stations on the water in high boating states like North Carolina, New Jersey, Michigan, Florida and California. We’re focused on these spots because, besides recreational boats, commercial fleets are driving the volume of fuel sales. Two to three boats in a commercial fleet make it feasible for us to have a location on the water. Once they’re there, we market to recreational boaters as well.

How have you been marketing yourselves?

We’re at the major boat shows with our Dusky and Intrepid boats. Boaters see it in the water, and can do test rides, so the exposure is good. We’ve also won innovation awards for the technology and top product awards from the industry. Our tests show a fuel efficiency increase of up to 50% while running on compressed natural gas. CNG is also 33% lighter than gasoline for the equivalent energy.

That means that a boat will go much further on an equivalent amount of CNG than on gasoline, while operating costs are up to 70% lower. Besides price, we’re also seeing clients who like its greener potential. One home owner’s association wants to put one of our fuelling stations on their lake in Indiana, which is mostly millionaires, and install our technology on all their pleasure boats. Our emissions levels are so much lower than gasoline or diesel powered engines that air and water pollution levels are almost nothing.

Where are you now in your business plan?

Right now, most of our sales are in the refit market for used boats. Our timeline is actually going much faster than I expected. In the last four months, we’ve achieved the same sales pipeline that I’d anticipated for the next two years.

We’ve entered the market and don’t expect it to be mainstream immediately. But over the next five years as the technology takes hold, we hope to have 10 to 20 boatbuilders across different boating-use segments offering our technology. We also hope to see even bigger gains in the commercial sector.

We see our technology as the future for recreational, commercial and government/ military boating. When another recession hits, most boatbuilders are going to be impacted. Right now, everyone is enjoying low fuel prices. But when they go up, the builders that can offer much lower fuel prices on their boats will be the ones that will weather that economic storm the best.