Towards a biofuel policy for energy security

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VIASyed Akhtar Ali
SOURCEThe Express Tribune
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ISLAMABAD:  Biofuels are a agro-based fuels as opposed to fossil fuels, which include both liquid and gaseous forms.

Current ethanol production is crop based, called 1G Ethanol, made out of fermentation of corn, sugar and others. Recently, 2G Ethanol (also called advanced liquid biofuel) has been introduced, which is based on cellulosic material such as bio-waste material including crop waste, municipal solid waste, sewage, etc.

Biofuels have been mandated for all petroleum products including gasoline, diesel and furnace oil. Biogas and bio-CNG are gaseous inclusions. Our discussion will focus largely on biofuel blending with gasoline.

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Biofuels have been a preferred fuel for a variety of reasons. These include energy security as most of the petroleum-importing countries have a large agricultural base producing ethanol; price stability which is a balancing insurance against mercurial oil price variations and shocks; emissions from burning biofuels in motor engines are considerably less than fossil-based gasoline and diesel; and ethanol is a good and benign octane booster.

Also Read: Bio-fuels and our exports

Pakistan greatly needs all these four features. Biofuels, however, would not be able to completely replace fossil fuels as neither there would be adequate supplies to replace fossil fuels nor can biofuels be burnt alone as a single fuel.

Biofuels have to be mixed in a ratio of 5-15% into the existing automotive engines without requiring any modifications. However, with modifications higher percentages of biofuels can be used.

Ethanol is a great octane booster with octane rating of RON 113 as against RON 87 for an ordinary ex-refinery non-blended gasoline.

Quite ambitious targets for biofuel mixing in fossil-based gasoline and diesel have been set by most industrialised countries of Europe, North America and Asia-Pacific. About 65 countries in the world have set such targets including 30 developing countries.

Only the Middle Eastern region appears to have ignored biofuels possibly due to oil abundance and less agriculture. In Europe, E5 gasoline with RON 95 quality is most popular, although its universal availability is scarce.

Many European countries have set targets to have E10 by 2020 but have reduced these to 5-7.5% lately. In the US, they are now talking of even E15 (15% ethanol).

In China, the target is 15% ethanol blending by 2020. Nine Chinese provinces have adopted E10 with various levels of success. Most developing countries out of the list of 65 have gone for E5.

India mandated E5 in 2003 in 13 states initially and by 2006 extended it to all over India. By 2013, E10 was introduced. However, the actual target achievement in India has been 7.2% by averaging the various ethanol usage levels and non-usage.

Thailand deserves a special mention. Five grades of gasoline are marketed at Thai petrol pumps. Thailand plans to replace E10 by E20.

On the diesel side, there are two products B7 (7% palm oil) and B10 (10% palm oil). It is mind boggling as to how such a variety of petroleum products are being provided at Thai pumps, while variety is a common feature in Europe. All Thai cars imported from Japan are said to be E20 compatible.

Ethanol exports

Pakistan exported ethanol to the tune of $425 million in 2018. In volume terms, it was 653,443 tons and average export price was estimated at $650 per ton. If blended with gasoline at a ratio of 5%, it can be mixed with 1.2 billion litres of gasoline.

Pakistan’s total annual consumption of gasoline is 7.5 million tons. If all of the exported ethanol is made available for blending with gasoline in the country, average ethanol content in gasoline would be around 10%.

It means that all of the ethanol requirement for making E10 gasoline can be met by local production. However, it may be too optimistic to prescribe E10 in one go, it may be advisable that a more realistic E5 target is applied.

Pakistan has not adopted any such target in this respect. No apparent explanation is available for this. Pakistan is a major ethanol producer and reduction in ethanol exports could be a possible reason.

Ethanol is cheaper than gasoline. It means that by exporting ethanol, we tend to lose net foreign exchange as an equal amount of expensive gasoline is imported. Thus, there is a net foreign exchange loss of 10-20% of ethanol exports per year.

About 10 years ago, PSO did introduce ethanol blending and marketed it as a separate product. The initiative was suspended for unknown reasons. Lack of market acceptance and perceived risks to automotive engines were cited as reasons.

Pakistan’s oil sector has been using manganese-based additives in excess quantities to enhance RON levels, prompting complaints from auto manufacturers. A good alternative could have been ethanol as an octane booster.

Reportedly, motorcycles would have some problems using E5. Admittedly, even RON 92 is overkill for motorcycles. A low RON 87 gasoline may be adequate for them. This may cause a price reduction of at least Rs5 per litre, which is significant for the low-income class.

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The share of motorcycles in gasoline consumption is about 50%. It was probably a mistake to discontinue RON 87 while it was correct to introduce RON 92.

Consideration may be given to reintroducing the regular RON 87 gasoline. In the US and Canada, the regular RON 87 gasoline is still widely available.

Special petrol pumps may be installed for motorcycles as well. There may be some old vehicles which may be sensitive to ethanol. Thus, it may not be feasible to introduce mandatory ethanol blending in all gasoline.

However, an additional product may have to be introduced. This may require additional infrastructure. Gasoline is being transported by trucks, so no issue in transport facilities.

However, regional storages and pump storage tanks may have to be modified or added. Consultation with stakeholders would have to be done to sort out these issues.

Biodiesel

Biodiesel includes traditional biodiesel fatty acid materials and hydro-treated vegetable oil, also referred to as renewable diesel.

The EU is the world’s largest biodiesel producer. Biodiesel represents about 75% of the total transport biofuel market. Rapeseed oil, used cooking oil and palm oil have market shares of 39%, 22% and 19% respectively among the feedstock materials.

Pakistan is short of cooking oil. A large amount of foreign exchange is spent on import of palm oil from Indonesia and Malaysia. Used cooking oil and animal fat may provide some raw material base for biodiesel.

It appears that the raw material base not being there, one may postpone it from the agenda for the time being.

Present government appears to be more sensitive and responsive to environmental issues. The Ministry of Climate Change has been made more active and effective.

Prime Minister Imran Khan has reportedly taken personal interest in issuing a policy statement on low sulphur fuel. It is likely that steps may be taken in this respect as well.

There may be some overloading due to the simultaneous implementation of low sulphur regime and introduction of biofuels. A roadmap and a policy harmonising various requirements and constraints are required.

The writer is former member energy of the Planning Commission

Published in The Express Tribune, December 30th, 2019.

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