Indonesia Advances on Petrol Lead Phase-Out Indonesia is the last of the larger Asian countries to implement the switch to fully produce unleaded petrol. While unleaded petrol was first introduced in mid-200, as of July 2006, stateowned petroleum company Pertamina began voluntary production of unleaded petrol to supply the entire country lead-based additive was no longer blended to petrol during the refining process. As the current stock of leaded gasoline is used up, and because lead has adsorbed onto pipeline and storage tank walls, it will take some time before the country achieves its target for lead-free fuel. To accompany this lead phase-out, Indonesia has implemented new fuel specifications following World-Wide Fuel Charter Category 2 with some differences. ACFA has held the goal of helping achieve unleaded petrol in all markets of the Asia-Pacific region. Providing sound, sciencebased technical information about the benefits of cleaner-burning, lead-free petrol is an important program for ACFA. ACFA recognises that removing lead from petrol is usually the first step in the evolution of better fuel quality and to improved public health from better air quality. Indonesia s Proposed Scenario for Gasoline Specifications Property Gasoline Grade Term () RON 88 RON 92 RON 95 Sulphur, ppm, max Lead, g/l, max Technical Action Market Regulation Action 2 3 2 3 2 3 0.3 500 50 0-30 0.03 - Refinery upgrading - Import fuel 0.03 - Refinery upgrading - Import fuel - New refinery development - Reduce lower grade for gasoline - Import fuel - New refinery development - st stage of subsidies removal - Applied new regulation (No. 22/200) 2 - Completion of subsidies removal 3 - No subsidies given INSIDE THIS ISSUE A Monthly Publication by Asian Clean Fuels Association Vol. 5 Issue - January 2007 Indonesia Advances on Petrol Lead Phase-Out Expert Talk: CEO Ari Soemarno Discusses Plans and Progress at Pertamina WHO to Publish Global Air Quality Standards Thailand s E0 Mandate for Year-End 2006 Hits Snags Australia s NRMA Calls for Alternative Fuels Road Map Philippines Enacts New Biofuels Law Indonesia s new gasoline specifications were implemented in March 2006. The RON 95 petrol specification was changed the most manganese/phosphorus and silicon limits were set at non-detectable levels; aromatics content was lowered to 40 vol % (RON 9 petrol was allowed to continue with 50 vol % aromatics content). New properties for RON 95 and RON 9 petrol included a benzene limit of 5 vol % maximum and oxygen content was limited to 2.7 weight %. Although no olefin limit was introduced for either grade, oxidation stability must be a minimum of,000 minutes if olefin content exceeds 20 vol %. Other property changes include RvP restrictions of 45-60 kpa, and a density limit set at 75-770 kg/m 3. Sulphur content was maintained at 500 ppm maximum. For RON 88 petrol, most properties remain unchanged, except for reduction in sulphur content to 500 ppm for both unleaded and leaded grade (from,000 ppm for unleaded; 2,000 ppm for leaded), and establishing standards for oxygen content, density, distillation and oxidation stability. Although the new petrol specifications will still allow leaded fuel, it does not reflect the current situation of lead phase-out. Note: () Term : By end-2005, Term 2: By end-200, Term 3: Beyond 200. Source: LEMIGAS, March 2005 (Continued on p6) You can reach us at acfanews@acfa.org.sg. Visit our website at www.acfa.org.sg. Copyright 2007. Asian Clean Fuels Association.
EXPERT TALK CEO Ari Soemarno Discusses Plans and Progress at Pertamina Ari Soemarno is president director and CEO of Pertamina, the national oil company of Indonesia. He was appointed CEO in March 2006, and, prior to assuming this job, Mr Soemarno was the corporate senior vice president for marketing and trading. He has been with Pertamina for almost 30 years, starting his career as an engineer in the Bontang LNG plant. still do not appreciate it. For example, in distributing subsidized fuels, which also is known as the public service obligation, only since 2006 have we been compensated based on market prices. Even now, our LPG business is losing as much as US $300 million a year because we cannot pass on the cost to the consumer, although the business is technically an open market and, as such, is not supposed to get any subsidy. Pertamina is an integrated oil and gas company. On upstream, the company is currently the second-largest producer for oil and gas; in Indonesia the top producer for oil is Chevron; for gas, Total. In addition to oil and gas, Pertamina is also active in the geothermal energy business. In the downstream sector, the company has about million b/d of refining capacity, and, although the refining business is open, Pertamina is currently still the only refiner in the country. In marketing petroleum products to the Indonesian market, Pertamina used to be the monopoly but now the market is open to new entrants. Shell and Petronas have opened retail stations, and other companies have entered as suppliers to the industry. Q: Pertamina has gone through a great deal of change since becoming a limited liability company in September 2003. What are the major achievements so far and how has the entry of foreign oil companies into the Indonesian oil retail sector affected Pertamina? As you are aware, the oil and gas industry in Indonesia has experienced a great deal of change since the enactment of the new Oil and Gas Law in November 200. Becoming a limited liability company is a consequence of that law. It is indeed a very different business environment for Pertamina. Essentially, we have been transforming from an operator company (on the government s behalf) to a company in a true business sense. It has not been an easy transition, and we are still struggling. Part of the struggle is gaining the understanding of our stakeholders, who are not used to treating us as a true business entity. Even many factions of the government The oil and gas industry in Indonesia has experienced a great deal of change since the enactment of the new Oil and Gas Law in November 200. Becoming a limited liability company is a consequence of that law. It is indeed a very different business environment for Pertamina. The biggest challenge, however, is in transforming the company so that we have the right mindset and corporate culture in this new business environment. We are not used to this, as for many years we were shielded from true competition. Despite this, I think we have made significant improvements and are moving in the right direction. We are implementing a thorough transformation program for the company. Since it was initiated in June 2006, we have successfully implemented 00-day breakthrough projects, identified as quick wins or low-hanging fruits. From these, we generated substantial revenue increases, slashed significant costs, simplified and streamlined many of our business procedures and processes. This in turn increased our overall efficiency. We need to continue to have the ball rolling and move towards bigger and more important projects so that this type of effort becomes internalized in our system. Q2: Pertamina has been producing and marketing unleaded petrol in major urban areas for more than five years. Pertamina has also recently confirmed to the Ministry of Environment that it has ceased adding lead to all petrol being made since July 2006. What set the stage for this decision to fully phase out leaded petrol in Indonesia? For me the answer is quite simple: It is the right thing to do. Safety, health and environment should not be jeopardized in our business operations. As you are aware, Indonesia is one of the last countries in Asia to eliminate lead in its gasoline; what we did last June was long overdue. Providing cleaner fuels is not less important; it is also required to remain competi- (Continued on p3) January 2007 Page 2
EXPERT TALK CEO Ari Soemarno Discusses Plans and Progress at Pertamina (continued from p2) tive. We cannot afford to be perceived as a company that disregards clean fuel trends. Q3: A recent fuel-monitoring survey showed that the average lead content in petrol has dropped to 0.038 grams per liter, nearly 75% lower than last year. What is your projected timetable to use up the existing stocks to become lead-free nationwide? We have not blended lead since last June and, as such, it is no longer in our system. Q4: Removing lead from petrol results in an octane deficit. What steps have Pertamina taken to substitute for this octane loss to ensure that adequate octane level and consumer satisfaction are maintained? Our refineries have adapted to the requirements. In the short term, we combine optimizing gasoline-producing units in our refineries with the most cost-effective (imported) blending stocks, as well as importing unleaded gasoline directly since our refining capacity cannot meet the whole country s gasoline demand. In the longer run, we need to upgrade our existing refineries so that they can produce the required cleaner fuels in the most cost-effective manner, as well as adding some new capacities. We are committed to making the necessary investment in our refining systems so that we can effectively compete in the region. Q5: Although updated specifications were issued in March 2006, when do you anticipate revised petrol-quality specifications can be issued to reflect the removal of lead? Essentially, we have been transforming from an operator company (on the government s behalf) to a company in a true business sense... The biggest challenge is in transforming the company so that we have the right mindset and corporate culture in this new business environment. The adoption of new regulations, including those for fuel standards, is in the hands of the government. We expect the Directorate General of Oil and Gas to make the necessary revisions soon. Q6: Fuel quality is improving worldwide; Indonesia s petrol quality will also follow this trend. What are the next steps now that unleaded petrol is the norm do you expect specifications to generally follow Euro-type standards? As I mentioned earlier, we aspire to be able to compete effectively with other refineries in this region. This is not only with respect to petrol specifications but also to other standards in all fuels, such as reduction in sulphur contents. In upgrading our refineries, we will have Euro-type standards in mind. Q7: Looking toward the future, Pertamina is planning new refinery investments to meet growing demand in Indonesia and produce cleaner, more environmentally friendly fuels. Can you share these plans with us? First and foremost, we need to have our existing refineries able to produce the required fuels while providing decent margins. Some of our refineries unfortunately are not in this position yet. For example, our largest refinery in Cilacap, with the capacity of 340 kb/d, is basically a simple refinery. We need to make an investment to increase its complexity and sophistication. Similarly, we need to upgrade other refineries so that we can achieve our goal. As for building a grass-roots refinery, we have to make sure that it will be economically justified, before we can decide whether or not to go ahead. Thank you, Mr Soemarno. January 2007 Page 3
WHO to Publish Global Air Quality Standards The World Health Organization (WHO) is about to formally publish its new air quality guidelines that dramatically lower standards for particulate matter (PM), ozone, nitrous oxides (NO X ), and sulphur dioxide (SO 2 ). The health agency for the UN has also challenged governments around the world to improve air quality to better protect people s health. These guidelines, based on the latest scientific evidence, are provided for all regions of the world to establish uniform targets for air quality in some cases they are substantially stricter than national standards. In setting these air quality targets, WHO believes it would protect the large majority of individuals from the effects of air pollution on health. In addition to guideline values, interim targets are given for each pollutant. These are proposed as steps in a progressive reduction of air pollution and intended for areas where pollution is high. According to WHO, progress towards the guideline values (not just to the interim targets) should be the ultimate objective of air quality management and health risk reduction in all areas. Several of the guideline standards are stricter than similar WHO guidelines for Europe published in 2000. The recommendations include an annual PM 0 standard of 20 µg/m 3. According to WHO, many cities, particularly in developing nations, experience average annual PM 0 levels exceeding 70 µg/m 3. WHO estimates that reducing PM 0 levels to this annual standard could reduce deaths in polluted cities by as much as 5% every year. Beside the annual standard, the organization calls for lowering the 24-hour mean PM 0 levels to 50 µg/m 3. The PM 2.5 standards are also changed to 0 µg/m 3 for the annual mean, and 25 µg/m 3 for the 24-hour mean. The WHO established other lower standards for air pollutants, including: Ozone (ground level) limit of 00 µg/m 3 for an eight-hour mean (down from the previous limit of 20 µg/m 3 ); and SO 2 limit of 20 µg/m 3 maximum for 24-hour period (reduced from the previous limit of 25 µg/m 3.) The standard for NO 2 was unchanged; however, WHO noted that meeting the limits remains a great challenge in many urban areas where heavy auto emissions occur. Air pollution is estimated to cause approximately 2 million premature deaths worldwide per year as many as 530,000 in the Asian region based on WHO assessment. More than half of this burden is borne by people in developing countries. According to WHO, the global burden of air pollution includes disease from respiratiory infections, heart disease and lung cancer. Moreover, action to reduce the direct impact of air pollution can also cut emissions of gases that contribute to climate change and provide other public health benefits. Pollutant PM 2.5 PM 0 Ozone (Ground Level) Nitrogen Dioxide (NO 2 ) Sulphur Dioxide (SO 2 ) WHO Air Quality Guidelines (AQG) 2000 and 2006 Interim Target Interim Target 2 Averaging Time Annual mean 24-hour mean Annual mean 24-hour mean Revised 2006 2000 AQG AQS (µg/m 3) (µg/m 3) 0 µg/m 3 25 µg/m 3 20 µg/m 3 50 µg/m 3 8-hour Daily mean 20 µg/m 3 00 µg/m 3 Annual mean 40 µg/m 3 40 µg/m 3 -hour max. 200 µg/m 3 200 µg/m 3 24-hour mean 25 µg/m 3 20 µg/m 3 0 minutes max. 500 µg/m 3 500 µg/m 3 WHO Air Quality Guidelines (AQG) & Targets for PM: 24-Hour Limits Interim Target 3 PM 0 (µg/m 3 ) PM 2.5 (µg/m 3 ) 50 75 00 50 75 37.5 AQG 50 25 Basis for Selected Level Based on published risk coefficients from multicentre studies & meta-analyses (about 5% increase of shortterm mortality over the AQG value). Based on published risk coefficients from multicentre studies & meta-analyses (about 2.5% increase of shortterm mortality over the AQG value). Based on published risk coefficients from multicentre studies & meta-analyses (about.2% increase in shortterm mortality over the AQG value). Based on relationship between 24-hour & annual PM levels. January 2007 Page 4
Thailand s E0 Mandate for Year-End 2006 Hits Snags The Thai Energy Ministry has announced that it has postponed indefinitely the phase-out of UGL 95 RON (premium) petrol that was due to occur by the end of 2006. The petrol was supposed to be substituted with E0 gasohol a blend of 0 vol % ethanol with 90 vol % gasoline. Insufficient ethanol supplies, uncertainty over gasohol quality and auto manufacturers refusal to guarantee that gasohol was compatible with all their models are the reasons for postponement. Australia s NRMA Calls for Alternative Fuels Road Map Australia s National Roads & Motorists Association (NRMA) is calling for the establishment of a group of industry experts and decision-makers to develop a road map for an alternative fuels industry in the country, following a recent Alternative Fuels Summit. NRMA is contributing $250,000 (AUD), and seeking other financial supporters, to establish the Jamison Group, which will be responsible for creating the road map to address Australia s alternative fuels progress. The group will look at all alternative fuel energy options and what proactive steps can be taken to promote their development. NRMA also wants to look at what role governments can play to support the development of these industries and the new vehicles that will run on these fuels. NRMA used as an example of alternative fuels development the dramatic expansion of biodiesel use in America as its fastest-growing alternative fuel. The NRMA is looking to the oil and clean fuels industry, financial/banking sector, auto manufacturers, federal and regional governments, leading research scientists, and alternative fuels experts to establish and support the group. The government had estimated demand of 800,000 litres per day; however, less than 700,000 would be available. The Energy Ministry plans to discuss supply and pricing issues with ethanol producers before making any further decisions. Furthermore, according to the Energy Ministry, gasohol quality is being reviewed since it can absorb contaminants in storage tanks and potentially impact older vehicle engines. One auto firm has recommended that motorists modify their engines before filling up with gasohol. Although the government waives the excise tax on gasohol, additional costs would be immediately included in the retail gasohol price if premium petrol was completely phased out to enable the State Oil Fund to cover its debts. Upcoming Conferences & Events SAE Fuels and Emissions Conference Cape Town, South Africa 23-25 January 2007 Asia Fuels Singapore -2 March 2007 3th Annual Fuels & Lubes Asia Conference Bangkok 7-9 March 2007 Refining Operations Asia Singapore 25-27 April 2007 January 2007 Page 5
Philippines Enacts New Biofuels Law The Philippines recently enacted a new law that mandates biofuels blending in the country and provides fiscal incentives for the implementation of the bill. The law mandates the use of E5 gasohol (a blend of 5 vol % ethanol with 95 vol % gasoline), rising to E0 by 202. The law also provides that a minimum of vol % biodiesel would be blended into all vehicle diesel fuels, then increasing to 2% by 200. The Philippines currently has no domestic ethanol production of its own and imports about 30% of its fuel requirements. Upon signing the new law, President Gloria Macapagal-Arroyo noted that the legislation is expected to lessen the country s dependence on imported fuel and achieve energy independence. The signing took place during a roundtable discussion between members of the Association of Southeast Asian Nations involving greater energy cooperation. President Arroyo also called on the countries of the region to begin producing flexible fuel engines for vehicles that can run on biofuels. She further urge that the whole of Asia must observe the same standards. In the Philippines, automakers, engine manufacturers and some oil refiners had expressed concerns about mandating biofuels. One significant issue raised by the Chamber of Automotive Manufacturers of the Philippines (CAMPI) is whether biofuels, and gasohol specifically, are compatible with up to 40% of the vehicle fleet because of the changes in oxygen content of the fuel, resulting in potentially higher emissions. CAMPI had also indicated concern about possible impacts to vehicle fuel system parts and poorer cold start performance due to gasohol s higher heat of vaporization compared with other octane enhancers. The industry group also cited lower energy content of ethanol (blended to make gasohol), which reduces mileage per litre. Because of these concerns, CAMPI called for rigorous standards for biofuels use in the country. Commercial drivers associations are calling for deferment of the Biofuels Act until an extensive study on the effects of ethanol and biodiesel in motor vehicles is conducted. In response, the Philippine Department of Energy has worked with industry and producers to promote strict compliance to the Philippine National Standards (PNS) for fuels. The PNS specifies the requirements that a product should meet to ensure quality. For fuels, compliance with safety and emissions standards and acceptability by the vehicle/engine producers are additional PNS requirements. Ethanol blended to make gasohol must meet standards set by the Department of Trade and Industry. The PNS for biofuels are generally designed to conform to international guidelines, such as the World-Wide Fuels Charter, endorsed by auto and engine manufacturers. Indonesia Advances on Petrol Lead Phase-Out (continued from p) According to the LEMIGAS (Centre for Oil & Gas Technology of the Ministry of Energy & Mineral Resources), another road map beyond 200 to supply cleaner fuels has been proposed. This proposal has a three-phased approach, as summarized in the table on page. Implementation of this road map extends beyond 200, during which petrol sulphur limits would reach World-Wide Fuel Charter Category 3 or 4. Currently, fuel quality monitoring indicates that the level of lead in Indonesian petrol fell significantly over the past year. Results show that the average lead content in petrol is 0.038 g/l, well below the current maximum allowable. During 2006, the survey shows that lead levels have declined by 7%. Such progress shows that Indonesia is well on the way to achieving the goal of lead-free petrol. 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 website at http://www.acfa.org.sg. January 2007 Page 6