Shares in Vancouver-based Westport Innovations spiked almost 22 per cent Tuesday after it announced a deal with heavy equipment giant Caterpillar to jointly develop natural gas-powered engines technology for off-road equipment, including mining trucks and locomotives.

Its stock closed up $5.02, or 21.68 per cent, at $28.17 on the Toronto Stock Exchange.

Westport and Caterpillar will combine technologies and expertise and Caterpillar will fund the program.

Westport expects to supply key components if the program succeeds.

"This is a significant opportunity that has the potential to transform important segments of the global off-road equipment industries," said Westport CEO David Demers.

"We are working with the global leader in engines, locomotives and off-road equipment to develop an attractive natural gas offering for their customers."


"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," Demers said in a release.

Natural gas, a major Canadian commodity export that has recently hit 10-year lows, closed up three cents in New York at $2.45 US per million British Thermal Units.

News of the deal came the same day as Calgary-based TransCanada Corp. said Shell Canada Ltd. to build a $4-billion natural gas pipeline to transport natural gas from northeastern B.C. to a liquefied natural gas export facility near Kitimat, B.C. and as the International Energy Agency predicted global demand for natural gas will likely grow by 17 per cent over the next five years.

Jason Zandberg, an analyst with PI Financial in Vancouver, said the deal was good news for Westport and adds to its high-profile partnerships.

"Westport has done a good job of aligning themselves with good brands," he said.

"It makes a nice fit with Caterpillar but from my perspective as an analyst I still need to see this company get closer to profitability.

Westport earlier signed with Cummins, Chinese firms

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.

In addition to the deal with Cummins and now Caterpillar, Westport also 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 northern B.C. and Alberta, Pennsylvania, Colorado and Wyoming that were previously unavailable because the gas was trapped in shale rock.

If successful, the technology would result in reduced carbon emissions and might also have possible use on converting existing heavy equipment.

The companies also plan to develop natural gas technology for Caterpillar's off-road engines, which are used in a variety of electric power, industrial, machine, marine and petroleum applications worldwide.

"This agreement does more than pair two leaders in their respective industries," said Steve Fisher, vice president of Caterpillar's Large Power Systems Division.

"Many of our customers are asking for natural-gas powered equipment in order to reap the financial and environmental benefits," Caterpillar vice-president Steve Fisher said.

Development is to start immediately with commercial production planned to begin in about five years.

With files from The Canadian Press