Editorial

Dear Reader,

Welcome to the second issue of the electronic EFOA Newsletter.

The articles you will discover in this issue cover very different topics - from the history of MTBE to environmental management, among others - but reflect one of EFOA's priorities: inform all interested stakeholders of issues and developments occurring in the field of fuel oxygenates.

Earlier this year, EFOA co-sponsored an important scientific symposium organised by Nicole, the Network for Industrially Contaminated Land in Europe, on site characterisation. As a science-based organisation, we believe that it is essential for experts to share the latest state-of-the-art knowledge in an open manner, and we are proud to have contributed to this exchange of views between some of Europe's top scientists.

As usual, policy developments affecting our products have followed a rather hectic pace in the last few months. In our "Letter from America" we give you an update on what could appear as - and is - a rather confusing situation in the United States on the legislative status of MTBE and ethanol.

In Europe, ethanol and more generally biofuels are also the subject of intense political discussions. The 15 EU Member States and the European Parliament are engaged in a debate on how best to promote alternative fuels such as biofuels. This is an important issue for EFOA.

Finally, we thought you would be interested by a look back.

MTBE is much talked-about, but one could be forgiven for not knowing the history and the people behind the product. MTBE has been invented in Europe, by one of EFOA's founding and still active members. We recap in our article the successful development of what has become the world's oxygenate of choice and a key ingredient of modern, environment-friendlier, gasoline.

We hope you will find our Newsletter of interest and await, as usual, your comments and suggestions for future articles.

Yours sincerely,

Bruno Hé²¹
Director General, European Fuel Oxygenates Association
Email: efoa@efoa.org

Nicole Pisa Workshop : Reviewing the international event

On 18th and 19th April 2002, the Network for Industrially Contaminated Land in Europe (NICOLE) organised a workshop meeting focusing on ? Cost-effective Site Characterisation - Dealing with Uncertainties, Innovation, Legislation Constraints ?. Held in Pisa, Italy, the event was sponsored by EFOA, member of NICOLE, which welcomed the invitation to display a booth with MTBE posters and fuel oxygenates documentation.

Among the speakers' panel, three specialists addressed a presentation of interest to EFOA: Richard Woodward, Microbiologist from Sierra Environmental Services (USA); Martti Suominen, Environment & Safety Manager from Neste Marketing and Pekka Huttula, Deputy Managing Director from the Finnish Oil & Gas Federation.

More than 150 participants coming mainly from Europe attended the meeting, among which Italians were most represented (40), followed by some 25 from UK, 20 from Holland and 15 from Belgium. The audience expertise ranged from engineering, geology, hydro-geology, toxicology to environmental consulting and research.

The main topic of the seminar being Site Characterisation (SC), the intention of NICOLE was to clarify the way in which SC is performed between different EU member countries. Apparently, often conflicting interests are involved in the interpretation of site characteristics where many stakeholders get involved : buyers and sellers, scientists & lawyers, etc.

One question which was raised for discussion between speakers and participants concerned the regulatory framework of SC in Europe : is there a need for a harmonised European approach? If so, would it be possible to base such an approach on site specific risk assessment, rather than on the application of generic rules?

Indeed, the rules for performing and interpreting SC in Europe have been designed and implemented by national governments and differ from nation to nation within Europe. Consequently such variety does not help companies seeking international development within Europe.

Therefore, one of the aims of the workshop was to bring clarity into the diversity of European national rules for SC and provide insight in the consequences of this diversity; said Peter van Driel of Fugro.

After careful examination of SC practices in Europe by service providers, NICOLE observed many similarities between different approaches, but identified also large differences both in cost and schedule. It was hence recommended that "a further European integration process would benefit from harmonisation of rules, specifically if these rules provide insight in acceptability of risks".

The workshop attempted to provide insight on available methodologies and tools for site characterisation.

In his paper titled "Consideration of Stakeholder Concerns in the Development of Site Characterisation Plans and Deployment of Resources", R. Woodward first defines stakeholders involved in a SC plan : authorities, industry, community leaders, contractors, academia / researchers and special interests groups. Then he suggests five major concerns to be developed by those stakeholders for a successful site characterisation plan : equal partners, cost effective management of the issues, open information sharing, agreed convergence of interests and finally, common objectives.
Using concrete US remediation case studies, he describes basic objectives and principles of a site assessment while reviewing various techniques employed with an estimation of the cost it generates.

Mr. Suominen's paper "Site Characterisation at Retail Stations, Experiences in Finland", is more specific regarding practical aspects of SC and legislation involved. He points out that in Finland the "polluter pays" principle is a driving standard in terms of remediation liability. The cost for remediating Neste Marketing Ltd's retail sites in Finland ranges from ? 10 K to ? 150 K with an average of ? 40 K, except a few unfortunate cases rising up to ? 500 K.

The SC approach in Finland is mostly a simple site investigation focusing on hot spots. The picture is often improved with on-site analysis during remediation and potential receptors. On that basis, authority discussions are held and conclusions drawn. More sophisticated SC is at times used in cases with wide and long contaminant plumes causing potential risk to groundwater. Such precaution in relying on SC can save time and lots of money in remediation.

Mr. Suominen states that high remediation costs cases, were the result of unwise delaying and cutting corners in remediation rather than the consequence of SC approach. On a conclusion note, he mentions that further developments for SC, supported by handy field analytical tools, are needed to guide excavation and analysing groundwater at remediation sites.

"Legal Aspects of Remediation of Oil Contaminated Soil and Groundwater in Finland" is the subject of Mr. Huttula's paper. We learn that extensive or explicit provisions on site characterisation do not exist in the Finnish legislation. According to the Environmental Protection Act, the Government of Finland may stipulate by decree the maximum permitted content of harmful substances in the soil. However, the Government has so far, not given any stipulations, only different drafts. This paper describes the latest proposals.

In Finland most of the polluted sites were contaminated a relatively long time ago, excluding service stations. Mr. Huttula presents the different stages of remediation legislation in Finland : definition of soil contamination, administrative procedures, restoration liability, civil law; he then goes on to describe the environmental liability regime in the EU. He concludes with the Finnish oil companies' soil remediation programme.

These three presentations can be downloaded in their full version from the EFOA web site, workshop page.

EFOA is a full member of NICOLE since January 2002. NICOLE is a network for the stimulation, dissemination and exchange of knowledge about all aspects of industrially contaminated land. Its members, located in 17 European countries, are either industrial companies (problem holders), service providers/technology developers, universities and independent research organisations (problem solvers) and governmental organisations (policy makers). The network started in February 1996 as a concerted action under the 4th Framework Programme of the European Community. Since February 1999, NICOLE is self supported and is financed by the fees of its members.

 

US Legislative Update on MTBE : Where do we stand mid-2002 ?

The dilemma around oxyfuels and particularly MTBE in the USA since early 2002 has kept public authorities and the whole wide industry amid developments.

On 25th March 1999, California Governor Gray Davis ordered the phase out of MTBE no later than 1st January 2003. But on 19th February 2002, the California Energy Commission recommended a 2 year delay for the phase-out. It warned that a sudden interruption in MTBE delivery would cause 5% to 10% gasoline shortfall and consumer gasoline price increases from 50% to 100%. Therefore a month later, on 15th March 2002, Governor Davis delayed by executive order the initial phase-out for 12 months¹, until 1st January 2004. Anyhow, California refiners are using today greater quantities of MTBE than before the order.

At the House Government Reform Committee Hearing on 23rd April, Rep. Doug Ose stated that internal memos circulating among ethanol suppliers "show a disturbing trend of potential market manipulation by ethanol producers".

US Congress continues to debate whether MTBE or ethanol is the better choice for cleaner gasoline. On 25th April 2002, the Senate passed the US first comprehensive energy policy legislation in more than a decade. However this bill, which passed with the aid of a majority of Republicans, lacks some provisions President George Bush has said are vital to an energy policy and differs greatly from the House Republican bill passed in 2001.

Those Bills must now go to "conference" where House and Senate members will try to resolve differences. Then, the President could sign the new bill but Congress could also override his veto.
The end of the process is still a long way off. In fact Environmental groups and many Democrats say they are concerned that the Energy Bill will only be further weakened in conference. Some have even said that the conference will never be able to produce a bill because of the drastic difference between the two bills.

It still remains still unclear whether the US EPA (Environment Protection agency) will regulate MTBE.
In March 2000, the Clinton Administration EPA announced that the Agency would use its authority under the Toxic Substances Control Act (TSCA) to eliminate or reduce MTBE use in gasoline. Yet in April 2002, the Bush Administration EPA has not acted to restrict MTBE in gasoline and appears to be waiting on Congress to make the decision. In February 2001, President Bush ordered hold of an MTBE Regulation from the Clinton Administration and today the Bush Administration Department of Energy predicts gasoline shortages if MTBE is phased out.

According to Washington based OFA (Oxygenated Fuels Association)², the California MTBE phase out was based on politics rather than science. It is important to underline that the US has not yet made a final decision regarding the use of MTBE throughout the country.

 

EU Biofuels Policy : Two directive proposals

Biofuels have become an increasingly important issue in Europe and recent developments impact the automobile, refining and chemical industries.

First, what are biofuels? Officially, they are defined as "liquid or gaseous fuels for transport produced from biomass and/or the biodegradable fraction of waste".

That technical consideration taken, it is necessary to return some 30 years back, in order to understand why biofuels have gained more and more consideration from European public authorities and industry.

The first oil crisis of 1973 triggered in subsequent years a growing concern of the European dependency on external energy sources. Other parts of the globe felt likewise and this explains partly why, starting in the 70's, Brazil, and later the United States, have launched important ethanol production programmes, designed to establish indigenous supplies of fuel to be used in traditional or easily adaptable gasoline-powered vehicles.

Today the European Union dependence on imported energy is approximately 50% and it is estimated that it could reach 70% in 2030, should the current supply and demand trends continue unabated. In 2000, the European Commission published a Green Paper¹ which stressed the need to develop plans to save and diversify energy. The Commission proposed, among other, to achieve 20% of alternative fuels in the transport sector in 2020.

Another key reason for the development of biofuels is the need to respond to the challenge of climate change and for Europe to meet its commitment under the Kyoto Protocol to lower its emission of greenhouse gases by 8% in 2008. The transport sector is where the challenge is the biggest, since it is practically 100% dependent on oil and is one the biggest contributor to CO2 emissions.

Finally, biofuels, which in Europe are essentially produced from wheat, sugar beet or rape seed, can provide an opportunity to continue to grow crops for non-food usage on land normally destined to be set aside under the European Common Agriculture Policy.

With these three important policy developments in mind - security of energy supply, climate change and agriculture - the European Commission published, in October 2001, two directive proposals aiming to promote the use of biofuels in Europe².

• One directive proposes to set a mandatory target of biofuels in the fuel pool of all Member States : 2% volume (calculated on the basis of energy content) of biofuels would be required by 2005, this volume increasing by 0.75% per year to reach 5.75% in 2010.
  

• The second proposed directive would facilitate the penetration of biofuels in the market by authorising Member States to apply lower excise duty rates to biofuels or fuels containing biofuels to reduce by up to 50% the excise duty rates applicable to biofuels or fuels containing biofuels. This technical and fiscal measure is designed to compensate the extra cost of biofuels, which remain significantly more expensive to produce than traditional, petroleum-derived fuels.

These two directives are currently examined by the relevant European institutions. Because of its nature - fiscal policy - the second proposal on taxation is examined by Member States only and must be approved by unanimity, whilst the first is to be adopted under the co-decision process by both the Council (i.e. the 15 Member States) and the European Parliament.

Reactions from Member States, the European Parliament and stakeholders - industry, non-governmental organisations etc - are best described as "mixed", and the final adoption of these two directive proposals is extremely uncertain.

Some Member States, set to benefit from the massive development of biofuels, are strongly in favour. This is the case of Spain and, generally, of Southern European countries which are best able to produce the necessary biofuel feedstock. Others, typically North European countries, whilst agreeing in principle that biofuels should be developed and already actively pursuing such a policy - e.g., Sweden - oppose the principle of a mandate. On the taxation side, Member States appear ready to remove the 50% limit and would support a full excise exemption for biofuels.

In the European Parliament the debate is also very controversial. A key EP member, Mrs Heidi Hautala, who is the rapporteur of the fuels directive, recently stated that, in her view, biofuels still give cause for concern in terms of their high cost per tonne of CO2 reduction achieved. She is also concerned about the environmental risk that intensive growth of mono-cultures would pose in the set-aside areas where feedstock would be produced. Mrs Hautala advocates the setting of indicative rather than mandatory targets.

The automobile and refining industries, representing the potential users and suppliers of biofuels, are concerned about the technical and practical aspects of the biofuels directive.

For its part, ACEA (European Automobile Manufacturers Association)³ states that "biofuels are acceptable as long as they meet current fuel quality requirements stipulated under directive 98/70 and that the quality/purity of the biofuel is guaranteed. Otherwise car manufacturers will not meet their emissions requirements". The automobile industry favours the use of ETBE, up to 15%, rather than pure bio-ethanol.

The oil industry, represented by Europia⁴ believes that flexibility should be left upon Member States to decide on biofuels policy and also opposes a mandate.

EFOA follows with interest the development of the European biofuels directives and the discussion on alternative fuels. It is a member of the European Commission Consultative Group on Biofuels for Transport. EFOA is concerned that the draft directives could create market distortions and inefficiencies and is opposed to establishing mandatory volumes of biofuels.⁵

Any European objective to promote biofuels should be based on indicative targets instead. It should also rely on sound economic principles. Today, biofuels require fiscal incentives to become economically viable at a cost that authorities feel is justified. However, Europe's aim should be to reduce the overall cost of bringing biofuels to the market. This is best achieved, not by creating a compulsory level of biofuels, but by allowing the most cost efficient biofuels to access the market unimpeded.


Footnotes :

1 - "Towards a European strategy for the security of energy supply", COM(2000) 769 - see: http://europa.eu.int/comm/energy_transport/en/lpi_lv_en1.html

2 - "Communication from the Commission to the European Parliament, the Council, the Economic and Social Committee and the Committee of the Regions on alternative fuels for road transportation and on a set of measures to promote the use of biofuels", COM(2001) 547 - see: http://europa.eu.int/comm/energy/library/comm2001-547-en.pdf

3 - European Automobile Manufacturers Association - see: http://www.acea.be

4 - Europia - see: http://www.europia.com

5 - EFOA position on the proposed European Biofuels Directives - see: EFOA press release

 

The Italian Origins of MTBE : Chronological milestones of MTBE history

When the first drops of MTBE flowed from the ENI Ravenna plant in September 1973 everyone present expressed great satisfaction but certainly none of these people realised that they were looking at what would become one of the world's most studied and debated energy product for the next 30 years.

Their satisfaction originated from the fact that a plant had been designed and built around a smart new idea: combining a by-product of the chemical industry of limited value (isobutylene) with methyl alcohol (an alcohol completely unrelated to the petroleum cycle), thus recovering and valorising the by-product and making it available for use in petrol blending.

Moreover, it was immediately clear to all that this new product had such a high octane number that it could be very promising, provided Europe followed USA in eliminating lead from petrol.

When MTBE was first conceived the lead content in petrol was 0.6 g/litre; at that time no-one really wanted to reduce this value and the fact that MTBE had a high octane number therefore aroused little interest. Indeed, for this reason MTBE was actually looked on with suspicion, especially by refiners who could not contemplate petrol containing components external to the refining cycle.

However, after cultural barriers had been overcome, the real importance of the new product became clear: a reaction was induced between two substances which could not be used individually in petrol to obtain a product with almost perfect blending properties for use in the cycle of this important fuel.

During the energy crisis operators were forced to find a way of reducing the consumption of crude oil. It was then discovered that MTBE was of great importance. For every tonne of MTBE the refinery introduced in its production cycle, more than two tonnes of crude could be saved.

This huge saving soon came to the attention of the Authorities. In the mid-eighties the European Community adopted Directive 85/536 of 5 December 1985 on "Crude-oil savings through the use of substitute fuel components in petrol", which allowed the use of MTBE up to 15 %.

More or less at the same time in 1983, ENI began to develop a cost-effective way of increasing the availability of isobutylene, since traditional sources of this olefin (petrochemical and refinery) were not sufficient to meet the expected growth in demand for MTBE. The aim was achieved in 1988 with the Ibn Zahr plant in Saudi Arabia being set up where olefin is produced from field n-butane.

The rest is recent history. The constant growth in fuel consumption has been increasingly accompanied by political actions aimed at protecting the environment. Stricter specifications have been set for petrol: the elimination of lead, reduction of aromatics and volatility, limiting olefins and almost complete elimination of sulphur. All these measures have had a direct or indirect impact on MTBE demand.

Chronological milestones of MTBE history

1960 - 1970 :

ENI's research organisation, working on C4 to optimise the C4-butadiene cycle is the first company to produce MTBE by reacting Raffinate 1 with methanol. The product is seen initially as a solvent, then as an octane enhancer.

In the USA, concerns over air quality lead to the development of catalytic converters in order to reduce emissions from vehicles. Due to its detrimental effect on the efficiency of the catalyst, lead is gradually removed from gasoline.

1970 - 1980 :

ENI's chemical subsidiary, ANIC (Co-owner with Snamprogetti of the technology) decides to build a plant in the site of Ravenna, North East Italy, on the Adriatic shore. The plant utilises Raffinate 1, has 80.000 t/year capacity and starts operating in 1973. The MTBE product is sold at a profit, most of it on the German market where it is used as an octane booster and fuel extender by blenders and gasoline distributors. MTBE prices vary from 1.1 to 1.15 times premium gasoline.

Anxiety about health and environment brings about the first measures to remove lead from gasoline in the USA and in Germany. Consequently several MTBE plants are built in the USA in the late 70's to compensate the lead elimination. The biggest plant is Petrotex in Houston, with a 280.000 t/year plant production capacity from Raffinate 1, on ANIC/Snamprogetti licence in 1979.

Due to the oil crisis, the world's refining capacity is reduced, which increases the market for fuel extenders and octane boosters. Refiners consider then buying MTBE instead of investing in new reformers.

1980 - 1990 :

ENI sees the opportunity of developing the product and starts a double action :

A technical study to overcome the limitations imposed by the availability of raw material.

This brings in 1982 the first feasibility study by Agip and Apicorp on a world scale plant using normal butane as a feedstock. The study proves the feasibility of such a revolutionary concept.
ENI companies are invited by Sabic to present an MTBE project, and the following meetings lead in 1983 to a feasibility study with Sabic, Neste (now Fortum Oy) and Apicorp.

In 1984 the oxygenates division of Enichem Polimeri, a company owned 100% by Enichem, takes over the Ravenna plant and the Saudi project.
In 1986, this division is spun off and Ecofuel is formed, owned 60% by Agip Petroli and 40% by Enichem. Later Enichem drops out and Agip Petroli reaches 100%.

In 1988 the first world scale MTBE plant, owned by Ibn Zahr goes on stream in Al Jubail, Saudi Arabia. Ibn Zahr is owned 10% each by Ecofuel, Neste and Apicorp, and 70% by Sabic. Ecofuel and Neste lift initially 80% of the product.

Ecofuel looks around for new opportunities to increase MTBE supply starting from cheap butanes. An agreement with Puquiven, the chemical subsidiary of PDVSA, creates Super Octanos (49% Ecofuel, 49% Pequiven, 2% private shareholders), which starts building a second world scale plant.
In the late 80's, ARCO Chemical abandons the concept of alcohol mix fuel and completes the transformation of TBA in MTBE, reaching a total production of 2.6 million tonnes, in Europe and the USA.

In the USA the lead phase-down is completed. MTBE is allowed in the gasoline at a maximum of 15%. Anxieties about CO2 emissions bring about the idea of making oxygen compulsory in gasoline. From now on, MTBE is given a role as oxygen donor, which greatly enlarges its market.

In Europe lead phase-down starts later and progresses more slowly than in the USA. MTBE is allowed in gasoline at a maximum of 15%.

MTBE prices reflect the higher demand and the inadequacy of supply. They increase from 1.20 times premium gasoline in the early 80's to 1.45 towards the end of the decade.

1990 - 2000 :

In 1991, Super Octanos comes on stream with the product being marketed in the USA. Pequiven and Ecofuel create Super Methanol (34,5% Ecofuel, 34,5% Pequiven, 31% international banks) to build a 2.000 t/day methanol plant in Jose, back to back to the MTBE plant. Ecofuel has an entitlement of 50% of the production, another part goes to Super Octanos and the balance to Pequiven.

Ibn Zahr Board decides to increase its capacity by building a 700.000 t/year MTBE plant back to back to the existing plant.

In the USA it becomes compulsory to use oxygenated gasoline (2.7% oxygen, equal to 15% MTBE) as of November 1992 and reformulated gasoline (minimum 2% oxygen, equal to 11% MTBE) as of January 1995 in designated, highly polluted areas. At the beginning of the decade, the major oil companies start designing MTBE world scale plants. Imports of MTBE begin from Saudi Arabia in 1990 and Venezuela in 1991.
Unleaded gasoline is being sold normally in almost all European countries. As a consequence MTBE claims an international demand and its price goes up to 1.5 premium gasoline and occasionally up to 1.6 and over.

Source : Ecofuel

 

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