A Monthly Publication by Asian Clean Fuels Association Vol.3 Issue 6 - July 2005 Philippines Moving Towards European Fuel Standards The Philippines is located in Southeast Asia as an archipelago of about 7,000 islands between the Philippine Sea and the South China Sea. With a total land area of 115,800 square miles, the Philippines is the 12th most populated country in the world. INSIDE THIS ISSUE Expert Talk: Interview with Philippine Department of Energy s (PDOE) Director of the Oil Industry Management Bureau (OIMB) Zenaida Y. Monsada ACFA s Global Fuels Standards Workshop in Manila, Philippines ACFA s Lead Phase-Out Implementation Workshop in Jakarta, Indonesia Metro Manila, which is the metropolitan area containing the capital city of Manila, has been ranked by the World Health Organization as one of the five most polluted cities in the world. The transport sector accounts for 70-80% of air pollution in Metro Manila, which is mainly contributed by diesel vehicles and three-wheelers using two-stroke engines. There were almost 4.8 million vehicles nationwide in 2004, of which 3.4 million were running on gasoline. Motorcycles and cars accounted for about 55% and 23% of the gasoline vehicles, respectively. Currently, there are two refineries in the country with a total crude processing capacity of 333,000 barrels per day (bpd) owned by local refiner Petron Corporation and Pilipinas Shell, respectively. Alongside several other importers and retailers in the downstream industry, Petron supplies more than one-third of the country s oil requirements. S o u t h C h i n a S e a Palawan Laoag Luzon Baguio Quezon City Philippine Sea Manila PHILIPPINES Iloilo Bacolod Cagayan De Oro Mindanao Zamboanga Celebes Sea Davao Samar Gasoline consumption in 2002 was 69,000 bpd compared to leading Asian gasoline consumer Japan s 1.09 million bpd. The Philippines imports more than half of its petroleum demand (50% for gasoline and 55% for diesel). Leaded gasoline was phased out nationwide in January 2001, and current gasoline specifications are equivalent to Euro I standards, which were implemented starting 2003. Under the Clean Air Act (CAA), which legislates changes in fuel quality requirements, the max aromatics and benzene content in gasoline was lowered from 45 to 35 vol% and from 4 to 2 vol%, respectively. Diesel sulfur content was lowered from 2,000 to 500 ppm starting in 2004. Petron inaugurated in May two new facilities, which are now capable of producing 500 ppm sulfur fuels. Pilipinas Shell s refinery also produces CAA-compliant fuels. (Continued on p3) You can reach us at ACFANEWS@acfa.org.sg. Visit our website at www.acfa.org.sg. Copyright 2005. Asian Clean Fuels Association.
Interview with Philippines Director of Oil Industry Managament Bureau Zenaida Y. Monsada is Director of the Oil Industry Management Bureau (OIMB) of the Philippine Department of Energy (PDOE). She is a licensed chemist with advance studies in Petroleum Management at the Arthur D. Little MEI in Boston and at the National Petroleum Directorate in Zenaida Y. Monsada Stavanger, Norway. She is also pursuing a Masters in Public Management from the Development Academy of the Philippines. She chairs the Technical Committee on Petroleum Products and Additives (TCPPA) tasked with setting fuel specifications adopted as Philippine National Standards (PNS) with which all products sold in the country must comply. Q: Please explain the role of the Department of Energy (PDOE) in the Philippines. A: The PDOE is the agency mandated to oversee the energy sector to ensure sustainable, stable, secure, sufficient, accessible and reasonably priced energy. The OIMB is the unit in charge of the downstream sector. With the Downstream Oil Industry Deregulation Act of 1998, the OIMB s primary role, on top of assisting in the planning and policy formulation for the sector, is the monitoring of prices (both local and international), quality (both products & facilities), marketing & refining processes, and supply & demand of petroleum products. With the Philippine Clean Air Act (CAA) of 1999, the OIMB is the primary agency responsible for developing and enforcing fuel quality standards as well as registration of fuel additives. Thus, even as the downstream oil industry is deregulated, the government, through the PDOE/OIMB, continues to intervene on matters related to quality, health, safety and environmental protection to ensure a level playing field, maintain a favorable business climate for the industry players, and at the same time, protect the welfare of the consumers. Accordingly, the OIMB is empowered to enforce fuel quality standards through sampling and testing of product from the refineries, bulk depots and retail outlets. A: Even as the PNS for unleaded gasoline has been promulgated pursuant to the CAA specifications, there is an ongoing review as the CAA also requires improvements in fuel composition for increased efficiency and reduced emission. With representatives from the auto and oil industry, as well as from relevant government agencies, the TCPPA is considering changes such as the reduction of the sulfur content to 0.05% (mass) for all grades in conformance with the sulfur content of the Euro II standard (refer to Figure 1 on page 3); lowering of lead (Pb) contamination tolerance to 0.005 g/l; specifying and limiting alcohols to ethanol; and the reduction of maximum volume of ethers from 10%. Q: What is the road map in terms of future fuel quality and vehicle emission reduction strategy? A: The major thrust of government is to enhance supply security and promote the use of efficient technologies. 1. Establishment of baseline information on the current pollution and emission sources and levels of the country. Improvements in fuel quality should be directed toward improving pollution. 2. Vehicle emission standards development. Generally, emission standards trigger fuel quality standards. In our case, Euro II compliant fuels are ahead of the vehicle/emission standards. As vehicle standards approach Euro III and IV, compatible fuels will have to be developed and specifications set. 3. Integrated approach to emission reduction/control. With fuels as only one of the factors contributing to vehicle emissions, the government, in cooperation with the private sector, is pursuing programs to address such other factors as compatibility of fuel to vehicle/engine design and make; vehicle utilization, inspection and maintenance; traffic management, etc. Currently under (Continued on p3) Q: New fuel specifications for unleaded gasoline (ULG) are currently being drafted by the DOE for implementation in the Philippines as per CAA provisions. What are the changes that will be made, and what effects are they expected to have on the improvement of air quality and emissions from vehicles? Page 2 July 2005
Interview with Phillipines Director of Oil Industry Managament Bureau (Continued from p2) discussion in the ASEAN ministerial meetings is the ASEAN Automotive Federation (AAF) proposed fuel standards. I understand that this approach will incorporate the ongoing standards development in vehicle engine technologies, emission control technologies and fuel quality specifications. Figure 1 4. Fuel quality harmonization. The Philippines directly imports nearly half of the finished petroleum product requirements. It is therefore imperative that products meeting our specifications are accessible from the international market, particularly from countries in the region. Q: You were the guest speaker in the Global Fuels Standards Workshop, which was held recently in Manila. Please share your thoughts on whether this workshop is beneficial to the attendees? * depends on 6 volatility classes for different seasons and transition periods A: Let me take this opportunity to once again extend our appreciation and gratitude to ACFA for the invitation and conduct of the Global Fuels Standards Workshop in Manila last June. The forum, with regional and international experts as resource persons and attendance by representatives of the government agencies composing the TCPPA, was very informative and timely. It provided technical insights and updates vis-à-vis market realities, indeed very useful inputs to the ongoing deliberations on fuel quality improvements for the Philippines. Understandably, policy issues such as energy security, environmental considerations and local politics will play a role in any country s fuel quality strategy. However, pure science will certainly be the solid guiding factor in the final decision-making. Philippines Moving Towards European Fuel Standards (Continued from p1) The Department of Energy (DOE) is looking to implement Euro II comparable fuel specifications this year, which are expected to be published in the coming months. The equivalent emission specifications are also planned to be implemented in the near future. The option to leapfrog to Euro IV equivalent fuel specifications around 2010 is also under discussion. UPCOMING CONFERENCES Refining Asia 2005 Sheraton Grande Sukhumvit, Bangkok, Thailand, 13-14 September 2005 For additional information please visit: http://www.cmtevents.com/eventschedule.aspx?ev=050939&flg=nor Sinopec s 6th China/Asia Clean Fuels International Conference Beijing, China, 7-8 November 2005. Hart s World Refining & Fuels Clean Technologies Conference Beijing, China, 9-10 November 2005. For additional information please visit: http://www.worldfuelsconferences.com/pdf/wrfcasia05.pdf July 2005 Page 3
ACFA s Global Fuels Standards Workshop in Manila, Philippines On June 28, ACFA organized Global Fuels Standards Workshop at the Shangri-La Hotel in Manila. ACFA organized this workshop to create awareness among the policymakers about the benefits of clean fuels and the implementation options available to them. As highlighted in the interview with Ms. Monsada, the Philippines are in the midst of revising their fuels standard toward Euro II fuel standards. This workshop looked at the global fuels standards and how different countries have approached their air pollution problems. Both local and international expert speakers provided updates on the latest developments in clean fuels issues and standards around the world. The Workshop was opened by Ms. Zenaida Monsada, Director of the Oil Industry Management Bureau of the Department of Energy (DOE), presenting on Fuel Policy Status Quo in the Philippines. Ms. Monsada explained DOE s role in formulating fuel policies. She also presented the historical and present fuel specifications and the plans and programs DOE has initiated to meet Cleaner Air. Under the Clean Air Quality Improvement Program (CAA), DOE hopes to meet fuel quality standards similar to Euro II this year, and by 2010 it aims to introduce Euro IV standards. Although the announced fuel quality standard is supposed to meet European Euro II sulfur levels most of the other parameters deviate from the European standards. Although it was not highlighted which emission improvements are targeted, it is apparent that different fuel specifications will also result in different emission levels. Given the lower aromatics and benzene levels, toxic and probably particulate emissions will be lower than the European targets. The other parameters largely differing from European Euro II fuel standards are the concentrations of oxygenates; alcohol and ethers. Experience shows that the use of oxygenates will provide immediate emission reduction in the Philippines, especially when considering the old vehicle parc. An increased concentration of oxygen improves the combustion and reduces both carbon monoxide and hydrocarbon emission levels. Contrary to the Philippines, both Europe and global vehicle manufacturers agree on maximum levels of 5vol% alcohol and 15vol% ethers to obtain optimum vehicle compatibility and emission Figure 1 limits. Ms. Monsada concluded her presentation by summarizing the issues and constraints the government is facing while trying to reduce emissions from the transportation sector. Especially challenging is the vehicle compatibility of fuels as their overall development of the vehicle parc lags many years behind the proposed development of fuels. She feels that this increasing gap between age of vehicles and improvements in fuels makes it difficult to set emissions limits that obviously have to move hand-inhand with fuel quality improvement plans. Finally, the government is also looking into how to monitor actual air emission improvements as well as determine the overall benefits that increased fuel and emission limits provide the country. During the workshop, presentations were also provided by Ms. Liisa Kiuru of the International Fuel Quality Center and Dr. Frank Palmer of Hart s Energy Consulting on Asian and global fuel developments including biofuels. It was highlighted that the foundation for a successful fuel quality strategy is three building stones, including Air Quality, Automotive Emissions and Fuel Quality Strategies. Each building stone, although a separate entity, is dependent on the other to uphold the resulting fuel quality strategy. The impact of a vehicle on air quality is directly linked to the type of engine and after-treatment technology on that vehicle and the quality of fuel used in the engine. Therefore, the development of a fuel quality strategy is shown to be mostly successful if it is based on meeting certain air quality objectives. Once these objectives are defined and source apportionment has occurred, e.g. the actual impact of transport on urban air pollution has been calculated, determination can be made of which automotive emissions must be reduced and by how much. This in turn will determine engine technology needs and the quality of fuels necessary to enable the engine and/or after-treatment technology to meet the emission requirements. Dr. Palmer summarized the different paths chosen in Eu- (continued on p5) Page 4 July 2005
ACFA s Clean Gasoline Development Workshop in Manila, Philippines (continued from p4) rope and USA to reduce emissions from the transportation sector, all from removing lead, introducing volatility control, increasing octane and reducing sulfur and benzene. A section of the workshop discussed the role of oxygenates, both alcohols and ethers, and in particular MTBE, in improving fuel quality to alleviate air pollution and improve engine performance. Figure 1 (previous page) shows the exhaust impact of oxygenates on regulated emissions. The Biofuels Policy Outlook concentrated on evolving biofuels policies around the world with focus on Europe. As of mid-2005, the Europe biofuels situation can be summarized as follows: The 2005 2% (on an energy content basis) biofuels target is far from being met; Production and use are directly linked to tax incentives or subsidies; Most Member States are late in reporting & implementing legislation; Biofuels may create problems for the conventional fuel quality directive on vapour pressure (RVP) and ethanol splash blending; ETBE is the preferred renewable fuels above EtOH due to vehicle, logistical and RVP issues; Biodiesel is the preferred biofuel, as Europe is short in diesel supply; Biodiesel feedstock is derived predominantly from fatty acid methyl esters (FAME) e.g. RME; Quality assurance is a significant issue: Ethanol standard under discussion; Biodiesel (FAME) standard adopted (EN14214); and The presentation, The Importance of a Roadmap for Cleaner Fuels in Asia, was given by Herbert Fabian of the Clean Air Initiative - Asia (CAI-Asia). Besides giving an overview of the role CAI-Asia plays in formulating Asian clean fuels initiatives, Mr. Fabian emphasized the importance of individual country roadmaps (refer to Figure 2). Many examples were provided on how air quality is improving, although there is strong growth in motorization. Mr. Fabian highlighted that the introduction of cleaner engines and fuels (refer to Figure 3) have definitely slowed down overall growth in emissions; however, considerable potential remains to slow down the increase in emissions from transport even further. Figure 3: Gasoline Emission & Fuel Changes Required for emission improvements Emissions: Zero Lead: Catalytic vehicles Low Sulphur: Catalyst Performance Fuel Quality Sulphur: SO2, HC, NOx, CO, Toxics RVP: HC, Toxics Benzene: Toxics Aromatics: Toxics, NOx, HC Oxygenates: CO (older vehicles) Olefin: Reactivity, Toxics Distillation: HC, NOx Process options, emissions and cost impacts to produce cleaner fuels, and factors to consider in refinery upgrading were also discussed. Examples on how pricing, taxation and incentives have helped accelerate the introduction of cleaner fuels were provided as shown in Figure 4. Figure 4 Figure 2 If you are interested in more details of the workshop, please visit ACFA s Web site where all the papers are available: http://www.acfa.org.sg. July 2005 Page 5
ACFA s Lead Phase-Out Implementation Workshop in Jakarta, Indonesia On June 30, ACFA held a Lead Phase-Out Implementation Workshop for about 40+ attendees at the Nikko Hotel in Jakarta. ACFA organized the workshop to create awareness among policymakers on the health benefits of lead-free gasoline and clean fuels, and to provide a better understanding of implementation options available for both lead removal and fuel quality improvement. ACFA believes that especially Indonesia would benefit from increased use of oxygenates. The use of oxygenates would help supply the loss of octane caused by lead removal (Indonesia still consumes more than 60% of leaded gasoline) and it would provide immediate reduction in emissions from its continuously fast-growing vehicle parc (refer to Figure 1). It would also be a great intermediate tool to help supply the country s increased gasoline demand (fuel consumption is rising by about 7% per year) until it builds its next refinery 1. Figure 1 As highlighted in the last issue of ACFANews, Indonesia is one of the world s most populated countries with some of the most polluted cities, including Jakarta. As highlighted by CAI-Asia in Figure 2, the air concentrations of particulates in Jakarta exceed international standards. The workshop reviewed options available to the refiners for lead phase-out. Cost and technology comparisons were provided for components such as Fe, MMT, ethanol, alkylates and MTBE. For each option the comparisons included cost, environment, supply, ease of attainment and operation, etc.. Ms. Heng Lee Shir of DeWitt & Company, reported that due to changing global oxygenate markets, increased supply of MTBE is available to Asian markets. As for pricing, it was shown (refer to Figure 3) that Asia s prices remain very low compared to other regions. Figure 3 Figure 2 If you are interested in more details of the workshop, please visit ACFA s Web site where all the papers are available: http://www.acfa.org.sg. 1 In mid-july it was announced that the Indonesian government, to overcome possible fuel shortages in the future, is looking to build the country s 10th refinery at Tuban in the province of East Java. According to an announcement by Indonesia s president, the refinery would be built if oil exploration can be carried out at Cepu in Central Java and at Jeruk field, south of Madura island. 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 Page 6 July 2005