Cai asia oil industry dialogue for cleaner fuels in asia
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CAI-Asia – Oil Industry Dialogue for Cleaner Fuels in Asia. Cornie Huizenga Grant Boyle John Courtis Michael Walsh. Better Air Quality (BAQ) 2004 6-8 December, 2004 Agra, India. Overview of Oil Dialogue.

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Cai asia oil industry dialogue for cleaner fuels in asia

CAI-Asia – Oil Industry Dialogue forCleaner Fuels in Asia

Cornie HuizengaGrant BoyleJohn CourtisMichael Walsh

Better Air Quality (BAQ) 2004

6-8 December, 2004

Agra, India


Overview of oil dialogue

Overview of Oil Dialogue

  • Goal: To contribute to better air quality management in Asia by following a structured and scientific approach in the identification of fuel quality improvement and associated improvement in vehicle technology and other directly related measures

  • Participants: Launch meeting in Singapore on 21 July 2003 included Bangchak Petroleum Public Company, BP, ChevronTexaco, ExxonMobil, Indian Oil Corporation, Pakistan State Oil, Petron Corporation, PTT Public Company Ltd, Shell, Showa Shell Sekiyu K. K., Singapore Petroleum Company, Thai Oil Company Limited.

  • ToR: Adoption of Singapore statement kicked of the Dialogue (http://www.cleanairnet.org/caiasia/1412/articles-58710_singapore.pdf). This was followed by the formulation of the detailed ToR.

  • Components: Three background papers under preparation:

    • Relationship Fuels and Vehicles;

    • Costs of Producing Cleaner Fuels

    • Incentives for the adoption of Cleaner Fuels


Context summary

Context Summary

  • Asia as a region has the fastest vehicle growth rates in the world. Variable growth rates by country and by technology

  • Characteristics of the vehicle fleet in Asia are unique: high percentage of 2-3 wheelers; modified vehicles; and high average lifetime of vehicles; and low capital cost of in-use vehicles

  • Considering existing and currently planned emission standards majority of vehicles in Asia in 2010 will still be less than Euro 2 equivalent.

  • Cleaner fuels will have direct impact on emissions from both new vehicles and existing in-use vehicles


Gasoline effects on emissions

Gasoline Effects on Emissions

Emissions

Toxics (Unregulated )

Regulated

Fuel-

change

CO

HC

NOx

Benzene

Butadiene

Aldehyde

Reduction of :

+++

o

o

o

o

o

Benzene

---

---

-

-

++

++

+++

Aromatics

++

o

o

o

o

o

Olefins

+

+

+

o

o

o

Sulphur

/+

o

o

Vapor pressure

o

o

o

o

-

++

+

+++

Distillation

Characteristics

?

?

--

++

+

o

+

o

Addition Oxygenates

0

2-10 %

10-20 %

> 20 %

}

Improvement

or

Deterioration

+

++

+++

-

--

---

2 %


Diesel fuel effects on emissions

Diesel-Fuel Effects on Emissions

Vehicle - Emissions LDV / HDV

Diesel fuel-change

CO

HC

NOx

Particulates

Reduction of:

+/++

o

o

? / o

Sulphur

--

++/

+

/

++/-

++/o

o

Density

-

-

+

/

/

/

+

+

o

o

Aromatics

-

-

-

- -

/

/

+

o

/

o

/

o

Back End Distillation (T95)

Increase of ...

-

/

+++/+

o

+++/++

o

Cetane Number

0

2-10 %

10-20 %

> 20 %

}

Improvement

or

Deterioration

+

++

+++

-

--

---

2 %


Control devices emission reduction potential and effects of sulfur on catalyst performance

Control Devices, Emission reduction potential and effects of sulfur on catalyst performance (*)

Note: CAI-Asia, a work in progress (not to be quoted)


The asian refining industry

The Asian Refining Industry

  • Significant number of small refineries

  • Even the complex refineries in the Asian region are not well equipped to produce clean fuels

  • Significant capital investments are required

  • Amongst the most critical parameters are sulfur, benzene, and aromatics.


Costs of production

COSTS OF

COUNTRY

PRODUCTION

STUDY’S

STUDIES

REGION

(cents/gallon)

OBJECTIVES

GASOLINE

DIESEL

Enstrat

All Asia

Sulfur

Reductions

Intl.

----

8.1

-

12.4

-

50ppm

-

10ppm

Australia

Australia

Fuel

Reformulation

Gov.

2.5

4.2

EURO 4

(S, benzene)

T

rans

-

China

Fuel

1.5

3.2

Reformulation

Energy

(EURO 4)

Daedalus

Thailand

Fuel

6.1

-

25.3

2.3

Reformulation

LLC

(EURO 4)

California

California

More severe

15.0

-

19.0

8.2

-

8

.7

than EURO 4

(Many Studies)

ADL

Europe

EURO 4

(Gasoline)

Costs of Production

  • Preliminary review of cost studies to determine the applicability of cost estimates to Asia

  • Comparison of refinery data for Asia with data from other countries to assess applicability

10.4

-

11.3

----


Potential options for implementation of clean fuels

Potential Options for Implementation of Clean Fuels

  • Option A:Follow an integrated strategy and regulate all fuel properties at the same time

    • optimum strategy; takes full advantage of refinery integration

    • requires larger capital investment; all air quality benefits materialized

  • Option B:Implement some fuel quality standards first and follow later with more comprehensive standards

    • depends upon the time for implementation of vehicle standards

    • requires less capital investments in the short term

    • sub-optimum strategy; more costly in the long term

    • some air quality benefits will be delayed

  • Option C: Limited introduction of fuel quality standards in cities and regions where air quality is an issue; different standards for the remainder of the country.

    • depends upon the ability to monitor compliance; possible enforcement and fuel adulteration issues

    • reduces the costs of compliance; increases the costs for fuel segregation

    • potential for the quality of fuels in the uncontrolled areas to deteriorate


Implementation time frame

Implementation Time-Frame

  • USA and EU issued regulations, which gave 4-7 years for the introduction of cleaner fuels, which was feasible

  • For Asian countries implementation time of 4-6 years can be considered for planning purposes, whereby:

    • 2 years permitting, engineering, financing

    • 2-4 years construction (includes contingencies)

  • However there will be location specific factors that will influence timing:

    • Ability to raise capital and to finance capital investments

    • Growth in demand for transportation fuels

    • Availability of trained labour, engineering services

    • Avoidance of risks in supply disruptions

    • Ability of the marketing and distribution system to adjust

    • Ability of the government to make, where relevant decisions on future of small scale refineries

    • Flexibility granted by regulators to refiners

    • Availability of merchant – export refiners in the region to meet shortfall in local production.

      NOT ALL COUNTRIES WILL OPERATE WITH SAME TIMEFRAMES


Implementation strategies for fuel quality improvements

Implementation Strategies for Fuel Quality Improvements


Tax and pricing differentials in asia

Tax and Pricing Differentials in Asia

Unleaded Gasoline

Lower Sulfur Diesel


Market orientation

Market Orientation

(EIA, 2004)


Incentives and taxation versus command and control

Incentives and taxation versus command and control

  • Taxation and Incentives can complement fuel quality regulations but not replace it.

  • Where the market will not accept the costs of higher quality fuels, governments should adjust taxes or duties to create a price advantage for the cleaner fuel. This can rest on pricing processes in both state-owned and market driven refining sectors.

  • Governments with state owned oil sectors and price controls should not rely on tax differentials between higher and lower quality fuels to stimulate investments in refinery upgrades, but instead may allocate directed subsidies to accelerate the introduction of higher quality fuels and complement regulations.

  • Where the costs of domestic refinery upgrading to produce desired cleaner fuels are prohibitive or the investment environment is not attractive, governments should look toward regional imports over the short term to supply cleaner fuel to the market.

  • Governments can develop tax incentives for cleaner vehicles to indirectly encourage the market for cleaner fuels.


Next steps in oil dialogue

Next steps in Oil Dialogue

  • Follow-up: Inform governments on the potential ability and associated efforts to produce cleaner fuels, this in support of the development of medium term fuel quality strategies by Asian governments

  • Road-map: Develop consensus among main stakeholders (oil industry, vehicle industry, emission control technology industry, regulators, NGO’s) on where, how, and when Asia will move in terms of fuel quality and vehicle emission levels.

  • CAI-Asia is considering a workshop for 2005 to bring together all stakeholders to discuss outputs of CAI-Asia Oil Industry Dialogue to develop consensus on the road map.CAI-Asia will invite different groups such as ASCOPE, AMEICC, ESCAP, PCFV, UNEP, Male Declaration, SASEC, SAARC to the workshop.

  • Policy advocacy:Promote the promulgation of medium term regulations to create predictability, and transparency in regulation


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