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Sulfur reduction remains the most dominant parameter for on-road diesel fuel quality improvements, which is one of the pre-conditions for sales of cleaner diesel vehicles, especially for passenger cars used in top diesel fuel markets such as the EU, India, Turkey, South Korea, Australia, etc. While several of the top markets have already achieved 10-15 ppm sulfur limits, developing countries are in the process of reducing diesel sulfur content to similar levels, although implementation delays are continued to be expected. In this report, three case studies on China, Kuwait and Mexico are presented discussing the challenges of supplying ULSD in Mexico to meet Euro VI standards, the impact of exporting 10 ppm sulfur diesel from Kuwait to the GCC and select African countries, as well as the implications of a tax loophole of importing and blending light cycle oil (LCO) with diesel fuel in China resulting in non-compliant fuel with high sulfur and aromatics content and low cetane.

Besides sulfur, other properties such as cetane, density, lubricity, polyaromatics (PAH) and total aromatics are also important in determining diesel quality. Although they are not covered in this report due to lesser activity compared to sulfur, updated information on their specifications can be found in the Appendix of the full report. 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. Besides increasing cetane limits, a couple of countries (Malaysia and Saudi Arabia) 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 figure below). Japan overtook the U.K. from last year’s report as the market with the 7th highest on-road diesel demand, while Turkey entered the Top 10 for the first time by taking the 10th place.

Top On-Road Diesel Markets

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

Source: Stratas Advisors, 2021

Current maximum on-road diesel sulfur limits worldwide vary from 10 ppm in the most developed regions to 12,000 ppm in developing countries (see figure below). For the past years, Stratas Advisors has been reporting on the advantages of low sulfur fuels in new vehicles (to enable application of PM traps, NOx reduction) vs. older/ used vehicles with no catalysts (to reduce SOx emissions). Currently, a number of countries including Australia, Canada, Chile, China, EU-27, India, Japan, New Zealand, Russia, South Korea, U.S. etc. are receiving the biggest benefit from requiring 10-15 ppm sulfur diesel fuel.

Current Maximum Sulfur Limits in On-Road Diesel

Source: Stratas Advisors, October 2021

Furthermore, automakers and governments often indicate that new vehicles meeting the emission requirements will not (and cannot) be supplied until fuel of compatible quality is made available on the market (see figure below). For example, the East African Community (EAC) is currently looking into setting harmonized vehicle emission standards equivalent to Euro 4/IV for the first time now that diesel with 50 ppm sulfur and below is imported and widely available in the subregion.

Gap between Current Vehicle Emission Standards and On-Road Diesel Quality

Source: Stratas Advisors, October 2021

The full report 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, 2020), the report primarily focuses on issues surrounding sulfur, emissions and fuel efficiency standards for vehicles running on diesel, i.e., passenger cars (PC), light-duty vehicles (LDV) and heavy-duty vehicles (HDV).

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