Monday, 5 November 2012 10:57 PM

Cleaner Diesel Fuel will be Better for PICTs

Friday 2 November 2012, Secretariat of the Pacific Community (SPC), Suva, Fiji. The Economic Development Division (EDD) of SPC has this week sent out a petroleum advisory to its members, advising that it would be beneficial economically and environmentally to consider a transition to cleaner diesel fuel.

Diesel fuel comes in various qualities according to the amount of sulphur in its make-up. The sulphur content can be 5,000 parts per million (ppm), 2,500 ppm, 500 ppm, 50 ppm and even 10 ppm. The lower the sulphur content, the cleaner the fuel, and the less pollution from exhaust fumes.

Diesel engines generate most of the region's electricity, and move the land and sea transportation systems, but the exhaust they emit can prove deadly. Diesel exhaust is now classified as a cause of cancer and it also contributes to climate change. In an effort to promote clean air and a healthy environment, almost all countries in the world have moved to diesel with a lower sulphur content, and the oil refineries, car makers and engine manufacturers have adjusted accordingly.

Given the reduced trade in high sulphur diesel, such as the 5,000 ppm, the lead publisher of petroleum pricing data in the Asia-Pacific region - and the one that Pacific Island countries and territories (PICTs) rely on as an independent source of petroleum market data for price verifications (Platts) - has announced that it will lower the sulphur specification reflected in its market assessments to 500 ppm on 2 January 2013. What this means is that the few PICTs that are still using 5,000 ppm diesel will continue to receive low quality fuel with high sulphur content but the price will be set at the cleaner 500 ppm.

Why buy fuel that has 5,000 ppm sulphur, when fuel that is ten times cleaner costs only a little more? This was the message in the advisory that SPC sent to its members. For instance, in September 2012 the mean of Platts Singapore for 5,000 ppm diesel was USD 130.519/barrel while it was USD 132.613/barrel for 500 ppm over the same period.

Moving towards a lower sulphur benchmark reflects changing supply and demand trends across the region. It is also reflective of current legislative, environmental and trading norms regionally and globally. There is a shift towards cleaner fuel standards in Asia and the Middle East, which suggests that future diesel (gasoil) benchmarking in Asia will change over time to lower sulphur grades and the trend seems irreversible, given current conditions.

The advisory further noted that the Government of Fiji is currently reviewing its fuel standards, including those of diesel, which currently stands at 500 ppm. Cook Islands is also considering 10 ppm diesel for its ground transport fuel. The move to lower sulphur content diesel has become imperative; globally the transition is towards a cleaner fuel that is more economical and has reduced environmental impact.