Octane - Global & Regional Supply & Demand

Transcription

1 Octane - Global & Regional Supply & Demand The global octane market has generally been characterized as a growth market. Fuel quality improvements, starting with lead removal and subsequently followed by sulphur and aromatics reductions, have continually pressed the need for octane replacement. Vehicle technology advances, such as fuel injection, and gasoline demand growth have also contributed to growing octane requirements from refineries. Octane needs and balances have varied considerably across regions of the world. The regions are on very different fuel quality schedules and market octane targets vary widely as well. Gasoline markets and regional octane trends will generally correlate, but at times the differences in regional needs, quality and balances result in market distortions. In the recent past, the octane market has been particularly volatile, as regulatory requirements placed strains on octane capacities in some markets and overall gasoline production capacity approached maximum utilization. The global economic downturn has impacted fuel demands, however, regional conditions again vary substantially. As economic recovery takes place in the coming months, gasoline demand will also recover and along with it octane needs. A recent analysis on global octane supply and demand conducted by Hart Energy Consulting (McLean, Virginia, USA), examined Figure 1: Regional Market Octane INSIDE THIS ISSUE A Monthly Publication by Asian Clean Fuels Association Vol. 7 Issue 4 - August 2009 Octane - Global & Regional Supply & Demand Interview with Dr. Petr Steiner of Hart PCFV Regional Workshop for East Asia - Highlights Fuels Industry Updates world-wide and regional gasoline octane trends and required refinery octane from 2007 to Projections indicated that global market octane will gradually increase by about 1.4 octane numbers (R+M/2) by The most significant increases will take place in developing regions and other areas where low octane grades are currently marketed or being phased out. Regional market octane needs show that all regions, except North America, are expected to experience increases in market octane (see Figure 1). Europe currently has the highest octane market and is expected to further increase as 91 RON gasoline is phased out. Other regions with significant octane market needs include the Middle East and the CIS. Fuel quality improvements will place additional octane requirements on refinery operations and expansions. Reductions in gasoline sulphur levels and aromatics (basically benzene) content will require octane replacement. Some octane needs will be met with blending components like fuel-ethers, or by non-refinery products, mainly bio-ethanol. Together, these blending components can provide gasoline pool octane of 2.4 R+M/2 by The octane outlook quantified regional gasoline market drivers that will impact future octane markets. For each region, the market conditions and trends were characterized for gasoline demand, current market octane, imports/exports, biofuels and other merchant components supply, and fuel quality regulations that will impact octane demand. Using these factors, the refinery octane was determined and compared across regions. Two specific regions are summarized as follows. Source: Hart Energy Consulting ( (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 Expert Talk Interview with Dr. Petr Steiner, Director, Refining Services and Manager Russia & CIS Regions, Hart Energy Consulting Dr Petr Steiner received his doctorate in chemical engineering from the Norwegian University of Science and Technology upon defending research investigating hydrodesulphurization catalysts. Originally from the Czech Republic, he obtained his master s degree from the Institute of Chemical Technology. During his research, he worked closely with Statoil and SINTEF center (Norway), and Technical University of Delft (Netherlands). He was a research associate at the University of Cambridge (U.K.) department of chemical engineering. Can you briefly describe your responsibilities at Hart Energy and current activities regarding the refining and fuels industries? I am presently centered at Hart Energy Consulting s offices in Brussels, and serve as director for refining with main focus on regions of Europe, Russia and CIS, Africa and Middle East. In addition, I am responsible for all Hart Energy services as manager for the Russia and CIS region for the International Fuel Quality Center and Global Biofuels Center. I am also one of the lead authors of Hart s 450-page World Refining and Fuels service report. With global petroleum markets continuing to fluctuate dramatically, what kinds of impacts does this have on gasoline production and octane quality? Global refining and fuel markets have changed substantially over the past ten years, and as indicated by recent changes in demand, they will likely evolve even more quickly over the next decade. The Asia-Pacific region is now the number one global consumer of refined products, over 25 million barrels per day. Demand growth for the region is expected to add as much as 17 million barrels per day more by China is projected to account for more than half of this demand growth for the region. Despite current economic conditions, expanding vehicle fleet and accompanying fuel demands will place premiums on octane requirement. More stringent fuel quality specifications, especially sulphur reductions in Asia-Pacific and other regions and volatility constraints will add to the pressures for gasoline supplies and octane levels. Tighter octane gasoline is needed as newer vehicles enter the marketplace. For these reasons, I believe that octane gains are inevitable. However, with the exception of a few regions, most of this gain will be achieved by non-refinery sources, mainly bioethanol, ETBE and MTBE. In some regions, the requirements for refinery octane are even expected to decrease. Our feature article highlights Hart Energy s multi-client outlook analysis of octane requirements. Can you tell us about how the study was conducted? This Hart Energy study, Global Refining Octane Outlook, examines regional market octane requirements and quantifies impacts of gasoline grade split, quality specifications, and biofuel growth on the refining industry. Our study design looks at market trends in terms of gasoline demand, market octane, imports and exports, biofuels and other non-refinery component supplies, and fuel quality regulations. From these inputs, market octane levels are modeled for each of seven regions North America, Latin America, Europe, Russia/CIS, Asia-Pacific, Middle East and Africa to identify market octane and refinery octane demands. The initial refinery octane target is then adjusted to account for anticipated fuel quality changes and future demands. We established a baseline year for 2007 and project to We are working on the updated analysis for release during the 4 th quarter this year. What areas will experience the greatest need for higher octane levels? Europe currently has the highest market octane level, and will continue to need high octane grades as Euro-V specifications phase out 91RON grade, and eventually Euro-VI becomes implemented. North America will see a slight decline in market octane levels and a strong biofuel addition will significantly reduce refinery octane requirements. The CIS region will experience the greatest increase in both market and refinery octane requirements. The Middle East region will also have significant octane gains. Market octane in the Asia-Pacific region will increase while refinery octane declines mostly due to the addition of oxygenates into the fuel pool. In what ways do you believe octane demands will be met in these regions? Each region is quite unique in how gasoline demands are met and quality standards are implemented. For example, to meet octane increases in the CIS region, refinery investments will be needed for new units that produce higher octane components, as biofuels are not projected to help to increase octane in this timeframe. Russia is a strong MTBE market and is projected to remain so due to recently enforced technical regulations for fuel quality. In the Middle East, refinery expansions include high octane processes, such as MTBE units. For the Asia-Pacific region, process reconfigurations can help meet some of the increased demand. New process units will also be installed based on economics and outside supply sources for blending components Oxygenates, like ETBE and MTBE, will be key octane contributors to the Asia-Pacific region. August 2009 Page 2

3 Octane - Global & Regional Supply & Demand (continued from p1) Asia-Pacific Region The Asia Pacific gasoline market as a whole is diverse and octane characteristics and trends cover a wide range of developments. The region is not far removed from gasoline lead removal in some areas and has therefore experienced increases in octane requirements. Other ongoing fuel quality improvements have added to octane needs, such as gasoline sulphur reduction to 10 ppm in Japan and phase out of low octane grades in China. Future quality changes will continue, and relative country demand share for octane will play a measurable role in aggregate octane trends in the region. to Europe and the U.S. As low octane grades are phased out over the next 5 years and gasoline quality moves closer to international standards, the overall market octane is projected to gradually increase to 88.2 average, or about 1.9 R+M/2. The Middle East refinery octane requirement will correspond to the market octane minus octane contributed mostly by fuel ethers. The import volumes to the region will be comparable to the average market octane. The fuel quality octane impacts are largely due to final lead phase out and some gasoline sulphur reductions. New refinery projects in the region will likely incorporate designs to meet the fuel quality and octane improvements. The Hart Energy projected Middle Eastern market and refinery octane trends are illustrated in Figure 3. The Asia Pacific gasoline market is the second largest behind North America, and represents 19% of global demand (about 4.25 million barrels per day in 2007). More significant, the region has represented the largest share of gasoline growth this decade and this trend is expected to continue. Consequently, the region s octane needs are having an increasing influence on global trends. In 2007, the average market octane in the Asia-Pacific was about 86.7, with premium grand gasoline about 14% of the market. The Hart Energy analysis indicates that an increase of 1 octane number is projected for regular grade gasoline as lower octane grades are increased (sub-90 RON grades to at least 91 RON minimum). Overall the market octane is projected to increase by 0.8 R+M/2 by 2020, as illustrated in Figure 2. As the world s vehicle fleet expands and modernizes, quality transportation fuels and appropriate octane quality will continue to be prime factors to ensure performance and customer satisfaction. The capability of the refining industry to meet the octane demands and gasoline volumes is expected to accomplish these requirements. Figure 2: Asia Pacific Market & Refinery Octane Trends ( ) The Asia Pacific refinery octane requirement will correspond to the market octane minus the octane contributed by ethers and bioethanol blending. The refinery octane will also be impacted by fuel quality changes that will reduce octane of refinery generated components, as noted previously sulphur and benzene reductions. These fuel quality changes will mostly affect octane requirements in those countries that have not yet completed significant quality improvements. Middle East Region Source: Hart Energy Consulting ( Figure 3: Middle Eastern Market & Refinery Octane Trends ( ) The Middle East gasoline market has experienced rapid growth in recent years, more than any other region. Driven by this demand and by product quality improvements (especially lead phase down), a growing shortfall for both gasoline and octane is occurring. Certain countries have actually lowered octane as a means of mitigating the near-term shortfall. Demand growth will continue to be strong in the Middle East region and octane needs will increase. In 2007, the average market octane was about 86.3 R+M/2, with premium grade representing about 24% of the market. The regional premium grade has a lower octane compared Source: Hart Energy Consulting ( August 2009 Page 3

4 PCFV Regional Workshop for East Asia - Highlights The United Nations Environment Programme coordinated Partnership for Clean Fuels and Vehicles (PCFV) Clearing-House conducted a Regional Workshop for Clean Fuels and Vehicles for East Asia this past May in Pathumthani, Thailand. The workshop was hosted by the Asian Institute of Technology (Thailand) and included representatives from Cambodia, China, Indonesia, Lao PDR, Malaysia, Mongolia, Myanmar, Philippines, Thailand and Vietnam. Efforts to improve air quality in the Asian region have been growing since the development of a roadmap for fuel quality and vehicle emission standards (see ACFA News, Vol. 7, No.1). A wider consensus by regional countries is leading to improved cooperation on joint research, development and deployment of low emissions technologies that rely on cleaner burning fuels to reduce vehicle pollution. This regional workshop builds on this consensus to improve fuel quality and to address practical challenges to implementing these advances. The framework for the workshop was guided by a concept paper that identified the preceding initiatives by PCFV and Figure 4: Benefits if China Adopted Euro V-equivalent Vehicle & Fuel Standards other entities and set out objectives and expected outcomes. The workshop provided an overview of clean fuels and vehicles, technical session on emissions data and air quality management efforts, and panel discussions about the issues. The workshop result was development of a concept paper Highlights from the workshop are as follows. Ms Vered Ehsani, UNEP PCFV, provided the keynote address and spoke on the Clean Fuels, Global Trends and the PFCV Focus. She noted the inter-relation of emissions to urban and global environment, and the importance of energy security when addressing these issues. Ms Ehsani summarized strategies to reduce transportation emissions in urban areas and PCFV s campaigns to work with countries to improve fuel quality and in-use vehicle technologies. The newest program is the Global Fuel Economy Initiative launched in March The goal is to gain a 50% improvement in fuel economy across the global vehicle fleet by Mr Dennis Leaf, U.S. Environmental Protection Agency, Office of Transportation and Air Quality, presented An Integrated Approach to Clean Fuels and Vehicles. He noted the need to reduce sulphur levels in fuel is critical to vehicle emissions controls. He examined the costs and benefits of an integrated approach to transport emissions reductions, and highlighted what could occur if China adopted national Euro V-equivalent vehicle and fuel standards (Figure 4). Source: USEPA, International Council on Clean Transportation Figure 5: PM Emissions in Asia Transport Sector Source: Asian Development Bank, CAI-Asia, Segment Y Ltd. Ms Glynda Bathan, Policy and Partnership Manager, Clean Air Initiative for Asian Cities Center (CAI-Asia Center), spoke on Current Fuel Quality and Vehicle Emission Standards Challenges and Opportunities in Asia. She showed data indicating that 57 major Asian region cities exceeded World Health Organization s PM10 guidelines of 20 µg/m3 (2005 or 2007 air quality monitoring), some by as much as 8-times higher than the recommended limit. The current trend and projection for PM emissions are shown in Figure 5. Ms Bathan summarized current and projected emission standards for new light-duty vehicles and fuel quality standards (sulphur) in the region. On challenges and opportunities, she showed the country data on fuel subsidy and economic benefits of clean fuel, and noted that fuel subsidies hamper introduction of clean fuels standards. Ms Maello Soares Pinto, Director, Global Biofuels Center Europe, Hart Energy Consulting, presented Promoting Cleaner Vehicle Technology & Co-Benefits with Climate Change. She noted that energy security needs (Continued on p6) August 2009 Page 4

5 Air Pollution Impacts Childhood IQ Study The current issue of the scientific journal Pediatrics (August 2009, Vol. 124, No. 2) published results of a study that for the first time links air pollution exposure before birth with lower IQ (Intelligence Quotient) scores during childhood. These findings support the concern that smog can harm the developing brain. The research was jointly conducted by the New York Department of Environmental Health Sciences, Columbia University, and Southwest Research Institute (all U.S.), and monitored air quality during mothers pregnancy and then assessed intelligence measures of the children to age 5 years. After adjusting for various confounding factors that could affect intelligence, the researchers found that low level exposures to polycyclic aromatic hydrocarbons (PAH) and other components of smog was correlated with reduced scores. This could be an indicator of academic challenges faced by disadvantaged children in highly urbanized centers with poor air quality. Further research is being considered to confirm results and expand the datasets. EIA International Energy Outlook 2009 The U.S. Energy Information Administration (EIA), part of the U.S. Department of Energy, published in May its latest International Energy Outlook, which presents an assessment for international energy markets through The assessment reflects the impact of economic conditions and stimulus programs in the U.S. and other countries. The report concludes that world marketed energy consumption is projected to increase by 44% from 2006 to Total energy demand in the non-oecd (Organisation for Economic Cooperation and Development) countries increases by 73%, compared to an increase of 15% in the OECD countries. World use of liquids and other petroleum grows from 85 million barrels per day in 2006 to 91 million barrels in 2015 and a projected 107 million barrels per day by The EIA determined that, while biofuels production and use will continue to increase along with other alternative fuel sources, conventional oil resources will still contribute about 85 of global transport fuel supplies. The EIA report is available at: U.S. Agency for International Development Issues Biofuels Sustainability Options Analysis Fuels Industry Updates The U.S. Agency for International Development (USAID), Environmental Cooperation-Asia Clean Development and Climate Program, recently sponsored an analysis of sustainability options for biofuels production and use in Asia. The global interest in biofuels development, spurred by policies in the European Union and the United States, have encouraged producers to seek out feedstocks and fuels from tropical and subtropical regions. This has transformed biofuels from a niche energy source to widely traded commodity market. The USAID identified the need for an objective, comprehensive, and fact-based evaluation of the viability of biofuels in Asia. While biofuels present a range of opportunities, the USAID found that they also entail significant environmental, social and economic risks. Significantly, the USAID determined that by 2030, biofuels will meet only an estimated 3 to 14% of the total transport fuel demand in Asia. Several additional findings of the assessment include: Many biofuels have limited GHG or net energy benefits only high-yielding feedstocks grown on existing cropland and converted to fuel using highly efficient processes result in significant net energy and GHG benefits. Most large-scale biofuels production systems are not economically viable without extensive subsidies and are subject to boom and bust cycles. Sustainable biofuels policies are needed to safeguard food security. The environmental impacts of biofuels depend greatly on the type of feedstock, production system, location, and land cultivation practices. An international framework is needed for sustainable standards and certification of biofuels. The USAID report was prepared by the International Resources Group and is available at USAID-biofuels-asia pdf Vietnam Considers Opening Up Futures Trade Vietnams Ministry of Industry and Trade has asked the government to open oil and fuel markets to begin movement toward a market-based system. In a recent statement issued by the Ministry, it proposed that companies or individuals with storage facilities and distribution systems meeting specific requirements be allowed to import fuel. The country should also allow companies to hedge against fluctuations in oil prices by trading in oil contracts, included futures markets. Earlier this year, Vietnam lifted fuel subsidies, effectively exposing product importers to market pricing and increasing the need to hedge on international markets. Fluctuations in world oil prices have resulted in frequent pump price changes that triggered consumer protests. A draft plan is being considered by the government. (Continued on p6) August 2009 Page 5

6 (continued from p5) Saudi Arabia s Yansab Starts Production at New Petrochemicals Complex In a July statement, Yanbu National Petrochemical Company (Yansab) stated that production at its complex at coastal Yanbu Industrial City has started. The extensive start-up may take a couple of months to reach full capacity. The petrochemical complex will produce world-scale volumes of ethylene, propylene, ethylene glycol, aromatics, and MTBE (for gasoline blending). Additional production streams are planned to come on-line during the remainder of Fuels Industry Updates Vietnam Sets B5 and E5 Specifications The Vietnam Standards and Quality Centre of the Directorate of Standards and Quality (TCVN) recently approved and released specifications for biodiesel blended fuel (B5) and bioethanol blended gasoline (E5). The blend specifications were issued ad separate standards one for diesel fuel (TCVN 5689:2005) and other on current gasoline (TCVN 6776:2005). The fuel ethanol and biodiesel specifications have been in place since September There is no national requirement to blend biofuels in Vietnam. In fall 2008, PetroVietnam launched pilot trials of E5 at two filling stations in Hanoi. Future plans are being developed to introduce B5 blends to the marketplace, however, no specific implementation dates are announced. PCFV Regional Workshop for East Asia - Highlights (continued from p4) are the common drive to policy development, and that advancing incomes leads to more vehicles, more travel and more energy demands. Ms Soares Pinto highlighted regional differences in how fuel and vehicle requirements can evolve and become implemented. She indicated that the evolution of transportation fuel quality is moving from conventional pollutants impacting urban air quality to emissions affecting climate change, and further into the future to sustainability of fuel supplies. Mr Panya Warapetcharayut, Director of Automotive Air Pollution Division, Thailand Ministry of Natural Resources and Environment, spoke about National Needs Regarding Emission Reduction for the Transport Sector. He listed emissions inventory data showing that mobile sources are leading contribution for particulate matter, carbon monoxide, nitrogen dioxide and hydrocarbons. He provided details about vehicle emissions standards for Thailand. Mr Warapetcharayut reinforced the elements of a comprehensive transport sector pollution control strategy includes cleaner-burning fuels, clean vehicle technologies, inspection and maintenance programs, and sound transport and land use planning. The workshop participants agreed to provide the information acquired with colleagues and associates to stress the link between fuel quality and clean vehicles, and therefore benefits for public health improvement and environmental protection. Upcoming Conferences & Events 2nd APAC Refining Summit 6-9 October 2009, Hanoi, Vietnam 2nd Downstream Asia Roundtable October 2009, Kuala Lumpur, Malaysia Oil & Gas Outlook Asia 2 November 2009, Singapore 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 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. August 2009 Page 6