Oil industry reluctant to lend support: Ethanol blending with petrol
KARACHI, Sept 20: While sugar millers appear firm in promoting and activating plans of blending ethanol with petrol, oil marketing companies (OMCs) and refinery operators are a bit reluctant to lend their support to the millers on the issue.
The sugar millers have been claiming for the last few days that Pakistan can save $500 million per annum by using an economical and environmental-friendly fuel — ethanol — in automobiles, aircrafts, tractors and trucks.
Ethanol, produced from molasses, is used as a fuel by many countries, including the US, India, Brazil and European countries, in aircrafts, automobiles, trucks and tractors, as it contains 100 per cent octane and oxygenerator.
“It is the cheapest and environment-friendly fuel, as it costs only Rs19.29 per litre in Pakistan,” the millers said, adding that mills had already invested over one billion dollars in the installation of 17 ethanol producing units after the directives of President Pervez Musharraf in January this year to blend five per cent ethyl alcohol in motor gasoline for use in automobiles, keeping in view the rising oil prices.
“The production of ethanol has been doubled — from 531 million litres to more than 1,000 million litres — in just one year after the investment,” according to the millers.
A sugar miller said that confusion had emerged after Prime Minister Shaukat Aziz had asked for conducting a fresh study on the ethanol project. “This situation has irritated the millers,” he said, adding that the millers were seeking only five per cent blending of ethanol with petrol.
“While the sugar millers and oil industry are at loggerheads over the ethanol project, the government should conduct a study how far the project is feasible for the general public in providing any relief in the shape of price cut in petrol instead of seeing the interest of powerful lobby of sugar millers and equally powerful OMCs/refineries. The government should take cognizance of the grievances of general public who now pay over Rs50 per litre for petrol,” market analysts observed.
“Instead of focussing on blending ethanol with petrol, the government should find out ways and means for reducing diesel prices that run the economy of the country.”
Diesel dominates over 75pc market, with only 38pc supplies from the local refineries as against costly import of 4.5 million tons per annum.
Executives at OMCs and refinery operators think that there is a conception in Pakistan that petrol is imported and the country will save millions of dollars by introducing ethanol in gasoline. They said that petrol was currently surplus in Pakistan, which meant that the production and demand was equal at 1.3 million tons per annum. “Refineries create an exportable surplus, resulting in naphtha exports of over 500,000 tons per year. Blending ethanol with petrol would mean that refineries will have to export even more naphtha.”
Aftab Hussain, the manager commercial and supplies, Pakistan Refinery Limited (PRL), says Pakistan imports Light Arab Crude (LAC), of which 45 per cent furnace oil, 15 per cent naphtha, 22 per cent diesel and 18 per cent kerosene are refined at the local refineries.
He said that unless a gap appeared between the demand and supply in petrol with demand surpassing supplies, it was unlikely that blending ethanol with petrol would take place. “I think it is not feasible to blend 10 per cent ethanol with petrol.”
Almost the same reply came from the secretary-general, Oil Companies Advisory Committee (OCAC), Abid Saeed Ibrahim, who said: “We can go ahead with blending ethanol with petrol after eight to 10 years. Currently it is not viable as petrol is not in a deficit position.”
Giving environmental aspects, he said that 10 per cent ethanol blended with gasoline reduced car’s emissions like carbon monoxide, hydrocarbons, carcinogens (benzene and toluene), greenhouse gas — carbon dioxide, while ethanol increased petrol volatility, evaporative emissions of volatile organic compounds, increasing global warming and formation of ground-level ozone, higher emission of carcinogenic aldehydes and oxides of nitrogen.
However, he says that in Pakistan the gasoline is unleaded and the possibility of bringing about any improvement in the environment is yet to be seen. He said E10 (10 per cent ethanol blended with gasoline) blends used in higher octane (93RON+) using countries and Pakistan average octane is 87-88RON. The volatility of 10 per cent blend in severe temperatures will affect older vehicles, besides affecting engine performance and drivability. It causes corrosion of the fuel system, damages plastic and rubber parts and dissolves existing deposits, which may lead to blockages of the fuel line or fuel filter.
On commercial and economical aspects, Mr Ibrahim says that ethanol contains only about 68 per cent of the energy of petrol and E10 is likely to increase fuel consumption by about two to three per cent. On pricing and subsidies, he said the government had already owed OMCs and refineries’ Rs8 billion, which was increasing every fortnight by Rs1.5 billion.
He also claimed that the governments in other countries provide patronage for fuel ethanol programmes. “The Australian government provides direct subsidy at the rate of $0.21 per litre for 10 per cent blending of ethanol. In France, 60 per cent relief in corporate income tax is adjusted annually for direct blending of E10; 100 per cent tax exemption for 85 per cent blending in Sweden; 30 per cent tax exemption in the UK for 10 per cent blending; and in the USA, E10 receives a partial exemption from federal excise tax on gasoline of 5.4 cents/gallon, which is passed on to the consumers at the pump.”
In other words, the federal subsidy is 54 cents per gallon of ethanol when it is blended with gasoline, he adds.
He pointed out that due to the hygroscopic nature of ethanol, it must be blended closest to the retail outlets that required all the OMCs to invest Rs250 million in developing storage and blending facilities.
He claims that most car makers in the world feel that more than 10 per cent blend of ethanol in the engine may prove harmful. He said Brazil moved to ethanol owing to the 1970s oil crisis, as the country was importing petrol, while the US had moved purely to satisfy the sugarcane lobby, as it had become mandatory in the California state to use ethanol blended fuels.
Source:
http://www.dawn.com/2005/09/21/ebr2.htm
