As the region resumes business as usual, Asian governments are juggling with advancements in fuel quality and emission standards. 

Analysis

Analyst, Asia Pacific

Casey Tan

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As the height of the pandemic dawdled in the background, most Asian countries have resumed business as usual for over a year. Since then, increased commercial and human activities had yield greater fuel demand in the face of growing inflation amidst a receding global economy. Hence, while the reopened borders offer a return to the pre-pandemic world, Asian governments are met with the issue of fuel security and tighter economic budget with rising commodity and fuel prices. For some Asian countries already facing economic difficulties prior to the onset of the pandemic, the global situation further exerts on their foreign reserves. As such, the fuel security of cash-strapped countries like Pakistan and Sri Lanka are at a high risk with their respective governments unable to meet local fuel demand and people would increasingly be vulnerable to fuel shortage and high fuel costs especially impacting those whose livelihood depend on it. In view of this, balancing the need between meeting domestic demand and cushioning soaring fuel prices is observed to be a main priority for Asian governments. Fuel subsidies or remuneration measures have been introduced in most Asian countries to help people tide over this difficult period, yet these remain temporary solutions to the issues at hand. In the long-run, fuel independence or fuel security is key to treading the uncertainties brought about by the volatility of the current global economy plagued by the Russia-Ukraine crisis and growing U.S.-China tensions. These have led to the resumption and expedition of refinery upgrading projects to increase production capacity as seen in Indonesia and Vietnam. In addition, the region is becoming more environmentally aware with goals of achieving better air quality through implementing stricter vehicle emission standards and/or fuel quality standards. With all these overlapping interests, it is inevitable that fuel quality improvements can be sidelined. In the second half of 2022, Cambodia and Myanmar missed their deadlines to implement stricter emission standards. However, notably Australia announced the implementation of 10 ppm sulfur max gasoline three years ahead of the previous deadline from 2027 to 2024, while Thailand is set to implement Euro 5/V emissions standard from 2024 to improve the country&rsquo;s air quality. This works down the gaps between emission standards and fuel quality especially in Australia&rsquo;s case. As such, we can see that the Asia Pacific region is potentially dynamic with upcoming changes mostly expected in 2024. Since there is no coordinating regional structure in Asia Pacific such as that of the European Union (EU), fuel quality specifications and regulations vary substantially from country to country and often between urban and rural areas within countries, especially in China and India. Many have developed fuel specifications based on those implemented in the EU, with the limits of some fuel properties amended to meet domestic conditions. However, each country has its own timeline for moving to more stringent fuel standards. In general, Asia Pacific countries have made significant progress toward improving fuel quality in a relatively short timeframe. Sulfur reduction remains at the core of fuel quality policies in Asia Pacific, with various biofuels mandates and targets being carried out concurrently (see figure below). Overall, developing countries such as Bangladesh, Cambodia, Laos, Myanmar, Pakistan, and Sri Lanka continue to trail behind rapidly developing and developed countries due to ineffective fuel polices and weak enforcement measures on fuel quality continue to plague efforts in implementing improvement plans. These countries are generally more dependent on international partners such as the Climate and Clean Air Coalition (CCAC) and the United Nations Environment Program (UNEP) to assist and support any implementations on fuel quality or vehicle emission improvements. In 2023, China will be implementing China 6b standards for all LDVs and HDVs from July 1, 2023, while Vietnam will adopt Euro 5/V-equivalent fuel standards through new national technical regulation QCVN 1:2022/BKHCN for gasoline, diesel, and biofuels from June 15, 2023. In addition, Japan will enforce PN limits for vehicles with GVW not exceeding 3.5 tons running on diesel effective for new models starting from Oct. 1, 2023. On the other hand, further delays are expected in the implementation of 50 ppm sulfur max limit for diesel in Bangladesh due to limited refinery capacity.
Current Gasoline Sulfur Limits in Asia Pacific
<img alt="" height="690" width="1280" src="-/media/6F35577FA21F4F52A0272F2A207BAC3B.ashx" />&nbsp;
Source: Stratas Advisors, March 2023
<div style="background-color: #ffffff;">The full report updates a previous report (see Insights, <a href="~/link.aspx?_id=CA2CF1B61709436F9161D4959BC629B9&amp;_z=z">May 9, 2022</a>), and summarizes changes to gasoline, diesel and biofuels specifications from 2022 to March 2023 in the Asia Pacific region. An outlook for planned changes in fuel specifications beyond March 2023 is included as well.&nbsp;</div>
&nbsp;&nbsp;


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 Subscribers&nbsp;can&nbsp;<a href="~/link.aspx?_id=652EE8B907824167A8B590A84361005E&amp;_z=z">access the full report</a>&nbsp;from our&nbsp;<a href="~/link.aspx?_id=1E5044E88EA54ADA80FBCF5531300FEB&amp;_z=z">Global Fuel Specifications</a>&nbsp;service. Not a subscriber?&nbsp;<a href="~/link.aspx?_id=BEA209B6EB3644F6BACD5454EE0FFC6B&amp;_z=z">Create an account</a>

Fuel Security Agenda Slows Down Fuel Quality Improvements in Asia Pacific

As the height of the pandemic dawdled in the background, most Asian countries have resumed business as usual for over a year. Since then, increased commercial and human activities had yield greater fuel demand in the face of growing inflation amidst a receding global economy. Hence, while the reopened borders offer a return to the pre-pandemic world, Asian governments are met with the issue of fuel security and tighter economic budget with rising commodity and fuel prices. For some Asian countries already facing economic difficulties prior to the onset of the pandemic, the global situation further exerts on their foreign reserves. As such, the fuel security of cash-strapped countries like Pakistan and Sri Lanka are at a high risk with their respective governments unable to meet local fuel demand and people would increasingly be vulnerable to fuel shortage and high fuel costs especially impacting those whose livelihood depend on it. In view of this, balancing the need between meeting domestic demand and cushioning soaring fuel prices is observed to be a main priority for Asian governments. Fuel subsidies or remuneration measures have been introduced in most Asian countries to help people tide over this difficult period, yet these remain temporary solutions to the issues at hand. In the long-run, fuel independence or fuel security is key to treading the uncertainties brought about by the volatility of the current global economy plagued by the Russia-Ukraine crisis and growing U.S.-China tensions. These have led to the resumption and expedition of refinery upgrading projects to increase production capacity as seen in Indonesia and Vietnam. In addition, the region is becoming more environmentally aware with goals of achieving better air quality through implementing stricter vehicle emission standards and/or fuel quality standards. With all these overlapping interests, it is inevitable that fuel quality improvements can be sidelined. In the second half of 2022, Cambodia and Myanmar missed their deadlines to implement stricter emission standards. However, notably Australia announced the implementation of 10 ppm sulfur max gasoline three years ahead of the previous deadline from 2027 to 2024, while Thailand is set to implement Euro 5/V emissions standard from 2024 to improve the country&rsquo;s air quality. This works down the gaps between emission standards and fuel quality especially in Australia&rsquo;s case. As such, we can see that the Asia Pacific region is potentially dynamic with upcoming changes mostly expected in 2024. Since there is no coordinating regional structure in Asia Pacific such as that of the European Union (EU), fuel quality specifications and regulations vary substantially from country to country and often between urban and rural areas within countries, especially in China and India. Many have developed fuel specifications based on those implemented in the EU, with the limits of some fuel properties amended to meet domestic conditions. However, each country has its own timeline for moving to more stringent fuel standards. In general, Asia Pacific countries have made significant progress toward improving fuel quality in a relatively short timeframe. Sulfur reduction remains at the core of fuel quality policies in Asia Pacific, with various biofuels mandates and targets being carried out concurrently (see figure below). Overall, developing countries such as Bangladesh, Cambodia, Laos, Myanmar, Pakistan, and Sri Lanka continue to trail behind rapidly developing and developed countries due to ineffective fuel polices and weak enforcement measures on fuel quality continue to plague efforts in implementing improvement plans. These countries are generally more dependent on international partners such as the Climate and Clean Air Coalition (CCAC) and the United Nations Environment Program (UNEP) to assist and support any implementations on fuel quality or vehicle emission improvements. In 2023, China will be implementing China 6b standards for all LDVs and HDVs from July 1, 2023, while Vietnam will adopt Euro 5/V-equivalent fuel standards through new national technical regulation QCVN 1:2022/BKHCN for gasoline, diesel, and biofuels from June 15, 2023. In addition, Japan will enforce PN limits for vehicles with GVW not exceeding 3.5 tons running on diesel effective for new models starting from Oct. 1, 2023. On the other hand, further delays are expected in the implementation of 50 ppm sulfur max limit for diesel in Bangladesh due to limited refinery capacity.
Current Gasoline Sulfur Limits in Asia Pacific
<img alt="Sulfur Limits" height="690" width="1280" src="https://cdn.aglty.io/stratas-advisors/upload/Current%20Gasoline%20Sulfur%20Limits%20in%20Asia%20Pacific_20230505040712.jpeg?w=800" />&nbsp;
Source: Stratas Advisors, March 2023
<div style="background-color: #ffffff;">The full report updates a previous report (see Insights, <a href="~/link.aspx?_id=CA2CF1B61709436F9161D4959BC629B9&amp;_z=z">May 9, 2022</a>), and summarizes changes to gasoline, diesel and biofuels specifications from 2022 to March 2023 in the Asia Pacific region. An outlook for planned changes in fuel specifications beyond March 2023 is included as well.&nbsp;</div>
<hr />
 Subscribers&nbsp;can&nbsp;access the full report&nbsp;from our&nbsp;<a href="~/link.aspx?_id=1E5044E88EA54ADA80FBCF5531300FEB&amp;_z=z">Global Fuel Specifications</a>&nbsp;service.

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Fuel Security Agenda Slows Down Fuel Quality Improvements in Asia Pacific 

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