Fuel For Thought
February 2019

ACFA-CSIS-UN Environment seminar on Government-Private Sector Collaboration in Realising Indonesia’s Cleaner Fuel Aspirations

▪ ACFA-CSIS-UN Environment seminar on Government-Private Sector Collaboration in Realising Indonesia’s Cleaner Fuel Aspirations

The Asian Clean Fuels Association (ACFA) jointly organised the seminar on Government-Private Sector Collaboration in Realising Indonesia’s Cleaner Fuel Aspirations in Jakarta on 30 October 2018, together with CSIS Indonesia and UN Environment.

The seminar, which was held provided a platform for discussing ways for the government and other parties to cooperate in promoting cleaner fuel, after the Ministry of Environment and Forestry’s (MoEF) March 2017 regulation to introduce Euro 4 standards in Indonesia came into effect. ACFA’s engagement in Indonesia helped pave the way for future collaboration with reputable stakeholders such as CSIS (Centre for Strategic and International Studies), a non-profit organization and influential think-tank In Indonesia, and UN Environment, a key partner in the Global Fuel Economy Initiative, which assists governments and transport stakeholders in promoting greater fuel economy.  

The seminar was attended by about 40 participants, including government officials, representatives from the oil and automotive industry, non-government organisations, and the media. The speakers covering a broad spectrum of stakeholders, including Minister for National Development Planning Dr Bambang Brodjonegoro as well as Expert Staff to MoEF Minister Hudoyo, CSIS Executive Director Philips Vermonte and UN Environment Global Fuel Economy Initiative Coordinator Bert Fabian. Additional speakers included representatives from Pertamina and the Ministry of Energy and Mineral Resources (MEMR).

The lively discussions at the seminar have helped kick-start the conversation on fuel affordability and its impact on Indonesia’s cleaner fuel aspirations. CSIS hinted that it was open to further collaboration with ACFA on clean fuels and the environment, which was one of the new areas of research that the institute would focus on. The media coverage from the seminar has raised ACFA’s profile and enhanced its role in Indonesia, thereby placing it in a better position for future key stakeholder engagement. ACFA could also build on the seminar to conduct other public education activities to socialise the benefits of cleaner fuel.  

Minister for National Development Planning Dr Bambang Brodjonegoro delivered a stimulating keynote speech highlighting the importance of Euro 4 standards in meeting the Sustainable Development Goals (SDGs) and that one of the biggest obstacles was Pertamina’s hesitance to upgrade and build more refineries. He compared Indonesia with India, noting that the latter was an oil importing country that already reached Euro 4 standards but Indonesia was still lagging. He highlighted Indonesia’s reliance on oil imports as a cause for its depreciating currency and current account deficit. He also urged Pertamina to demonstrate greater will to upgrade its refineries, pointing out that it played a big role in ensuring fuel affordability.

Mr. Hudoyo, Expert Staff to MoEF Minister Siti Nurbaya Bakar, delivered a speech on behalf of the Minister. The speech focused on the environmental impact of air pollution and the government’s efforts to achieve cleaner fuel, especially Euro 4 standards. Mr. Hudoyo noted that there was often a trade-off between the environment and economic growth, with the latter being prioritised. Although he admitted that Indonesia was lagging in implementing Euro 4 standards, he pointed out that some action was better than none. Notwithstanding the challenges, Mr. Hudoyo acknowledged the need for Indonesia to adopt Euro 4 standards in order to achieve the SDGs and to improve the environment for future generations.

Affordability of clean fuels was the main theme at the seminar, with CSIS Executive Director Philips Vermonte highlighting affordable fuel as being akin to human rights in Indonesia. Minister Bambang also addressed the issue of high fuel, caused by the reliance on fuel imports. Minister Bambang hopes to see Pertamina realise its ambition to upgrade existing refineries and build new ones quickly.

When highlighting its refinery upgrading and construction plans, Pertamina pointed out repeatedly that it needed government cooperation to set fuel prices to make it commercially viable, financial support to help it upgrade its refineries and assistance in acquiring land for the new refinery projects.

MEMR suggested that Euro 4 standards had already been implemented, in particular for the 98RON grade. It noted that fuel affordability remained an issue that Pertamina needed to solve as it was not possible to force consumers to switch to cleaner but more expensive fuels.

The consequent discussions highlighted the issue of rolling out Euro 4 fuels alongside cheaper, lower quality fuels, which would lead to consumers choosing the more cost-effective option. The government needed to institute fiscal policy alongside public education to promote the use of cleaner fuels.

▪ Advanced Biofuels Canada: Canada’s Clean Fuel Standard takes step forward

In a significant development for the clean fuels sector, Environment and Climate Change Canada released the Regulatory Design Paper reflecting a year of intensive consultation on the national Clean Fuel Standard (CFS) in December 2018. The CFS will be implemented in 2022 for the liquid fuel stream, and in 2023 for gaseous and solid fuel streams, with 30 MT of annual reductions from all streams by 2030.

The CFS design includes the following key elements.

  • Liquid fuels—of which transportation consumes 80 percent – will shoulder 23 MT of the 30 MT CFS total, with reductions to come from clean fuels such as biofuels, electric vehicles, renewable natural gas and hydrogen
  • Reductions will also come from refinery improvement and upstream projects under protocols to be developed
  • Cross-steam credit utilization, early period credit generation, and carry-forward of unmet credit obligations are amongst the additional compliance flexibilities for obligated parties
  • A compliance credit market system to support clean fuel credit generation, trading, and regulatory compliance
  • Canada’s Renewable Fuel Regulations’ volumetric mandate will be incorporated into the CFS at existing levels (5 percent in gasoline, 2 percent in diesel)
  • Indirect land use changes will not have a carbon intensity factor, but measures will be adopted to protect against adverse environmental impacts

  • Advanced Biofuels Canada released the following comment by President Ian Thomson. “Our federal government has kept the promise that this would be a modern, flexible regulation using a proven, cost effective approach. Many stakeholders said that transportation was the logical place to find the majority of reductions, and the CFS design follows that recommendation. The design addresses a number of concerns expressed by fossil fuel producers, with a range of compliance options. The consultations made clear that the reductions can be met with proven technologies currently operating at commercial scale around the world. The CFS design sends a compelling signal to the global clean fuels and investment sectors that Canada is prepared to widely deploy these technologies in the decade ahead.”

    “Further, expanding use of clean fuels gives consumers more choice at the pump and creates economic benefits both in cities and rural communities across Canada. Our abundant, sustainable resources can produce low carbon, advanced biofuels from agricultural and forest biomass and a variety of diverse waste streams.”

    To complement the CFS, Advanced Biofuels Canada and other advocates have called for the federal government to work with industry to develop a Clean Fuels Plan to ensure that the economic benefits of the CFS are realized in Canada. A multi-year initiative would support domestic production and distribution of low carbon fuels and put Canada on the path for continued reductions after 2030. Alignment of carbon pricing and fuel taxation with the CFS objectives would be a core element of this plan.

    Thomson added, “In the heated debate about how best to move to a much lower carbon economy, what is often missed is that BC, California, and others have been on this path for almost a decade, expanding their economies while using low carbon fuels with negligible impact on fuel costs. These regulations work; they’re smart because they increase market competition and, with improved clean fuel and clean vehicle options, consumers are the winners.”

    Advanced Biofuels Canada/Biocarburants avancés Canada is the national voice for producers, distributors, and technology developers of advanced biofuels. Our members are the global leaders in commercial biofuel production and technology development, with 13 billion liters of worldwide capacity and rapidly expanding investments in Canada to meet new low carbon fuel demand. Since 2005, ABFC has provided provincial and federal leadership on effective biofuels policies that expand clean energy options, achieve measurable climate action results, and stimulate new clean growth investments. For information on Advanced Biofuels Canada, visit www.advancedbiofuels.ca.

    For our readers’ reference, the clean fuel standards regulatory framework can be accessed at: http://www.advancedbiofuelscanada.ca/cfsregdesignpaper

    ▪ East African countries to review diesel, gasoline specifications

    The oil technical teams of five out of the six East African Community countries, namely Kenya, Uganda, Tanzania, Rwanda and Burundi have begun an open public review of a set of proposed gasoline and gasoil specifications, according to the draft document seen by S&P Global Platts Thursday.

    All comments and feedback on the proposed specifications outlined by the technical teams are to be submitted to the respective teams by February 7.

    "The technical committee will review the comments and issue the final specifications for publication... the new specifications will apply from some date in the second half of 2019," an industry source familiar with the matter said.

    Key specification elements under review for gasoline include reducing sulfur content from the current 150 parts per million to 50 ppm. In addition, the proposed specification in the draft has also called for the reduction of the maximum content of benzene allowed to be blended into gasoline to 1% volume from 3% currently.

    The draft gasoline specification also includes a proposal to lower the lead content in the fuel to 5ppm from 13 ppm currently, and for maximum density to fall to 775 kg/cu m from 780 kilograms/cubic meter. The technical teams will also review the need to make changes to the Reid Vapour Pressure specification, which currently stands at a maximum of 9.5 PSI.

    On gasoil, the committee is seeking feedback on the current flash point of 66 degrees Celsius.

    Both Kenya and Tanzania are large importers of gasoil and gasoline into the region, with some of these imports being distributed to other East African countries, due to their access to the sea.

    The last specification change made by the five East African countries was on January 1, 2015. The change then was the dramatic shift in sulfur content for both gasoline and gasoil to 150 ppm and 50 ppm, respectively, from 500 ppm previously.

    ▪ Update on Malaysia’s Petronas RAPID project

    On the southernmost edge of the Asian landmass and on the shores of the busy shipping lanes of the Singapore Strait, Malaysia's Petronas is starting up a state-of-the art petroleum processing hub, called RAPID or Refinery and Petrochemical Integrated Development. The huge complex in Malaysia's Johor province is currently testing its systems, running crude oil through its fuel processing units and labyrinth of pipes and producing large exhaust gas fires from its flare tower. The flames are clearly visible for miles around, including on Indonesian islands just across the narrow strait. The 300,000 barrels-per-day (bpd) development will come on-stream around May.

    For Petronas, RAPID marks a milestone as it prepares for a future with less crude oil output while serving the region's booming fuel demand. RAPID, being built in collaboration with Saudi Aramco, has cost around $15 billion and is one of Petronas' biggest ever investments. It is part of an even bigger Pengerang Integrated Complex (PIC) being developed by more than 50,000 workers at an estimated cost of more than 100 billion ringgit ($24.61 billion), and which will eventually also include a deep-water oil and a liquefied natural gas (LNG) import terminal. According to a Petronas statement, RAPID "will position Malaysia to capitalise on the growing need for energy and petrochemical products in Asia in the next 20 years ... pushing our country into a new frontier of technology and economic development."

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