MTBE:

Relevance in Today’s World

April 23, 2013

Doha, Qatar

Middle East MTBE Workshop

CLEAN FUEL, CLEAN AIR

Working closely with fuel policymakers,

regulators and stakeholders in the fuel industry,

ACFA promotes and advances the use of

cleaner automotive fuels based on principles of

sound science, cost efficiency and

sustainability of the environment.

Who is ACFA?

MTBE has NEVER been classified as toxic or

carcinogenic by any regulatory body anywhere

in the world.

MTBE Facts

3

MTBE Facts

1. The European Union conducted a 3-year MTBE risk

assessment based on 20+ years of European MTBE

usage and research.

Conclusion:

•MTBE is a safe and beneficial gasoline component

•When used and handled properly, MTBE is not expected to have any

harmful impact on human health and the environment.

•Potential to cause odour and taste problems in water, need to consider

a risk reduction strategy for groundwater and drinking water

• Proposals mainly dealing with the construction and operation of

petrol underground storage and distribution facilities at service

stations

4

MTBE Facts

2. WHO reviewed the impact of MTBE use on public

drinking water.

Conclusions:

• MTBE is non-genotoxic

• Insufficient data to reach any conclusions about its potential

to cause human cancer

• Did not see any reason to restrict the use of MTBE in gasoline

5

All these reputable bodies have found no

sufficiently compelling reason to classify MTBE as a

possible cancer-causing agent for humans:

6

• The Clean Air Act Amendments of 1990 (in the

US) established the Reformulated Gasoline

(RFG) program, which included an oxygenate

mandate.

– The requirement for oxygenates could be met with

either ethanol or MTBE

– MTBE captured approx. 85% of the oxygenate

market.

– MTBE was a product approved and mandated by the

federal government.

• California found MTBE in groundwater and

drinking water supplies in 2000/2001, and

moved to ban the use of MTBE in 2003.

Let us go back to where it all started…

7

• The Energy Policy Act of 2005 removed the oxygenate

mandate for RFG and instead established the

Renewable Fuel Standard, requiring ethanol content in

gasoline.

• Once the oxygenate mandate expired, refiners stopped

blending MTBE in the U.S. for liability concerns.

• In considering the Energy Policy Act, the Congress

REJECTED an amendment calling for a federal ban on

the use of MTBE.

• While a number of states maintain MTBE bans on their

books, there is NO federal ban on the use of MTBE.

• In fact, there is still MTBE production in the U.S. for

export markets in Mexico, Venezuela and Europe.

The facts of MTBE in the USA

8

• The Initial Problem: Public Perception versus

Reality

– Lack of focus on true problem: leaking gasoline tanks

– Overestimation of risk to water resources

– Overreaction to odor/taste thresholds

– Convergence of political influence of powerful lobbies

• The Result: Adverse public reaction particularly

in California & Northeast

– Incorrectly framed issue as a choice between clean

air and clean water

– MTBE became a convenient “scapegoat”

The U.S. Experience:

Sound Science vs. Political Science

9

• According to statistics compiled by the U.S.A.

Oxygenate Fuels Association, the introduction

of MTBE in gasoline has resulted in the

reduction of common air pollutants.

– 20-25% less carbon monoxide

– 20-30% less benzene

– 5% less nitrogen oxides

– 15% less evaporative emissions

– 30% less particulate matter

– 10-15% less unburned hydrocarbons

US Experience: MTBE Reduce Air Pollutants

10

THE RELEVANCE OF MTBE

• 1990s: Middle East and Asia/Pacific.

• The main driving force in Middle East was

the need of MTBE for lost octane from

lead phase out and as high sulphur levels

are gradually reduced in gasoline.

• In Asia/Pacific the main driving force was

the real necessity of clean air through

cleaner fuels legislation.

• MTBE begun to be commonly imported in

Taiwan, Thailand, and largely produced

and consumed in Saudi Arabia, South

Korea, Singapore and Malaysia.

Clean Gasoline

12

Most Immediate: Cutting Vehicle Emissions

13

13 in 15 of the world’s most

polluted cities are in Asia.

Emission Standards (New Light Duty Vehicles)

Notes:

*The level of adoption vary by country but most are based on the Euro emission standards

Italics – under discussion; a – gasoline; b – diesel; c – Entire country; d – Delhi, Mumbai, Kolkata, Chennai, Hyderabad, Bangalore, Lucknow, Kanpur, Agra, Surat, Ahmedabad, Pune and Sholapur;

Other cities in India are in Euro 2; e – Beijing [Euro 1 (Jan 1999); Euro 2 (Aug 2002); Euro 3 (2005); Euro 4 (1 Mar 2008); Euro 5 (2012)], Shanghai [Euro 1 (2000); Euro 2 (Mar 2003); Euro 3 (2007);

Euro 4 (2010)] and Guangzhou [Euro 1 (Jan 2000); Euro 2 (Jul 2004); Euro 3 (Sep-Oct 2006); Euro 4 (2010)]; f – Equivalent to Euro 4 emissions standards; g – for gasoline vehicles only

Source: CAI-Asia. September 2012. Emission standards for new light-duty vehicles

Gasoline Specifications (Asia)

15

As at Target

Markets Sep 2011 2012-2014

Bangladesh Pre Euro Pre Euro

Brunei Pre Euro Euro II

Burma Pre Euro Pre Euro

Cambodia Pre Euro na

Nepal Pre Euro Pre Euro

Pakistan Pre Euro Pre Euro

Sri Lanka Pre Euro Euro II

Indonesia Euro II Euro II

Malaysia Euro 2M Euro 4M

Philippines Euro II Euro IV

Thailand Euro II Euro IV

Laos Euro II Euro II

Vietnam Euro II Euro IV

India (national) Euro II Euro II

India (cities) Euro IV Euro IV

China (national) Euro IV Euro IV

Hong Kong Euro IV Euro IV

Taiwan Euro IV Euro V

Japan Euro V Euro V

S. Korea Euro V Euro V

• Octane replacement due to fuel

quality improvements (lead phase-

out, reduction in sulphur, benzene,

aromatics, olefins).

• Expanding vehicle fleet and

growing gasoline demand.

• Vehicle technology advances need

cleaner fuels to meet the stricter

emissions standards and to operate

as designed.

• Increase in minimum octane grade.

• Growing demand for higher grade

gasoline.

• Market is octane-short (especially

clean octane.)

Octane Trends 2007-2020

16

Benefits of MTBE

• Overnight improvement in air quality

• Vapor pressure improver

• Gasoline pool volume extender

• Excellent blending octane value

• Refinery blending flexibility

• Economic/cost effectiveness advantages

– Avoids heavy capital investment

– Lower operating costs

• Fully compatible with transport/handling systems

• Improves vehicle performance (such as drivability & cold

starting)

• Readily available world-wide and locally produced

17

MTBE: Impact on Emissions

Source: Hart Downstream Energy Services, 2003

18

• The octane number improvement with MTBE in

general depends on the base gasoline.

• Clear octane numbers for MTBE are relatively

high and therefore MTBE is used widely to

improve the octane rating for gasoline.

MTBE Enhances Octane

19

MTBE Lowers RVP of Gasoline

Source: Hart Energy 20

$0

$2

$4

$6

$8

$10

$12

$14

$16

Billio

n U

S$

Base Case w/ MTBE

Flex Case- without MTBE

2003 Cases 2006 Cases 2012 Cases

APEC: Chinese Refining Capital Investment

21

APEC: Korean Capital Investment

Requirements Impact of MTBE

22

0

500

1000

1500

2000

2500

3000

2003 2006 2012

Million US $

With MTBE

Without MTBE

MTBE GROWTH OPPORTUNITIES

• Asia and Middle East to boost MTBE demand

• South and Central America and Africa

– Scope for further penetration of MTBE, paving the

way for potential increase in demand in the future.

• Growing gasoline markets in developing markets

– Gasoline blending was the major consumer of MTBE

at global level, followed by solvents and chemical

reagent applications.

• Improved gasoline quality requirements

• Phase out of metallic octane boosters

• Low biofuels penetration rate in developing nations

Global MTBE Demand Drivers

24

• Growing emphasis on renewable fuels /

sustainability

– Risk of reduction of gasoline consumption in general

– MTBE may be edged out in gasoline pool as not

produced from renewable sources

• Biofuels mandates in EU and USA.

• Risks of declining gasoline consumption in

developed nations

– FFV and alternative energy

– Fuel economy improvement

– Dieselization

– Market maturity and aging demography

• Groundwater concerns

Global MTBE Demand Constraints

25

Global MTBE Market Demand (2011 vs 2020)

26

Source: GBI report on

MTBE Global Markets to

2020, 2012

Demand share (tons)

RegionYear 2011

% of

totalYear 2020

% of

total

Forecast

Growth

Asia-Pacific 7,437,747 61% 13,738,018 68% 6,300,271

Middle East & Africa 2,435,501 20% 3,832,612 19% 1,397,111

Europe 1,644,630 14% 2,041,513 10% 396,883

South & Central America 545,624 5% 631,559 3% 85,935

North America 40,164 0% 9,766 0% -30,398

Global 12,103,666 20,253,468 8,149,802

In the report, Asia-Pacific refers to China, Taiwan, Thailand, South Korea,

Malaysia, Singapore and India only; Europe refers to Germany, Belgium, Italy,

Russia and the UK only; South and Central America refers to Mexico, Brazil and

Argentina only; the Middle East and Africa refers to Saudi Arabia and Iran only.

Regulatory impact on MTBE use in Asia

27

Legislation / Regulation Impact on MTBE use Markets

Clean Air Act Opportunity for MTBE to be used All

Lead phase-out Clean octane replacement

Almost all except Laos,

Myanmar, Cambodia and Sri

Lanka

Strict emissions

standardsOpportunity for MTBE to be used All

Ultra-low or low sulphur

requirementsMTBE widely used

China, Hong Kong, Taiwan,

South Korea

Limits on benzene,

aromatics and olefinsOpportunity for MTBE to be used All

No MTBE restrictions Opportunity for MTBE to be used All

Biofuels mandates Low to no MTBE usage Thailand, Philippines, Japan

High RON requirement Opportunity for MTBE to be used All

Tax subsidies on

gasoline alternatives

Competition for MTBE-blended

gasolineThailand, India, China

China: Asia’s fastest growing and largest MTBE market

28

‘0000

tonnesChina MTBE Consumption (2006-2011)

2006 2007 2008 2009 2010 2011

4.85

(yoy +4%)

Euro IV (Gasoline)

29

• MTBE has NEVER been classified as toxic or

carcinogenic by any regulatory body anywhere in the

world. Safe and beneficial gasoline component.

• Responsible care is critical to the long term sustainability

of the MTBE industry

– When used and handled properly, MTBE is not expected

to have any harmful impact on human health and the

environment.

• Tighter vehicle emission standards and fuel quality

legislation will support MTBE’s long term viability and

sustainability in the fuels landscape in the Middle East

and Asia.

Concluding Remarks

30

Thank You!

If you have any queries, please contact

Clarence Woo

clarence@acfa.org.sg

(65) 6430 6658