A Monthly Publication by Asian Clean Fuels Association Vol. 7 Issue 6 - October 2009 Middle East Region Fuels Quality Progress

Transcription

1 Middle East Region Fuels Quality Progress The Middle East is the top petroleum producing and exporting region in the world. The region also has the world s largest crude oil reserves and vast natural gas fields. While presently a net exporter of refined products, some areas have supply shortages of gasoline mostly due to limited refining capacity to make gasoline. Because of these reserves and production, the Middle East will continue to play a pivotal role in supplying the world s crude oil requirements. The region is expected to provide as much as 60% of the world s forecasted increase in crude and condensate requirements through There are currently two primary local organisations in the Gulf Cooperation Council Countries 1 that are involved in fuel quality issues. These are the Cooperation Council for the Arab States of the Gulf (GCC) and the GCC Standards Organisation (GSO). In addition, several countries have their own national standards authorities. The European Committee for Standardisation (CEN) provides affiliate membership to select national standardisation bodies of (neighbouring) non-eu countries having trade, technical, scientific or similar relations with the EU or the European Free Trade Association. The national standardisation bodies of Jordan, Lebanon and Syria are eligible for CEN affiliation allowing participation in CEN technical working groups and assistance to adopt Euro-type standards in their own countries. Although the Middle East region has lagged behind the global leaders in implementing clean fuel programs, this situation is changing rapidly. The lack of public transportation in the region results in a growing dependence, and concerns, over increasing vehicle numbers, fuel demands and impacts on air quality. The majority of light-duty vehicles are gasoline powered, whereas diesel fuel is used mostly in heavy-duty trucks and vehicles. Refiners in the region are struggling in many cases to meet their local gasoline, and sometimes diesel fuel, demands. More stringent fuel specifications in key export markets for these refiners also places pressures on the refining operations. 1 Gulf Cooperation Council countries: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab Emirates. INSIDE THIS ISSUE A Monthly Publication by Asian Clean Fuels Association Vol. 7 Issue 6 - October 2009 Middle East Region Fuels Quality Progress Special Report: U.S. Motor Fuels Benzene Reductions OILBOSS 2009 Summit Features Private Gasoline Stations Development Fuel Industry Updates IFQC Corner: U.S. Proposed New Standards to Reduce GHG Emissions and Improve Fuel Economy The combination of local demand and export market changes with economic prosperity in recent years throughout the Gulf region has led to investment in new refineries being planned in these countries and upgrading of existing refineries. Although GCC member states have agreed to start producing clean fuels equivalent to Euro-III emission standards by 2010, the current economic downturn has causes some projects to be deferred until the 2015 timeframe. This may bring about a leap frog effect where projects would proceed directly to producing Euro V-equivalent quality fuels. Leaded gasoline has been predominantly eliminated in the region. Today, only Afghanistan, Iraq and Yemen still have leaded gasoline in their markets. Yemen aims to phase-out leaded gasoline during 2009, however, the implementation plan has not yet been announced. Iraq and Yemen allow leaded gasoline with maximum content levels of 0.4 g/l and 0.15 g/l, respectively. For gasoline, the maximum sulphur limit varies from 100 ppm to 2,000 ppm content, although often gasoline provided into the local markets may have lower levels. The United Arab Emirates (UAE) and Qatar lead the region at the lower limit for gasoline (RON 97). Yemen is at the other end of the scale with the highest gasoline sulphur specification. Figure I shows current maximum sulphur limits for gasoline in select countries of the region. (Continued on p3) You can reach us at info@acfa.org.sg. Visit our Web site at Copyright Asian Clean Fuels Association. Disclaimer: The Asian Clean Fuels Association does not represent or warrant the accuracy, adequacy or completeness of the information and materials contained in this newsletter (the Content ), and expressly disclaims any liability for any error or omission in the Content, or for any action taken in reliance on the Content.

2 Refiners and fuels importers in the United States will be required to achieve significant reductions in the benzene content in gasoline sold throughout the country after The stricter standards, officially called the Control of Hazardous Air Pollutants from Mobile Sources: Final Rule to Reduce Mobile Source Air Toxics, were adopted back in early 2007 to allow sufficient time for refiners and supplier into the U.S. to implement the requirements. The mobile source air toxics (MSAT) rule will help lower emissions in three ways: By lowering benzene content in gasoline By reducing exhaust emissions from passenger vehicles operated at cold temperatures (under 75ºF/24ºC) By reducing emissions that evaporate from and permeate through portable fuel containers. Upon full implementation of this rule, the U.S. will have one of the tightest specifications for benzene content in gasoline. Currently, only a few countries world-wide have set similar strict benzene content limits, as noted in Table 1. As gasoline (and other fuels) sulphur content reductions progress globally, the next stage of fuel quality improvements will center on reductions in toxics emissions achieved with improved benzene controls. While there are exceptions notably Japan, Taiwan, South Korea, Australia, and parts of China for many Asia-Pacific region countries national standards for benzene limits are either lacking or in need of improvements to help reduce exposure and enhance public health. Hazardous air pollutants, also known as air toxics, include benzene and other hydrocarbons such as 1,3-butadiene, formaldehyde, acetaldehyde, acrolein and napththalene. Air toxics emitted by motor vehicles and other mobile equipment and sources contribute significantly to nationwide risk from breathing outdoor air toxics. Section 202(1) of the Clean Air Act requires the federal Environmental Protection Agency (EPA) to set standards to control hazardous air pollutants from motor vehicles and/or motor vehicle fuels. Since 2001, EPA has in place toxics emissions performance standards for gasoline refiners. From that time, EPA worked to evaluate and finalize toxic emissions controls specific to gasoline. Why reduce Mobile Source Air Toxics? MSATs are known or suspected to cause cancer or other serious health or environmental effects. Benzene is of particular concern because it is a known human carcinogen and most benzene emissions come from mobile sources. People who live or work near major roads or congested urban streets, or spend more time in vehicles, are likely to have higher exposures and consequently higher health risks due to benzene levels. Many MSATs are part of a larger category of mobile source emissions known as volatile organic compounds (VOCs), which contribute to the formation of ozone and possibly particulate matter (PM). Elevated ozone and PM air pollution causes serious Special Report U.S. Motor Fuels Benzene Reductions public health impacts, including premature mortality, aggravation of respiratory (lung) and cardiovascular (heart) diseases, damage to lung tissues, and other respiratory effects. Under the U.S. benzene standard, refiners must meet an annual average gasoline benzene content of 0.62 vol.% on all grades nationwide (including both conventional and reformulated gasoline). The current average benzene content of gasoline in the U.S. is slightly above 1.0 vol.%, with conventional gasoline specifications having a maximum cap of 4.7 vol.%. Gasoline sold in California is exempted since that state has already implemented standards as stringent as those established by EPA. To help with compliance, the regulations include a nationwide averaging, banking and trading program. In addition to the 0.62 vol.% average, each refinery must also meet a maximum average benzene content of 1.3 vol.% after Under this limit, a refinery s or importer s actual annual average gasoline benzene levels may not exceed this maximum average. EPA expects the nationwide averaging will help to lower benzene levels below current content, and to reduce the geographic variability in gasoline benzene levels. EPA is also providing compliance flexibility for approved small refiners or refiner that experiences unforeseen difficulties. EPA estimates that, for the U.S. under this new standard, total MSAT emissions will be reduced by 330,000 tons in 2030, including 61,000 tons from benzene. Gasoline will have about 38* lower benzene content overall. The estimated additional cost of producing gasoline to comply with the benzene standard is expected to average U.S.$0.0027/gallon (U.S.$0.0007/litre). The estimated net social costs of this rule (decreased pollution and improved public health) will be about U.S. $400 million in Benzene reduction strategies will vary by refinery, and some level of modification and investment for processing units will be needed. These costs, however, will readily be mitigated by the public health benefits reaped from reduced exposures to benzene and other air toxics. Table I: Country Fuel Quality Specification Fuel Quality Specification Country Benzene (vol.%, max.) Aromatics (vol.%, max.) U.S. Conventional U.S. RFG Phase II 0.95 avg. (1.3 max.) - U.S. (national after 2011) 0.62 avg (1.3 max.) - Calif. RFG Phase avg. (1.1 max.) 22 avg. (35 max.) European Union 1 35 Australian 1 45 avg. China (national) 2.5 (1) 40 (2) China (Beijing) 1 - (3) India (national) 3 - India (metro areas) 1 42 Indonesia (unleaded 95 RON) 5 40 Philippines 2 35 South Korea (4) Source: International Fuel Quality Center, February 2009 (1) Starting December 2009, nationwide specification of 1 vol.% max. (2) Total aromatics and olefins content controlled for RON 97 gasoline, then aromatics limit 42 vol.%. (3) Total aromatics and olefins of 60 vol.% max. (4) Either aromatics 24 vol.% max. and olefins 16 vol.% max., or aromatics 21 vol.% max. and olefins 19 vol.% max. October 2009 Page 2

3 Middle East Region Fuels Quality Progress (continued from p1) The Reid Vapour Pressure (RVP) specifications for the region are relatively high (70 kpa) given the ambient temperature range for most Gulf area countries. The maximum benzene limits for Middle East countries vary from 1.5 vol.% up to 7 vol. %, with the UAE set at the lower limit and Oman at the upper level. Figure 2 indicates the current maximum RVP and benzene specifications for the region. Most countries in the Middle East region experience different levels of air quality concerns. Some estimates place 50%, and in some cases as much as 75% of air pollution, particularly from higher ground level ozone (smog) levels, is due to the transportation sector. As part of the initiative to reduce air pollution, the GSO established vehicle exhaust emissions standards for new imported vehicles into GCC member states. These standards are currently voluntary for imported second-hand vehicles. Generally, these standards follow the Euro-II requirements for gasoline engine passenger cars. As improved fuel quality and cleaner-burning fuels increasingly make their way into the marketplace, the GSO is expected to update the existing GCC Technical Regulations on motor vehicle exhaust emissions to come into line with Euro-IV equivalent levels. Future fuel specifications in the region after 2010 are expected to also become more aligned with the Euro IV and Euro V-equivalent standards. The progress being seen in countries like Qatar and UAE on clean fuels supplies are expected to transfer into the markets of Saudi Arabia, Bahrain and Kuwait. Advances in the other Middle East countries will largely depend on progress with refinery upgrades and expansion plans. Figure 1: Current Maximum Gasoline Sulphur Limit (Middle Eastern Region) Source: International Fuel Quality Center, July 2009 Notes: 1. Waiver in place with sulphur content set at max of 400 ppm. 2. Two grades available (RON 98 and Ron 95) with max sulphur limit set at 500 ppm and 1,000 ppm, respectively. 3. Two grades available (RON 97 and RON 90) with max sulphur limit set at 100 ppm and 300 ppm, respectively. Figure 2: Current Maximum RVP and Benzene Limits (Middle Eastern Region) Source: International Fuel Quality Center, May 2009 Upcoming Conferences & Events Oil & Gas Outlook Asia 2 November 2009 Singapore Competitive Strategies for the Asia Energy Industry 10 November 2009 Beijing National Workshop on Clean Fuels & Vehicles 16 November 2009 Manila, The Philippines Fuels Forum 17 November 2009 Manila, The Philippines National Workshop on Clean Fuels & Vehicles 17 November 2009 Haiphong, Vietnam Clean Energy Expo Asia November 2009 Singapore If you have any enquiries or feedback on ACFA News, please contact us at info@acfa.org.sg or contact Joanne Chong at (+65) or joanne@acfa.org.sg. Visit our website at October 2009 Page 3

4 OILBOSS 2009 Summit Features Private Gasoline Stations Development The annual China Oilboss (2009) Summit was held in mid-september 2009 in Qingdao. This year s summit featured the First Forum of China Private Gasoline (Petrol) Stations Development. The Oilboss Summit looks to advance petroleum market development in China by working through host organisations and participants in seeking cooperative programs and conformity in policies at the national and regional levels. Over 200 attendees of the forum included delegates from national agencies and commissions, national and off-shore petroleum companies, industry and professional trade associations, university researchers, and technical, policy and management experts. Mr Clarence Woo, executive director of ACFA, was a Special Invited Guest speaker for the forum. His presentation was titled Building a Competitive Edge: Green Petrol Stations. The major points of Mr Woo s speech were: green gasoline station means that both the facility and its functions should be designed and operated in an environmentally supportive way; for private refueling stations in China, such practices will help them become more competitive in the marketplace; and the sooner private refueling stations upgrade to install and implement such practices and standards, the stronger the advantage of achieving national policy of energy saving and pollutant (emissions) reductions. Mr Woo noted that private refueling stations would eventually need to undertake these upgrades and now have the opportunity to focus on improvements, in many cases ahead of the national oil stations. The Forum conducted two sessions - the first addressed policies and markets; and the second focused on fuel supply and private stations. During the first session, Mr Jiang Xinmim, Assistant at NDRC Energy Research Institute, presented China Energy Market Situation in the Future and Private Oil Company Development Strategies. He spoke about competitive business structures that allow market innovation and development, importance of finished product pricing that reflects international market conditions and refining operations, and policies that balance supply-demand dynamics in the marketplace. Mr Jiang reviewed the petrol price management regulation and potential enhancements to its function. He further discussed development strategies for national and private petrol companies, highlighting the need for cooperation to ensure market and pricing stability. The fuel price mechanism should be tied to international markets with maximum retail pricing of gasoline and diesel set by government, and domestic finished products prices determined from crude oil and processing costs, applied taxes and appropriate margins for both wholesale and retail levels. Forum on Private Petrol Stations Development Source: Olboss (209) Summit; courtesy ACFA Mr Woo Addresses Forum on Private Petrol Stations Development Source: Oilboss (2009) summit; courtesy ACFA Additional speakers during the policies and markets session included: Mr Wang Jin, President, China Petrol Stations Network Running Module Practice and Thinking for Private Petrol Stations. Mr Deng Yusong, Deputy Director, Market Economy Institute, State council Development Research Center Understanding of Petrol Pricing Management Regulation. Mr Niu Li, Deputy Director, Macro-Economy Research Department, State Information Center International Oil Price Trend and Forecast on Economic Recovery. The session on fuel supply and private refueling stations noted that, in addition to those operated by SINOPEC and PetroChina, some 46,870 refueling stations are privately owned, and account for nearly 50% of the country s total. Of major importance, privately held companies and refueling stations need to ensure upgrades and compliance with leak detection and prevention systems and practices. Implementation of such efforts brings significant business opportunities along with environmental protections. In addition of round table discussion, speakers for this session included: Mr Wang Xudong, Ph.D., Beijing Training College of PetroChina New Thought and New Strategies for Petrol Retail. Mr Gao Chongdong, Managing Director, Qingdao Jindun/Century Sunshine Petrol Stations Running Philosophy of Private Petrol Stations. Mr Cao Chun You, General Manager, Shandong Linyi Jinjiu Petrochemical Company Branding is the Shortcut for Survival and Development of Private Petrol Stations. October 2009 Page 4

5 China Expected to Adopt Carbon Tax As international negotiations continue in advance of the United Nations 15th Conference of the Parties (COP-15) on climate change set for December in Copenhagen, China s Ministry of Finance released a study in September proposing the country implement a carbon tax to signal businesses that there is a cost for emitting carbon. The proposal would not adopt a carbon tax until about 2013, following changes to both fuel and natural resources tax structures. Based on preliminary planning analysis, the initial tax would likely be low, likely from 10 yuan to 30 yuan (US$1.46 to US$4.39) per metric ton of carbon from coal, oil or natural gas consumption. According to the ministry proposal, these fuels used by individuals in their homes would not be taxed. The ministry s Research Institute for Fiscal Science developed the study to help encourage business to adopt energy saving and emissions reductions measures in advance of applying the carbon tax. Over time, businesses that do not meet reduction targets could have higher taxes imposed. Other proposals are expected in the coming months from the Ministry of Environmental Protection, the National Development and Reform Commission, and the National Bureau of Statistics, however specific timetables are not yet available. China s State Council will review all the studies and use them as a basis for the eventual broad-based carbon tax plan. China s President Hu Jintao, at the United Nations in September, indicated a national goal of reducing carbon emissions intensity per unit of gross domestic production by 2020 to that of 2005 baseline levels. Fuels Industry Updates A recent study, published in the journal Science of the Total Environment, investigated the effects of bio-ethanol-gasoline blends on criteria air pollutant emissions from four-stroke motorcycles. The study was headed by researchers from the Department of Environmental Engineering, National Cheng Kung University (Tainan City, Taiwan), and supported by the Taiwan Environmental Protection Administration. The ethanol was blended with unleaded gasoline at levels of 3 vol.%, 10 vol.%, 15 vol.%, and 20 vol.%, and controlled for constant RON 95. Emissions characteristics for carbon monoxide (CO), total hydrocarbons (THC), and nitrogen oxides (NOx) were evaluated with the chassis dynamometers (EC cycle). The result of the ethanol-gasoline blends were compared with commercial unleaded gasoline blended with methyl tert-butyl ether. In general, the exhaust CO and NOx decreased with increasing oxygen content in both fuels. The ethanol addition did not reduce the THC emissions for constant RON gasoline. The high ethanol-gasoline blend (20 vol. %) resulted in less emission reduction compared to lower ratio blends, possibly due to changes in combustion conditions in the carburator engine. Furthermore, the influence of ethanol-gasoline blends on the reduction of exhaust emissions was observed a different driving modes, especially at 15 km/h cruising speed for CO and THC, and acceleration stages for NOx. The researchers noted that changes in combustion conditions in carburetor engines may influence the emissions, suggesting additional studies. (Ref: Science of the Total Environment, Vol. 407, Issue 19, 15 Sept. 2009; Yung-Chen Yao, Juin-Horng Tsai, Hung-Lung Chiang) India s Air Quality Continues to Decline According to a recently issued report, State of Environment Report India 2009, air pollution levels continue to rise in all of India s major cities. The report was prepared by the nongovernmental organization, Development Alternatives, for the Ministry of State for Environment and Forests. The assessment showed that the level of respirable suspended particulate matter (PM10) has increased in all 50 cities in the country that were studied by the All India Institute of Medical Sciences and the Central Pollution Control Board. Another example of air quality concern was in Delhi where NO2 levels have risen by 33% between 2000 and The study attributes the main causes of declining urban air quality were emissions from vehicles and factories. Estimates in the report indicated that the urban vehicle fleet is expected to quadruple by Among the critical strategies over the coming years will be managing urbanization in India, and strengthening monitoring and enforcement of emissions standards. (Ref: in/downloads/home/home-soe-report-2009.pdf ) Bio-ethanol Gasoline Blend Emissions from Motorcycles Study Gulf Petrochemicals & Chemicals Association Announces Market Study The Gulf Petrochemicals and Chemicals Association (GPCA), a leading regional, non-profit organisation that represents Gulf-region industry, has commissioned a study to address key macro-economic and investment indicators to help fill a void on reliable regional industry data. The on-going study is being conducted in partnership with UK-based Nexant Chem Systems. The outcomes are expected to include forecasts for production, capacity, profitability, competitive positioning, supply/demand and technology trends. Statistics are being developed for 13 production areas, including, ethylene, propylene, benzene and other aromatics, methanol, MTBE and other petrochemicals/chemicals. According to GPCA, this initiative is to support continued business development in the region by providing consolidated information, and all major petrochemical manufacturers and allied companies are participating. ( ). October 2009 Page 5

6 U.S. Proposed New Standards to Reduce GHG Emissions and Improve Fuel Economy A joint notice of proposed rulemaking was issued by the U.S. Environmental Protection Agency (EPA) and National Highway Traffic Safety Administration (NHTSA) to establish a National Program consisting of new standards for light-duty vehicles that will reduce greenhouse gas (GHG) emissions and improve fuel economy. EPA is proposing GHG emissions standards under the Clean Air Act (CAA), and NHTSA is proposing Corporate Average Fuel Economy (CAFE) standards under the Energy Policy and Conservation Act, as amended. These standards apply to passenger cars, light-duty trucks, and medium-duty passenger vehicles, covering model years 2012 through 2016, and represent a harmonized and consistent National Program. Under the National Program, automobile manufacturers would be able to build a single light-duty national fleet that satisfies all requirements under both programs while ensuring that consumers still have a full range of vehicle choices. The agencies have harmonized many elements of program design and the definitions used for cars and trucks and have Source: IFQC citing NHTSA, September 2009 developed the same or similar compliance flexibilities, to the Figure 4: Projected and Expected to Achieve Fleet-Wide extent allowed and appropriate under their respective statutes, such as averaging, banking, and trading of credits. They Emissions Levels Under Proposed CO2 Standards (g/mi) have also harmonized the compliance testing and test protocols used for purposes of the fleet average standards each agency is proposing. The proposed National Program would result in approximately 950 million metric tons of total carbon dioxide equivalent (CO2-eq) emissions reductions and approximately 1.8 billion barrels of oil savings over the lifetime of vehicles sold in model years 2012 through In total, the combined EPA and NHTSA standards would reduce GHG emissions from the U.S. light-duty fleet by approximately 21% by 2030 over the level that would occur in the absence of the National Program. These proposals also provide important energy security benefits, as light-duty vehicles are about 95 % dependent on oil-based fuels. The benefits of the proposed National Program would total about US$250 billion at a 3% discount rate, or US$195 billion at a 7% discount rate. While there is savings in future fuel costs, the value of time saved due to less frequent refueling, and utility gained from additional travel that results from the rebound effect, the success of these programs is also dependent on the consumers buying behavior. Vehicle manufacturers currently produce many models that would allow them to meet the proposed higher CAFE standards, yet at least on average, buyers reveal a preference for lower fuel economy than the proposed rule would require. In this situation, Figure 3: Required and Expected to Achieve Fleet-Wide CAFE Levels Under Proposed Standards (mpg) Source: IFQC citing EPA, September 2009 often referred to as the Energy Efficiency Paradox, consumers appear not to purchase products that are in their economic selfinterest. The standards must be finalized by March 2010 to allow adequate time for implementation by auto manufacturers for the 2012 model year. The agencies are currently accepting public comments on the proposed standards. The accelerated timelines for the standards responds to a call by President Barack Obama back in May to develop a National Fuel Efficiency Policy. Disclaimer: The Asian Clean Fuels Association does not represent or warrant the accuracy, adequacy or completeness of the information and materials contained in this newsletter (the Content ), and expressly disclaims any liability for any error or omission in the Content, or for any action taken in reliance on the Content. October 2009 Page 6