Iran, H-FAME, Stage V Highlight Of Diesel Webinar’s Q&A

Iran, H-FAME, Stage V Highlight Of Diesel Webinar’s Q&A

Stratas Advisors
Jan 11, 2017

This material is part of Stratas Advisors’ Global Alternative Fuels Service

Last month, Stratas Advisors’ Global Fuel Specifications (GFS) service hosted a webinar titled, “Overview & Outlook of Diesel Quality, Vehicle Emissions & Fuel Efficiency.” Stratas Advisors’ Huiming Li, director of GFS, provided a global overview and outlook of specifications for on-road and off-road diesel, and moderated the members-only webinar. In addition, GFS analysts Anas Abdoun, Luis Erazo, Sylvain Jonckheere and You Wei Aw presented case studies on sulfur, density and H-FAME.

A transcript of the Q&A session follows.

  • Q: Re: case study in Iran. Is the diesel market set to grow in the next four years? Do you have the figures for the commercial vehicle population now and in 2020?

Anas Abdoun, Analyst: We do not have information on Iran’s commercial vehicle population, but we know that Iran has currently 13 million vehicles in use; however, we have not forecasted Iran’s vehicle fleet. With the introduction of 50 ppm sulfur fuels and stricter vehicle emission standards (Euro 5) coming into place, we can expect growth of the diesel market in the next few years. For more information on diesel fuel demand projections, please visit this page.

Huiming Li, Director: Stratas Advisors offers a subscription service called the Global Automotive Service which provides fleet projections up until 2035, although forecast data is currently not available for Iran’s vehicle fleet in 2020 as mentioned by Anas. For more information on the Global Automotive Service, please visit this page.

  • Q: Re: H-FAME: Do you know if use of H-FAME is likely to be extended to the markets of Europe or North America? Or do you see it as a regional phenomenon in Southeast Asia?

You Wei Aw, Analyst: In the short-term, we do not expect the use of H-FAME to extend to the Southeast Asian market but will remain well within the Thai market because of a few reasons as shown below:

  • H-FAME technology is still at the demonstration phase and has yet to enter the commercial phase;
  • H-FAME technology requires additional investments (cost, time, space, etc.) to existing infrastructure which, without government intervention, will unlikely make headways with biodiesel producers; and
  • Palm methyl ester (PME), which is widely produced and blended into conventional diesel in key palm oil producing Southeast Asian markets such as Indonesia, Malaysia and Thailand, currently provide sufficient oxidation stability for higher blend levels of up to B10. Hence, there is no immediate need to upgrade PME to H-FAME unless higher biodiesel mandates are implemented. (See the Global Biofuels Assessment service for details on biodiesel mandates).

Li: In today’s webinar, we saw that the benefit of H-FAME is its oxidation stability; however, its disadvantage would be cold flow. Once H-FAME is made commercially available, it would make sense to blend it with conventional diesel fuel in tropical regions like in Southeast Asia, especially in Indonesia and Malaysia which are setting biodiesel blending mandates as high as B20 and B10, respectively. Exceptions would apply to the hilly regions of these countries that have lower temperature climates. This could also be seen as an opportunity for additive companies to introduce cold flow improvers to help improve cold flow of H-FAME, which would help its introduction into the markets of Europe and North America, which are facing the same issue with cold flow in diesel. This is why, so far, HVO has been the alternative to conventional FAME in these regions.

  • Q: What are the main changes that will be introduced by Stage V compared to the current Stage VI, regarding emission standards of off-road diesel vehicles?

Sylvain Jonckheere, Analyst: Stage V significantly upgrades the type-approval system for NRMM with respect to the technical requirements on emissions by adopting stricter limits for all types of pollutants, depending on the engine sub-category.

Besides addressing the existing major air pollutants of NOx, HC, CO and PM, the proposal introduces new limits on PN for most of the engine categories, which complements the PM limits.

In addition, the new legislation will also extend the scope of the legislation, in order to improve market harmonization, by introducing new categories of vehicles; and introduce measures for simplifying administrative procedures and improving enforcement, including conditions for better market surveillance.

  • Q: What has been the reason for delay in the move to a lower sulfur content diesel in Mexico?

Luis Erazo, Analyst: The reason for the delay can be contributed to several different factors, perhaps the leading factor has been the delay or lack of implementation of upgrades to the refineries in Mexico. With that, there may have been some complacency or lack of urgency by PEMEX to proceed with the necessary upgrades. In addition, with the recent drop in the price of crude oil, this caused further delays from those that have already plagued them at that point. The hope is that within the next year or two to meet the 15 ppm sulfur diesel grade deadline, the focus may be on how to implement the necessary upgrades to compete with those now able to operate in Mexico with the opening of the energy market in the country.

Mexico has long delayed the entry of 15 ppm sulfur diesel and stricter vehicle emission standards into force due to issues with their refining sector and most recently the decline in the price of petroleum. With the combination of the above factors that led to the delay in upgrading the fuel specifications, Mexico has been pushed to advance the distribution of 15 ppm sulfur diesel at a faster pace.