June 2019

Trends & Resources

Business Trends: Sustainability: Clean fuels—The advancement to zero sulfur

In April, Hydrocarbon Processing launched the first iteration of its HP Sustainability webcast series.

Nichols, Lee, Hydrocarbon Processing Staff

In April, Hydrocarbon Processing launched the first iteration of its HP Sustainability webcast series. This series will focus on policy/regulations, capital expenditures and the latest technological advancements to ensure more sustainable operations at refineries, petrochemical plants and gas processing/LNG facilities.

The following is a summary of the first presentation, which focused on the global increase in policies and regulations to produce low-sulfur and ultra-low-sulfur (ULS) transportation fuels, and the subsequent boost in capital expenditures to adhere to new fuel regulations. The full webcast can be viewed at www.HydrocarbonProcessing.com/resources/webcasts.

What are clean fuels?

A major aspect of “clean fuels” focuses on mitigating pollutants—carbon monoxide, nitrogen oxide, hydrocarbons and particulate matter—from vehicles’ exhaust.

Many refiners around the globe have adopted European standards for fuel quality (Euro 4, Euro 5 and Euro 6), as Europe has been the frontrunner on regulations for low sulfur, “clean” transportation fuels. This includes reducing sulfur limits—measured in parts per million (ppm)—in transportation fuels. The refining industry has invested hundreds of billions of dollars over the past 30 yr to reduce the amount of sulfur in gasoline, diesel, jet fuel, etc. These investments have reduced sulfur levels in transportation fuels from 2,000 ppm (prior to Euro 2) in 1993 to less than 10 ppm (Euro 5 and Euro 6) at present.

Most countries use the European standards to measure sulfur in fuels, but use different names to describe them. These ULS fuels include Bharat Stage 6 (BS-6) in India, National 5 and Beijing 6 in China, Tier 3 in the US, AFRI 4 in Africa, and K4 and K5 in Kazakhstan, among others. Not only are these nations, and others around the world, regulating and investing in low-sulfur and ULS fuels production, but they are also mandating higher ethanol blending rates; an increase in biofuels production and usage; and an increase in the adoption of electric, hybrid-electric, compressed natural gas (CNG), hydrogen-fueled and/or alternative fuels-powered vehicles.

The push for lower-sulfur transportation fuels has moved into the global shipping sector, as well. In 2020, the International Maritime Organization’s 2020 Global Sulfur Cap regulation will go into effect, which calls for marine vessels to burn low-sulfur marine fuels.

Capital expenditures for sulfur reduction

Over the past 30 yr, the global refining industry has invested hundreds of billions of dollars to reduce sulfur levels in transportation fuels, and many new units are expected to begin operations over the next several years.

According to OPEC’s World Oil Outlook 2018, nearly 12 MMbpd of new secondary unit capacity will begin operations by 2024 (FIG. 1). These capacity additions include more than 6 MMbpd of new desulfurization capacity, more than 3 MMbpd of conversion capacity and more than 1.7 MMbpd of octane-boosting capacity. Most of this new capacity will be in the Asia-Pacific and Middle East regions.

FIG. 1. New secondary unit capacity construction (MMbpd), 2018–2024. Source: OPEC.
FIG. 1. New secondary unit capacity construction (MMbpd), 2018–2024. Source: OPEC.

Global initiatives

Every region has announced new policies and regulations to reduce sulfur levels in transportation fuels, along with emissions-mitigation initiatives and capital investments in new processing capacity. The following will detail major initiatives and investments being made by each region. Additional in-depth information on these plans is available in the HP Sustainability webcast.


Many nations in the Asia-Pacific region are enacting policies to provide their populations with ULS fuels. The move towards clean-fuels production will help mitigate pollution in major cities, as well as adhere to emissions reduction targets set in the Paris agreement.

China is making great strides to mitigate significant smog in major cities. The country has, and continues to, invest in capital-intensive refineries to produce ULS fuels, as well as upgrades to existing facilities. This includes the production of China 6 (which is equivalent to Euro 6-standard fuels), as well as removing more than 1 MM high-polluting long-haul trucks by 2020.

The country has also initiated its Blue Sky Defense to help curb air pollution. The program includes setting aggressive fuel economy, emissions and quality standards through 2020, retiring many coal-fired power plants and converting them to natural gas; experimenting in utilizing alternatives fuels, such as methanol and CNG; increasing ethanol blending to 10% (known as E10); and increasing the adoption of EVs/HEVs.

In January 2015, India announced that it will skip the implementation of BS-5 fuels and move directly to BS-6 fuels (e.g., fuels that are equivalent to Euro 6 standards). This regulation will go into effect in 2Q 2020. Most of the nation’s refineries are adapting to the new fuel standard and are investing in new units and/or upgrades to produce compliant fuels. The nation has also approved its National Biofuels Policy. This program envisions increasing ethanol blending in gasoline to 10% by 2022 and up to 20% by 2030. The policy will help mitigate fuel imports, which could save India approximately $7 B in oil import costs.

Additional Asia-Pacific clean fuels initiatives include:

  • Indonesia. The country has initiated its $25-B Refinery Development Master Plan, which calls for the construction of greenfield refineries and the upgrade of its existing refining network by 2027. The goal is to increase the complexity and flexibility of the nation’s refineries, while being able to produce Euro 4- and Euro 5-standard fuels.
  • Malaysia. The country has mandated that all domestic refineries must produce Euro 5-equivalent fuels by September 2020. The $27-B Refinery and Petrochemical Integrated project, which started commissioning activities in late 2018, will produce Euro 5 fuels. In February, the country enacted its B10 biodiesel program, which increased bio-content—primarily palm oil—in diesel from 7% to 10%.
  • Thailand. Investments are being made to boost refining capacity to satisfy demand, as well as upgrades to existing facilities to produce Euro 5 fuels.
  • Singapore. ExxonMobil announced it will make significant investments to its integrated complex in Singapore. These investments include increasing the production of clean fuels. Neste has announced it will invest $1.6 B in new biofuels production facilities.


The African Refiners Association (ARA) has developed AFRI specifications as a guideline to produce low-sulfur, clean fuels to improve air quality. According to the ARA, the goal is to implement AFRI 4 (equivalent to Euro 4) by 2020 and AFRI 5 (Euro 5) by 2030.

However, these standards are being met with several challenges. Adhering to these standards would be capital-intensive, and many African nations do not have the monetary resources to invest in expensive upgrades and/or grassroots units. Problems also arise in synchronizing standards among many nations, as well as trying to implement them.

Although adhering to low-sulfur and ULS standards can be capital-intensive for refiners, several countries are investing in upgrades and new units to meet Euro 4 and Euro 5 standards. For example, Algeria has initiated a refinery upgrade and rehabilitation program to produce low-sulfur fuels; Egypt will produce more Euro 5 fuels once its Midor refinery expansion/modernization and Assiut refinery hydrocracking projects are completed; Dangote’s $12-B integrated complex in Nigeria will produce Euro 5 fuels once completed; and South Africa is instituting a framework that calls for biofuels to meet 2% of the country annual fuel consumption a feasibility study is being conducted by Saudi Aramco on a new $10-B refinery to produce ULS fuels, and BP announced a $300-MM upgrade to its refinery to produce low-sulfur diesel such as D50 and D10.

North America

In December 2018, Canada announced its Clean Fuel Standard framework. The initiative calls for the mitigation of greenhouse gas emissions of 30% below 2005 levels by 2030. The region is planning to enact this program in 2022. Canada hopes that the plan will encourage the use of biofuels, EVs and alternative fuels, as well as an increase in the investments for clean fuels.

The US has begun to enforce Tier 3 regulations, which lower sulfur content in gasoline from 30 ppm to 10 ppm. Large US refineries—those with a processing capacity of more than 75,000 bpd—had to comply with the regulation in 2017. Refineries with a capacity of less than 75,000 bpd must comply by 2020. In total, Hydrocarbon Processing’s Construction Boxscore Database is tracking more than $6 B in active refining projects to boost the production of ULS fuels in the US. These projects are being executed by companies, such as Andeavor, Chevron, ExxonMobil, Valero, Marathon Petroleum andMeridian Energy, among others.

Earlier this year, the US Environmental Protection Agency (EPA) issued its final rule that set renewable fuel targets for 2019. The renewable fuel standard—put in place by the US EPA to increase the production and use of renewable fuels—set a biofuels blending target of 19.92 Bgal for 2019.

Latin America

Mexico has announced an ambitious $11-B plan to rehabilitate the country’s refining network and build a grassroots facility. The rehab plan includes increasing domestic production of high-quality, low-sulfur fuels at all Pemex refineries. Mexico is trying to significantly decrease sulfur levels in domestically produced diesel to adhere to new regulations that call for a reduction in diesel sulfur limits from 500 ppm to 15 ppm. However, due to the scarcity of the fuel, the country’s Energy Regulation Committee has delayed the new regulation until at least mid-2019.

Most capital expenditures will be directed towards a new $8-B, 340,000-bpd grassroots refinery in the state of Tabasco, enabling the country to boost production for ULS fuels.

With help from China National Petroleum Corp., Brazil’s state-owned oil and gas company, Petrobras, plans to finally complete its COMPERJ refining project; the project is in the feasibility study stage. If completed, COMPERJ will produce ULS fuels. The country is also trying to boost the use of biofuels and renewables fuels through its RenovaBio program. The program, which will go into effect in 2020, aims to double the use of ethanol to 26 Blpy by 2030, along with an increased use in renewables.

Additional Latin America clean-fuels initiatives include:

  • Argentina. YPF is investing $2 B to add desulfurization units to its La Plata and Mendoza refineries to increase clean fuels production.
  • Ecuador. At the time of this publication, Ecuador was tendering contracts to complete upgrade work at the Esmeraldas refinery, as well as the construction of a new 300,000-bpd complex refinery. The new units at the Esmeraldas refinery would increase clean fuels production, reduce emissions, etc. If built, the country’s 300,000-bpd grassroots refinery would produce ULS fuels.
  • Jamaica. Petrojam is investing $1 B in the Petrojam Refinery Upgrade Project (PRUP). Once completed, the PRUP will increase the refinery’s flexibility and conversion to produce high-value, low-sulfur fuels.
  • Peru. The country’s state-owned petroleum company, Petroperú, is investing $6 B on the Talara refinery modernization project. The capital-intensive project will increase the refinery’s flexibility and conversion to produce fuels that adhere to new sulfur limit requirements in the country.

Middle East

The Middle East has and continues to build highly complex facilities. These facilities, combined with upgrades and expansions, are designed to minimize fuel oil output and to maximize middle distillate, diesel and gasoline production.

One of the region’s main initiatives is the focus on clean fuels production. Most Middle Eastern nations have invested in new units to increase the production of ULS transportation fuels. ULS fuels are becoming mandatory in both developed and developing countries, and it is imperative that Middle Eastern refineries produce fuels that adhere to sulfur requirements—especially since surplus fuels will be exported to regions that require low-sulfur fuels (e.g., Asia and Europe).

The region is making capital-intensive investments in secondary unit capacities to increase the production of ULS fuels. According to OPEC, the region will add more than 4.1 MMbpd of secondary unit capacity by 2024. This capacity increase includes 2.8 MMbpd of desulfurization capacity; 700,000 bpd of conversion capacity; and 600,000 bpd of octane-boosting units.

As part of its Vision 2030 program, Saudi Arabia is investing more than $6 B in clean-fuels initiatives at several domestic refineries. Kuwait is investing approximately $25 B in the 615,000-bpd Al-Zour refinery and the Clean Fuels Project (CFP). Both projects will increase the production of ULS fuels. Earlier this year, Kuwait National Petroleum Co. announced that it is considering the construction of a fourth refinery in the south of the country.

The United Arab Emirates plans to invest $45 B to boost downstream processing capacity. A portion of this investment includes the construction of a new 600,000-bpd refinery in Ruwais, which will produce ULS fuels once completed. Bahrain is investing $6 B to expand and modernize its Sitra refinery. The project’s primary goals are to increase conversion to ULS fuels, as well as increase energy efficiency and environmental compliance.

Europe: East vs. West

Both Western and Eastern Europe, Russia and the Commonwealth of Independent States (CIS) are investing to increase the production of ULS fuels. However, Western Europe’s refining network is much older and more developed, so many Western European countries are focusing on the move towards a carbon-neutral society while Eastern Europe, Russia and the CIS are investing in upgrades and new refining capacity to adhere to higher fuel-quality standards.

Western Europe is pushing for a carbon neutral economy by 2050, which includes programs such as the EU Renewable Energy Directive (RED 2), an increase in the use of biofuels, EVs/HEVs, etc. According to the European Commission, RED 2 has an overall target of 32% use of renewables in the EU total energy mix by 2030, along with a minimum of 14% for renewables usage in the transportation sector.

Most nations in Western Europe have announced major initiatives that call for the increased use of biofuels and alternative fuel technologies and capital investments to increase biofuel production capacity, as well as the outright ban of gasoline and diesel-powered vehicles. Several of these initiatives include:

  • Spain—Proposing a ban of gasoline and diesel by 2040. The country’s Balearic Island has announced it will ban the use of diesel-powered vehicles in 2025 and gasoline in 2035.
  • Italy—Investing in new biofuels, low-carbon fuels and waste-conversion technologies/plants.
  • Germany—The country is allowing cities the right to limit/ban the use of diesel cars to help mitigate emissions. The nation has also announced plans to phase out nuclear power generation for renewables.
  • The Netherlands—Implementing zero-emissions vehicles for all public transport by 2025.
  • Sweden—Neste and BP will supply low-carbon aviation fuel (e.g., non-palm renewable and sustainable raw materials) to Sweden airlines.
  • Finland—Neste is making capital-intensive investments in new biofuels technologies.
  • United Kingdom—Announced plans to ban the sales of gasoline and diesel vehicles by 2040. The country will also subsidize the sales of EVs, as well as invest in retrofit public transport, build new charging stations, and fund research and development in new low-carbon transportation technologies.
  • France—The country has announced plans to ban gasoline-powered vehicles in Paris by 2030, as well as pushing the use of SP95-E10 gasoline (10% ethanol blend).

Russia and the CIS have major ongoing initiatives, as well. Russia is at the tail-end of its $55-B modernization program to upgrade and modernize its domestic refining network. Since the nation is self-sufficient in fuels production, the program focuses on upgrading and conversion capacity rather than additional crude distillation capacity.

In the CIS, several capital-intensive projects are helping the region to mitigate imports, as well as produce ULS transportation fuels. Examples of these projects include SOCAR’s Aliyev Heydar refinery modernization project, Kazakhstan’s completion of its domestic refineries modernization and plans to build a fourth refinery to adhere to K4 and K5 fuel specifications (fuels equivalent to Euro 4 and Euro 5-standards); and Uzbekistan’s investment of more than $2 B to build a new 5.5-MMtpy refinery in the Jizzakh region to produce clean fuels. HP

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