Cleaner Fuel Specifications

1. Cleaner Fuel Specifications Date: 13 December 2005 Venue: Parliament DME Presentation to the Portfolio Committee Cabinet decision on clean fuel specifications

2. Why Cleaner Fuels • Lead is toxic – especially malnourished children • Introduction of unleaded in SA – medical reports showing improvements in health • World has moved & is moving to unleaded • Implications for local car manufacturers • Keep up with world technology trends • WSSD commitments • Dakar declaration • International pressure

3. Broad Approach to Fuel Specifications • Follow EU • Euro 2 - from 2006 • Euro 3 – from 2008 • Euro 4 - from 2010 • Alignment within SADC • SADC moving in groups in introduction of clean fuels • Each country decision on which grades to avail • Timing within months of each other • Vision: compatibility throughout the region

4. So are many other countries

5. Diesel is the same

10. Key issues to consider • Investment • Reliance on imports • Loss of jobs • Security of supply • Foreign exchange impacts • Loss of skills

11. Challenges for fuel specs • Refinery investments • Oil industry claimed approx R10-12 billion • Optimal future petrol octane structure • Infrastructure, supply and logistics issues • Cross contamination of heavy metal additives and petrol without heavy metals • Some oil companies refuse to sell heavy metals • Some car manufacturers demand metal free petrol

12. Options for refineries • Increase reformer severity • Loss of volume due to lower yield • Increases emissions • Refining investments • Most preferred • Opportunity for refineries to upgrade refineries • Do not invest but reduce refining capacity • Use of high octane imports (Reformate, MTBE, MMT) • Final product import –refining value-add is lost

13. Preparation and Consultation • Octane study – July 2003 • Jointly funded by DME, SAPIA & NAAMSA • Interdepartmental • DEAT, the dti, National Treasury, DoT, DST, • Legal Resources Centre • Publication for public comment of doc • 2003 Nov Vehicle Emissions Strategy gazetted and post on the DME Website • World Bank – March 2004 • Stakeholder Committee • Clean Fuels Committee 2003 • Participants • SAPIA, Government Dept, NAAMSA • Sub Committees • Pricing & tax, logistics, technincal, and Communication

14. Current Position • How does altitude affect the need for octane • Different engine technologies have different altitude responses • Some engine technologies are able to fully compensate for altitude and thus have similar octane requirements at all altitudes • Many motorists believe octane puts “whooma in de wiele” • Much octane wastage • Octane wastage has macro economic impacts • Unleaded petrol market penetration is at 30%

15. Current Position • Can our refineries produce 100% 95RON without importing octane enhancers • Without additional investments – only 50% • Withadditional investments - up to 75%

16. South African Government Decisions • December 1991 • Cabinet approved introduction of unleaded petrol (introduced 1996) • April 2002 • Cabinet approved a recommendation to phase-out lead from petrol by 2006 • Approved that sulphur in diesel be reduced to maximum of 0.05 per cent by 2006 • 16 March 2005 • Cabinet confirmed 2002 decision • Approved National Octane Structure w.e.f. 2006

17. New Octane Structure from 2006 • Coastal Region • 91 • 93 • 95 • 95LRP • Inland Region • 91 • 93 • 95 • 93LRP

18. Price Differentials • Price differentials between different octane grades • Only be BFP differentials • Retail price differentials between ULP & LRP same octane • None • Motorist will not pay more for cleaner fuels • New grades of fuels • 95ULP Demand levy inland

19. Labeling • Anti valve seat recession additives will be available at the pump • Pumps dispensing petrol containing heavy metal additives will be clearly labeled as such

20. Diesel specifications from 2006 • Sulphur standard grade • 500ppm • Sulphur niche grade • 50ppm

21. How will fuel specs be regulated • Through the Petroleum Products Amendment Act of 2003 • The Minister of Minerals and Energy to promulgate fuel specification regulations • Will be regulated in cooperation with SABS, which currently has only voluntary regulations

22. Demand management levy • The levy to be imposed through the Equalisation Fund levy mechanism to allow for regular adjustments • Limited to the “inland” region • Will be between 0cpl & 50cpl depending on the demand level of 95 ULP • DME to draft the rules for the triggers in consultation with the industry • Will commence at 10cpl

23. 93 LP and 93 ULP • 95 ULP and 97 LP • 93 and 97 • 93 and 95 and 97 • 93 and 95 58% of total petrol 42% of total petrol Current supply patterns • The inland region defined as the zones in Grey • Defined by areas that are currently predominantly 93RON

24. Vehicle compatibility database • The National Association of Automobile Manufacturer of South Africa in conjunction with SAPIA is developing a detailed VFCDD • Ready by mid April 2005 for public access • Intended to inform consumers which octane grade is recommended for their particular vehicle

25. Stakeholder complaints • Concern has been raised from some quarters about the removal of lead Which comes first? Cleaner fuels More efficient vehicles

26. Benefits • Access to new efficient vehicle technology • Improved health • Cleaner environment • Reduced operating and maintenance costs • Money in your pocket • Promotion of use of the Platinum • Increased local production of catalytic converters