Fuel For Thought
September 2012

Global MTBE demand projected to exceed 20 million tons in 2020

▪ Global MTBE demand projected to exceed 20 million tons in 2020

In its latest research report MTBE Global Markets to 2020 Global Business Intelligence Research expects Asia-Pacific to account for 67.8% of the global MTBE demand in 2020, which is expected to grow to reach to 20,253,468 tons in 2020. Asia-Pacific has rapidly emerged as the largest global MTBE consumer over the past decade. China alone accounts for 65.3% of the Asia-Pacific region's MTBE demand in 2011. Increasing development has increased gasoline consumption in China during the past decade. Additionally, the increasing environmental concerns in China have catalyzed the growing MTBE demand, as it is increasingly being used as a replacement for other additives in gasoline with higher levels of aromatics and sulfur. Other developing countries in the region such as India are also following the same path. By 2020, GBI projects China to be the largest MTBE consuming market, covering more than half of global demand for MTBE.

▪ Global investment in renewable power and fuels up 17% in 2011

Global investment in renewable power and fuels increased by 17% to a new record of US$257 billion in 2011, according to The Global Trends in Renewable Energy Investment Report published by UNEP's Division of Technology, Industry and Economics (DTIE) in cooperation with the Frankfurt School-UNEP Collaborating Centre for Climate & Sustainable Energy Finance. This was a six-fold increase on the 2004 figure and 93% higher than the total in 2007, the year before the global financial crisis, according to U.N. Under-Secretary General and UNEP Executive Director Achim Steiner, in the foreword of the report. Developing economies made up 35% of this total investment, compared to 65% for developed economies. "There may be multiple reasons driving this renewable investment, from strengthening regulatory frameworks to decreasing costs — whatever the drivers, the strong and sustained growth of the sector is a major factor that is assisting many countries towards a transition to a low-carbon, resource efficient Green Economy," he said. The U.S. closed in on China in the race to be the lead investor in renewable energy, with a 57% rise in its outlays to US$51 billion. India, however, posted the fastest expansion rate for investment of any large renewables market in the world, with a 62% increase to US$12 billion in 2011.

▪ Nigeria's Federal Government approves Petroleum Industry Bill

Nigeria's Federal Government has approved the Petroleum Industry Bill (PIB), which as part of its provisions will provide for the unbundling of the Nigerian National Petroleum Corporation (NNPC) into five companies. With its approval by the Federal Government, the PIB will soon be sent to the National Assembly for consideration and passage into law. According to the Minister of Petroleum Resources, Diezani Alison-Madueke, the new PIB was presented, discussed and approved at the Federal Executive Council (FEC) meeting and got extensive input from the cabinet.

The new bill, Alison-Madueke said, would look at a number of areas that are quite critical. These are the unbundling of NNPC, the creation of an inspectorate unit, independent regulatory agencies, and the architecture of the fiscal regime in the oil and gas sector.

According to the minister, the bill provides for the unbundling of the NNPC by the creation of a new national oil company, which will be independent and will be a registered company.

The PIB was first drafted in 2008 but was revised several times due to varying politics and industry opinions. With the resumption of the 7th National Assembly, it was re-presented but will have to be withdrawn and supplanted by the new PIB.

The current draft of the PIB came into being after the minister set up a Technical Petroleum Industry Bill Committee and the PIB Task Force last January to review and harmonize the various version of the old bill and come up with a new comprehensive draft that will address the concerns of stakeholders in the industry.

▪ Refinery closures in U.S. to boost role of Europe in U.S. gasoline markets

The current state of the crude oil and refining industry in the Northern Atlantic Basin has led to excess European gasoline production playing a vital role, saving the U.S. East Coast from shortages, says GlobalData's expert analyst Jeffrey Kerr.

Economically-hard hit Europe has seen more than its fair share of refinery closures over the last two years. A combination of high crude oil prices and relatively low refined product prices, as well as dismal gasoline and middle distillate demand growth prospects, have resulted in a number of high-profile refinery closures and company bankruptcies.

The U.S. East Coast refining market has been impacted by the same factors, with large refineries in the Philadelphia area shut down, threatened to be shut down, or sold to new owners, keeping the supply of motor fuels tight amid the traditional summer driving season, when gasoline demand usually rises.

Jeffrey Kerr, GlobalData's Senior Analyst of Downstream Oil & Gas in New York, said: "While it's not new for Europe to send its excess gasoline to the U.S. in the summertime, the magnitude of those shipments this year is much higher. The shut refineries in the Philadelphia area and the Caribbean have really changed the dynamic of the East Coast marketplace, causing wide swings in cash market prices."

Since the East Coast gasoline cash market sets the price for the rest of the U.S. through the futures market, Kerr added, European refiners, now more so than ever before, are having a direct impact on U.S. gasoline markets, coast-to-coast.

▪ China enters new phase in air quality management

China is entering a new phase in air quality management to address the unfinished business of air pollution in Chinese cities. The 8th China City Air Quality Management (AQM) Workshop brought together 16 Chinese cities, three provinces and leading research institutes and universities to discuss new AQM approaches and zoomed in on how PM2.5 pollution levels can be reduced under the revised national ambient quality standards of the Ministry of Environmental Protection (MEP) released last February.

Li Pei, deputy-director general of FECO-MEP, opened the workshop. "We should explore how to expand this City Workshop to involve a broader group of stakeholders to achieve real progress in air quality in China, and to share China's experience with the rest of Asia."

Organized by the Foreign Economic Cooperation Office (FECO) of MEP and the Clean Air Initiative for Asian Cities (CAI-Asia), with strong support from the Energy Foundation and the Fu Tak Iam Foundation, this workshop was the 8th of the series of city AQM workshops started by CAI-Asia and FECO-MEP in 2005.

Liu Zi, senior official of the Pollution Prevention and Control Department of MEP, who delivered the keynote address, explained how MEP is shifting from control of specific pollutants to multiple pollutant control in an integrated manner, involving a multitude of stakeholders, and covering city, regional and national levels. "We need to work towards the improvement of environmental quality which goes beyond the total emissions control approach."

Yan Peng, CAI-Asia China Director, also emphasized the need for a systematic approach to AQM and gave as an example the Clean Air Management Assessment Tool for a systematic assessment of a city's capacity to manage air quality. "Air pollution causes must be assessed in a transparent, objective, and scientific manner to establish an air pollution baseline and monitor trends, develop appropriate control measures, and achieve targets more effectively."

▪ IARC reclassifies diesel engine exhaust as carcinogenic to humans

The International Agency for Research on Cancer (IARC), which is part of the World Health Organization (WHO), has reclassified diesel engine exhaust as carcinogenic to humans (Group 1), from probably carcinogenic to humans (Group 2A), based on sufficient evidence that exposure is associated with an increased risk for lung cancer.

In 1988, IARC classified diesel exhaust as probably carcinogenic to humans (Group 2A). An Advisory Group that reviews and recommends future priorities for the IARC Monographs Program had recommended diesel exhaust as a high priority for re-evaluation since 1998. Christopher Portier, chairman of the IARC Working Group, stated that "The scientific evidence was compelling and the Working Group's conclusion was unanimous: diesel engine exhaust causes lung cancer in humans."

IARC said that while newer diesel engine and fuel technology may have reduced the amount of particulates and chemicals from diesel engine exhaust, "it is not yet clear how the quantitative and qualitative changes may translate into altered health effects; research into this question is needed. In addition, existing fuels and vehicles without these modifications will take many years to be replaced, particularly in less developed countries, where regulatory measures are currently also less stringent. It is notable that many parts of the developing world lack regulatory standards, and data on the occurrence and impact of diesel exhaust are limited."

IARC added that "governments and other decision makers have a valuable evidence-base on which to consider environmental standards for diesel exhaust emissions and to continue to work with the engine and fuel manufacturers towards those goals."

The Working Group left the classification of gasoline engine exhaust unchanged to Group 2B, possibly carcinogenic to humans.

▪ Brazil rules out changes to ethanol blending laws

Despite pressure from energy major Petrobras and other suppliers, Brazil's federal government has reportedly ruled out changing the ethanol admixture laws. Petrobras had requested the government to increase the proportion of anhydrous alcohol (ethanol mixed with gasoline) in gasoline from 20% to 25%. Petrobras made the request in a bid to lessen the rising demand for gasoline imports. Suppliers also advocate increasing the ethanol admixture because the increase in sales of anhydrous alcohol would compensate for the reduction in hydrous sales which are used for ethanol-only and flex-fuel vehicles. Last year, Brazil reduced its ethanol admixture from 25% to 20% in response to a nationwide ethanol shortage brought about by adverse weather conditions and soaring sugar prices. Unica, Brazil's sugarcane industry association, said the country's total ethanol sales in 2011 was 14.6 billion liters, 18% lower than the previous year.

▪ China sets aside CNY6 billion for car subsidy program

As part of its green car strategy, China recently announced that it has set aside CNY6 billion (US$952 million) for subsidies of up to CNY3,000 (US$469.76) for the purchase of every vehicle with an engine capacity of 1.6 liters or less, and fuel consumption of up to 6.3 liters per 100 kilometers. The southwestern city of Chongqing followed suit with its own local incentive program, the first of its kind in the country. Chongqing promised a subsidy of 6% on the sale price of cars and mini-buses with engines of 1.6 liters or less and capped the subsidy at CNY3,000 (US$469.76) per vehicle. The new policy announcements resulted in a 21% increase in deliveries of smaller-engine vehicles in May to 638,500 units, compared to the previous year; this resulted in positive cumulative volume sales in that segment for the first time. A 16% increase in vehicle sales across all segments has caused some skepticism however; analysts attributed the increase in deliveries of smaller-engine vehicles to seasonal factors and competitive pricing.

▪ Saudi Aramco to begin production of cleaner fuels in 2016

Saudi Aramco will begin production of cleaner fuels and aromatics at its largest crude oil refinery in Ras Tanura by 2016, which will in turn help supply the company's new petrochemicals joint venture with Dow Chemical. "The project will additionally add value to our downstream portfolio to produce cleaner fuels and also increase production of paraxylene, benzene and toluene," said Abdulaziz al-Judaimi, vice president of chemicals at Aramco. The project will have an annual production capacity of 1 million metric tons of aromatics. Within a decade, Aramco wants to increase its refining capacity to 8 million barrels per day (bpd) and maximize revenues from oil. The integration between refineries and petrochemicals is expected to boost profitability. Saudi Aramco is currently building three new refineries in Saudi Arabia: one with France's Total, in the east; another one with China's Sinopec near the Red Sea city of Yanbu; and one at Jizan, near the border with Yemen. All three refineries are expected to produce cleaner fuels and some petrochemicals.

▪ Vietnam to start pilot program to test E5 next year

Vietnam's Deputy Prime Minister Hoang Trung Hai ordered the Ministry of Industry and Trade (MoIT) to start implementing the use of biofuels by next year. Seven cities—Ha Noi, HCM City, Hai Phong, Da Nang, Can Tho, Quang Ngai and Ba Ria-Vung Ta—will be involved in a pilot program to test E5 next year, before it becomes mandatory nationwide in June 2015. E10 will be implemented in the seven cities by June 2015, before it is adopted nationwide in 2016.

▪ Beijing revises fuel-grading system

The Beijing government said it will revise its current fuel grading system with lower octane ratings so as to meet a stricter emission standard. Effective May 31, gasoline stations in the capital city will no longer offer gasoline with octane ratings of 90, 93 and 97. These will be replaced instead by 89, 92 and 95-octane gasoline, the Beijing Municipal Commission of Commerce announced in its website. Octane rating is a standard measure of the performance of a motor fuel. Fuels with a higher octane rating are used in high-compression engines that generally have higher performance. Use of gasoline with low octane numbers may lead to engine knocking.

▪ Indonesia drops plan to limit sales of subsidized fuels to small cars

The Indonesian government will temporarily drop implementing an earlier plan to limit the sale of subsidized fuel due to go into effect this month, Energy and Mines Minister Jero Wacik said. The original plan was to limit the sale of subsidized 88 RON gasoline in Java and Bali to private cars with engine sizes of 1,300 cc or less. Public transport vehicles and motorcyclists would still have been allowed to use subsidized fuel. "We have studied the plan to limit subsidized fuel for private cars based on engine size over the past two months, and it is difficult to apply. The cc sizes will not be applied for a temporary period because the saving is not huge and there would be too many protests," he said. Indonesia subsidizes 88 RON gasoline, gasoil and kerosene. The government and parliament have agreed to allocate 40 billion liters (335 million barrels) as the subsidized fuel quota this year, from 40.49 billion liters in 2011.

▪ Singapore targets cleaner air by 2020

Singapore is aiming for cleaner air by 2020. To this end, it has adopted World Health Organisation guidelines on air quality as a target. From April 1, 2014, new petrol vehicles in the country have to meet cleaner Euro IV vehicle tailpipe emission standards, up from the current Euro II standard that has been in place since 2001. According to Minister for Environment and Water Resources the country could adopt even stricter Euro V emission standards for petrol vehicles in the near future. The National Environment Agency will also tighten air pollution monitoring efforts and improve transparency on air pollution data, including publishing data on PM2.5 which encompasses airborne matter, such as soot particles, which are a fraction of the diameter of a human hair. These pollutants can get lodged deep in one's lungs and bloodstream, posing health risks.


▪ UN urges US to cut ethanol production

The United Nations has called for an immediate suspension of government-mandated US ethanol production. The US Congress-enacted mandate could potentially divert around 40 per cent of the country's corn into ethanol while the nation battles one of the worst droughts in at least 50 years. There are calls to temporary suspend the ethanol mandate to allow more crop to be channeled towards food and feed uses.

However, some analysts argue such a suspension could have a lower impact on food prices than expected. Even disregarding the mandate, US refiners need billions of gallons of ethanol to meet environmental specifications for their gasoline. Moreover, ethanol is now a sizeable component of global energy supplies and the suspension of the mandate could push up oil prices.

The UN intervention is welcomed by those alarmed by surging prices for corn. Members of the Group of 20 leading economies including France, India and China have expressed concerns about the US ethanol policy.

▪ 2nd China Green Vehicle Forum

The 2nd China Green Vehicle Forum will be held on November 15th-16th in Beijing, China. The forum will continue to gather global automobile manufacturers, engine manufacturers, local government officials, society authority, related technical suppliers and professional medias to discuss about Chinese heavy-duty vehicles and engine industry, the regulations and policies of emission standard in China, advanced technologies of emission reduction as well as the trend of diesel cars in China.

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