February 2016

Trends and Resources

Business Trends: Clean fuels—a global shift to a low-sulfur world

New technologies are helping move refiners to a low-sulfur world, while revised fuel standards are catalysts for more clean fuels projects to develop higher-quality transport fuel.

Nichols, L., Hydrocarbon Processing

Over the past decade, the refining industry has taken incredible steps to reduce sulfur levels in transportation fuels. Refiners have invested billions of dollars in new units, upgrades/retrofits and expansions to meet new sulfur and emissions regulations. These investments promote the reduction of carbon monoxide, nitrogen oxide, hydrocarbons and particulate matter in both diesel and gasoline vehicles. New technologies are moving the refining industry toward a low-sulfur world. New regulations and fuel standards are acting as catalysts for additional clean fuels projects to develop higher-quality transportation fuels.


  Essar Oil’s 20-MMtpy refinery is located in Vadinar,
  Gujarat, India. The facility concluded a planned
  maintenance turnaround in 4Q 2015 that included the
  completion of the D-Max Project. Part of Essar’s Optima
  Plus program, the project included the conversion of the
  vacuum gasoil hydrotreater unit into a mild hydrocracking
  unit, as well as the addition of new installations in the
  diesel hydrotreating unit. Photo courtesy of Essar Oil. 

Around the world, legislation mandating decreased emissions and lower levels of airborne pollutants is coming into effect. In response, refiners are implementing operational and processing changes to reduce sulfur levels in transportation fuels. New technologies are moving the downstream hydrocarbon processing industry toward cleaner, lower-sulfur transportation fuels.

A low-sulfur world doesn’t come cheap, though. Refiners are investing billions of dollars in new units, upgrades/retrofits and expansions to meet new sulfur and emissions regulations. These investments will help produce high-quality fuels that meet Euro 4, Euro 5 and Euro 6 specifications. Many refiners around the globe have adopted European standards for fuel quality, as Europe has been the frontrunner on regulations for low-sulfur, “clean” transportation fuels. European passenger vehicle emission standards for Euro 4, Euro 5 and Euro 6 are detailed in Table 1 and Table 2. These standards promote the reduction of carbon monoxide (CO), nitrogen oxide (NOx), hydrocarbons (HCs) and particulate matter (PM) in both diesel and gasoline passenger vehicles. As shown in Fig. 1, many nations around the world already produce transportation fuels that meet Euro-4 specifications. Other regions, such as the Middle East, are investing heavily to increase the production of Euro 4 and Euro 5 standard fuels.




  Fig. 1. Vehicle emissions standards: global status as
  of February 2015. Source: United Nations Environment
  Program, PCFV Secretariat. 

The following is an overview of major clean fuels projects and trends being implemented around the world. Each region is investing in the implementation of new technologies to meet cleaner fuel requirements. These new processing units will help produce higher-quality transportation fuels.


The US transportation fuel market is the world’s largest. The country's government will begin to enforce the new Tier 3 program starting in 2017. This program will set new vehicle emissions standards and lower the sulfur content in gasoline. According to the US Environmental Protection Agency (EPA), sulfur content in gasoline will be limited to 10 parts per million (ppm). This is a reduction from Tier 2 standards, which limited the sulfur content in gasoline to 30 ppm. The program maintains the current refinery gate per-gallon content of 80 ppm and the 95-ppm downstream distribution cap. The EPA forecasts that the new rule will significantly reduce vehicle pollutants into the atmosphere. For example, the EPA forecasts that NOx emissions will be reduced by about 260,000 tons in 2018 alone.

Large US refineries (those producing greater than 75 Mbpd) must comply with Tier 3 standards by 2017. Refiners producing below 75 Mbpd must meet Tier 3 regulation standards by 2020. To comply with new regulations, US refiners have invested in additional units, such as hydrotreaters, to reduce the sulfur content in transportation fuels.

In Canada, petroleum fuels constitute 95% of Canada’s transportation energy needs. The country has aligned itself closely with US fuel standards and is making strides to continually reduce sulfur levels in transportation fuels. This includes the introduction of stringent Tier 3 fuel regulations for passenger vehicles and light-duty trucks. These fuel standards will begin in 2017, which coincides with the startup of US Tier 3 regulations. Canadian refiners have already invested over $8 B over the past decade to reduce sulfur levels in gasoline and diesel fuels. Since 2005, sulfur levels in gasoline and diesel have decreased by more than 90% and 97%, respectively. New Tier 3 standards would be instrumental in continuing to reduce sulfur in transportation fuels, as well as reducing vehicle emissions to nearly zero over the life of the vehicle.


To help curb air pollution, the country has set aggressive fuel economy standards through 2020. China is implementing its National V fuel quality standard, which equates to Euro 5 standard transportation fuels. Euro 5 caps sulfur content in gasoline and diesel at 10 ppm. Recent regulations required refiners to produce Euro 4 standard transportation fuels nationwide by the end of 2015. Euro 5 standard transportation fuels will be required for the automotive industry by 2017. These new regulations are being implemented one year ahead of schedule. The implementation of National V fuel quality standards for non-automotive diesel has been pushed back one year to January 2018. This includes “general” diesel used in agriculture and industry. General diesel will need to meet Euro 5 standard requirements within this time frame. Upgrading the nation’s fuel quality could cost Chinese refiners over $7 B.


The country has 22 major refineries in operation, with a total throughput capacity of 4.3 MMbpd. To satisfy increasing demand for transportation fuels, India is investing upward of $30 B in additional refining projects through 2020. Capital expenditures are expected to be even higher due to new regulations to curb air pollution and produce Euro 4 and Euro 5 standard fuels by 2020. In January, Road Transport Minister Nitin Gadkari announced that Indian refiners will need to invest $4.5 B to produce Bharat Stage 6 (BS-6) standard fuels by 2Q 2020. BS-6 fuels are equivalent to Euro 6 fuel specifications. These new regulations are being imposed four years ahead of schedule and call for a 68% reduction in NOx emissions. Cars sold in the country are subject to BS-4 standards. India’s new regulations will bypass the BS-5 stage and move directly to BS-6.

The proposed clean fuels bill was in response to a World Health Organization study that found that 13 of the world’s dirtiest cities were in India. The installation of secondary units to comply with new fuel standards could cost Indian refiners over $17 B.


Southeast Asia’s biggest economy is the world leader in the production of palm oil, and is promoting its use as a biofuel. The country boosted the mandated amount of blending in diesel in 2014 from 7.5% to 10%, and subsequently to 15% in 2015. Indonesia raised the blending requirement to 20% this year and plans to increase it to 30% in 2020. According to the Indonesian Biofuel Producers Association, Indonesia’s biodiesel consumption will increase from 1.1 kiloliters in 2015 to 7.9 kiloliters in 2016. The additional usage of biofuels is expected to decrease vehicle emissions substantially.


Few countries have adopted low-sulfur fuel regulations, but multiple countries in southern Africa have announced a commitment to produce cleaner fuels by the end of the decade. The African Refiners Association has developed AFRI specifications as a guideline for the production of cleaner fuels. The region aims to produce fuels with AFRI-4 specifications by 2020. This would constitute maximum sulfur content in diesel and gasoline of 50 ppm and 150 ppm, respectively. To meet these goals, African refiners would need to invest over $7 B in additional units.

The most notable clean fuels initiative has been put forth by South Africa. The country’s Clean Fuels Program 2 (CF2) is an effort to develop Euro 5 specification fuels. This would entail developing fuels to contain 10 ppm or less of sulfur, a lowering of benzene from 5% to 1%, and the reduction of aromatics from 50% to 35%.

The CF2 program was initially designed to begin in 2017, but it has been pushed back to 2020 or beyond. The extended deadline provides South African refiners with time to make the necessary upgrades to produce cleaner fuels and is a more realistic timetable for the program’s implementation—one that could cost South African refiners billions in upgrade costs. The country’s refiners are hesitant to make the necessary upgrades due to the low return on investment.

The country is also in talks with Iran to build a new clean fuels refinery in the country. The plan could replace the $10-B Project Mthombo, in the industrial port of Coega, which has been in limbo for some time. The new refinery, fed with Iranian crude, would produce Euro 5 specified fuels, meeting the government’s mandate.

Other countries, such as Egypt and Algeria, are planning projects to improve local fuel quality. With ultra-modern refineries being built in Asia and the Middle East, Africa may continue importing refined products to meet demand, in lieu of investing heavily in capital-intensive projects.

Middle East

The region continues to increase refining capacity to diversify exports and provide higher-quality refined products to the global market. Traditionally, Middle East refineries have had simple configurations and high fuel oil yields, partly due to strong power generation requirements. This condition is changing. A new generation of highly complex plants, combined with upgrades and expansions at existing plants, is radically altering the product mix. New unit configurations include hydrocracking, catalytic cracking and hydrotreating capacities designed to minimize fuel oil output and maximize low-sulfur middle distillate, diesel and gasoline production.

Saudi Arabia and Kuwait are leading the charge in new clean fuels projects in the region. To comply with mandatory sulfur specifications for gasoline and diesel, Saudi Arabia is spending billions of dollars to construct multiple clean fuels projects. The country is seeking to reduce sulfur content in diesel and gasoline to 10 ppm and to lower benzene content in gasoline to 1%. This represents a dramatic shift in sulfur levels from 2012, when Saudi Arabia’s maximum sulfur level for diesel was greater than 500 ppm. The country plans to commission its 400-Mbpd Jazan refinery by 2018. The refinery will produce higher-grade transportation fuels, including ultra-low-sulfur diesel. Along with its JVs, Saudi Aramco will upgrade all of its domestic refineries to produce lower-sulfur transportation fuels. Several projects—the Ras Tanura Refinery Clean Fuels and Aromatics project (which was on hold, but was reinstated in mid-2015), the Riyadh Refinery Clean Transportation Fuel project, the Saudi Aramco Mobil Refinery Co. Clean Fuels project (completed in 2014) and the PetroRabigh Clean Fuels project—are designed to accomplish the Kingdom’s goal of producing near-zero-sulfur fuels.

Kuwait is investing over $30 B on ambitious plans to overhaul its refining sector and become the region’s clean fuels leader. The plan focuses on modernizing and integrating the country’s Mina Abdullah and Mina Al-Ahmadi refineries, as well as on building the region’s largest refinery, the Al-Zour plant. Once completed, the reconfigured and integrated Mina Abdullah and Mina Al-Ahmadi refineries will decrease the sulfur in gasoline production from 500 ppm to less than 10 ppm. Benzene and aromatics concentrations will also decrease. Bunker fuel oil sulfur content will decrease from 4.5 ppm to 1 ppm, and maximum sulfur content of full-range naphtha will drop from 700 ppm to 500 ppm. With the construction of Al-Zour and the upgrading and integration of its domestic refineries, Kuwait is set to become the largest producer of clean fuels in the Middle East by 2019.

Other countries in the region are also making sizable investments to produce higher-quality transportation fuels. Efforts include the Ruwais refinery expansion (completed in 2015), the Jebel Ali and Fujairah projects in the UAE, the Sohar refinery upgrade and Duqm refinery projects in Oman, the Sitra refinery modernization project in Bahrain, and the SOCAR Turkey Aegean Refinery project in Turkey.

Latin America

Due to the growth in the region’s middle class, Latin America has seen tremendous petroleum product demand growth over the past decade. Demand has been shifting to more middle and light distillates, as opposed to fuel oil. Multiple refinery upgrades, expansions and greenfield facilities have been delayed or canceled due to the drop in oil prices. Latin American countries, which rely heavily on oil export revenues, have been hit hard by the drop in oil prices. In turn, this has left little money to fund capacity expansions and upgrades to produce higher-grade transportation fuels. New clean fuels initiatives are taking place in the region, however.

In late 2014, Brazil increased its ethanol blending mandate in gasoline from 5% to 7% and in diesel from 25% to 27%. These new blend requirements, along with the startup of new refining capacity, are forecast to help mitigate a substantial portion of refined fuel imports. Additional refinery plans have been announced, but massive debt, corruption and cost overruns have put projects on the back burner.

In late 2015, Mexico’s state-owned oil company, Pemex, announced plans to reinstate its domestic refinery upgrade program. The $23-B investment will upgrade Pemex’s refining system to increase production of cleaner-burning diesel and gasoline. The plan’s goal is to more than double the production of ultra-low-sulfur gasoline and increase the production of ultra-low-sulfur diesel.

Colombia is also investing heavily in the production of higher-grade transportation fuels. State-owned Ecopetrol plans to complete the full ramp-up of its Cartagena refinery in 2Q 2016. The $7-B expansion project more than doubled capacity to 165 Mbpd, which included the modernization of the existing refinery to take advantage of the new complex and improve efficiencies. The project will help reduce regional refining constraints; produce ultra-low-sulfur gasoline and diesel from heavy, high-sulfur crudes; adhere to the latest emissions protocols and requirements; increase the refinery’s conversion capacity from 76% to 95%; and meet international standards for transportation fuels.


The country produces more than enough refined products to meet domestic demand, but it lacks advanced facilities to produce higher-grade transportation fuels, such as Euro 4 and Euro 5 fuels. In response, Russia launched a $55-B program in 2011 to modernize its existing plants and encourage exports of high-quality products. The plan called for the installation of 130 new units by 2020. The program saw delays in 2015 due to falling oil prices and Western sanctions, which have limited the ability for Russian companies to secure financing.

The peak of Russia’s modernization program is forecast for 2016–2018. The country’s two largest refiners, Rosneft and Lukoil, have led the charge on refinery upgrades to produce Euro 4 and Euro 5 fuels. Smaller Russian refiners are also upgrading their refineries to reduce sulfur content in transportation fuels. Russia's modernization program will continue to focus on increasing its light products yields, with a key focus on meeting demand for gasoline and jet fuel, increasing fuel standards to Euro 5 specifications, and replacing old units to decrease residual product yields and maximize utilization.

Bunker fuels

A major change for European Union (EU) refineries is the required sulfur content reductions for marine fuels. Marine fuels constitute about 7% of EU refining output, according to Concawe. New regulations kicked into effect in 2015 that require shippers to switch from marine residual fuels to lower-sulfur marine fuels in designated emission control areas (ECAs). These areas include the Baltic and North Sea, coastal areas off of the US and Canada, and the US Caribbean Sea.

Sulfur content in marine fuels consumed in ECAs was capped at 0.1%, the same quality as lower-sulfur distillate materials. The International Convention for the Prevention of Pollution from Ships (MARPOL) directive also sets limits on marine fuels in non-ECAs. Beginning in 2020, the sulfur content of marine fuels used in non-ECAs will be reduced from 3.5% to 0.5%. Although the initial start date of this new regulation is January 1, 2020, the plan will be reviewed in 2018 to check the availability of the required fuel oil. Depending on the outcome of the review, the startup date of new non-ECA sulfur regulations could be postponed until at least 2025. HP

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