November 21, 2019

Sulfur Reduction and Planned Biofuel Increases to Carry Over Into 2020 and Beyond in Latin America

Stratas Advisors

This excerpt is from a report that is available to subscribers of Stratas Advisors’ Global Fuel Specifications service.

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The Latin American region continues to work towards improving the regulations within their respective countries to improve the fuel quality of diesel and gasoline; as well as improving the air quality with the implementation of Euro based vehicle emission standards.

The 14 Latin American countries covered in the full report include: Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, French Guiana, Guyana, Mexico, Paraguay, Peru, Suriname, Uruguay and Venezuela. Information provided in the full report takes into account recent developments for gasoline, diesel and biofuels specifications which have occurred since the last report (see Insights, Oct. 1, 2018).

Changes Since Last Report

As observed over the past year, sulfur reduction was made by only one country in the region i.e. Argentina which reduced maximum sulfur limits from 50 ppm to 10 ppm in Ultra Grado 3 gasoline and from 1,500 ppm to 1,000 ppm Super Grado 2 diesel fuel since Jan. 1, 2019. Later in the year, Argentina took further steps to revise the timeline for future sulfur reduction in gasoline and diesel fuel distributed in the country. Super Grado 2 gasoline will undergo  sulfur reduction from 150 ppm to 50 ppm max from January 2024 (instead of January 2022) and Super Grado 2 diesel will undergo two separate sulfur reductions within the next four years. Specifically, the maximum sulfur limit in diesel fuel will be reduced to 800 ppm in January 2020; with a second reduction in January 2024, where the 500 ppm and 800 ppm sulfur diesel grades would be combined to form one grade with 350 ppm to be used nationwide without restrictions based on regional population.

The move to 15 ppm sulfur diesel in Mexico began under the emergency fuel standard NOM-EM-005-CRE-2015 issued by the Energy Regulatory Commission (CRE) on Oct. 30, 2015, in which the CRE established a July 1, 2018 deadline for the nationwide distribution of 15 ppm sulfur diesel fuel. Moving beyond the emergency standard, the CRE set the official diesel fuel specifications on Aug. 29, 2016 under NOM-016-CRE-2016 standard; whereby the nationwide implementation for 15 ppm sulfur diesel was to occur no later than Dec. 31, 2018, except for the Bajio-Centro region which was allowed to delay distribution until July 2019. Since the implementation of NOM-016-CRE-2016, the nationwide transition to 15 ppm sulfur diesel across the country has progressed at a gradual rate but could only reach 12.9% market share of the total diesel pool as of August 2019. Over the past year, the potential shortfall in the nationwide use of 15 ppm sulfur diesel may be attributable to the insufficient capability of several refineries servicing the country.

Brazil continued their work from 2018 into the current year by advancing their use of biodiesel in the country. Since their move to B10 last year, the country has moved forward with the implementation of a B11 blend mandate which occurred in June 2019. Since then, Brazil has set plans to increase the biodiesel content to a B15 blend level in 2023 through a stepwise approach that will increase the biodiesel blending level of 1 vol% each year until the goal is met. In addition, Colombia has also bolstered their use of biodiesel in their country, which increased the blend mandate from a B10 to a B12 over the past year. Unlike the approach Brazil took, Colombia increased the biodiesel content by 2 vol% in a relatively short period.

In terms of vehicle emission standards, the Congress of Colombia established regulations to control vehicle emissions and particle pollutants from diesel fueled vehicles and motorcycles. From the law that Colombia passed, the country will set limits for exhaust emissions according to Euro 6/VI standards for new diesel light-duty vehicles (LDV) and heavy-duty vehicles (HDV) by 2023 as well as Euro 3 standards for new motorcycles by 2021. By doing so, the Ministry of Mines and Energy will assist in the move to tighter vehicle emission standards by ensuring that Colombia is able to produce and distribute the fuels needed to comply with the Euro emission standards. The fuel quality changes include switching from 50 ppm to 10-15 ppm by Jan. 1, 2023 and fully to 10 ppm by Dec. 1, 2025.

Among the countries that may lead the region in fuel quality monitoring, Brazil continued their work to improve the Fuel Quality Monitoring Program in their country. Based on work that began in 2018, the National Agency of Petroleum, Natural Gas and Biofuels (ANP) passed a resolution to revise the requirements for the accreditation of laboratories that work with providing fuel quality analysis in the country. The resolution took into account the previous proposal that was issued in 2018 and inputs from industry stakeholders, once all of those matters had been settled, the ANP set the requirements that laboratories would need to abide by to maintain accreditation while providing service to those in commercialization and fuel distribution industry.

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