ASIAN PRODUCT SPECIFICATIONS TO TIGHTEN BY 2000

Aug. 7, 1995
The Asia/Pacific region is characterized by much diversity in environmental standards for petroleum products. Specifications in Japan, for example, are quite stringent, while, in India, kerosine - even that used for cooking or lighting - may contain as much as 0.2% sulfur. Widhyawan Prawiraatmadja and Fereidun Fesharaki of the East-West Center in Honolulu outlined regional product quality in a report titled, "Trends in Petroleum Product Specifications in the Asia-Pacific Region: A

The Asia/Pacific region is characterized by much diversity in environmental standards for petroleum products. Specifications in Japan, for example, are quite stringent, while, in India, kerosine - even that used for cooking or lighting - may contain as much as 0.2% sulfur.

Widhyawan Prawiraatmadja and Fereidun Fesharaki of the East-West Center in Honolulu outlined regional product quality in a report titled, "Trends in Petroleum Product Specifications in the Asia-Pacific Region: A Supply/Demand Analysis (69670 bytes) and Government Policy Responses."

THE REGION

Progress in setting standards for petroleum products in the Asia/Pacific is strongly related to the level of income in each country.

According to the East-West Center report, "There is a tendency for governments to try to achieve significant growth first and to address environmental issues later - by which time (with the anticipated higher levels of income) the issues will be relatively easier to deal with."

Japan is clearly the regional leader. All its gasoline is unleaded and sulfur specifications soon will be among the world's strictest.

Australia and New Zealand used to rank second in the region, but South Korea and Taiwan have become more aggressive when it comes to tightening specifications. And Thailand is following close behind.

For high-speed diesel fuel, for example, Japan will adopt a 0.05% sulfur maximum in 1997. Taiwan will follow suit the same year, said the report, as will South Korea and Thailand in 2000.

Likewise, fuel oil used for electricity generation in Japan contains less than 0.3% sulfur. The other three countries are moving toward a 1% maximum, and eventually will adopt a 0.5% specification.

In addition, these three countries are phasing out leaded gasoline. Singapore and Malaysia also have begun lead phaseout, and the Philippines and Indonesia will follow suit soon, according to the report.

China, India, and other countries in southern Asia lag behind in the race to tighten product specifications. China's average octane level is among the lowest in the region. The East-West Center says that, although some of China's gasoline is unleaded, this product can have octane numbers as low as 70 RON.

China's first priority is to improve gasoline octane. This will be achieved by increasing catalytic cracking and reforming capacities, and by adding lead. As a result, on an absolute volume basis, the country will actually consume more leaded gasoline, although the lead specification will be reduced eventually.

"In any case," says the report, "improvements in petroleum product specifications in China and India seem to be the proverbial drop in the bucket, since most of the emissions polluting these countries come from their enormous consumption of coal. The coal shares in the energy mixes are about 75% in China and about 60% in India."

GASOLINE

The authors summarized changes in gasoline demand in major Asia/Pacific countries. The data include current data and projections through 2000 (table)(68301 bytes), The quality figures xin the table are not mandated standards, but rather average levels based on assumptions about refinery capacity, sophistication, and feedstocks. In many cases, several grades were averaged to produce the values shown.

Regional gasoline consumption is projected to increase from 2.76 million b/d in 1994 to 3.21 million b/d in 1997 and 3.72 million b/d in 2000. Unleaded gasoline's share of that demand is projected to increase from 64% in 1994 to 76% in 1997 and 82% in 2000.

Meanwhile average octane was 90 RON in 1994 and is expected to be 91 RON in 1997 and 92 RON in 2000. Other expected improvements are Rep reductions and decreases in allowable levels of lead, benzene and other aromatics, and sulfur, and increased use of oxygenates.

DIESEL

Diesel consumption in the region has increased more rapidly than that of other products. Diesel use is expected to increase from 4.75 million b/d in 1994 to 5.45 million b/d in 1997 to 6.3 million b/d in 2000.

Most Asia/Pacific countries divide diesel into automotive and industrial varieties, based on cetane number and sulfur content. Automotive diesel oil (ADO) also is called high-speed or motor diesel, and industrial diesel oil (IDO) is known as bunker diesel. ADO's cetane number is 45-50, while IDO's averages less than 40.

About 80% of the diesel consumed in the Asia/Pacific region is ADO. It should be noted, however, that, because of the wide variety of standards in the region, ADO in one country can be of lesser quality than IDO in other countries.

Aggressive reductions in the sulfur content of ADO are expected by the end of the decade. By 2000, Australia, Japan, South Korea, Taiwan, and Thailand are projected to have 0.05% sulfur limits. At the high end of the range, India and Viet Nam are expected to decrease their limits from 1.0% in 1994 to 0.5% in 2000, which should be the regional maximum at that time.

China, Malaysia, the Philippines, and Singapore are expected to have limits of 0.2% by 2000.

It should be noted that, because of the availability of domestic sweet crudes in countries such as China, Indonesia, and Malaysia, average fuel sulfur levels are less than the maximum specifications.

FUEL OIL

Regional fuel oil quality also is expected to improve. Sulfur content will decline, especially in fuel oil consumed for electricity generation. Some countries also have adopted tighter specifications in polluted urban areas.

Regional demand for low-sulfur fuel oil (LSFO) historically has been met easily by processing low-sulfur Asian crudes. The LSFO market is likely to become tighter in the future, compared with the high-sulfur fuel oil (HSFO) market. The price spread between the two, therefore, will increase, say Prawiraatmadja and Fesharaki.

Production of sweet crude in the region is stagnating, however, and dependence on mid and high-sulfur crudes from the Middle East will increase. The projected surplus of fuel oil in the region thus comprises only HSFO.

At the current cost of adding residual desulfurization (RDS) capacity to produce LSFO, the investment is economical at a LSFO/HSFO price differential of $4/bbl. When the LSFO market tightens, the economics of this conversion technology will improve, according to the report.

In 1997, the power sector's standards for fuel oil sulfur are expected to range from 0.3% (in Japan) to 3.5% in eight of the countries included in the report. By 2000, the only projected changes are declines in six of those eight countries to a maximum sulfur content of 3.0%.

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