Asia-Pacific refiners are investing in upgrades to refinery units and gasoline blenders are reconfiguring specifications, as the region introduces tighter sulphur limits and higher octane requirements.
Governments in Malaysia, India, China, Singapore and elsewhere have already made plans to shift to the use of lower-sulphur gasoline. And buyers in Indonesia, the Philippines, Pakistan and Vietnam have started to purchase higher Ron and lower-sulphur gasoline grades.
Malaysia will introduce Euro 4 vehicle emissions specifications for lower-Ron gasoline by 2018-19. Malaysia already applies the Euro 4 standards — which cap sulphur content in gasoline at 50ppm — but only for the 97R gasoline grade.
India will implement the same 50ppm sulphur cap in its Bharat Stage (BS) 4 vehicle emission and fuel standards in 2017. Delhi is then planning to roll out the stricter BS 6 standards in 2020. The tougher specifications are compatible with the EU's Euro 6 vehicle emissions specifications, which require a maximum sulphur content of 10ppm.
The region's biggest consumer market, China, is also tightening fuel quality specifications. The new China 5 tailpipe emissions standards will cap sulphur content in road fuels at 10ppm from January. And regional trading hub Singapore will adopt Euro 6 vehicle emission specifications by September 2017.
The Philippines introduced diesel and gasoline specifications compatible with Euro 4 vehicle emissions standards in July 2016, replacing the previous Euro 2 standards that allowed up to 500ppm sulphur content. And Vietnam in December issued a tender seeking a Euro 4-compliant 95R gasoline cargo for the first time, possibly to meet demand in Ho Chi Minh city.
The tightening of sulphur limits has pushed refineries in two of the largest regional economies, China and India, to upgrade and install new units. State-controlled Chinese refiners PetroChina, Sinopec, CNOOC, Sinochem, ChemChina and Norinco have installed more than 1.8mn b/d of secondary capacity to produce gasoline meeting the new 10ppm requirements. And in India, state-controlled refiners BPCL, HPCL and IOC are upgrading their plants to produce BS 6 gasoline.
Refineries also need to invest in hydrogen-fed desulphurisation and treating units to remove sulphur. But the hydrotreating process that reduces sulphur levels in gasoline also has the effect of lowering its Ron, and this has led to a rise in demand for high-Ron blend stocks. Spot tanker bookings for Asia-bound European reformate and mixed aromatics more than quadrupled to 5.6mn t in January-October this year compared with the same period in 2015.
Moves to cut sulphur content are only part of efforts to improve gasoline quality. There is also a shift towards the use of higher octane gasoline in Asia-Pacific's largest gasoline buyers Indonesia and Pakistan. Pakistan increased its domestic gasoline octane specifications from 87R to 92R as of 1 November, while Indonesia has started to consume significantly more high-octane gasoline.
The 88R gasoline grade continues to make up the bulk of fuel consumption in Indonesia, but the trend is changing. Jakarta has already been importing more gasoline with an octane rating above 90R and below 97R. Around 15pc of the country's gasoline imports in the first half of 2015 had an octane rating of between 90 and 97, with the other 85pc likely comprising the 88R grade. But the proportions have since shifted, with Indonesia importing an average of 22pc of the higher-octane gasoline and 78pc of other grades in the first half of this year.
The change in specifications is increasing refining costs and could strain gasoline supplies if refineries are unable to keep up with the tighter limits. But air pollution is becoming an increasingly sensitive political issue in Asia-Pacific, making it unlikely that the trend towards cleaner fuels will be reversed.
