Taiwan: Clean Fuels Leader in South East Asia A Monthly Publication by Asian Clean Fuels Association Vol. 5 Issue 5 - June 2007 Taiwan was admitted to membership in the World Trade Organization (WTO) in late 2001 as a developed country, meaning the country had to adopt more stringent requirements for reducing barriers to foreign competition. Economic growth has remained steady with these changes with gross domestic product expanding just over 4% each year since 2005. This year s forecast calls for a 4.4% increase (source: Taiwan Institute of Economic Research; Bloomberg). This economic strength, industrial productivity and societal stability have allowed the development and implementation of advanced vehicle emission and fuel quality specifications that meet international guidelines. With very limited domestic energy resources, Taiwan relies on imports for most of its energy requirements. The country has encouraged investment in domestic oil and natural gas projects, including partnerships with mainland Chinese companies. These efforts, while important, are unlikely to yield sufficient energy resources to reverse the island s import dependence. INSIDE THIS ISSUE Taiwan: Clean Fuels Leader in South East Asia Expert Talk: An Interview with SC Chuang, Division Chief, Mobile Source Control, Taiwan EPA Delegates Optimistic About Methanol & Fuel Ethers Markets at 10th IMPCA Conference Thailand Mandates Lower-Sulphur Fuels China Revises Biofuels Policy: No Ethanol from Food Crops Japan Clean Air Program - Opens Door to ETBE Blends Taiwan has about 2.4 million barrels of proven oil reserves as of last year (source: EIA; Oil & Gas Journal). It produced about 7,910 barrels per day (bbl/d) of oil during 2006, including only 800 bbl/d crude oil. Most of the country s feedstock production results from volumetric gains due to processing methods within its large petroleum refining sector. Overall petroleum consumption in Taiwan was about 975,000 bbl/d in 2006, virtually all of which came from imports. Transportation demands used about one-third of overall consumption. Presently, there are four refineries in Taiwan with a total refining capacity of more than 1,290,000 bbl/d. The refineries are operated by two companies: the CPC Corp. (formerly Chinese Petroleum Corp.) and the Formosa Petrochemical Co. Gasoline Property (FPC). The CPC has refineries in Taoyuan, Talin and Kaohsiung with combined processing capacity of more than 770,000 bbl/d. The Kaohsiung refinery has a TAME production unit. The CPC, founded in 1946 in Shanghai, moved to Taiwan (Taipei headquarters) in 1949 as a state-owned enterprise under the Ministry of Economic Affairs. The CPC has been the main player in all sectors of the country s petroleum and natural gas Table 1: Current Taiwan National Standards for Gasoline industry, including exploration, refining, storage, transportation and marketing. The FPC has a refinery in Mailiao, which has about 520,000 bbl/d processing capacity following an expansion in August 2006. The FPC refinery also has a 4,000 bbl/d MTBE plant. The significant expansion of FPC refinery operations, combined with CPC s output, has allowed Taiwan to become a significant Specification CNS 12614 RON, min 90/92/95 MON, min - Lead, g/l, max 0.013 Sulphur, ppm, max 50 Benzene, vol%, max 1 Aromatics, vol%, max 36 Olefins, vol%, max 18 Oxygen content, wt%, max 2.7 RvP @ 37.8 o C, kpa, min-max 60-70 Metal content (Fe, Mn), mg/l, max - Source: International Fuel Quality Center; China National Standards, EPA, ROC fuel exporter and supplier for the region. This has required Taiwan s fuel producers to upgrade quality specifications to meet the export market demands. The Bureau of Standards, Metrology and Inspection Ministry of Economic Affairs (MOEA) is responsible for fuel quality legislation in Taiwan. The Environmental Protection Agency is responsible for fuel component specifications that are related to air pollution such as content of sulphur, benzene, aromatics and olefins. The Energy Commission of MOEA is responsible for the permission of manufacturing and importing/exporting of petroleum products. The current national standards (Continued on p6) You can reach us at acfanews@acfa.org.sg. Visit our Web site at www.acfa.org.sg. Copyright 2007. 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.
EXPERT TALK Interview with SC Chuang, Division Chief, Mobile Source Control, Taiwan EPA Mr SC Chuang is the division chief for Mobile Source Control within the Department of Air Quality Protection and Noise Control for Taiwan s Environmental Protection Agency (EPA). Could you please tell us about your organization s major goals for the current year? At the Mobile Source Control Division, our major goals for the current year include the implementation of more stringent motor vehicle emissions standards, the promotion of clean fuels and clean vehicles, and the development of an enhanced motor vehicles emission inspection program. Taiwan recently lowered gasoline sulphur specifications to 50 ppm with additional tax incentives to reach 10 ppm. Also, you introduced quality-based standards for transport fuels instead of performance-based qualities. Please explain the changes and the reason for changing fuel specifications and what you expect to achieve. What additional fuel quality changes do you project over the next several years? Taiwan s EPA has the responsibility for regulating vehicle emissions and has established standards equivalent to those covered under the Euro IV requirements. Under this circumstance, the fuel quality standards must be the same as the EU countries to meet the vehicle emission control system. Consequently, the sulphur content in cleaner-burning gasoline must be lowered to 10 ppm to meet car import needs starting in 2011. Regional efforts to improve gasoline quality have helped to reduce vehicle emissions while balancing the need to maintain octane levels and other fuel properties. Do you anticipate continued or even expanded use of oxygenates such as MTBE, to address these issues? Currently, the EPA does not intend to mandate expanded use of MTBE; rather, we will follow the European approach to control the leakage of fuel storage tanks to avoid potential impacts to groundwater. Furthermore, the government is promoting a biofuel policy that can maintain fuel properties and help reduce emissions. This ethanol-gasoline blend still can maintain the fuel properties and can reduce the vehicle emissions as well as experience using MTBE. The Taiwan EPA has been encouraging motorbike engine improvements through its Clean Vehicle Development Plan, and enhanced inspection and maintenance requirements. LPG has historically been the promoted fuel for motorbike conversions. Do you see greater use of gasoline-powered engines with cleaner-burning fuels as future strategy to help improve urban air quality? In Taiwan, the government encourages motorists to use alternative cleaner-burning fuel, so we have introduced incentives for LPG vehicles. Prior to this time, we did not have LPG motorcycles since they are not that popular in this region of the world. More recently, the government decided to push its policy calling for all the gasoline to be blended with 3 vol% of bioethanol (E3) starting in 2011, and for diesel fuel to have 1 vol% blending with biodiesel (B1) from July 2008. These initiatives are intended to help further improve air quality in our country. Taiwan s expanding economy and manufacturing base have been accompanied by increasing per capita CO 2 emissions. Do you see efforts and restrictions to control these emissions, and what impact would they have on your country? The Taiwan EPA is still promoting LPG fuel use in cars to help reduce emissions. The government s unchanged environmental policy is to continue to use cleaner-burning fuels such as biodiesel and ethanol for our future strategy to help improve urban air quality. Regarding CO 2 emissions, the EPA has always been concerned with the GHG emissions and global warming issues, and we will take efforts to control these emissions. In the last few years, Taiwan s transport fuels supply and domestic demand have been in relative balance. With the changing dynamic in Asia Pacific region on energy and fuels use, what impact does this have on your domestic situation? The high price of crude oil impacts the cost of living for our citizens, particularly in recent months compared to the past several years. The potential consequence is economic slowdown creating further pressures on people s standards of living. To find out more about Taiwan EPA programs and initiatives, please go to their Web site at www.epa.gov.tw/. June 2007 Page 2
Delegates Optimistic about Methanol & Fuel Ethers Markets at 10th IMPCA Conference The 10th International Methanol Producers and Consumers Association (IMPCA) Asian Methanol conference was recently held in Singapore. The conference engaged some 140 participants from the Asia Pacific region as well as from other parts of the world. A number of important and well-received presentations were made during the 2-day program, including a regional update by ACFA s Mr CK Lee. The conference agenda incorporated a broad spectrum of regional and international issues, including marketplace developments, emerging technologies for production, traditional product needs and Responsible Care initiatives. Several key presentations are highlighted as follows. Mr Mark Berggren, managing director for Methanol Market Services Asia (MMSA), presented a thorough review of the current state of the methanol industry, looking not only at the Asian Pacific region but also globally. He noted a healthy level of activity on new production and expanded facilities, market development, logistics investments, and new process and technology developments for methanol and its derivatives. Berggren warned, however, that the rapid pace of production expansion could bring about a typical petrochemical cyclical correction, particularly if economic growth in China and other parts of the region soften. He observed that Asia, with a methanol demand of 18.2 million tonnes, will lead global consumption. He believes that aggregate growth is projected to be about 9% over the next 5 years, led mostly within China but also to a lesser extent in South East Asia and India. Figure 1: MTBE Regional Demand Source: 10th IMPCA Asian Methanol Conference, Singapore, Mark Berggren, MMSA, 2007 Plenary Session of 10th IMPCA Conference in Singapore Berggren presented several avenues for methanol use into fuels, including MTBE, fuel cells and other alternative fuels. This is due to high energy pricing that has led to improved methanol energy valuation based on increasing gasoline use. He believes that continued growth will be driven by gasoline demand and expanded use of dimethylether (DME). This is particularly the case in China where a number of planned DME facilities are expected to be built through 2012. He noted that China fuel policies are still in flux; nevertheless, the country is most interested in using methanol as a means to replace refined products (like gasoline, naphtha and diesel) to improve energy efficiency. He further indicated that expanded DME use is expected in other countries of the region, notably Japan and Korea. China also continues to use MTBE-blended gasoline and Berggren believes that by 2010 growth in global MTBE demand is expected to return for previous demand loss (see Figure 1). Finally, he noted other regional growth areas for methanol, including more traditional derivative use for acetic acid, formaldehyde and methyl methacrylate production, and for production of biodiesel fuel. In the Asian region, India is the wild card regarding methanol demand for either fuels use or in derivative products the potential growth in India is substantial as its economy and consumer needs grow. For the time being, however, much of the world is watching China as the main driver on methanol use. Jim Jordan, president of Jim Jordan & Associates, presented his firm s global and regional methanol review and forecast. He noted that methanol producers received an unexpected boost from world energy (Continued on p4) June 2007 Page 3
Delegates Optimistic about Methanol & Fuel Ethers Markets at 10th IMPCA Conference (continued from p3) prices that have impacted demand and pricing of the product. In previous years, methanol supply and demand fundamentals and US natural gas prices were the primary factors affecting methanol demand and pricing. Today, US methanol production is very small compared to the rest of the world and of little impact to overall demand and price factors. With different marketplace dynamics now established, Jordan noted that overall trends would indicate a more balanced market in the longer term. Much, of course, depends on the economic progress in the Asian region and the rest of the world, and as always, the cost of energy crude oil, natural gas and coal. Figure 2: Middle East & Africa Methanol Demand Jordan remarked that base assumptions on production expansion significantly impact regional developments on methanol use. With this in mind, overall forecasts on methanol capacity expansion indicate about 12.6 million tonnes coming online between 2007 and 2010. Up to 10.6 million tonnes of additional capacity could also be built in the same time frame, but highly dependant on methanol pricing to justify construction. Government policy also affects marketplace decisions. For example, Jordan noted that most EU countries accept MTBE-blended gasoline; however, with biofuels incentives being pushed in this region, he expects continued decline in blending (but with some further long-term conversions to ETBE). Methanol used for biodiesel production is likely to increase in Europe depending on government incentives and policy clarifications. For the Middle East and Africa regional analysis, methanol production is centered in the Middle East and significant volumes are exported to other regions. Considerable methanol volume is also used for MTBE production in the Middle East, and is mostly exported to Asia and some to Europe. Jordan observed that their base assumption is MTBE capacity in the US will go away by 2010, thus economic factors in Europe and Asia will influence production in the Middle East. Jordan s demand summary for the Middle East and Africa is given in figure 2. As for the South American/Latin American region, Jordan noted the most obvious market situation is the significant export volumes for methanol, and the conversion of the world-scale MTBE plant in Venezuela by next year. Similarly for North America, only Mexico continues some limited demand for MTBE. Methanol demand for derivative products in North America remains quite large and sourcing will be driven purely by economic conditions and product pricing. Source: 10th IMPCA Asian Methanol Conference, Singapore, Jim Jordan, Jim Jordan & Associates, 2007 CK Lee, communications director with the Asian Clean Fuels Association, gave a presentation about MTBE and clean fuels in Asia. He gave an overview of the air pollution problems in Asian cities, noting that many exceed healthy air quality standards for three or more pollutants. Although each city is unique in its emissions profiles, in some cases over 70% of urban air pollution is the result of vehicle emissions. Consequently, most Asian countries continue working to adopt more stringent vehicle emissions standards and cleaner fuel specification requirements. Lee explained the various options to improving fuel quality. He noted that oxygenates, including ethers, are a key component in the strategy of many countries to set clean fuel specifications. Based on comparative options, Lee summarized the benefits of MTBE blending to gasoline: MTBE has been used worldwide for some 30 years as a clean octane enhancer and lead-additive substitute. It helps reduce emissions from all types of gasoline engine vehicles, regardless of their emissions control technology. Its low volatility helps maintain gasoline vapour pressure characteristics. MTBE can reduce atmospheric reactivity of gasoline mass emissions. It allows refiners to use co-product streams from FCC and steam cracker units. It is fungible in the gasoline pool, providing increased flexibility to fuel producers, blenders and marketers. It is cost competitive in the marketplace without need for subsidies. It is compatible with engine and fuel system components and generally preferred by auto manufacturers. (Continued on p5) June 2007 Page 4
Delegates Optimistic about Methanol & Fuel Ethers Markets at 10th IMPCA Conference Figure 3: Worldwide Fuel Ether Use (continued from p4) Lee observed that virtually all countries allow MTBE blending, except for limits in Australia and some individual states in the US (see Figure 3). He noted that because of its high quality, performance, economics and availability, MTBE demand in Asia grew by about 7% last year to about 4.5 million tonnes. As continued economic prosperity takes place in China and elsewhere in Asia and growing numbers of vehicles occur as a result, greater pressures will be applied to urban centers to control emissions and improve air quality. Coupled with further efforts to reduce gasoline sulphur, benzene and aromatic content levels, and to control RVP, the use of oxygenates including MTBE becomes even more important to pollution control strategies. Upcoming Conferences & Events Source: 10th IMPCA Asian Methanol Conference, Singapore, Lee Chook Khean, ACFA, 2007 Thailand Mandates Lower-Sulphur Fuels The Thailand Department of Energy Business has announced stricter sulphur limits for gasoline and diesel fuel, including E10 (10 vol% ethanol blended into gasoline) and B5 (5 vol% of biodiesel blends) formulations. The current sulphur limits for conventional gasoline and diesel fuel are 500 ppm and 350 ppm, respectively, and covers E10 and B5 products. The new limits will reduce sulphur to 50 ppm for all of these transportation fuels starting January 2012. In addition to the lower sulphur content, several other changes are being made to the gasoline specifications. The allowable lead content is being lowered to 0.0005 g/l max (from the current level of 0.013 g/l max), and benzene limits go to 1 vol% max (from existing specification of 3.5 vol% max). An olefins limit of 18 vol% max is also being added to the gasoline specification. The specifications for oxygenates content and for aromatics levels remain unchanged in the revised standards. Thailand s current and future (selected) gasoline standards are summarized in the accompanying table. Thailand had been working to reduce oil imports and assist in cutting carbon emissions by substituting 20% of its vehicle fuel consumption with renewable energy sources within the next 5 years, primarily using ethanol for gasoline blends and palm oil methyl ester for diesel fuel. The recently unsuccessful replacement of RON 95 gasoline (premium grade) with E10 blends (called gasohol ) forced a move to reduce prices at the pump to gain consumer acceptance. Concerns about engine warranties when using the higher ethanol blends contributed to auto manufacturers and consumers resistance. The government is also requiring all refiners to blend B2 (biodiesel at 2 vol% blended with standard diesel fuel) nationwide starting 1 April 2008. Originally, B5 blend was planned; however, insufficient local palm oil supply exists to produce biodiesel at the necessary volumes. These efforts are part of the Energy Ministry s integrated strategy to support the biodiesel and renewable fuels industry. Current & Future Thailand National Standards for Gasoline Gasoline Property Current Specification Future Specification Year 21 October 2002 January 2012 RON, min (Reg/Prem) 91/95 91/95 MON, min (Reg/Prem) 80/84 80/84 Lead, g/l, max 0.013 0.005 Sulphur, ppm, max 500 50 Benzene, vol%, max 3.5 1 Aromatics, vol%, max 35 35 Olefins, vol%, max - 18 Oxygenates, vol%, max 11/5.5 min 11 max RvP @ 37.8 o C, kpa, min-max 62 62 Water, wt%, max - 11/5.5 min 11 max Source: Thailand Depart of Energy Business; International Fuel Quality Center JSAE/SAE Fuels & Lubes Conference Kyoto 23-27 July 2007 ICIS Biofuels Public Training Course Singapore 27 August 2007 5th Annual Methanol Forum Toronto 16-18 October 2007 World Refining & Fuels Conference Beijing 6-8 November 2007 2nd GPCA Annual Forum 2007 Dubai 12-13 December 2007 June 2007 Page 5
Taiwan: Clean Fuels Leader in South East Asia (continued from p1) for gasoline properties are given in table 1. The sulphur limit for gasoline was lowered to the 50 ppm max for all grades as of 1 January 2007. This standard is comparable to the Euro IV-equivalent gasoline specification. Although Taiwan did not sign the Kyoto protocol, the government is working to reduce greenhouse gas (GHG) emissions. The MOEA has announced plans to cut CO 2 emissions by 170 million tonnes per year by 2025. The MOEA plans to impose restrictions on emissions from Taiwan s top 200 energy consumption enterprises, including the CPC and the FPC. The government is also examining the use of renewable energy sources, including biofuels use in transportation. The Bureau of Energy is beginning ethanol blend trials later this year. E3 blends (3 vol% fuel ethanol blended with gasoline) will be made available at seven service stations in Taipei in September as part of a 2-year pioneer project. The stations are expected to mostly serve vehicles belonging to government agencies, although the blend would be made available to private cars. Additional stations would be supplied around 2009 to 2010 before making E3 blends available nationwide by 2011. The Taiwan EPA has indicated that there are China Revises Biofuels Policy: No Ethanol from Food Crops The China State Council has announced that it plans to move fuelethanol production off crop feedstocks as part of a new long-term renewable energy development strategy. China s current Five-Year Plan includes a goal of achieving 15% biofuels use for transportation needs by 2020. Refueling stations in various provinces presently sell gasohol a 10 vol% mix of ethanol with gasoline. But concerns about food security, crop land conversion and increasing costs for corn and other feedstocks are leading the government to restrict any projects that produce fuel-ethanol from food grains. An official with the Office of the National Energy Leading Group has indicated that food-based ethanol fuel will not be the direction for China. Japan Clean Air Program Opens Door to ETBE Blends A new Japan Clean Air Program (JCAP) is being launched through the Japan Petroleum Energy Center (JPEC) to investigate the use of diesel, biofuels and synfuels for emissions reductions and fuelsupply diversity. This joint program of the automobile industry, petroleum industry and other stakeholder interests has resulted in the successful introduction of ultra-low sulphur gasoline and diesel fuel. Because of increasing global demand for biofuels, secure supplies of biofuels at competitive prices are needed to no plans to increase the ethanol blending levels beyond the E3 allowance. The MOEA is concerned about compatibility with motorcycle engines that may not tolerate the ethanol blend. As part of efforts to reduce emissions, the Taiwan EPA last year introduced new policies pertaining to motorbikes and LPG vehicles. Owners of motorbikes who fail to have them tested when required will be fined and barred from renewing their licenses. The policies included subsidies to encourage the use of low-emission motorbikes and LPG vehicles that extend until 2007 and 2008 respectively (LPG is also subsidized at the filling stations). The fifth phase of emission standards for motorbikes, which is equivalent to the EU s thirdphase regulations, will come into effect on 1 July 2007. The EPA has also adopted regulations at the end of the year that allow random emission testing for all in-use vehicles, not just for motorbikes. All of these efforts by Taiwan tightened emission standards for vehicles, including motorbikes; strict enforcement of the requirements; and higher quality specifications of fuels to meet advanced engine designs have helped the country to reduce emissions and become a leader in South East Asia in addressing air quality and providing high quality, cleaner-burning transportation fuels. The new renewable energy initiative will restrict ethanol production to non-grain sources, such as grasses, corn stalks, cassava or other non-basic food products. Various initiatives include growing certain plants grown in wastelands to see if they are viable as feedstocks for biofuels production. One limitation is that cellulosicbased conversion technology is not yet fully developed, and generally uneconomical compared to current production methods. The Chinese government is nonetheless proceeding with efforts for fuel-ethanol companies to move to non-food based operations, although specific time frames have not yet been determined. develop broad availability in the country. This effort is intended to help improve energy efficiency and reduce oil use in transportation by 20% by 2030. One current initiative toward this goal is Japan s move to introduce an 7 vol% blend of ETBE in a limited number of service stations to evaluate performance and consumer response. The program is planned to expand in 2009 and eventually develop a nationwide blending option by 2010. If you have any enquiries or feedback on ACFA News, please contact us at acfanews@acfa.org.sg or contact Lee Chook Khean at +65 6236 0248 or e-mail cklee@acfa.org.sg. Visit our Web site at http://www.acfa.org.sg. 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. June 2007 Page 6