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Over the past year, a number of countries in the Asia Pacific region have managed to implement stricter fuel specifications. However, it is not all smooth-sailing for the region as Malaysia delayed the implementation of 50 ppm sulfur limit for its RON 95 grade gasoline for the second time. Besides Malaysia, the Philippines had planned to require oil companies to sell 500 ppm sulfur diesel on the market alongside 50 ppm sulfur diesel, which was implemented nationwide since January 2016. The objective was to help ease the rising inflation rates in the second half of 2018, particularly for the operators of public utility vehicles. However, the plan was eventually abolished as oil prices retreated in late 2018. Overall, developing countries such as Bangladesh, Cambodia and Laos continue to trail behind rapidly developing and developed nations due to challenges in political and economic landscape, poor knowledge on fuel quality and prioritizing supply security over fuel quality. However, as air pollution worsens, the governments in the region are increasingly aware of the importance of fuel quality, and investments are gradually put in place to supply cleaner fuels.
The full report updates a previous report (see Insights, Sept. 6, 2017), and summarizes changes to gasoline, diesel and biofuels specifications from 2018 to January 2019 in the Asia Pacific region. An outlook for planned changes in fuel specifications beyond January 2019 is included as well.
Sulfur reduction is still at the core of fuel quality policies in Asia Pacific; it is carried out in parallel with various biofuels mandates and targets. MTBE and ethanol continue to be among the region’s more popular options to enhance octane in gasoline. For diesel, new biodiesel blending levels beyond B7 are being planned or are in the process of being phased in by oil palm-producing countries such as B10 in Malaysia and Thailand, while Indonesia currently requires biodiesel to account for 20% of the total diesel pool. Such increases in blend levels will have a direct impact on the quality of conventional diesel. However, these countries are expected to continue supporting and protecting their oil palm industries by increasing blending levels despite low crude oil prices.
Because 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 time line for moving to more stringent fuel standards. In general, Asia Pacific countries have made significant progress toward improving fuel quality in a relatively short time frame.
Changes Since Last Report
Since the last report, automotive fuel spec changes have been implemented in China, Fiji, India, Indonesia, Malaysia, Mongolia, New Zealand, Philippines, Singapore and Thailand. In particular, China aligned the sulfur limit of off-road diesel with on-road diesel at 10 ppm max from Jan. 1, 2018, and subsequently phased out the off-road diesel standard from Jan. 1, 2019 along with the implementation of specifications for China VIA gasoline and China VI diesel. On the other hand, Malaysia delayed its spec changes for RON 95 gasoline from Oct. 1, 2018 to Jan. 1, 2020. Additionally, Bhutan, Nepal and Sri Lanka started importing lower sulfur fuels. It is also worthy to note that since Jan. 1, 2018, the Vietnamese government phased out conventional RON 92 gasoline, replacing it with RON 92 E5 blend. However, there are no changes to the specifications for gasoline and ethanol blends in Vietnam. In addition, Bangladesh, China, Fiji, Hong Kong, India, Mongolia, Pakistan, Philippines and Singapore announced or proposed new changes to fuel specifications and emission standards over the past year.
Looking at the rest of 2019, it is probable that India will introduce BS-VI fuels in select regions ahead of the national deadline of Apr. 1, 2020. In May 2018, the press reported that the Indian government informed the Supreme Court that BS-VI fuels would be made available in 17 out of 23 districts in the National Capital Region (NCR) and in Agra in Uttar Pradesh by Apr. 1, 2019. However, the plan to introduce BS-VI fuels in these regions, except for Agra, was deemed not feasible after a consultative meeting between the Ministry of Petroleum and Natural Gas (MoPNG) and oil marketing companies. Product and logistics constraints were cited as the main challenges to introduce BS-VI fuels in these regions.
Besides India, Australia is expected to announce the outcome of the fuel quality standards review that has been ongoing since 2015, before the sunset of the fuel quality legislation from October 2019. In addition, Brunei is expected to supply RON 97 gasoline and diesel containing 10 ppm sulfur max on its market once the new Hengyi Refinery goes into the commercial production stage which is expected for Q4 of 2019.
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