In Conversation
January 2018

In Conversation with: Mr. Edward Aviles

In this issue of our “In Conversation with” we are pleased to introduce our readers to the Latin American Clean Fuels Organization ACELA (Asociacion de Combustibles Eficientes de Latinoamerica). ACELA was founded in February 2016 by companies involved in the clean fuels components business. Its members include LyondellBasell, Huntsman, Enterprise Products, TPC Group, SABIC and Braskem. ACELA complements the global network of clean fuels associations, together with EFOA (European Fuels Oxygenates Association) and ACFA (Asian Clean Fuels Association). We had the pleasure to talk to Edward Aviles, Executive Director of ACELA. We would like to thank Mr. Aviles for his efforts in comprehensively answering our questions which provide some highly valuable insights into the work ACELA is undertaking in their efforts to promote Clean Fuels in Latin America.

Profile:

Mr. Edward Aviles
Executive Director
ACELA

Edward Avilés is the Executive Director of the Asociación de Combustibles Eficientes de Latinoamérica (ACELA), a non-profit trade association that promotes clean transportation fuels in Latin America based on sound science and sustainability. Prior to ACELA, Edward worked for six years at chemical company LyondellBasell and was the primary Legal support for the Latin America businesses. He has extensive knowledge of the petrochemical industry in Latin America and was an integral part of the LyondellBasell teams that formed ACELA and acquired/divested chemical businesses in India and Argentina. Edward received his M.B.A. from the University of Texas at Austin and has extensive international business experience in Latin America and Europe. He also holds a B.A. in Economics from Rice University and a law degree from the University of Houston. He was raised in Houston, Texas and speaks several languages fluently, including Spanish, French and Italian.

Q: With ACELA being two years old, could you please share with the readers what the organization’s prime objectives, in general terms, in Latin America are? What do you see as the key issues and challenges?

A: The primary objective of the organization is to promote clean fuel components in Latin America. More specifically, we are promoting ethers (MTBE, ETBE) as the oxygenates of choice for gasoline in Latin America. One challenge we face is that some countries such as Brazil and Argentina have ethanol mandates in place that make it difficult to introduce ethers in those markets. Another issue we face is the global expansion of ethanol as a gasoline additive. It is a challenge to educate the key stakeholders in certain markets due to misinformation being disseminated by proponents of competing products.

Q: Emission control (air quality control) and fuel quality are globally the two main concerns for policy makers, other stakeholders in this industry and, in particular, for consumers.

What are ACELA’s mission and strategy to actively contribute to improvements in both segments of the forward planning?


A: In terms of oxygenates, ethers are the best solution to improve both emissions and fuel quality. When ethers are added to gasoline at a level of 2% oxygen content by weight (i.e. approximately 11% MTBE), emissions of VOCs (precursor of ozone), carbon monoxide, and particulate matter decrease; in addition, ethers provide high octane, which improves fuel quality and allows their use in higher efficiency high-compression engines. In sum, when ethers are added to gasoline, air quality improves due to reduced emissions, and fuel quality and efficiency improve from increased octane and more complete fuel combustion.

Q: Fuel quality standards in Latin America and fuel policies are very much fragmented in Latin America. Refinery operating rates and market supplies in terms of quantity and quality fluctuate. The biggest consuming countries rely heavily on import supplies.

How can ACELA help to harmonize and stabilize the situation? Who are your organization’s main alliances in your quest to enhance fuel standards throughout the region?

A: ACELA can help harmonize fuel quality standards in the Latin America region by educating key stakeholders on global best practices for achieving high quality fuels. We can serve as a resource to provide information on fuel specifications in other countries and regions that have implemented best practices to improve air quality and fuel quality. Such practices include adding oxygenates to gasoline, reducing sulfur limits, reducing aromatics and olefins limits, and increasing minimum octane levels, among others.  

Mexico is a great historical example of how to improve fuel specifications and air quality by adding oxygenates to gasoline, which began in 1993. According to the World Health Organization, Mexico City was the most polluted city in the world in 1992, in part due to its continued use of lead as the main octane booster. After replacing lead with MTBE, Mexico City experienced a large reduction in both ozone and particulate matter (PM10) from 1993 until 2014, despite a huge increase in the number of vehicles during that time period and slow adoption of low-sulfur standards.

We have contacts in Mexico with various governmental agencies and associated organizations, including SEMARNAT (environmental protection), CRE (energy regulatory commission), SENER (secretary of energy), IMP (Mexican Institute of Petroleum) and INECC (technical arm of SEMARNAT). We also have contacts in Argentina within the Ministry of Energy, the Ministry of Environment and Sustainable Development, and national oil company YPF. We have begun reaching out to other countries in 2018 and expect to establish contacts and begin developing alliances in several countries in the region, including Brazil, Chile, Colombia, Ecuador and Central America.


Q: Could you give us a sense of the clean fuels development in Latin America? What are the governments doing to help improve air quality via vehicle emissions? What are the fuel standards that exist in the region?

A: The development of clean fuels in Latin America is lagging behind Europe, the United States and the leading countries in Asia. The fuel standards in the region vary from country to country, but, as a general rule, the fuel specifications in Latin America are less restrictive than in the United States (sulfur content), Western Europe, and Japan. Although there are exceptions, Latin America as a whole has yet to adopt stringent gasoline standards in terms of octane, sulfur content, aromatics and olefins content, and oxygenate content. Governments, such as Mexico, have taken steps to improve air quality especially in urban areas, as evidenced by the 1% oxygenate mandate in Metropolitan Zones, but many countries are not actively taking steps to reduce vehicle emissions through fuel specifications at this time. Many countries also import large quantities of gasoline, and the local refineries either can’t compete with imported gasoline or can’t afford to produce gasoline that meets stricter standards that would improve air quality.

Q: Gasoline demand in Latin America is still growing. Three countries represent over 70% of today’s total demand in Latin America, namely Mexico, Brazil and Venezuela, which all three represent some major challenges and opportunities, for very different reasons.

Looking at Mexico, the country’s administration ratified the latest fuel specifications in August 2016. Ethers remain a key component in the country’s fuel specification, while fuel-Ethanol has been banned in major cities and can only be blended in a minor percentage elsewhere in the country.

What are in your opinion the main reasons for this decision? What is different in Mexico, compared to i.e. Brazil?


A: The fuel specifications announced by the Mexico energy regulatory commission (CRE) in August 2016 allowed ethanol at a 5.8 vol% in the rest of the country outside the 3 major metropolitan zones (Mexico City, Guadalajara, Monterrey) which have an ethanol ban in place. This ban and restrictions were put in place because CRE understood that Mexico’s vehicle fleet and gasoline distribution infrastructure were not designed to handle ethanol, and because they knew that ethanol increases VOC emissions, which are precursors to ozone and particulate matter. In June 2017, CRE revised the specification to allow increased ethanol at 10 vol% (E10) in the rest of the country outside the areas with the ethanol ban. Environmentalists and non-governmental organizations have filed lawsuits against the increase to E10 in the rest of country, and there is currently a definitive injunction in place that prohibits Pemex from blending ethanol into gasoline in Mexico.

Although it is not clear why CRE increased the ethanol allowance to E10 for the rest of the country, the reason for the ethanol ban in the metropolitan zones was to avoid a deterioration in air quality. The three major metropolitan zones currently use gasoline containing MTBE. Global studies have shown that switching from MTBE gasoline to E10 gasoline would lead to a deterioration in air quality because E10 gasoline would increase formation of volatile organic compounds (VOCs), and hence to increased ozone and particulate matter, the main components of toxic smog. Because of ongoing air quality issues in Mexico City, Guadalajara, and Monterrey, CRE elected not to allow ethanol in gasoline in those cities until the impact of E10 could be properly evaluated. A study currently in process by the Mexican Petroleum Institute evaluates the impact on vehicle emissions from switching to E10 gasoline. However, many studies conducted by the U.S. EPA and other independent regulatory bodies clearly show that ethers are superior to ethanol as oxygenated blending components.

Brazil began its ethanol program in the 1970s and currently has an E27 mandate in place, and many vehicles are flex fuel vehicles that can even use E100, which is also offered in Brazil. Brazil is an outlier compared to the rest of the world, and no other country has mandated ethanol at the levels seen in Brazil. Brazil has a huge sugar cane industry and is the second largest producer of ethanol in the world. For these reasons, we can’t really compare Mexico to Brazil, as Mexico has a very small ethanol industry and would have to import virtually all of its ethanol if it were to implement a mandate. The cost of gasoline in Mexico would likely increase with an ethanol mandate compared to current gasoline blends as it did in the U.S. following the implementation of the Renewable Fuels Standard.  

Q: What are the challenges faced by Latin America’s governments when planning for and implementing clean fuel standards? Could you provide some examples for our readers?

A: The biggest challenges faced by Latin American Governments in implementing clean fuel standards include a lack of resources to upgrade their refineries, lack of knowledge about what improvements will result in better fuel and air quality, and competing priorities. In Mexico, for example, PEMEX is now faced with extreme pressure to reduce its costs to better compete with U.S. and global gasoline producers. In addition, domestic and foreign ethanol interests are devoting significant resources to create a new market for ethanol, promising lower costs and better air quality, neither of which have been demonstrated anywhere else in the world. Governments are faced with conflicting information, pressure from special interest groups, foreign competition, a chronic lack of resources to upgrade their refining and distribution infrastructure, and systemic inefficiencies including bureaucratic inertia and corruption.  

Q: With Mexico being well taken care of by your organization, does ACELA engage in other fuel development programmes in other countries? If so, which are in your opinion the markets to focus on? Are there any specific plans to target countries like Columbia, Puerto Rico or Peru, where fuel standards are overdue for an upgrade?

A: In 2018, ACELA is doing key stakeholder and market analyses for several countries in Latin America in order to begin educating, engaging and networking in the key current and future markets in Latin America. Columbia is a likely target, and we still have to do further evaluation on the Peruvian market. Fuel standards are definitely due for an upgrade in much of Latin America, and in the future ACELA will educate key stakeholders in various countries on clean fuel components and policies that, if implemented would lead to improved fuel standards.

Q: We would like to thank you for sharing your views and opinion on the above topics with us.

Are there any other concerns, challenges or opportunities for ACELA you would like to raise with our readers in order to comprehend the complexity of your work for the clean fuels developments in Latin America?


A: Despite the many challenges of working in Latin America, we are greatly encouraged by the interest that stakeholders have shown in the information we have been providing and the positive influence we have had on fuel and air quality in Latin America. Many cities are still plagued by poor air quality, so it is vitally important that governments be presented with accurate information on what they can do to improve their fuel and air quality cost-effectively. We will continue to provide this information to anyone willing to listen.  

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