W. EUROPEAN REFINERS FACE TOUGH ENVIRONMENTAL RULES

Western Europe's refiners are beginning to grapple with the kind of fundamental changes and huge outlays related to stringent new environmental standards their U.S. counterparts are encountering. Just as the 1990 amendments to the Clean Air Act (CAAA) is transforming the shape of U.S. refining and imposing staggering costs on refiners there, new directives proposed by the European Community Commission threaten the same for western European refiners. And the price tags are comparable. Ashland Oil Inc. recently estimated U.S. refiners' capital costs triggered by the CAAA at about $40 billion. A new study by Enerfinance Consulting Services and Beicip-Franlab, pegs added costs of just implementing EC mandates for lower sulfur limits in refined products at $9-12 billion.

Given the current state of the industry in Europe, industry officials warn, refiners there might not be able to fund those massive environmental outlays.

Olivier Appert, director of France's Hydrocarbon Department in the Ministry of Industry, expressed those concerns. Speaking at a press conference last week, Appert said "dark clouds" are gathering over the refining industry in France and the EC overall in the form of squeezed margins and falling products prices.

He cited capacity creep as a result of debottlenecking projects that has boosted throughput capacities higher than expected amid economic malaise.

"But there is no overcapacity," Appert said. "Refinery closures will not solve the problem. Whatever the case, companies are faced with huge environmental outlays that have no immediate return."

European refiners took a much less apprehensive view of the situation only a few years ago, when the biggest challenge ahead was completing the transition to unleaded gasoline.

Since then, implementation of tax measures favoring unleaded has sparked explosive growth in unleaded's share of western Europe's gasoline market.

But other than EC proposals to trim sulfur, there was a widespread expectation that Europe won't necessarily follow the U.S. into reformulation of gasoline (OGJ, Aug. 27, 1990, p. 14). Although reformulation might not take as severe a route as it has in the U.S., EC, government, and auto industry proposals have been made to determine new formulas for gasoline and various gas oils this decade.

COSTS UNJUSTIFIED

An example of how European refiners are coming to grips with those concerns is the stance taken by the European Petroleum Industry Association (Europia) over an EC directive on reducing sulfur in gas oil.

The directive calls for cutting sulfur levels in all gas oils to 0.2 wt % by October 1994 and a further cut in diesel fuel to 0.05 wt % by October 1996.

Europia estimates EC refiners will have to spend $2-5 billion to implement the reductions.

The association said it will accept the diesel sulfur limits if there are no further changes in diesel sulfur levels before October 2001 -and then only if studies of post-1996 exhaust emission standards show a need for further cuts. However, Europia remains strongly opposed to any further reduction in heating and marine gas oil sulfur content to less than 0.2 wt %.

Citing a study of sulfur dioxide levels in Cologne and London, the association said data showed the effects on urban SO2 levels resulting from such a reduction would be "extremely marginal." Those studies show environmental mitigation from measures already planned or under way would result in SO2 levels in those two cities well within EC standards.

Considering that reducing sulfur levels in other gas oils further would cost another $1.5 billion, Europia said, "Such a move would be totally unjustified on a cost-benefit basis."

UNLEADED TRANSITION

The first important step to change the quality of fuels in western Europe came with a 1970 directive by the United Nations Economic Commission for Europe that set in motion the gradual phaseout of leaded gasoline.

This process is still under way in western Europe because the directive was implemented to varying degrees among EC members.

Germany and Netherlands immediately provided incentives for use of unleaded and adoption of automobile catalytic converters. Other countries, such as France and Italy, have offered incentives for unleaded only as recently as 1989 (Table 1).

In 1990 unleaded gasoline in Italy accounted for only 5% of the market, and autos with catalytic converters represented less than 1%. In Germany the same figures were 67% and 34%, respectively.

SULFUR LIMITS

The EC Council of Environment Ministers in March 1987 approved a directive trimming sulfur levels in all gas oils except those used by shipping sectors or for further processing to 0.3 wt % and letting member states adopt a limit of 0.2 wt % in heavily polluted areas.

The council in March 1992 proposed these new diesel sulfur measures:

• A limit of 0.2 wt % for all gas oils, middle distillates, and motor diesel by Oct. 1, 1994.
• A limit of 0.05 wt % for motor diesel by Oct. 1, 1996. EC member states must ensure the phase-in of 0.05 wt % sulfur diesel beginning Oct. 1, 1995.
• For all gas oils and middle distillates, excluding kerosine jet fuel, cuts below 0.2 wt % will be decided on by July 31, 1994. That will be based on an EC Commission proposal to be implemented by Oct. 1, 1999.
• For kerosine jet, new sulfur limits will be considered by July 31, 1994.

There is leeway within individual EC countries in implementing the new standards. Italy's government passed a regulation imposing a sulfur limit of 0.2 wt % for fuels used in public transportation in urban areas of more than 300,000 and in fuels burned in power plants on Italy's islands.

Europia slammed the 0.05 wt % sulfur limit as "a political decision" that imposes on western Europe the U.S. CAAA standards.

The association managed to deflect an initial draft requiring that 0.05 wt % sulfur motor diesel account for 25% of the market by Oct. 1, 1995, a deadline it considers unrealistic. It also managed to block the 1999 target for heavy fuel oil and bunker oil with a maximum 0.1 wt % sulfur content, arguing that no proper study had been made involving the cost and environmental effects of such a measure.

Europia also argued that the need for 0.05 wt % sulfur motor diesel in Europe has not been scientifically established by research conducted by Europe's automakers and oil companies.

Europia is cofunding an EC research program coordinated by Institut Francais du Petrole on the possible correlation between engine emissions, motor diesel characteristics-such as density, sulfur content, cetane index, and aromatics levels-and the use of specific additives. Europia says the decision that will finally be made in this connection should "considerably influence the mode of production of diesel fuel in European refineries."

Under the October 1991 "clean lorry" directive, European refiners agreed to phased introduction of motor diesel with a 0.05 wt % sulfur content beginning by Oct. 1, 1995, providing the 0.05 wt % guideline remains unchanged for a 5 year period beginning in 1996.

A study by Conservation of Clean Air and Water in Europe (Concawe), the oil industry association in Europe for environmental and health protection, found the incremental cost of reaching a 0.05 wt % limit for sulfur in gas oils would be $15-18/ton.

For the remaining proposed sulfur limits on heating oil and middle distillates, to be decided in mid-1994, the EC Commission's proposals will hinge on aggregate success of other air quality measures taken up to that point.

EVAPORATIVE EMISSIONS

EC legislation also is being drawn up to control evaporative emissions at all stages in storage, distribution, and use of gasoline.

In a first step, an EC directive requires catalytic converters on all new vehicles beginning this month, in a bid to reduce emissions of volatile organic compounds (VOCs) from vehicle exhausts by as much as 90%. It also requires installation of 1 l. carbon canisters on new cars to recover evaporative emissions while the car is idling.

A new EC directive proposes emission controls during storage and loading into road, rail, or marine transport (Stage 1A) and distribution and offloading of gasoline at service stations (Stage 1B). A planned second directive will cover control of emissions during car refueling at service stations (Stage 2).

Shell U.K. Ltd. said legislation for both vapor recovery stages is expected to be phased in during several years, depending on throughput at respective terminals or service stations, beginning in early 1994.

Shell said industry prefers large, 4-5 l. carbon canisters installed on cars to recover VOC emissions when refueling as well as when running and idling.

"Industry figures demonstrate that cars fitted with large canisters can achieve 90% control of stationary and running losses and 98% control of refueling emissions," Shell said.

The EC Commission's argument against this approach is the long time-about 10 years-required to turn over the vehicle population. It opted instead for installing vapor recovery systems at service stations.

Shell notes that in any service station vapor recovery system, an effective seal between the car's filler neck and the pump's filler nozzle is essential.

"The recovery of vapor emissions is 50-60% where there is a poor seal between the nozzle and filler neck. This can be increased to 86% if standardized filler necks are used. The time it would take to achieve standardization of the filler neck design negates the EC argument against large carbon canisters.

"Accepting that installing vapor recovery is the legislated option, the decision then is between a balanced system or pump assisted system. The assisted system is more efficient, but the cost is likely to be three times that of the balanced system."

In the U.K., industry also has taken steps to reduce seasonal volatility of gasoline.

In September 1991, the U.K. Petroleum Industry Association agreed to cut winter and summer volatility. A further cut in volatility, due early this ear, has been negotiated with the U.K. Department of the Environment and the auto industry as part of the new European standard for unleaded gasoline.

FUEL QUALITY CHANGES

Until recently, western Europe's concern over motor fuels composition other than lead levels was limited to reducing sulfur content.

However, Concawe noted, "A number of countries are introducing compositional specifications in the belief this will enhance emissions performance."

Much of the debate over new specs for gasoline and diesel fuel in Europe has occurred within the confines of the Comite Europeen de Normalisation (CEN), the European standards organization, where automakers and oil companies have debated how to reconcile their needs with the proposals of the EC Commission and national governments.

Most of the quality requirements requested by some European governments closely follow CAAA standards that were predicated on changing fuels as well as engines, introducing the concept of reformulation of motor fuels to Europe (Table 2).

OCTANE LEVELS

The EC directive on unleaded gasoline fixes the minimum octane level at 95 RON/85 MON.

This value represented a compromise between the growing demand in Europe for engines designed to work with a low octane rating and refineries' increasing energy consumption in order to produce high octane fuels.

Some European automakers favor unleaded gasoline with an octane rating of 98 RON/88 MON.

But an increase in the unleaded gasoline octane pool would rest essentially with choices in marketing rather than with technology, industry officials contend.

It could be achieved without affecting yields and aromatic levels but only in deep conversion refineries with isomerization and alkylation plants producing or blending methyl tertiary butyl ether, currently in limited supply in Europe.

BENZENE, OTHER AROMATICS

The current limit on benzene levels, as authorized by the EC directive requiring introduction of unleaded gasoline, is 5 vol %.

German authorities have proposed a reduction to 1 vol % that has not been accepted by EC agencies. That would match the level called for in U.S. reformulated gasoline.

Because the European emphasis is on tailpipe and evaporative emissions of benzene, the current focus is on catalytic converters and activated carbon canisters to reduce benzene emissions.

In Europe, there is no legal limit to total aromatics content in gasoline. However, total aromatics are indirectly limited by a requirement to demonstrate a 15% reduction in emissions of air toxics, mainly benzene.

That compares with U.S. aromatics limits under reformulated gasoline guidelines of 30 vol % in 1992, 28 vol % in 1994, and 25 vol % in 1996.

What European refiners consider achievable on aromatics limits is to stabilize them at current level through 1996 and thereafter reduce them through available technology.

A Concawe study emphasized that to reduce benzene levels to 1-3 vol % and total aromatics levels to 30 vol %, European refineries will have to reconfigure into complex conversion plants by adding isomerization, alkylation, benzene recovery, and MTBE units.

That would call for an estimated added investment by western European refiners of $2 billion, with production cost increases of $16-20/metric ton for gasoline produced in reconfigured simple refineries and $8-12/ton in currently complex refineries.

OLEFINS

Western European refiners don't expect to see imposed the sharp reduction in gasoline olefins levels that have been proposed in the U.S.

Current CAAA guidelines don't set new limits for olefins levels in gasoline, assuming there is no percentage increase as a result of reformulation. But there remains consideration for later of a limit of 5 vol % for total olefins and 1 vol % for the most reactive olefins.

Agip SpA contends it is very unlikely such strict limits will be adopted in Europe.

However, a reduction of the most volatile olefins C4/C55 to less than 1 vol % in the U.S. might spur a comparable measure in Europe. Such a measure would involve eliminating the most reactive olefins, notably pentenes and butenes through tertiary amyl methyl ether etherification, thus calling for more refining investment.

OXYGENATES

Oxygenates will play a greater role in Europe's refining sector under an EC directive that sets a range of limits for various oxygenates (Table 3).

In France, however, the auto industry's labeling system for gasoline performance specs (cahier des charges) calls for no alcohols or ketones and a 15 vol % limit for ethers.

In the U.S., CAAA guidelines call for an oxygen content in the nine urban areas not in attainment for carbon monoxide of at least 2 wt % in 1992, 2.5 wt % in 1993, and 2.7 wt % in 1994.

Rather than set a required oxygen level, most western European nations are expected to adopt standards calling for maximum levels of oxygenates along the EC guidelines.

OTHER POSSIBLE CHANGES

European automakers, seeking to guarantee a long life for catalytic converters, have asked for tougher limits on lead and sulfur.

For lead, a limit of 0.005 g/l. might be necessary and would not create operating problems for refiners, they contend.

The CEN directive EN 228 found results of studies on the effects of sulfur on catalytic converters are inconclusive and catalytic converter technology applicable to sulfur effects is still at an early stage.

The directive proposed a provisional sulfur limit of 500 ppm by 1995. To reduce sulfur content further, it would be necessary to process crudes with much lower sulfur content or make huge investments in cat cracker desulfurization, CEN said.

The French cahier des charges also calls for use of detergent additives in gasoline. Other European automakers also recommend their use-but unofficially. In the future, however, European gasolines are likely to be characterized by multifunctional additives.

MOTOR DIESEL REFORMULATION

Several countries, notably Sweden, have proposed reformulating motor diesel fuel to rationalize the broad range of specs within the EC (Table 4).

That led to an EC directive and a compromise agreement between refiners and automakers to implement new motor diesel specs (Table 5).

These provisional specs were to be implemented in EC countries by yearend 1992 and remain in force until October 1995, when a second stage of more stringent emissions mitigation measures is expected for heavy duty diesel vehicles.

As for the 1995 specs, the European Association of Car Manufacturers (ACEA) has proposed even more stringent limits.

ACEA contends development of diesel catalytic converters would eventually require a further cut in diesel sulfur limits to less than 0.02 wt %.

To guarantee quality of ignition, ACEA proposes limiting motor diesel's cetane number to 58 and cetane index to 54, thus indirectly controlling aromatics content of gas oils and subsequent particulate formation.

ACEA also seeks a 10 vol % limit in aromatics content and a drastic reduction in final distillation-95% at 340 C. and final boiling point at 350 C. Significant aromatics cuts as proposed by ACEA aren't likely to get very far in Europe.

A study by Arthur D. Little found a reduction of 50% in aromatics content would cost $32.40/ton of gas oil. Refiners also point out that the role of aromatics in the formation of particulates is not yet clear.

Studies are under way to determine the significance of final distillation point in motor diesel emissions.

Laboratory tests by Agip Petroli found that the range of emissions among different diesel engines using the same fuels is generally far greater than among the same engines burning fuels along a wide range of quality. Agip also found that diesel engines designed for low particulate emissions are less likely to show gains in emissions reductions from changes in fuel quality.

Accordingly, Agip calls for a cautious approach by EC and member governments to auto pollution control that is based on fiscal or other incentives and follows the lead of a joint effort by auto, oil, and public sectors.

Copyright 1993 Oil & Gas Journal. All Rights Reserved.