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TRANSCRIPT
Lucky Nurafiatin
Research Manager, Asia & Middle East
30 July 2012
Overview of Fuel Quality
and Emission Regulations in Asia
Global Presence
Conferences Consulting Digital Media Mapping & Data
Publishing Research
Global Organization & Services
Who do we work with? IFQC Members
Outline
Air Quality
Improvements in Fuel Quality and Emissions Regulations
Emission Standards
Fuel Quality Standards
Conclusions
Factors Influencing Air Quality
Air Quality
Air Quality Standards
Pollutant WHO U.S. EU Malaysia Indonesia Thailand
NO2 (annual) 40 100 40 - 100 -
NO2 (1-hr) 200 - 200 320 400 0.17 ppm
O3 (8-hr) 100 150 120 120 - 0.07 ppm
O3 (1-hr) - - - 200 235 0.1 ppm
PM10 (annual) 20 - 20 50 - 0.05 mg/m3
PM10 (24-hr) 50 150 50 150 150 0.12 mg/m3
PM2.5 (annual) 10 15 - - 15 -
PM2.5 (24-hr) 25 35 - - 65 -
SO2 (24-hr) 20 377 125 105 365 0.12 ppm
SO2 (10-mins) 500 1,300 - - - -
Sources: Hart Energy’s International Fuel Quality Center, World Bank, WHO, U.S. EPA, Directive 2008/50/EC
In µg/m3
PM10
Concentration
Source: Hart Energy, citing CAI Asia Center
PM10 Concentration in Asian Cities in 2008
Air Quality
Improvements in Fuel Quality and Emissions Regulations
Emission Standards
Fuel Quality Standards
Conclusions
Major Drivers
Climate Change
Health Costs
Economics
Fuel and Vehicle Drivers
Vehicle
Industry
Kyoto
Protocol
Refining
Industry
Regulatory
Bodies
1. Low S, aromatics, RVP, …
2. Low -carbon fuels (LCFS)
3. Biofuels (RFS2, RED)
4. Alternative fuels
5. Vehicle technology
6. Energy & fuel efficiency
7. Greenhouse gases
Air Quality
Improvements in Fuel Quality and Emissions Regulations
Emission Standards
Fuel Quality Standards
Conclusions
Evolution of Emissions Standards
Note:
(1) Gasoline vehicles only
(2) Diesel vehicles only
(3) Diesel vehicles only, gasoline and CNG vehicles at Euro 2
(4) Delayed
Source: Hart Energy’s International Fuel Quality Center, 2012
Improvements in Emissions Standards
Reduction in traditional pollutants:
• CO
• HC
• NOx • Air toxics
Reduction in GHG/CO2 emissions
Air Quality
Improvements in Fuel Quality and Emissions Regulations
Emission Standards
Fuel Quality Standards
Conclusions
Current Maximum Sulfur Content
Current Maximum Sulfur Content
Future Trend of Sulfur Content
0
100
200
300
400
500
600
700
800
900
1,000
2010 2011 2015 2020 2025 2030
pp
m
North America Latin America Europe CIS Asia Pacific Middle East Africa
Source: Hart Energy’s World Refining & Fuels Service (2011)
Air Quality
Improvements in Fuel Quality and Emissions Regulations
Emission Standards
Fuel Quality Standards
Supply and Demand of Gasoline and Diesel
Conclusions
Conclusions
Environmental concerns drive cleaner fuels;
Stricter emissions requirements expected in near term; and
Systematic approach to air quality, vehicle emissions and fuel quality regulations needed to improve environmental situation.
Thank you!
Lucky Nurafiatin
Research Manager, Asia & Middle East
Questions/Discussion
Hart Energy Consultants
Global Biofuels Outlook:
Policy, Market and Technology Trends
Tammy Klein
Assistant Vice President
July 30, 2012
1
Presentation Overview
Petroleum Product Outlook
Global Crude Supply
Refined Product Demand
Regional Product Demand Growth
& Share
Global Biofuels Outlook
Trends
Mandates
Supply and Demand
Key Market: United States
RFS2 Program Issues
E15 Implementation
Ethanol “Blend Wall”
Key Market: Brazil
Impact of Sugar on Ethanol Price
Feedstock Availability
Demand Outlook
Supply/Demand Balance
Key Market: EU
Regulatory Framework
Sustainability
6% GHG Reduction
Next Generation Biofuels
Capacity
Cellulosic Feedstocks
Methanol, Biobutanol and
Renewable Diesel
Conclusions
2
Petroleum Product Overview
3
Crude Supply 2011 (million barrels per day)
Crude Supply 2030 (million barrels per day)
Crude Supply from Middle East, Africa &
Russia/Caspian Regions Will Grow
Source: Hart Energy analysis and forecast (2011)
Global Crude Oil Supply
North America 12.3%
Latin America 12.5%
Europe 4.8%
CIS 17.1% Asia-Pacific
10.4%
Middle East 31.1%
Africa 11.8%
North America 12.0%
Latin America 12.1% Europe
2.4% CIS
16.1%
Asia-Pacific 7.7%
Middle East 36.4%
Africa 13.3%
4
Refined Product Demand by Product
87.8 94.6 102.4
109.0 114.9
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
2011 2015 2020 2025 2030
Gasoline Naphtha JetFuel Kerosene
Middle Distillate Residual Fuel LPG Other Products
Source: Hart Energy analysis and forecast (2011)
MILLION BARRELS PER DAY
5
Regional Product Demand Growth
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
North America
Latin America
Europe CIS Asia-Pacific
Middle East
Africa
-0.3%
2.0%
0.3% 2.0%
2.2%
2.6%
2.2%
Source: Hart Energy analysis and forecast (2011)
MILLION BARRELS PER DAY
Annual percent growth shown above bars
Asia-Pacific accounts for 54% of 2011-30 growth,
China 33% of global growth
6
Source: Hart Energy analysis and forecast (2011)
2011 2015 2020 2025 2030 Increment 2011-2030
25% 25% 24% 24% 23% 15%
7% 7% 7% 6% 6%
5%
7% 7% 7% 7% 8%
8%
29% 30% 31% 33% 34% 49%
11% 10% 9% 9% 8%
10% 10% 10% 10% 10% 10%
11% 11% 11% 11% 11% 12%
Other LPG Heavy Fuel Oil Distillate Jet Fuel/Kerosene Naphtha Gasoline
Refined Product Market Share
Distillate dominates refined product market,
accounting for nearly half of refined product growth
7
Global Biofuels Outlook
8
Trends and Outlook
Biofuels Largely Rely on Food-Based Feedstocks
Biodiesel and renewable diesel prices are forecasted to be uncompetitive with petroleum products and depend on troubled
mandates
Federal RFS2 shows a strong potential for change within the next three years
Difficulties in Implementing Far-Reaching Biofuels Programs in the U.S., EU
ILUC is a problem for EU policymakers
Too much ethanol in the U.S. and not enough biodiesel, sugarcane ethanol and other advanced biofuels
Brazil Considered the “Linchpin” but Limited Supplies of Sugarcane Ethanol
through 2020+
Exports will barely reach 3 billion liters by 2020
Internal market demand and constraints
Next generation/advanced biofuels largely not available
Technologies still unproven and scale-up has been very slow
Competes with conventional biofuels in some cases and no where to blend in the pool
Despite these constraints: Biofuels consumption will continue to grow!
Ethanol: Strongest growth from the U.S. and Brazil
Biodiesel: Strongest growth from EU
9
Source: Hart Energy’s Global Biofuels Center, June 2012
Latin America: More
countries push for
mid- and higher
level ethanol blends Ethanol
Biodiesel
Ethanol & Biodiesel
Partial or No known biofuels program
Africa:
Countries beginning
to set mandates
Middle East:
Ethanol &
jatropha
R&D projects;
algae
Asia Pacific:
High variance
in blend levels
Europe:
RED implementation, sustainability
and GHG savings
North America:
RFS2, LCFS, intermediate blends
Biofuel Mandates in 2012 10
Current Mandates in Asia
Source: Hart Energy’s Global Biofuels Center, July 2012
NORTH KOREA
JAPAN SOUTH KOREA
CHINA
MONGOLIA
PAKISTAN
BHUTAN
BANGLADESH INDIA
SRI LANKA
MALAYSIA
BRUNEI
CAMBODIA
THAILAND
VIETNAM LAOS
BURMA
PHILIPPINES
Hong Kong Macau
Taiwan NEPAL
SINGAPORE
INDONESIA
Nationwide mandate
Partial mandate
E10 (or E5) available on market
ETBE - blended gasoline
Key:
E5 Nationwide except selected
states
B2
B2
E10 in 10 provinces
E10, B2
B5
E3, B2.5
B5
11
0
10
20
30
40
50
60
70
Supply Policy Demand
Market Demand
Supply Policy Demand
Market Demand
Supply Policy Demand
Market Demand
Supply Policy Demand
Market Demand
Asia Pacific North America Latin America EU27
Bill
ion
Lit
ers
2015 2020 2025
Supply & Demand for Ethanol
Source: Hart Energy’s Global Biofuels Center, June 2012
12
0
5
10
15
20
25
30
Supply Policy Demand
Market Demand
Supply Policy Demand
Market Demand
Supply Policy Demand
Market Demand
Supply Policy Demand
Market Demand
Asia Pacific North America Latin America EU27
Bill
ion
Lit
ers
2015 2020 2025
Supply & Demand for Biodiesel
Source: Hart Energy’s Global Biofuels Center, June 2012
13
Focus on the United States
14
“RFS2” Program Requirements
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Biomass-Based Diesel 0.5 0.7 0.8 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0
Advanced Biofuels (Sugar) 0.1 0.2 0.3 0.5 0.8 1.0 1.5 2.0 2.5 3.0 3.5 3.5 3.5 4.0
Cellulosic Biofuels 0.1 0.25 0.5 1.0 1.8 3.0 4.25 5.5 7.0 8.5 10.5 13.5 16.0
Renewable Fuel (Corn Ethanol) 4.0 4.7 9.0 10.5 12.0 12.6 13.2 13.8 14.4 15.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0
RFS1 Requirements 4.0 4.7 5.4 6.1 6.8 7.4 7.5 7.6 7.7 7.8 7.9 7.9 8.1 8.3 8.4 8.5 8.6
Total New RFS Requirement 4.0 4.7 9.0 11.1 13.0 14.0 15.2 16.6 18.2 20.5 22.3 24.0 26.0 28.0 30.0 33.0 36.0
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
Billio
ns
of
Ga
llo
ns
EPACT 2007
15
Changes to RFS2 Almost Certain
RFS2 faces fundamental challenges
Shortage cellulosic biofuels (revised EIA assessment)
Slow commercialization of advanced biofuel technologies
Near-term shortfall on sugarcane ethanol imports
E10 blend wall effects (and strong E15 waiver court challenge)
All concerned stakeholders are expecting a change to
the RFS2 volumes before a 2016 mandated restructure
Advanced Biofuels Association
American Fuel & Petrochemical Manufacturers
American Petroleum Institute
Department of Energy – Energy Information Administration*
Grocery Manufacturers Association
Environmental Working Group
16
Ethanol Blend Wall
Results of 10% Ethanol Blend Wall on RFS-2
Advanced Biofuels
Note:
Timing and volumes not to scale
U.S. is at blend limit, but effects on RFS2
compliance cost will not hit until 2013-2014 when
more biodiesel demand is forced. In the end, limited
biodiesel supply is the real RFS2 killer past 2014.
Short-Term RFS/Blend Wall solutions:
1) EPA modification of RFS
2) Congressional modification of RFS
3) Rapid state implementation of ASTM E15
standard, waiver of state E10 limit laws,
spontaneous cross-industry agreement and
implementation of E15 and E85
No short-term help from new drop-in technologies
(biobutanol, renewable gasoline)
Source: Hart Energy’s Global Biofuels Center
17
Focus on Brazil
18
Supply: Impact of Sugar on Ethanol Price
Industrial organization of sugar and ethanol sector (more atomized and competitive) requires it to be more responsive to supply and demand pressures. Key point of reference is price of sugar, i.e., the main alternative use for sugarcane.
USD 0
USD 5
USD 10
USD 15
USD 20
USD 25
USD 30
USD 0.00
USD 0.10
USD 0.20
USD 0.30
USD 0.40
USD 0.50
USD 0.60
USD 0.70
USD 0.80
USD 0.90
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
US
D/t
on
US
D/k
g
Source: Hart Energy, based on CEPEA, Bloomberg and IBGE data, March 2012
Sugar #11, USD/kg (left scale) Crystal Sugar, São Paulo, USD/kg (left scale)
Sugarcane, national avg., USD/ton (right scale)
19
Supply: Feedstock Availability
Allocation of feedstock to sugar expected to decline as sugar prices come down –expected turn of “Indian sugar cycle” expected to eventually put upward pressure on sugar prices.
30%
35%
40%
45%
50%
55%
0
200
400
600
800
1,000
1,200 2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
f
2013
f
2014
f
2015
f
2016
f
2017
f
2018
f
2019
f
2020
f
2021
f
2022
f
% o
f to
tal
mill
ion
met
ric
ton
s
Source: Hart Energy, March 2012
Cane crushed (left scale) % of cane used for sugar production (right scale)
20
Otto-Fuel Demand Outlook
Fill rates will continue to reflect gasoline-ethanol price relationship.
20%
30%
40%
50%
60%
70%
80%
0
2
4
6
8
10
12
14
16
18
20
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
f
20
13
f
20
14
f
20
15
f
20
16
f
20
17
f
20
18
f
20
19
f
20
20
f
20
21
f
20
22
f
Hyd. Ethanol (left scale) Anhyd. Ethanol (left scale)
Gasoline A (left scale) fill rate among FFVs (volumetric)
Source: Hart Energy’s Global Biofuels Center, March 2012
21
Ethanol Demand/Supply Balance
Upsurges in domestic demand – driven by softer prices – will periodically drive down net export availability. Even during peak years of availability, net exports will fall below most forecasts (e.g., Ministry of Agriculture, ICONE, UNICA, etc.)
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
-15
-10
-5
0
5
10
15
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
f
20
13
f
20
14
f
20
15
f
20
16
f
20
17
f
20
18
f
20
19
f
20
20
f
20
21
f
20
22
f
Hydrous Production Anhydrous ProductionHydrous Consumption Anhydrous ConsumptionNet Exports
Source: Hart Energy’s Global Biofuels Center, March 2012
22
Focus on Europe
23
20/20/20 target
Revision of the Emission Trading Directive (ETS)
Reduction of GHG emissions by Member States
Renewable Energy Directive (RED)
Directive on the geological storage of CO2 (CCS)
Action Plan for Energy Efficiency
State aid guidance on environmental protection
Additional measures
Fuel Quality Directive (FQD)
Regulation on CO2 reduction from passenger cars
EU Regulatory Framework 2010-2020
24
Renewable Energy Directive (RED)
Overall (EU27) 20% Renewable Energy consumption by 2020
10% by energy content Renewable Energy in Transport (can be on-road or off-road) by
2020
Sustainability certification requirement
Minimum GHG saving requirements
Double counting for Art. 21.2 biofuels
Indirect land use change considerations
Fuel Quality Directive (FQD)
6% Life-cycle GHG emissions reduction obligation for fuel suppliers
E10
B7
Blend levels too low for RED mandate
EU Regulatory Framework 2010-20
25
Sustainability Requirements for Biofuels
2011 or 2013
(with grandfathering clause)
2017
2018 (new installations)
“soft” interpretation of the term “installation”
26
Obligation for fuel suppliers
6% Life-cycle GHG emissions reduction with:
1. Sustainable biofuels
2. Electricity
3. Other fuels and energy
Additional 2%:
4. On-road and non-road
5. Technology to reduce GHG emissions
Additional 2%:
6. Credits purchased through CDM
6% GHG Reduction 2010-2020
27
Next Generation/
Advanced Biofuels
28
25 operating next generation biofuels pilot/demo
plants in the U.S.
18 cellulosic ethanol plants with capacities ranging from 1,600 gallons per
year to 1.5 million gallons per year
5 FT or HVO renewable diesel plants: undisclosed to 0.07 gallons per year to
5 million gallons per year
2 for biogasoline or biojet
2 operating commercial plants in the U.S.
Gevo: 18 million gallons per year of butanol
Dynamic Fuels: 18 million gallons per year of HVO renewable diesel
Next Generation Operating Capacity
29
Projects with Cellulosic Feedstock
0
50
100
150
200
250
300
350
Operating 2012 Including Proposed
Mill
ion
Gal
lon
s P
er Y
ear
Source: U.S. & Brazil Ethanol Outlook to 2022, April 2012
Capacities of Operating and Proposed Projects with Cellulosic Feedstock
Biobutanol Cellulosic Ethanol
FT Liquids / Hydrocarbons, Jet fuel Hydrogenated vegetable oil / animal fat
Synthetic gasoline
30
Biobutanol and Renewable Diesel
Biobutanol and renewable diesel have drop-in advantages
(pipeline compatible) and fewer blend restrictions
In U.S., both currently threatened by patent litigation
Renewable diesel shares feedstock with biodiesel but requires
larger cap-ex and operating costs; interest from aviation
Co-processed renewable diesel qualifies for the D5 RIN, but
dedicated processing gets higher priced D4 RIN (biodiesel), which
scales better with feedstock costs
Biobutanol blending into current gasoline infrastructure stymied by
narrow summer waiver blend range (9%-10% ethanol)
31
BTL and HVO Renewable Diesel
BTL and HVO renewable diesel have drop-in advantages (pipeline compatible)
and fewer blend restrictions
In U.S., HVO currently threatened by patent litigation
HVO renewable diesel shares feedstock with FAME biodiesel but requires larger
cap-ex and operating costs
Both have a market as aviation biofuel
Co-processed renewable diesel qualifies for the D5 RIN, but dedicated processing
gets higher priced D4 RIN (biodiesel), which scales better with feedstock costs
32
Conclusions
33
Conclusions
Reality: Era of cheap biofuels feedstocks is gone!
Corn, sugar, wheat, soy, palm – more expensive than ever and going to food
Crops having difficulty due to drought, new feedstocks are not scalable right now
Limited volumes of sugarcane ethanol for export
Progressive biofuels policies in the U.S., EU having trouble at the
implementation stage
Government support for conventional biofuels has waned
Higher blends difficult to implement, controversial in the U.S.
ILUC has caused Europe a headache
Next generation/advanced biofuels supplies limited
Technologies still unproven and scale-up has been very slow
Governments cannot afford to subsidize R&D any longer
Competes with conventional biofuels in some cases and no where to blend in the pool
34
Thank You!
Tammy Klein
Assistant Vice President
+1.239.970.2231
35
About Hart Energy
36
Global Presence
37
Fully-Integrated Capabilities…
…Unmatched Downstream Analysis
38
Regulations & Policy: taxation, incentives, credits,
subsidies, programs (LCFS) and policies
RINs: accounting, compliance, invalidation, tax credits,,
pricing, security, liquidity, contracting.
Ethanol Pricing: long and short term forecast
Supply and Demand: crude oil, gasoline, diesel, biofuels
Capacity & Production: searchable/downloadable
database
Import markets: trade and opportunities
Technologies, News, Mandates: regular global reports
provide detailed world developments
Access: 24/7
Introductions: to producers, traders & other market players
Global Biofuels Center Provides
39
Clients
REFINING
AUTOMOTIVE
TECHNOLOGY
FUEL
E&P
GOVERNMENT
40