National Fuel Quality Standards Regulation Impact Statement 1 ...

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As it is proposed that the Commonwealth fund enforcement and monitoring costs for national fuel quality standards, it is envisaged that these costs in the jurisdictions would be reduced once the Commonwealth legislation was introduced. States and Territories would no longer incur this expenditure for their State-specific standards and it is likely that the assistance provided by them for the Commonwealth process would be reimbursed. There is concern in the jurisdictions that Commonwealth standards will result in the closure of some refineries. The impact of tighter standards on the refining industry is discussed below. 5.5.2 IMPACT ON THE REFINING INDUSTRY The Downstream Petroleum Action Agenda acknowledges that the Australian petroleum refinery industry is in crisis. As currently structured, its high costs make it internationally uncompetitive. The industry’s profitability is currently low and declining, having more than halved in recent years, and yet it urgently needs to be able to fund investment to meet the Government’s timetable for new fuel specifications. Significant restructuring and investment is also required to enable industry to compete with large scale, low cost refineries in Asia. The Action Agenda acknowledge that even though the industry currently faces many challenges, the oil industry is committed to improving air quality, particularly in Australian capital cities. Significant investment will be required by the refining industry to meet tighter fuel standards. Australia’s eight major refineries have different configurations as a result of different investment decisions and, therefore, different capacities to meet the fuel specifications. The major investment costs are associated with reducing the fuel sulfur content of diesel and the benzene content of petrol, and increasing the octane rating of petrol while reducing its aromatic content. The cost to the industry will vary depending on the timing of the introduction of the standards and the combination of parameter levels proposed. The final costs to industry will be known when the actual fuel standards are finalised later in 2000, and individual refinery strategies to meet the standards are decided. Depending on the final fuel standards implemented under Commonwealth regulation, and given the current world downturn in the refining industry, one or more refineries may contemplate closure. Shell has already announced that its Clyde refinery in NSW may close before 2006, when the production of Euro 4 diesel (with 50 ppm sulfur content) becomes mandatory. Shell is currently considering its position in the light of the Government’s proposed fuel standards. A comprehensive analysis of the potential costs to the refining industry of a number of fuel quality scenarios was undertaken by the Fuel Quality Review. The fuel quality standards proposed for discussion by the Commonwealth include a slightly different timetable for the introduction of Euro 3 and Euro 4 for some parameters, compared to
that modelled in the Fuel Quality Review. The comparison for those parameters requiring significant refinery investment is outlined in the Table 5.3 below. Table 5.3: Fuel parameters requiring significant refinery investment Fuel Parame ter Year of Introduction Commonwealth Proposal Fuel Quality Review Scenario 4 Petrol Sulfur 2002 150 ppm 500 ppm (Euro 2) Diese l 2005 50 ppm 150 ppm (Euro 3) 2008 30 ppm* 50 ppm (Euro 4) Benzene 2002 3% Not specified Aromati cs 2005 2% 1% (Euro 3) 2002 45% Not specified 2005 42% 42% (Euro 3) 2008 38%* 35% (Euro 4#) Olefins 2002 18% Not specified Sulfur 2002 2005 16% 18% (Euro3) 2008 - 14% (Euro 4#) 2005/6 50 ppm * These proposed standards are indicative only. 500 ppm (From 1 January 2002) 500 ppm (By end 2002) 50 ppm (From 1 January 2006)
Page 1 and 2: 1 Introduction National Fuel Qualit
Page 3 and 4: Table 2.2 Greenhouse gas emissions
Page 5 and 6: of fossil fuels. Another significan
Page 7 and 8: interactions with the terrestrial a
Page 9 and 10: enhance the quality of conventional
Page 11 and 12: Summary A business as usual approac
Page 13 and 14: 500ppm limit on the sulfur content
Page 15 and 16: protection to all Australians where
Page 17 and 18: 4.5.1 Advantages and Disadvantages
Page 19 and 20: The Commonwealth proposal for fuel
Page 21 and 22: Table 5.1: Net Benefits of adopting
Page 23 and 24: It is probable that these increased
Page 25: direct injection. It is claimed tha
Page 29 and 30: egion. It would appear that Euro 2
Page 31 and 32: taking into account the objectives
Page 33 and 34: sulfur for both petrol and diesel a
Page 35 and 36: Auto-Oil Programme (1995) Informal
Page 37 and 38: FORS (1997) LPG In-service Vehicle
Page 39 and 40: ______ (1999) Air Emissions Invento
Page 41 and 42: Table A3.2 Regular unleaded petrol
Page 43 and 44: Table A3.3: Premium unleaded petrol
Page 45 and 46: APPENDIX 2: Summary of Assessment o
Page 47 and 48: APPENDIX 4 LIST OF STAKEHOLDERS * A
Page 49: * NRMA * NSW Cabinet Office * Premi

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