October 30, 2020

A Global Overview and Outlook of On-Road Diesel Quality, Vehicle Emissions and Fuel Efficiency

Stratas Advisors

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Developing countries are in the process of lowering sulfur content in on-road diesel which is one of the pre-conditions for sales of cleaner diesel vehicles. While delays are continued to be expected in the implementation of lower sulfur diesel fuel especially in a number of countries due to the ongoing COVID-19 pandemic, two case studies on Kazakhstan and Lebanon presented by Stratas Advisors in a full report discuss the challenges of maintaining the quality and supply of low sulfur diesel fuel.

Although sulfur reduction remains the most dominant on-road diesel quality issue being addressed by governments and stakeholders globally, other properties such as cetane, density, lubricity, polyaromatics (PAH) and total aromatics are important in determining diesel quality. AAppendix to the report shows that several countries around the world are planning to increase cetane number similarly to the EU limit of 51 min, which enables quicker ignition and helps reduce emissions such as NOx. Although cetane, lubricity, PAH and total aromatics are not covered in this report, updated information on their specifications can be found in the Appendix of the full report. Besides increasing cetane limits, a couple of countries plan to set PAH limits for the first time.

In analyzing the trends in local, regional and global on-road diesel quality, Stratas Advisors compared the world’s top 10 on-road diesel markets (see table below). Japan overtook Italy from last year’s report as the market with the 8th highest on-road diesel demand, while Spain took the 9th place and Italy took the 10th.

Top 10 On-Road Diesel Markets and Their Biodiesel Use

Rank No.

Country

2018 Demand*

(thousand b/d)

Biodiesel Blending Limit

Average Biodiesel Blend Level

HVO Use

(Y/N)

1

U.S.

2,496

B5

B4

Yes

2

China

1,956

B1

B0

No

3

India

1,204

B7

B0

No

4

Brazil

689

B12

B11

No

5

Germany

650

B7

B5

Yes

6

France

638

B7

B6

Yes

7

U.K.

499

B7

B4

No

8

Japan

437

0.1 wt%

B0

No

9

Spain

435

B7

B5

Yes

10

Italy

423

B7

B7

Yes

Note: * Volumes include biodiesel (as FAME, HVO, etc.) and GTL diesel where applicable.

Source: Stratas Advisors, October 2020

This report also summarizes recent developments in emission standards and fuel efficiency for vehicles running on diesel, i.e., passenger cars (PC), light-duty vehicles (LDV) and heavy-duty vehicles (HDV). It is common knowledge that maximum benefits will be achieved when fuel quality requirements are implemented with stringent vehicle emissions regulations (which enable advanced emission-control technologies and would, in turn, help countries or regions achieve their air quality targets). This report shows governments in some countries have taken this systems approach, particularly with sulfur reduction. Others have not — or have not been able to do so in a coordinated time line — hampered by factors such as refinery-modernization costs, as noted in the companion report on gasoline, or high costs of importing diesel fuel of better quality. Due to COVID-19, two additional case studies are presented in this report discussing hindrances in implementing stricter vehicle emission standards equivalent to Euro VI (PROCONVE-P8) for HDVs in Brazil and Euro 4/IV in Indonesia with possible delays until 2021-2022 or beyond, although Stratas Advisors expects the likelihood to be much higher for Indonesia than Brazil.

Changes since the Last Report

Sulfur

Since last year’s report, only two countries of Argentina and India reduced their diesel sulfur limits in 2020, while Brunei and Qatar supplied 10 ppm sulfur diesel nationwide (see map below). Since January, Argentina reduced the sulfur limit of one of its diesel grades Gasoil Grado 2 from 1,000 ppm to 800 ppm, which is sold in the low population zones (i.e. <90,000 inhabitants), while Gasoil Grado 2 with a maximum sulfur limit of 500 ppm is sold in the high population zones. In addition, India successfully reduced its diesel sulfur limit from 50 ppm to 10 ppm since April amidst COVID-19. Furthermore, in Brunei, 10 ppm sulfur gasoline was produced and supplied locally since May thereby implying a change in market quality but official changes to fuel specs have yet to be made. In Qatar, although Qatar Petroleum (QP) already set refinery specs for diesel fuel production equivalent to Euro 5 standards since October 2016, the full domestic supply and switch to 10 ppm sulfur diesel did not happen until late September 2020, following the successful upgrade of diesel hydrotreating units at the QP refinery in Mesaieed.

In addition, four countries of Bosnia & Herzegovina, Kuwait, Tajikistan and Turkmenistan have plans to reduce their diesel sulfur limits to 10 ppm max by the end of 2020. However, delays are expected for Kuwait, Tajikistan and Turkmenistan. In particular for Kuwait, a push back of refinery upgrades into 2021 due to COVID-19 is expected.

New additions to this year’s sulfur outlook include Pakistan, Saudi Arabia and Thailand.

Current Maximum Sulfur Limits in On-Road Diesel

Current Maximum Sulfur Limits in On-Road Diesel

Source: Stratas Advisors, October 2020

In the full report, Stratas Advisors examines key developments in on-road diesel quality and vehicle emissions, including Stratas Advisors’ outlook for changes in diesel fuel quality and emission regulations. Updating the previous report (see Insights, Oct. 30, 2019), this report primarily focuses on issues surrounding sulfur, vehicle emissions and fuel efficiency. 

 


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