Cleaner Fuel Specifications

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Cleaner Fuel Specifications
Date 13 December 2005 Venue Parliament DME
Presentation to the Portfolio Committee Cabinet
decision on clean fuel specifications
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Why Cleaner Fuels

• Lead is toxic especially malnourished children
• Introduction of unleaded in SA medical reports
  showing improvements in health
• World has moved is moving to unleaded
• Implications for local car manufacturers
• Keep up with world technology trends
• WSSD commitments
• Dakar declaration
• International pressure

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Broad Approach to Fuel Specifications

• Follow EU
• Euro 2 - from 2006
• Euro 3 from 2008
• Euro 4 - from 2010
• Alignment within SADC
• SADC moving in groups in introduction of clean
  fuels
• Each country decision on which grades to avail
• Timing within months of each other
• Vision compatibility throughout the region

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So are many other countries
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Diesel is the same
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Key issues to consider

• Investment
• Reliance on imports
• Loss of jobs
• Security of supply
• Foreign exchange impacts
• Loss of skills

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Challenges for fuel specs

• Refinery investments
• Oil industry claimed approx R10-12 billion
• Optimal future petrol octane structure
• Infrastructure, supply and logistics issues
• Cross contamination of heavy metal additives and
  petrol without heavy metals
• Some oil companies refuse to sell heavy metals
• Some car manufacturers demand metal free petrol

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Options for refineries

• Increase reformer severity
• Loss of volume due to lower yield
• Increases emissions
• Refining investments
• Most preferred
• Opportunity for refineries to upgrade refineries
• Do not invest but reduce refining capacity
• Use of high octane imports (Reformate, MTBE, MMT)
• Final product import refining value-add is lost

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Preparation and Consultation

• Octane study July 2003
• Jointly funded by DME, SAPIA NAAMSA
• Interdepartmental
• DEAT, the dti, National Treasury, DoT, DST,
• Legal Resources Centre
• Publication for public comment of doc
• 2003 Nov Vehicle Emissions Strategy gazetted and
  post on the DME Website
• World Bank March 2004
• Stakeholder Committee
• Clean Fuels Committee 2003
• Participants
• SAPIA, Government Dept, NAAMSA
• Sub Committees
• Pricing tax, logistics, technincal, and
  Communication

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Current Position

• How does altitude affect the need for octane
• Different engine technologies have different
  altitude responses
• Some engine technologies are able to fully
  compensate for altitude and thus have similar
  octane requirements at all altitudes
• Many motorists believe octane puts whooma in de
  wiele
• Much octane wastage
• Octane wastage has macro economic impacts
• Unleaded petrol market penetration is at 30

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Current Position

• Can our refineries produce 100 95RON without
  importing octane enhancers
• Without additional investments only 50
• With additional investments - up to 75

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South African Government Decisions

• December 1991
• Cabinet approved introduction of unleaded petrol
  (introduced 1996)
• April 2002
• Cabinet approved a recommendation to phase-out
  lead from petrol by 2006
• Approved that sulphur in diesel be reduced to
  maximum of 0.05 per cent by 2006
• 16 March 2005
• Cabinet confirmed 2002 decision
• Approved National Octane Structure w.e.f. 2006

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New Octane Structure from 2006

• Coastal Region
• 91
• 93
• 95
• 95LRP
• Inland Region
• 91
• 93
• 95
• 93LRP

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Price Differentials

• Price differentials between different octane
  grades
• Only be BFP differentials
• Retail price differentials between ULP LRP same
  octane
• None
• Motorist will not pay more for cleaner fuels
• New grades of fuels
• 95ULP Demand levy inland

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Labeling

• Anti valve seat recession additives will be
  available at the pump
• Pumps dispensing petrol containing heavy metal
  additives will be clearly labeled as such

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Diesel specifications from 2006

• Sulphur standard grade
• 500ppm
• Sulphur niche grade
• 50ppm

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How will fuel specs be regulated

• Through the Petroleum Products Amendment Act of
  2003
• The Minister of Minerals and Energy to promulgate
  fuel specification regulations
• Will be regulated in cooperation with SABS, which
  currently has only voluntary regulations

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Demand management levy

• The levy to be imposed through the Equalisation
  Fund levy mechanism to allow for regular
  adjustments
• Limited to the inland region
• Will be between 0cpl 50cpl depending on the
  demand level of 95 ULP
• DME to draft the rules for the triggers in
  consultation with the industry
• Will commence at 10cpl

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Current supply patterns

• The inland region defined as the zones in Grey
• Defined by areas that are currently predominantly
  93RON

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Vehicle compatibility database

• The National Association of Automobile
  Manufacturer of South Africa in conjunction with
  SAPIA is developing a detailed VFCDD
• Ready by mid April 2005 for public access
• Intended to inform consumers which octane grade
  is recommended for their particular vehicle

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Stakeholder complaints

• Concern has been raised from some quarters about
  the removal of lead
• Which comes first?

More efficient vehicles
Cleaner fuels
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Benefits

• Access to new efficient vehicle technology
• Improved health
• Cleaner environment
• Reduced operating and maintenance costs
• Money in your pocket
• Promotion of use of the Platinum
• Increased local production of catalytic converters