The Asian Clean Fuels Association has been holding a workshop in Jakarta on 10-October 2019, facilitated by White Rook Advisory, which was attended by representatives of the Ministry of Energy and Mineral Resources (MEMR), Lemigas (Oil and Gas Research Institution) and the country’s state-owned oil company Pertamina. The purpose of the workshop was to deepen the information exchange between the stakeholders involved in Indonesia’s Euro 4 implementation programme and expand possible collaborations ahead. ACFA has been recognized as a thought and solution partner to help Indonesia fully implement the long-overdue Euro 4 fuel standards. Till date, Indonesia is still lacking behind in terms of these fuel standards, having a current Euro2-like specification in place, with low octane/high Sulphur contents, while Euro 4 emission requirements and standards have already been implemented.

Current state of Indonesian refining industry - some background information:

At the moment, Indonesia only has a capacity of 820 kbpd, and this needs to increase to over 2m bpd, or otherwise, the country will continue to require even larger volumes of finished-grade fuel imports. In addition, with its refineries having a low complexity index of no more than 9 on the Nelson scale, the refineries are due for extensive upgrading exercises in order to meet future fuel quality standards that the government will legislate within the near future. The growing gap in both supply availability and quality has resulted in significant changes in the gasoline trade flow in recent years, and is a big factor in gasoline trading and movements within SE Asia. Indonesia presently imports more than half its total gasoline demand of around 30m MT/y, and imports are scheduled to expand further until new refinery capacity comes online.

Various upgrading projects have already been slated for Cilacap, Balongan, Balikpapan and Dumai, all scheduled to complete around 2025. In addition to this, Pertamina has already signed JV contracts with Rosneft and Oman Oil to build each 300 kbpd new capacity. Saudi Aramco has also signed another JV with Pertamina to revitalise the Cilacap refinery and increase the capacity to 400 kbpd. Pertamina had stated that it has budgeted US$ 4.2bn this year and will raise it to US$ 7bn/y in two years as part of plans to double its refinery capacity, as it remains under pressure from the government to reduce imports of refined oil products.

The event was attended by more than twenty participants and provided valuable insights from MEMR on the major challenges on the implementation of Euro 4 in Indonesia, such as concerns over cost of Euro 4 equivalent fuels for consumers and the low awareness of consumers to conserve environment and to improve the country’s air quality. ACFA and its representatives highlighted the objectives achieved in other parts of Asia as well as globally and how ACFA has helped governments and stakeholders to accomplish this by addressing the afore-mentioned concerns, raised by MEMR.

Underneath the reader will find some of the critical points addressed in various papers presented during the workshop:

MEMR Head of Sub-Directorate of Oil and Gas Standardization Bapak Yunan Muzaffar conveyed his hope for this workshop to produce an actionable plan for Indonesia to expedite the implementation of Euro 4 standard fuels in Indonesia.

He provided an overview of Indonesia’s current fuel situation and landscape, air quality and difficulties faced by Indonesia, coordination and alignment between relevant institutions in Indonesia. He shared that fuel specifications in Indonesia are mainly based on technical and chemical aspects, rather than performance basis. He presented an up-to-date overview of the Euro 4 implementation by various gasoline and Diesel grades, addressing issues such as the mixed success of market penetration, consumer pricing sensitivity, air quality concerns, particularly in Jakarta, health and safety considerations as well as the technical ability of the oil industry to comply with regulations.

Dr Walter R. Mirabella, Chairman Global Technical Fuel Team ACFA, ACELA and Sustainable Fuels, shared the European experience in implementing higher fuel quality standards and how this would help Indonesia on its path forward to accomplish cleaner fuel aspirations. Dr Mirabella highlighted that better fuel standards will benefit all stake-holders and that upgrades in vehicles and fuel quality standards jointly enable transport’s impact improvement. He also concluded that Indonesia’s adoption of Euro IV emission standards will greatly improve the country’s air quality and offered ACFA’s experience to contribute to achieve these goals in Indonesia.

The first two charts show the direct impact the European fuel quality standard evolution had on emissions in the region, while chart 3 and 4 highlight the apparent differences we are seeing today between the standards applied in the European Union and actual fuel standards in Indonesia and how the adoption of Euro 4 would drastically change the transport-related pollutant emissions in Indonesia.

Mr Clarence Woo, Executive Director Asian Clean Fuels Association, referred to two Asian examples, namely Thailand and China. One of the charts in his Thailand paper showed how rapidly carbon monoxide, nitrogen oxide, particulate matter and carbon dioxide emissions will evolve in the country between now and 2050 in case Thailand will not move on from current Euro 4 standards.

In his paper on China he showed how the country has successfully tackled PM and NOx emissions and how this has improved health issues and benefits on a large scale over the last 10-12 years when China improved fuel standards from GB 3 to GB 6, which equates to Euro 3 to Euro 6. During the time emissions were reduced greatly while this was basically achieved by reducing aromatics, olefins and Sulphur in gasoline, while the lost octane was compensated by the increased use of MTBE which is a known clean fuel component with tremendous impact on air quality improvements.

Mr Woo also addressed how the country successfully implemented higher fuel standards by considering all practical and financial aspects, with a multi-stage and regionally different approach. Today, China has achieved highest fuel quality standards globally and established itself as a leader in clean fuels production.

Mr Dieter Krumbach, Founder and Owner of DK & Associates Consultancy, addressed the issues the Indonesian oil industry will be facing if necessary investments in upgrading and building new grass-roots plants will be postponed. He used the Middle East case as an example where fuel consumption has grown at a high level in recent years which has been met by significant investments in refining capacity, helping the region to become less dependent on import supplies over time. Failure to invest will in his opinion lead to a loss of competitiveness against other domestic industries as well as international fuel suppliers.

ACFA is impressed with the MEMR’s eagerness to implement the national Euro 4 fuel standards. It notes the complexities of the domestic fuel market, the urgency of upgrading its refineries, and the need to close the ever-growing gap between domestic supply and demand, resulting in incremental import requirements. A lot of effort, resources and funding are required to support the country in its efforts towards the next level of fuel quality standards, but as with the challenges faced by most Asian countries, ACFA remains committed to be a positive contributor to the success of the endeavour.