INDUSTRY AND ENERGY DEPARTMENT WORKING PAPERENERGY SERIES PAPER No. 37

A Study of the Transfer ofPetroleum Fuels Pollution

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Report No. .11341 Type: (PUB)Title: A STUDY OF THE TRANSFER OF PET:-Author:Ext.: 0 Room: Dept.:

July 1991 JULY 1991

The World Bank Industry and Energy Department, PRE

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A Study of theTransfer of Petroleum

Fuels Pollutlon

by

Kay Mcdeough, Energy Development Divisionindustry and Energy Departnent, PRE

with

Energy Securifty Analysis, Inc.and Petroleum Economics, Ltd.

July 1991

Copyiht 1991l World Bank1818 H Set, N.W.Washi n, D. C. 20433

This ret s n of a seies issued by the Industy and Eneg Department for the informatonnd gui of Bank sf. The report may not be pubIshed or quoted as reprnting the views

of t Bank group, nor does the Bank group accept responsiblIty for Is accuracy or compltness.

Production and use of poor quality petroleum fuels is a widespread problem iLdeveloping counties, one that contributes to degradation of the enviroment. espite the

concern over global waming, this issue has received little atendon.

Ihe type and quaity of f puced depend on the sophidcation of the refinery,wbich in tum depends on the am ot capl ivested. us, efinees in devping countriestend to produce thie loreuality pefruwn poduct o ch there Is d ing demad on theword o lmarket environmental restrictons and the incred demand for premiu

a on fels and lean bng bo felhese fs rt in a lowrwodoil .The lower grade *fuls are atrctve to users without envimental srds or enfrcementm ues, name developing countries-o to the refinies with the apacity to upgade them,located mostly in deeloped coutries. Together tese ctors shift die negatie envromnaconsequences of using low quaLity petroleum fue fiom the deveoped to t developing cuntries.

This study examines how developing counties are affected by the adapton inindustialized counies of more stringent environmentad standards and ions for petrlfue. t tests the hyh that the new fuel stdards are causing a sft o the fuel polutionproblem from the itialized counts to the developing countrie Iis was acmphed byexamining the past tading patterns betwenslectd og developing otries and sdeveloped couriesthat have enacted mowA smgent fuel quality standd, to determine where thelower qualityfuel ar being marketed, domestcay or ternationally, and the fuel pricediffernces that have resulted.

The proect also euates and estmats the costs for the options available forupgrang and modiyg refineries in developing counWies, including the investment dollarsneceary to achieve these altraves

This study was funded by the Research Committee of the World Bank It isanticipated that the results woud providee basis for mre di policyrese work by theWadd Bank, in conjunction with other environmentally concerned natonal and inteonaorganizations on this important issue. Future work would likely point up specificneeds/opportunities for investments in spefic modificaion/upgrang refinery project in dtedv

ACKNOWLEDGEMENTS

Ihe authi wish to thank Andy udiMh the Direco of the Industry andEny Dqpartmentof d Ihe r. R_bAand ir (PRE,) pwup of the Word Bank,

NI his gIenin and rme viieng Ple

Mm study wa funded by the Reearh Cmmite of t*e Word Bak, andcon-tribution in helping bking this issule to die foern Isgeal pprecated Mm study was als

Ied by die Adia TcchnW Dqpa m "as asthe ., e of PRE Thei1gof the global Importance of the issue; is gmte- allyacnlegd

Mm study wodd not have b nwA thout the coopemion of the ofcis ofanal onl conianes and -nt mid W^lluubvro suppbe and vedio penoumn rauce data. IS

audagm woud blb tIad Al Ivory of Er Soi A her bel in dfCOMOlanw md analysis of die dama or the indMUvteity eamds

The conution of Cole-Suw Caronuovo to the assembly and rvision of thisuMISOtisgreatly

Table of Contents

Overview and MUthodoloy O.............................................. #........ 3Overview: Sope ad Objectives of the study .......... #.... ... ..... 3

Analysisof dkte Evidence .................................................... 3Environmental Replations ...o .............................................. 3

EnvIronimiental Regiulanw ... ........... 5Enrrvirornmenital Fafctors and Oil Plice nds.. .. ..... . .... ..... 6

Crude Oil DWerriousDuba - WH Dferenils (1987-1991) .6

Prioe Spread on QgaaiAy of Residual Fuel OilU.S. Guy C.ost .7

Picbe Diferntalk for Leaded and Unleaded GawsolneSinstpreu Market .8

Drrricnlrett Factokrs andl Oil TRrade P :els................... 8OECD Imps fromNonOECD Conties .9OECD Ept to Non-OECM Counriea 9.9Net Trade Posiion of OECD Wls-d-vis Non-OECD Counmbtes. 10

Ilsufficient Data on Fuel Spdecications bnTrdes .............. .1 1Case Studies of Developing Countries ................... 1 1O slrganizationl of tle Study' . 2

CHA*ER II OBSERVATIONS AND CONCLUSIONS...................................J3

M1ethocoo ............................................................................. 13v-**-Nio Traxnsfear of lhuodlai ............................. 3 ... 1Traonmsfer of I]Dbution .................................. 1 4

Reverse Transfer of Pollution .......................linfraimatc ofl dlution................. .............. 14

Observations an the Results by Fueld Ipe .............................Motr Gasoline - First, Second and Tir Lvel Crieria . 16Diesel Fuel - First, Second and Third Level Cia eria. 17Residual Fuel Oil - First, Second and Third Level C iter. . 18

CHAFFR HI OPTIONS FOR THE DEVELOPING COUNTRIES....................19cn3!z~~~oeril]ll ?r tlI[DDEwV ..... O ....... C.O........ [l ...................................................... 1V

The Status Quo and Oil Market Fact ............................ 9Change of Crude Oil Slate ......... 9RefiryUpg radifi/ad....a.ion.*4*4................. 20Closing of Obsolet Refineries 21...**.*. 1.. ......... ............. 21Vertical legdon and Downs_rem P=cessing Alrangements ................ ..21

CHAPFT'ER IV DE EILOPING COUNTRY CASE STUDEl S........................*.******.2.3A l<W3RGENTIA ......................................... 224BOLIVIA ............................................ 26

RA2L .-... *.*.*****.*.********...***.......................... . ...... .......*..*-*-...-. 27

E C US. OR DEVELOPING .COUNTRY.FUEL..RAD..G................. 29INDONESIA Fuel..i......................................................... 341KO O T s A F....l.O..Po.lu................... .... 3.3Dislc a.d.Gasol..e....d.................................................. .. 35ONbll A ...................... ll.tion...m..........a.dl.......... 3TI ILAND sIA l u ................. . late,the ...ited 3Stw-198.4TFNID ANes1iduAlGel)I4O rts ... ... the. United. Sta..s...1 ........... 9..... 41

1iBIini5ltS131,K .. .. #. .. . ............ O................. ...... .... 4 3CHAP2FI\:TM V U.li -D E fVlE3LO[PING C O UNTRYltl IFUELn T[RLADINUEG PtATT1E3RNS .... U5

{:b^efiiSs ......................................................................... 45R esiduoal PFuel O il Trlad e ................................................... 4 5

Ta1: ESI.- ud 0I oUS. Us ............................................ 46CtOvbe an do T nsf_f eiR Fad Oil PaLuWo .............................. 46D iesel anld G asoHiJe Tralde ........ ................................ .... 47tObQ doesa the rnfrof Polludon fiom Gaslne and Dieso .............................. 47

Re" Furp"It deW Stte U-198 ..................................... 48Re d l 1h Inod UxWSa - 19 ......9......-.. . ............... 49

tgll1~~tii lt 'i

g SS X Xl�0 I

4

_mpse evIonenalstandards-p tod toe of OCD countries alhth resehdicated that hIs i beginning to nin a few counties. In the abs,e of envtal

restritionsnd faced wt limed firesoure t natons ted to and ons_mlower priced lower quaity fuels.

By contast, h countdres have hastentd effaos to impmre air qualitby reducing S02, NOx and pardculate emisdons, remove lead fiom motr gasoline, and mostrecently, cm C02 emissions. Among OECD cowntr1es, the most prevalent enmetalreglations with far ag impact on fuel oi quality have been aimed at e reducdon of sulfur inred fuel and di ,and remova of d frm gasolne.

U.S. enironmentalgi oiol 'fpetroeum p¢oduc is nie tugh procesand emission control and to some dege thugh fuel cificatins. However, the quality ofpetum product has bad t change to satif te emlsona cols. 802 e am silyreguated so udlides and manufacturing can either lnit the sulfur content of their input (coal,residual fuel oil or diesel) or scrub their effluent. Most have opted to rn cleaner fuels and eschewthe costly scrubbing technology. U.S. udlities bun very low sulfur sidual fuel oil by worldstandards Hower, when the spread in price and low sWfur fuels is ientlylarge, Utilits will burn higher sul rd either by n te limits on their least resticted

tmixg the rid with*natural gas, or by tading emissons credits with other plants. Thisaccouns for the periodic impo af high sfur resid.

Within the EEC, there is a wide variance of domesticthough there are now EBC-wid envnmentl laws, known as dicives Co. 's are gi aood deal of flexibiitv in uminnl how to mee the oified cvd e of he dieives. An air

polion dhaective (1988) set vely stict oX n0 S02 and NOX emissi from lrcombustion plants on a country-by-country bas. It does not estabih te maxdmum sulfur contOfresidud fiel oiL but the trend is deely towads burning of lowe sulfr fuel ofl and increaseduse of ntua gas and cean coal

Japan has made considerable effoars to deal with energy-related environmealconcems and h totally eiminated the lead in gasoline. apan sbu also made considerablerogress in d ng 802 and NOx emissions by limiting the sulfur conten of fuel oil, aiding

idusy in desufing residual fuel oil and implementing flue gas d (FGD) as wellas slve catytic reduon (SCR) ofsufemission

The following tble smmrizes e enrnment egulaions. Lead content ofgasolie is mea as grams/U.S.gallon and sulfur content is measd as % by weight.

1 Tle main instrumeu of regulation are the 1977 Clean Air Act, subsequent EPA regulationsIplerendi hat Act and ste laws which can be even more stringent. The 1990 Clean AirAct

calsfor even stcter m u.

Envirmm taS

U.S. Japan EEC

Replatry 1977 and 1990 Ca Air Enlemetgla WiH vuiac in IniidalFrameWrk Act reglte peOlem fae thrug Air Pallution conr a

siandiatispnpsmnd lead Nadona Ambien Air EBCdecteQas)alits an gnoW . QualyStandard s.eC

1990ClaAirAct v P

bglions in hwea_enL andS2 and NO,K Mmbercoutiesallowed

Gasolie Jmided is1% fmaf etL Ailgsoln Is oa sty Lead ceokadfius

Sic 1986, _aimum lead WU adelimconten of leaed gmolrmins O0A0 maimumUP to 0.1 g Baumlon andupto0ASforSunleadd;will dS

U hecomez0O w4 is

afa

Diesel Nonl lmi of 0.5% mm sulo ntent AUEBCcountiesmandatesafur toberdu 1 03% to be soonedcd o a 02-3% maxImum sofu005% as of Octb 1993. 02%andpossiblyen Conen

0.S% in ftue01% sufubr forauos.

Sa Hmits can be mom

Residual Ovail.vylow (1%) MaxImum sulfrcon November198 DheiveFel Oil sfurcant 05 to 1.2%. S02adNO

_sdadls fiomInglamtior S°2 Moast kWeuingpns pepantscouty-by-

ams_osSuad Vo ande sune omin coomPybasssacowofndL e_dWihkFGDwd4V

caliWfsu TowdadswsulfSulsrconent vies by but curm* 0.58t 1.5%.regionsandbyplants wid Smal plants' an onsscungequipmcLl si 18.

6

In tecent yeas, except in some OECD counteis, light product (middle disdUlatesand gasoline) demand growth has condnued meedng the demand. Thmfor- the more desirable

ter ducts are receiving premium pices compard to the less deirable, heavier fuel producsAs a sult, the lighter crude oi, which an be more easily fSned into higher grale products, arin gar dema High sulfur is likewise not derable for both tecbnical and environmentalreasons. oo , on the supply side, a greater quandty of heavier, high sulfur cmrdes, which arehard to refne, have com In prodon.

Tbese supply and demand factors have Incraed the premiumns for highvgraity,low sufur cxIdeL I e bistoy of Dubai (32 API 1.7% sulfr) and West Tewcs Intermeditt(W6IX36 APJ, .3% s) cndes iluste the grwing differentials between the high and lowquality oils. Altough these prices have not been adjusted for vransport costs, the trends anddirection of the differeals would be the same. It shud be noted that when oil supplies are dght,ie., duing the 1990 Pesian Guf crisis, the acfferential narows as refiners scramble for any typeofsuply.

Djba- M- iffiuerentias (198-1991)

.. I " v t10tw' 0~~~~~~IV A

ace A

$o0 , LE

7Although en if hMeniald factr have onibued to these dUffetals, tb difficultto attribute h igp differhtin ue qualyiSy to vial d on becauoodwe ol maket ental have come into play. Evi&nce the vionvwmenl impact iscla wit rspec to dt prdiffentals for petolu fuducts. OnR t U.S. Gulf CO,wbher the maket for te id I pncipally the U.S., there are discenible diffentials for high(3%) and low (1%) sulfur resiual fuel o The spe between the 3% and very low sulfur(under .3%) rsiduad fel Is een ga, often reaching S8-$la=L

Ppm STead n CVnalitv'n f Re"sIdu Fner Oi

1%-3% US Gulf Coat Spread

5-~~~~~~-

87 as 89 90 _ I

There is a price spred in low aMd high sulfur diesel fuels; this is difficult to verfyb eas ah of the major markets (Rotterdam, Sigaor and U.S. Gulf) trades a different.

desinate sufur quality of diesel. Mme prices varybt'wee the markets but thi is partyattibuabl to regional Acing cactrsiswhich are unrelate to the evrnetlqaiyofuels. Therefor the evidenc rm diesl fuel trade was inonclusive inspotnOh rnfero

'pollution thesis Likewise, ther were pblems with ascetanig thle eirnntlpmiumfrgasolines T wheaoln price data were even more complicated bcaueusalwol lae orunlededgasoineis mtrded on an individual market and the gasoline pricsicud rcng

premumsforoctaem levels. Hwowee, a differentia between the,lwradhge ultgaoinswas evidenced In the Sirgppore market where unleaded for Jaa n eddour et

oercountrie awe both vade&d

8

AMNLY AVERAGE PM SWEAD

-'I UNL-LEAD 'P''A

morn often hn not hower, It was unclea wt t , ea i . .onereuted from the iade hne content or from the diffeing octane lees of e gasoline.Overall, the evidence from the gaidline spot markets could not support the thesis thatenviomnmental regulan affcted pnces

Whether In fact evironmental peguladons have contributed to the transfer of pofluuioidepeds on the degrse to which they have chnged the rae pas betwn the developing anddeveloped countries. We would expect an income effect that there would be evidenec ofexpo of better quality, more expensive fuels from t developing to the developed countries.We would expet ta the cheaper, poorer ones would be used domestically or be exorted to otherdeveloing countr. However, the data reflat lile change in OECD* imports in the past fewy9arS. Therehave beenvety low levels (400,00 btd - 05,OO b/d) of gasoline import by theOECD countries. The OECD diesel and resid imporu have been aeraging about 900,000 b/dalthough there have been ading diffaenes wihi the the regions. Th following table gives afive-year oveview of th aggregame OECD imports fom the non-OECD countries.

* Member countries: Aust, Belgium, Caada, Denmarlc Finland, Frace, Gemany, Gre,Iceland, Ireland, Italy, Luxembourg the Netherlands, Norway, Portugal, Spain, Sweden,Switnd, Turkey, the UMted Kingdom and the United States. The Padfic members aeAutia, Japan and New Zad

9

OECD Imports fhm NonOECD Conutr(MbA 4

Into: IE1!fU12flTotalQ=gGmlh 380 43S 454 484 389Diesel 987 970 913 970 887Redd 1080 1003 986 1007 962

Gasone 108 1 139 170 153Disl 769 725 608 645 S54Redd 404 394 340 381 386

Gasoline 216 264 243 234 180Disel 159 144 171 172 187Resid 528 428 468 465 409

oasolIne SS 60 72 79 56Desd 59 103 134 153 146Redd 148 181 172 161 166

Sourc: lEA

We would also nicipate that some poor quality fuels, whose use is restictd in theOED contries, woud be sold to he id Word. Statsdcs ndicate ta the agggrae e 3OECDexpom to the develoing countries have almost doubled over the last five years. The eamtmcrease ws in gaoln and diesd fuels.

OECD Exports to Nan-OECD Countries

Total

Gasine 60 87 103 122 171Diesel 112 122 144 178 218Resid 187 222 236 258 32S

GaslIne 41 59 79 80 103Desl 54 67 86 86 101Resdd 64 64 58 80 117

Gbsolne 14 14 13 29 58DIese 20 34 38 57 60bRed 102 134 159 158 169

Gasolne 5 14 11 12 9DIed 13 21 21 32 40Reud 21 24 19 10 39

Soure: ]EA

10

n looking at the net tade poson of the OECD via-vis th am-OEM ove telas five year the OECD has become a smaller net impora as pmp have fallen and export

Net Trade Podton of OECD vbs.vls Non-OECD Counties(000 W/d)

TotalOBMGasolIne 320 348 351 362 218Ded 875 848 7D 79Q 669Red 893 781 750 749 637

one 67 52 60 90 50Diesel 715 658 522 559 453ReMd 340 330 282 301 269

chsoline 202 250 230 205 122Diel 139 110 133 115 127Resid 426 294 309 307 240

Gasolne SO 46 61 67 47DIeas 46 82 113 121 106ReMd 127 157 153 151 127

Soure: IEA

At first glance, the data seem to supor the view tt ade patns may havebeen afected by the cle ai ements in the O countrie& However, the tade paternsprobably woud have wesuted anyway as a result of non-envhromental market fa principallybecause the developing counties simply do not have the fuels, especially the higher grade ones,avilable for export They have exprien d high demand growth rates for oil, and evenl higheones (4% per annum) for the lighter fuel oil products. At the same time, with the excepton of afew of the larger fing centers, dtey have not invested in modern rwny capacity to pduce thhigher grade fuels. This is paricularly true of the oil imporing countries. Together, theseelements have reduced the level of light products available for export fom the developingcounries and have increased their level of impo, even by some fo Xmere s.

By contrast, the OECD countries have expeienced drops in demand for certain fuelsResidual fuel oil demand has dropped due to competdon between fuels, such as natural gas andcoal and the trnsfer of energy-intensive ma cg processes to the developing counties. Ondhe odter bhd, gasoline demand has ris Diesel dem ctuates widely. Altough the OEMDcounties have insd in mre sopL edLrefies t poduce grater quantties ofte bghterful, high grde refiny capacit istight, especially in the Atlanic Ba. Ihe developingcouriees' refinens canot fil the gap, and they also rely on the OECD refiners for high gadefels.

In summary, the rade data examined were useful in undscoring goba odl market trnds,but thy prvided inconlusive evidence on the Impact of envimen regulaions on tading

11

patters This evidence would have to be pvided by fiel trade data brokn down by guiil

Obtning detailed, elevant dat proved to be a matjor obstae to testing thehypothesi. Develping county statisdcs ae oftn inconsit and thedy nely indicate impzrtsource or exot destin he are compheve data for the OEM counries but there anedeflntidonalrbls in fuel quality For eample,the U. S. classifies rsiduald fbewith ovelr 9as "i su whe one percent sulur c t would be considerd anexccellent quality fe in devloping countries wee the suf content Of fuels can reacb fourpercent. The folowig caos e used In this study although It is recognized they are vystringent by global stad~:

Low Sulfur .3% - 1.0%High Sulfur Over 1%

Me were oer data problems. Residual fuel oil trade data often inclde fuel soldinto dte int ion bunkers market for use in te boiles of ships. Satstcaly, redu andber fuel sales should not be co-mingled. In addition, cetain counties classify all middledslUates (which would include kerosene and diesel) as diesel fuel To add confusion, some

nies od gaso"l and diesel as dte same fuel in their satisdcal bases and others distinguishdiesel as automotve diesel and gasoi heating oil This study lumps gasoil and diesel as"diesel.

Mot imndy, the fuel sualitv data, which is essential for tstng the study'shypothess on theof puion wenr amou no-existen for developing countries. Wherefel quality data appear in the case studies, they were obtined by verfication with the stae oilcomanies or fuel imports

aSe Sbesaf DevelWag Co mies

As a result of the lak of evidence n the tansfer of polutn from the aggregatedata, the study rles on case studies in which empircd, anecdotal evidence is organized to identchages that enviroenal consai have had on ptoleum fuel trade patn The developingcountries were selected based on the crteia dtat they wee relatvely gnnt oil ptexporters (as opposed to crude ofl expers) or they bad good ng data

The countries which constitut the case studies for the tsng of the hypdsis ar:Algeria, Arnta, Bolivia, Brazil, Ecuador, Indonesia, Korea, Mexico, Nigeria, Thailand,Trinidad & Tobago and Venezuela. Other developing countries apperWed to be interesting casestudies but they were deleted because of lack of o ent inrmation

The case studies contain a brief synopsis of each country's refinery co ion,ol product balance (poducto sales and net trae podtion) and offer obseatons on the extif any, the country fits into the study's desis on the transfer of pollution. As a cross referencewith an OECD country, the U.S. was selocted because the fuel trade data - including qualitynspErif - we the most detailed.

12

The following chapter (Chapter ) psents observao and canclusions fom thecasestud and in doing so,so up forcw agorme forthe dm o 1)no nferofoludon 2) transfer of p 3) re tr of polluton and 4) n on of polludo

tgestablishe c-tra o e iin-hs clsiiaios and notes that some countrie canfll Into mM hn One tgory.

Chapter m dises the options avaiable to the delping conules to addres thekrfey situations. The pblem of uoph refiny linked to the fuelpolluion problem. The chater aises the issues which should be eed in evaluating refinery-elated options, but a thorough study would be needed before selecig one or acombiatio of them. Chaptr contas t cas studie ofteevelop con w were

usdto obain e o t r of pollutilon. The final chapt s d d rmationon dt U.S. - developing country fuel tding pas The U.S. w selected because the duaweremsw detoald with, rspect to quality a They ped usefu in crs refeencingand vefing the m contanedinte country

CliAFER II

OBSERVATIONS AND CONCLUSIONS

lhe hypotheds that ther is a tansfer of pollution fiom the developed to thedevelopng countries was tsted by reying on anedotal dat frm elev developing cootzy casestudis8alog wit a crss rfeene case stud with the U.S. This chpter draws conclusionfrom these cas sudes although there was a lac= of definitive ful quality data for some counries.Aso, the counties ofen did not have the same trading patterns for th three fuels examined. Acountay's "|tans of pollutione status can vary fud-by-fueL

Ihe study orgaiz the r tuls on the transfers of pollution into four categoriea 1)no transfer of pollution 2) transfer of poliuto to the developing country, 3) vse trander ofpolluon; t is, the t r of pollutin from a developing county to a dovepd country and 4)intelization of polludon. In the case of the latter, pollution is transfred from a developingcountry to othr developing countie Whether or not there is a transfer of polutin depe onth quy of the prduc traded. Some countis can fall into mor dtn one categoy. The data to

hese obsrvations and condusions are contained in the cas studies in Chapters IV and V.

In order to deoterine whether a countrys refining and trade has wesulted in ne ofthse categories of polludon transfer, the study establishes thee bels of criteia 1) does thedeveloping country trade with the OECD 2) what is the qualty of crude input t the refineries and3) how sophist d is the r g sector? The three levels of criteda for each of the fuels are

diag_~in mtie t h n fthics setioen.ii

The first level of criteria simpy asks if the developing country trades petroleumpwducts with the OECD, and if so, are ter sgificant volumes. "Significant" refen to enougtrade war a meamurable transfer Of An example of a cotry tat does nottade s

Bolivia. Thebfose, dwe is no transfer oapollut aland falls into this catgory because thereis veq little trade with te OECD. Howe, it impt substantial volumes of middle disdllatesfrom Singalpore and the Middle Ea which are of poor quality, resuing in an intn on ofpollution.

Libswise, there is no idntiabe transfer of pouto V the impots to thedeveloping county amehigh qua fuels-dther unladed gasoline or low sulur fuels. Anexmk is Korma wch imporu low sfuw disel Niia t anoter situtaion where dteis no trn of poluon because the fuel tades in bo e of bigh quat. The crudequaff illpUt to i coe into play with NWia, which lacks ist a refiningy,iAti but has hiCrude input enabling it to produce high xproducts Ngeria

both exports high qualiy fuels (under 1% sulfur resid to the U.S.) andimpos high quality fuels(unleaded gasoline). Therer, there appears to be no r of poluton. nsa also fitsinto ths ca ;goi, its high quaity crude bi rdined into high quality duct for both domestic useand expot (Thy import deel and gasoine but Po data on quait were availabl)

14

If a country imports pollufing fuels from an OECD country, there is a transfer ofpolluon. In the case of igh qualty crude level input Into the rfinery, them is only a ttrasfer ofp~olion if th resulting lower sul pduct is exported and repled by high sulfur product.lruzilis a case in point; its fuel exporu are of high quality but it imporu poor Quality resid. Itappears that this anser of pollution rests from countries mng a deliberate decisin to ean

oomi s based on the price di l between low and hgh q i eb at the expee ofthe envinment Some counties, such as Algeia and Tlndad ndbo, which podu hihquality prducts fitm high quairty caudes coud have the mnary incentive to export low sproducts and import high sulfw fuels. However, the situadon does not aris because thesecouns are using domestic sources of naturaIl gas instead of using much fuel oiL

Rnaw OfrUuti

fthe country exots high sulfr prducts and(or laded gasoline to the OECD andimpors clean fuels, then there is a rverse tasfer of polution. The cas stdes did not reveaany such evidce. However, Mexico could fall into this catgory since it begn to import

tgasolie into the Mexicoity area, because it exps leaded gasoie to the U.S.

Mexica rsid imports fail intosvea l categories: the imors fm- the U.S. are inthe 1-2% contsent range, and the sufur content of their expo to the U.S. are similar.Ounarily, there would be no trasfer of pollution, but sometimes the sulfir content of s ishigher (see Chapter V on U.S. residul fuel imports). In this case, there is a vse rr opolution. In addition, the resid exports to other Latin Ameican countries fail into theimon f polton category because the exports are of poor quality.

The third kvel criia-the sophication ofte refinery sector-leads to the fouhcategory of polution urnsflr-the dpollut there is high sulfur crude input tothe refinery, rarely is the refining sector in the developin counies modem enough to educe thefuel oil dand desufr it. With pect t gasoline,y t chavel oations of oct wkhoutad ives in shrt cannotproduce high quality, unleaded psoline. Thus, simple refining tons pdce poung fuelsas do cars with d emisons equipment, though this prolem is not within e rmesof dds study. f the pollting fuels are used ay or exped t o deig

s s is conidd an i the p on probem.

Although Argentina is an exporter, they tre very litle with the OECD; in thisregard, there is no trar of polution. They could also fit into the intena on of poludoncase, beca it is belived that they export poor grade p to oter Latn American countries.As noted aboe, Thaland is a smila cas alto por quality fuels. However, theinformaton on the q-lityof exports to these counties ould not be confimed. Ecuador hasmeduom-t- high sufr crude iput wnphistcated refining and poor qu ouut. he productsamusedlcalyore xpedtonon-u c ieseemp l ygBn,of polution.

Even countries dtat have sophistcated refining cpacity can contribute to theinternalation of fuel pollution: evidence revealed that crtain countries with sophisticatedrfinerie, such as Venezuela and Trinidad and Tobago exported the bigher qualit fl to theOECD countries and taded the lower quality ones to deveping coies in t regio

is

Indonsia has high qulity crude Input d sop sd rnfin, it eors lowsulfr waxy Ud to the U.S. and Japan. In the future, d i tobecome a serofclan, efrmulad gasoin to the U.S.. but at pesent ee s litde trd. It may be ortingsome of the lower quait resid to neighbo counori which wl suppot the _npollutionthesisd. Indonesia produces low sulfur diesel and imports middle dislas fmSingapum, but since the quaty sp wer unknowr, the study was unable to drawconcluions on the ar of po

ObSioM an b Results by Fuel M=

The rts ndicate tat the export of en enally ig quality fuels, especiallydiesl and gaspoln, from developig counties is minimal due to t rowing domestic demandfor the ighter prducts and te alit of their refineries to do more tan barely meet domesticdemand. A slight Increase in the export by OECD countries of poor quality (eaded) gasoine tthe develo untries was noted. Mexican inade will soo repntareversertranserof poluTbe diesd traded between the devand t eldopig coutries was geneay highqualityor the fuel quality were not avilable. Therefore, the evidence from thetrades of tese fels-withe expon of OECD gsolne exports-does not upport the transfrof pollution thesis.

By cont the resdual fuel trades pided evidence of the transfer of uon.Cross refeeni of the data reveaed that the berterw ritred is exported to OECDccuntries and that the hiwh ulfur fuel is being desticay dr exeveportcountrie This was in the Mexican Venauelan, lTindaddia aadc sudies. As defined i th study, these trdes eflect a ansfer w in alefpdlutoprobhe

The anecdotl evidence from the U.S. and Caribbean country case sudies (Mxico,Venezue an Tnidad and Tobago) uncoverd a growing tend where the poor quality reid,which can no longr be ed to the OECD countries, is bein sold into de bunk marktIbis is the in- l ipping maIket wbere fuel quaisty ay nl Gl bunkerfuel daa are vey s of te pouti nsferrd to bet is unknwn.

Alhough the sults of the study were mixed with respet to the tsfer of fuelpolluion, the casesdies did indicate an inabilty of al but a few of the Third World sxnerefiies to produce high gade fu. It can be assumed that problem woudd be momwith countries with localrefine. The following chapter adresses the opdons available to the

devlopngconuizs with repect liD their reieies.

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17

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18

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CHAPTER m

OPTIONS FOR THE DEVELOPING COUNTRIES

th e The sch points up dat most refineries in he developinxcouis even thosetbat have radonally been expoers, are technically unable to produce hbetber quality fuels.This refnery problem is even more wie ad in te oil impoing counties or small oil

pnftcig countdes tbat dont expct cil puctws. iThis chapter discusses in very gnea temthe polcy and vestment opdons availabl to te dwveloping counries to onect the problm. Thefirst opton is to maintain the stu quo whereas de o options woul rsut in the productioeand use ofbeter quaity fuels b eitd 1) n g a better cmde slte in the refes 2) upingthe refin s and related facites 3) shutting down obsolee efineria and intad impotng highqualt fues and 4) entering into downteamp agements. Thes options axecomplicated, involviig a whole set of suboions in t of socio-economic c atreflne~y economics and technologie, global oil ma rs and invement cons. It issuggested that deailed analysis of these ons i ectng the refiney situaion in developig

would be a highly relevant follow udy.

MmStan sO dodarkt acOn

The leat desirable (but least costy) option is the maintenace of the s quo,With the likely outcome tat the _nsfer of polluto to devk ping counties and the iof polludon will be intensified. Tbis is due to market facto. There is a stng likelhood that thedemand for the poorer grde fuels will deee as OECD countries continue to tightenenvironmentalregulati and some developing counties will slowly intoduce en ental fuelstandards. Alhouh the developing countrie' demand for oil is increasng at a higher rate dtantheir indusl o, their increased consption not compensate for the weddinp in demand frpo ity fues in the OECD counies. At the same time, seflner in thed alized coies whi have not been upgmded wil produce some poor quality fuels which

can not be used domescally. hese fuels will become available for expou to counries thoutenvironmental restrictions. Together, these factors will produce ovhang which wilpush down the elatve prices f t poorer grade fuels. Ths will make ven moe atctiveto Third Wod coies, exaing transfer of poution problem.

Chage af Crude Oil S&A

The second opdon available to the developing counties cals for the production ofbetter quality fuels by n be quality (high gravity, low sulfur) crude oil through therefineies nery processes are pefomed, high sulfir crude oil will tend toproduce products, parculay the diesl and residual fuel oils, that are high in sulfur content.Refining th lighter c tends " ult in p on of greater quantities of the lighter, morevaluable pro such as gasone and e disties. At the same time, running the low sulfrcrde-which are generally assocated with the higher gravity ones-wil aa ly rce thesulfu content of products.

The advantage with running the. better grade crude oils is that it does not involveincreased investment costs. The problem is that refiners selecting this option will likely face asews maket-and restant higher prices--because most refiners will be seeking the better gradecndes to fill growing demand for the middle distillates and comply with the stricter envinmental

20

staedar&s (On dhe other han d, h cheaper poore quality crdeds can be enomicall attractive toshisticated trefinr who have the ftbcnical capabilty of crawdg into lgtr gRa

The extnt of the differendal or prim sd beween high and low ty cudeOng wm depend on assumpdons with respct to the dates lhely to availabl i die future.These in tum are ded to geology, il drgprograms and ion goals of ol p Anyanalysisust take into accoutm global plans for upgrading of refing capacity to andl the lessdesrable crudes Expert disagree on the extent to which the di s will grow and anyrefinery upgrang investment can fice high risks.

In dng this pdon, it is import remember thatover the long m, it canbe difflict to be asswed ofa blend of crude oil that 08p c the desired sle of put withouta long term crude oil supply agieeement. Therore, It is advisable to have the processigc yaand flexibility to meet changes Inude l supply and prduct dmand. Tis tothe

option.

To produce betr fuels, the most epensive option for the deloping countries isto upgrade the refineries by adding components and technologie. These are expensive, withconstruction costs ranging from $2000 per barrel/day capacity for a vacuum gasoilhydrodesulfuaizing unit with $.6(Yper bael/day operating costs to $10,600 for a hy ngunit with $2.75 per barrl/day operating costL Such units are seldom bought in iolaton and atea8t sver prces and components are needed to produce the better fuels. A moden grass

roots 100,000 b/d refinery complex (with gasoine blending) could cost over onehalf billiondollars to one billion dollar Oping costs could run betwen $2-$3/bael, but they varydepending on utility, catlyst and labor costs

Obviously bere puring such an investment, coun need feasibilty studies oftheirfacilies to determi how to upgrad-the size, processes and blendin q operaons desired. Itis necesy to analy future trends in demand for oil producs, especiay the light end of thebarel, impact of environmental legislaion, and whetr the bamel will become heavier or lghter.Millions of invtment dollars are at sae. The investment cost of upgrading becomes lessbudensome if the ountry i an exer because higher revenues and levels of foreig exchangewiU be earned from the sale of the better grade/quality fuelL For cuntries with dorinrie, the Itadeoffs between the investment costs and benefts from production of better fuelsare moem diffict Although it is straightforward to quantify the economic rents from puctonand sale of beter grde fuels, it is more difficlt to establish a monetary pemium for proucngand uig vr ny better grade fuels.

Refinery upgrding does not coaect the fuel poUudon problem in developingcwanuies if the better quality fuels are exported to tihe OEC) coies and the poCoe ones are useddomestically or exported to oerde ng couries. Such actions cotinue the Intrnalaon of

hird World polluon and exempfy the case of the rse tra r of poludon.

21

The small refIaeIes in developing countdis which ar operated for localcouum~lanar usually tpigoskming plants which are technically restricted to dlst ofng

Geeraly s , they pde pollutig fuels, unless teyr ae using vey low suraueinput.Te akceia rnsomto rcsigo c cing failities that enable them to

brek or crack h cu l mo es thrugh tmal oratlydc mea. Al of these oare epeasive. Th are als ch by econoies of scale, whee n on co formalle unms generaly Ineas in reladve tems in per barel of ;i'put per day. With sma units,capital and operating costs have to be amoritiued over much smailer output and revenue.Moreover, in refining, it is necessay to match downstm pcng capacity with atmosphericand vacuum distition capacity. This is dOne base on yield and becomes tehicallycomplicated. In mmary, chng the potal for upading small refineres.

Unless they are an ail prdcr, it is unlkely tiht thoe countres could mobilize thecapita to build a large scae rfinery tat would be economic. Furihennore, they do not earn theforeign exchange to pay off the refinery up g investment because they are not prductexoe. Th*eir opton is to close down the po utdng refiner capacity and ined rely ontmOf cleaner fuels. Al:ouh this mays be the bet chie environmentally, the cuuntres have 1oeeprotecvc of their refineies for socioeconomic reasons and been relucat to shut tbem down.

j

Verdcal inteVadon of the oil industry offers an interesting twist to the optionsdcussed above. Vertcal integraon refers to the merging of the exploaion and produton(upstam) part of the business with the refining and markedtg parts (the downm). Oil

wcers have been buymg into tefineri in the counties whmre the demand centers are located.uae Venezuea's acquiing of the Citgo refinery in the U.S., Saudi Arahiabs equity

inest it Texacc's Sr Enteqtise and Aramcos prposed invement in Korean and Jpanesrefineries. Several m ed vees ae in planning or approv stes. Tlhe downstreamtargets are OECD counltries or develqg Cltrlies with a good invetment e, srong iiatmarkets and forein exchang. The refineries earn good economic rents; they are usuaUy

enough tO produce theslateofquality prcts in demad in th ming country.

These tp of annmen can be to developing countres in getngssce to nmo rdem caaac aor if they can be used to a sorely needed investment Cin theieer sectos t e reluctance on the part of industry to mvest in these ouw t Asmall, Th11 Word oil coud enter into a downs am agr with an OECD or newlyindustrialized country capitaL This would ensur te Third World producer anend-use mar*et, with acce to refinery capaity in a key maret Any y upgrading coud bethe ronsiblity of the finer.

Othear a p sing agrements are ss formalized and do not involve equitycipaon Thy all for the refining of designated volumes of the produces crude(s) into

spf pmucts for a fixed time perio Tse are often regionaized or examlie, Venemzelancrudes are processed in the uIenidaian fiy and, deth San Joe Agreement, Mexican andVenezuelan crudes are sold to Cntral Ameican and Caibbean countries at a discount Similarageements could be pursued in other regions, for example, between west African oil pducingand oil ming counie; refiry m could be made to accommodae t1he crude oil

ate if the ageement wee longtean.

22

Fra n nlzoena v lewpolntwnte &dwnsUtaintegraton agemeutscaN mi"Ptigdie Ian os f ofl flf ty st In develIg t modn g

TMo of the betto prduc are sevd for te OFB makets and te oomcults e exorted to th developing countries. If t bet ulity crudo oils ae to theOECD and the poo quality cru are refind y for co ptio n in sdeveloping coutry, the pollutio problem rmai8ns. (However, this may not o If thedvelopn couy refiey Is not able to proce the pograde cu.) Al ely, all of thecnude oil cold bo e gd to the OED fier and the output tcd with the OEDcourys). The deng country could tum arund and import pr quality fuels. Under hisscenao, the developing countsy oi producer earns rets basd on fuel qua diffrentls butcontributes to or exacetes the tansfer of plluaton. Therefoe, the downte in?tlonag_emnts can be ecnmicay attatve to both partes and can ult in the rfning bettrquality fuels pvided the develoing countries do not adopt tmdin a hich result in theirbelngnobetteroffin berms oft be ort roffuelpoSuXL

CHAPFER TV

DEVELOPING COUNTRY CASE STUDIES

The foing case studi povi brief descriptions of fte refing d tOade posito of elam developing counties fium which conclusons o when er coouy

satisfies te tanfer of polution thesfis a drawn. Te case studies ae by no meas ehaustiveanalyes, and in some cases, the country war-ants futher investigation to ascertain theenvirnmental efcts on its fel use d trades.

There i little, if any, published dma on the refinery production, domesticonsumpto, and ct de of the coute. Furdemore, none of these countri publishesinformaton on putwquat O prodct data we obind roug direct contactwith eidter the oil miy or the n oil company of each county. in some cases, datadifferd between sowres. To the exent nece, the author adjusd the data to take intoacwotorreptd inreprd and d g=1rissdefntos

Becae of the paucity of trade data, the study uses "net rade position" (caluatedas producto minus sales) as an inuicatofr o whethr a country was a net importer or a net exporteof a tiular producL In most cases, trade with the United Stes is used as a pmxy for trade witthe OECD because the OECD does not publish diagregated tde data for the developingounies Rader, the bulk of t OED export and pot data for non-OECD countries i

nally, eit the elee couni oeed by the case studies ae LItn Americanan TIffiaLlbis primarily becausethese couries wee the most forwoming with daa during the

pe during which the study was conducted. Moeo dere was more information on tradeee thes counries becue they traded with the U.S., which maintains the most readily

accesible and dmely on fuel ades. LA information in the first section on reyis fm the Ol wad Gas JowwL

The following counts are examined briefly: Argentina, Bolivia, Brazil, Ecuador,Indonesia, South Koa, Mexico Nigei Thailan Tinidad and Tobago, and Venezuela.

24

Arpnnu has 12 rfinies with a toa refining capacity of 69Oo bJd Refi t uputis n the order of 500,000 bid or 72 peent ulidzan Only four of the twelve refi are very

Totl upgding cap tyis apruxiniatlyr

289,000 b/d of vacum disdUadon;164,000 b/d of themal ns;171,000 bid of catg;41,000 b/d of cat24,000 bid of c b21,000 b/d of cat-h ng63,000 b/d Ocfhydaing

PRODUCrBLALNC19-90

(i nxxsnds b/d)

REINRY PROD)UClIONNERYPRODUCrgON 70 72 68 74 78

MkdDist 92 94 89 101 105FuelOil 48 49 47 60 7

DO1M SASmop 63 63 56 53 50MidDist 75 78 85 80 72fuelOl 42 56 61 37 26

NET TRADE POSMTON: EX(QM)Mos 7 9 12 21 28MhdDist 17 16 4 21 33FuelOl 6 (7) (14) 23 31

A,Cts s rfine s domestc crudes, wbich are relatively light and low sulfurdcn rAhy highav aftu de input into relaively simple ret yield8itly fi8m diIijes. 1`he, pF igasolin eyieldisrou 1,the dist

yield is iugly21 perCent and residl fuel oi accounts haeCL

25

t is unceftWa if the shto in Apei8n s vesting in the tsfer of polludaL Except forthe case of fd oi in 1987 and 1988, Aina is a net aep of peueleum podwt

ARGENTINA'S PRODUCr EXPORTS (bld)

mm am EIQaI

1985 8,000 12,000 30,0001986 2,000 4,000 10,0001987 1,000 2,000 3,0001988 10,000 3,000 9,0001989 24,000 11,000 10,0001990 28,000 20,000 9,000

We can idetf very lttle tade with OECD countie, threor it is liky th all of thse egto oDthr am_nic in Latn Amera Mreover, there b no pub i o e quof Atwnas exports, so it very hard to detemine this is a case of interang the poution

26

Bolvia has 3 rfinele with a wal crude distillation capacy of 4S,000 bUd Bolivia!s sefinincpacit opeates at ody 50 O ut on beaue i limited by dte avalabfftofdomestic cr Thoy haVe l onve cacity. lhe ring sect udes the wng:

2200 b/d Wwum distilladon;11,0 bid cat-rfong11,800 b/d cat-hydrohtatig

Even wih bmid convezoc capacity, Bo&as pd om ut S favorte lia ht end of tLe banedbocause the domesdc crude is esstiay cndea (t aie at 54.7 deg API and .02% Sul.). Asaasu, ye g ine yild is close to 40 percent, while middle distllat nd foel oil ae only 25pe and p respectively.

pROWUDBt 192 49M9

REWNERY PRODUCION8 8 9 9 10

Dist 5 5 6 6 6FueOl 0 I I 1 1 0

DOMESTI1C SAI "sias 8 8 9 9 9ZdDist 4 4 5 5 6FelOi 1 1 0 1 0

NET TRADE POSMTION: EXiM)lmom 0 ~~~ 0 0 0 0

ldidDist 0 0 0 0 0FuelOil 0 0 0 0 0

Bolivia consumes all of the products prduced and conducts very ttle, if any, Uade with odtr

It is difficult to make a case for the transfer ofpolludon with a country with such 1imitedcansmn and viry no rade. Fur ore, the quaty of Bolivia!s domestic crude forestallsthew of vey low quality petolum producs

27

Brazil has 13 refineries with a ta oprating caacy of approImaly 1A mmbWd. Forthe lastfour yeats Brazil has run Its iefinries at 85utiliatIon or a rate of tuput of appr oxialy 12mmWd. Brails sefiig sector is monaey sohsiae:

726,000 W/d vacuum distaon-40,000 b/d thennal o317,000Wdofa24,000 b/d of cat-refg156,000 b/d of cathyd

Brazl'refinersrun --- pp mately 600,000 b/d Nigerian crudes and 600,000 b/d of domesdccrudes While the qua;iyaf the domestic crudes vaies, the Nigein crudes ane tpicaly lowsulfur, crudes As a reut, Brazils sect Vields about 16 peeen gasoine, 35peretmiddle dstlas and 18 percent l fueloiL.

PRDUZCr BALANCl 9i989

Cm thusands b/d)

PRODUCMIONmowas 179 191 195 187 190MidDist 382 408 417 400 413FuelOl 195 209 213 199 212

DOMIESTIC SAIESMlOB"s 131 148 130 126 143-'-ADtIXbt 348 386 409 426 432FuelO0 170 198 204 199 192

NEDT TRADE POSITION: EX(IM)moas 48 43 65 61 48MkfDidns 34 22 8 (26) (20)FuelOil 25 11 9 (1) 20

In renot yeas, growth in diese demand has made Brazl a net importr of diesel oiL

Brg expors between 20,000 and 30,000 b/d of reMid t the U.S., al of it under 1.0 percentsulfur. Inrcentyes, Brazlbas iporedfuiofordomesticconsumpdton firm suppliers suchas Meadco. We believe the redd inpored fmr Mxidco and other supplie has a much hiersufr content dhan dhat expored bay Brazi to the U.S.

Brazil's primary export is gasolie, almost all of which Poes to te U.S. Ibe small amount offinished gasine Cofnsumeod in Brazl is unleaded, Hkewz; the finished gasoline expored to theU.S. iS unladed

28

ny sidual fulilexportedby Brail has to be replaced by hpmp , teref It is more tlikely tat Bzl erts lw sufr esid fr a p u and makes a pwfit by ion bihsulfrsidatadiscoun BrazZiexpectd tobn anew 113,000 b/d efineay by 1993 andan_h 35, bid refinys by 1994. Tis new diilla capacity wll in e B s rsidpvducton, theAeby emoving the and to import id.

FuelOR

This cas seems to support he "tunsfer pollun" tesis because Brail ex rsd to teU.S, but is not a net exaor, it follows that Brazil's exorts to the U.S. would only be pfibleif domesc cocld be met fom a chesoe (Le. high sulr midmports).

Gmle

In em of gasolie, bower, all gsoline produced in Brazil, whet for domesic consmponor export, is uaded.

DPe Fuel

m inase in dies demand over the la few yew8 has fed Brazl to import diesel oil t isunceran where these small vohlmes ofdiesel come fom, but we have a hige sulurcontent than tL05 pere tht is rapidly becoming th countries

29

Euador has 5 refinSes with a ttamdcrue diatn capacity of 142,000 b/d. Only CEPEsEsmeradas efiny has any convesion capacity.

43,000 bd vacuum distllain capacity,16~000 bd catcrci g cpciy25,200 b/d themnal eons2,780 b/d at-rfong

The othder fou refii ar simple disdllaton units cuados refine ru domestic crudes, mostof which are about 28 API nd 1.0 percent sulfir.

(in dousands b/d)

128 1M 9 28128 1989REFINERY PRODUCON

sogn 21 25 20 30 29b6Dist 15 19 21 22 25FuelOn 34 37 32 41 38

DOMESTC SAMmom 28 29 28 29 29

dDis 17 21 23 25 22Fuel 0l 20 18 14 17 1S

NET TRADE POSMON: EX(BQmom (7) (4) (8) 2 0A"DidKt (2) (2) (3) (2) 3FelOi 14 19 17 24 23

F3uads reidu" fuel oil yid is vey high I c Ecuador is a net eprte of fuel off andnorly expors up to 20,0 to 30,000 bid. At lea halfof Ecuados rsiddepot ar sod tothe U.S. and they average about 2.2 perent sulfur cont

With very litle con n capacity and a lot of heavy, medium sulfur crude available localy,Ecuados refing sector wil conme to churn out poor qualty sid for expor. Ecuador couldeithr ran a high quality foign crude and export mome of their own crude or they could histallmoreconversionor Ito capacty.

I is uncrtan if tie situan in Ecuador is resultng in the tansfr of pollution. Ecuador does notimpot resdual fuel oil, there, if tey are buing bwer qualt resid it i because of th own

lmsophi efinn p a/oor localcrude One coud argue td these is ome inalizationOf p since &C %enceo aenv ta restctons allows them to burn high sufur product

30

Ecsos impot of andd m negl W o expect their asolin cnsumpto isbaolluan dargu n couldbeihadt for gassue,an

PO aumt bd di_d oo

31

Inknsin has 8 refineris with a tota cmde distiation capa of 833 A0 The refni sctopeates at aout 82 peen utiliaon or an a tpUt of680,000 bA/d. iO a sIgIsrelatively iI with thefolwncactes

229,000 b/d of vacuum didao;81,700 bd of aions;12,600 b/d ofc g;61,500 b/d of catu100,000 b/d of cat-hydacin18,000 b/d of cathg51,500 b/d ofcathydeating

Indesa is building fiur new refinees in rder to incase product e he ineas indiladto capacit will be on the order of 400,000 bId. Oly one (125,I00 b/d in West Java) impeced to he completed on schedle by 1993. The othmr mtee are due t cae on stream in 1994.

new refineres will be modeaey std o mn heavier danenc amd Middle Easterncrudes.

itRODUBALAN 1M91989

Cin thsands b/d)

REFNERY PRODUCTIONmom 65 77 82 88 100Mkist 124 153 159 168 179FuelOil 100 131 169 180 162

DOMESTICSALESMom 71 77 84 90 98MidDist 165 159 173 189 207FuelOR 63 52 56 53 55

NET TRADE POSrTION: EX(1mom (6) 0 (2) (2) 2A"Dist (41) (6) (14) (21) (27)FudODl 37 79 112 126 107

As is appar from the tableabove, Indonsia consumes a lot more middle disullates than fel aiLsis larely because they use kene for cooldng and some houshoid heatng. As a resut,

theyare net expos of fuel oil and net importe of middle distillates.

32

*8mas neries un some A8ab fulf arudes (Sai, Ianian aWnd hii), but maiyly domesticcruis. Since most of Indoneas cud e lht d sweet (ie. Mina is 34.i dog. API and01% suL), they produce only 24 percefol oil and most of it Is low msulwaxy tosid (LSWR).LSWR eap ov he at ye hae toted

198S 88,000 b/d1986 96,000 b/d1987 115,0 b/d1988 12Q4,OWd1989 111,000 b/d.

More t half of thse exp so to Japan and about 8,000 b/d of LSWRis exWoteid to the US.Mos of bdon's sma tof line and diosel cone fom Singapore, qualgtB 08OtchOS of .w arhs

ldonesWs objecive is to become a more minen t ex e, es ay of ligt p csDmand growth has been so sthg in rocen Years, that the new refining cacit isneeded to meet domestic demand. Part of doness p to crase ep is to limit domestcoil . However it isproving hard to stem te ide of s dand g Withfthe rcent shotas indusria plnts ar bdng enugd to run theirown diesBP AInIo make delcrity while new utiLities ae brought ao line.

QBSVAUTIONS TIE IRAH OE7 POIMlION

Fue il and Diesl Fud

It is oWbvous t Indonesia committed to making high quality iht products for expot As such,dtir sau as a net importer of oline and diel is bound to chage soon. the meantime, thehigh quaiy of their domestic prduton and someInonesia to cosme and low sul fuel oiL The diesel fuel i:d by sl s ownrefineries pwbabo~ has relatwely low sulfur cont Therefore, it is ard to make a case forthe tanfr oto n because of indigenous low sulfu cude producdon andreativel sophistctd eing.

Gasoline

Since nesi conducts vey littl tade in gasoline, the tasfer ofpollution thesis amnot beortedwit gs Fur , dones growing capability and willngs to make

eangasoeIsrio dbyPer inas intan tonbecome asuplierrefofnultedgasdolineto the Wst coast ofthe United Stae

33

Koe has 6 refineis with a combined crude disaillon capaciy of aprxmately 880,000 b/d. Inllcnt a, refiy utilization has exceeded 90 per South KreasfinUig sector isZ"d y -- histiuatd, with the fol*owing c onTA

83,400 bid vacuum dist on;48,700 bid tmal ons62,450 b/d ofcat-rormng;29,000 b/d cath r21,000 bMidat-h eng;111,800 bid af cat-bydroretng.

A new 150,000 bid in spected to cea on seam at e end of 1991 and andt rfineyis expected to underp a 100,000 bid expansion by the end of 1992. Tberoe, wit he nexttwo year, Korean d otmaincrease by more da 200,000 bWd.

South Kora al of ts cue oIL Their suppes In rce years have included thU.AE., km and Oman, but they do import si-t quantiies fro other Arab GulfpIn addition they import crue from Asian such as alays onia, and Brnci. Itisafe to say dat Korean refinees rn a mix of crudes, ng some lght, sweet crudes

(in thousndls bid)

1985 1986 1987 1988 1989

REFNERY PRODUCTIONMopse 27 27 29 37 50MdDist 150 161 163 203 242FuelOil 202 203 201 238 288

DOMESICSALESmDOs 19 23 28 37 SOMitDist 143 157 174 204 230FuelOll 197 186 173 220 250

NET TRADE POSMON: EX(IM)Mias 8~~ ~ 8 1 0 0

MWDist 7 4 (11) (1) 12FudOll 5 17 27 18 38

With a lvely mined crude sam, Koes pmduct yield work out to 6 percent gsoie, 30pernt diesel, and 35 percent residual fuel ol Krea is a net expote of fuel oi, oWrdng at least20,000 to 30,000 b/d pmaily to other Asian deeoping countdie At the sme dme, howver,Kaim'o fuel o fom the U.S. In 1990, they imported as much as 39,000 bid with a sulfur

"6era

34

Kamcondc HW sub Indiesel, but does Inp about S00 bd fm the U.S. with a

sufu onetof OApsnt

Fuel OiladDiesel Fue

TIe a vm disel and fd oi a Kea i ppear to be of medium sulfur contAlhg dhee Is nopublished da we esmae the awge surcontent of Korea's rsidexpots s pobably1 to 3.0 per in ad, So Kea does not suWpot the tansferof Poutbn tesi. Howev, most of Koras fuel expot go to other Asian developingcounaies, so Koea in fat may sup the corolay thess of polluton i

There Is tr adb In gasolin to supor the Umnfer of pollutio thesis.

Finally, Karece (1W9S bega Implmtt Of wA enr nal l io£new heseiregulaions cmbine with owing emandfor lg products, ae eg imp o flighter ad sweeter ces, as wl as sed invement in conon capacit

.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

35

Mxl has nine refinries witd toa etude disdllaton capity of 1.679 million bd. In icntyam, Mexlcos refining sector has run at about 87 pe ud on or 1.5 millon h/d. Mexioohlas a dgnicant amount of convenion capacity, including:

267,000 bd of catccdag;157,800 b/d of cat-fo ;18,0 00 b/dof cath nckin2S3,000 bld of a - l206,000 b/d ofa at-

The Mexica government reetyanucdthe closure of the refiney in Mexw ioQty. Thnisrfinety was a reladively a smallks closure willresult in a dacof caity of app ely 1,b/d and a roduction in cat-emekcng ty of only 24,000 bL Pemex is biddinanew 200,000 bld d on unit at

Cwhich oud be qp oin late 1

Mexicode fineies pce a lot of their own MOya (22.0 deg API, 3.5% suL) cude In 1990,about 26 pe~nt of crude input to refineies wa Maa, 57 percent wa. a mix of crudes all ofwhich arelightr tn Maybut in some cases not much sweeter. b mlning 18 percet wasN s As a result, most af MexacoWs crude dtruput is elaively heavy, high sulr crudes.

PRODUC BALA& I8S-1989

Cmthousands b/d)

1985 1986 1987 1988 1989

REFINERY PRODUCTION^&ozas 366 371 379 385 394NAMrISst 246 243 232 206 234FueOll 398 405 425 421 427

DOMESTIC SALESMops 340 347 364 363 417MM Dist 231 218 221 199 223FelOil 382 396 438 439 472

NET TRADE POSIMION: EX(IM)moos 26 23 1S 21 (23)MidDist 1S 25 11 8 12FuelOil 15 10 (14) (18) (45)

AMexiods subsun Wf conveniou aliows sigifican production of lght products As aresult. Mieisaoi as follows: gasolne is 26 percent, middledstiates ordiezsho 16 peentand fui li28 perent.

36

of both p9dc , n fla as a net er of sao Mexico ored 28,00bA In f990 O um _d4hd to 31,I0b, W i._ M,,OO t SmOO,aOhAl of gone. At lot 85 pre clltcmsumpton il laded gasoline.

In 1969, M I mponed 11,0 bd of f the U.S. In 1990, that volume In sed to20,000 bid U.S. epo to Mexico a dm dy leaded in 1989 and 1990. It is estmated,however, tha as a sl of gromiand and goloss d o the of cafinery inMexio ity, total ic m will e to 50,0OO bd in 1991. Mooer, it Is eecddit as much Us 30to00 bldw beu'lead-dorhe Miadco City :a.

in ums of residual oil, in 1989, Meoo expod 25,000 b/d of fu oiL One third of thswent to te U.S W e h etm t thoe bae ex d to the U.S. we at least

perent sulfur or higer. Duding e same ye, Mexico imported 69,000 bid of fuel oil,50,000 bid of whichcam o eU dStates. In 1990, icoexordless than 1,000 bidof fuel Oil to the U.S. and impored 40,000 b/d firm the U.S. As in 1989, the fuel oil from theU.S. was 1.0 tol 20 penentsUur.

Mxco Is stll a modest exporte of disd oiL The sulfur conen of tose baels is unetain.

FdOfl

ue poor q t o xico domestic crude, the c of s refing, the lack ofnit" a£ -nt h n - inddemand gro 6thabasoeutdped,

its g c y bave resued in dan. Mexico burns mos a£its own highs fuel i mpot icemental as of medium ad high sulfur fuel oL

This case study supports the ti" s to hie exaen at Meiaco is becoming anet fadeloim anditis go two qua blsrodevelopng counies otecaseo

his also appeaw to be the ca f s Wih ltte domestic ofa£l eado dgasoline, Ihpsm hae been amalways od barels Ti because dth

xico Ciywas dosed r envt sons and the gasowlie prcn which isused In Meio City wilhe replaced with unlead'd from the,U.S. MicoialsoI g MTBE In ordr prote a caner fuel adupgrig otefierie

Diese

Tado is too imited o strongy support th tunsfer of poludon dh-si&

37

Nigria has 4 rfinerIes with a combied capacity o f 445,O00 b One f Nigeiasrefinetts has been osed dnc 1989, d , oa g capcity is ldoe to 395,000 bALThuput is on th order of 24S,000 b/d or 60 to 65 percent zhln Nges refineres areeltively unsphstcaed

124,00 bid of vacum dsdUla83,000 bd ofac g;70,000 bld of rfoming;109,000 b/d ofcathd ng

Domesic caudes m rnm in dese refinies. While the AP gravity of the domestc cudes may vayorcados at 29.7 vs. Bomny Light at 36.7), the sufur cont is 0.0 to 0.2 percent acro the

board.

(in thousands bfid)

1985 1985 1987 1988 1989

REFINERY PRODUCIIONMogas 47 43 43 64 64MdDist 33 30 30 46 45Fuel OH 29 27 27 38 42DOMESTC SALESmoms 96 84 84 97 103MIdI11t 45 43 40 36 41Fueloll 21 23 24 26 19

NET TRADE FOSMTION; EXQM4)moPs (49) (41) (41) (33) (39)MidDist (12) (13) (10) 10 4Fuel Oil 8 4 3 12 23

Detpit r vely P&SWIdUlnOphistiadepnid utresults in arelatively balanced pduct yield. Gasolineaccounts fbo roughly 26 percent, mdde distIlates for1e8eno, and residual fuel oil for 16 peet Nigeia umpons small velumes of aiddle ditilatespndo eixp oand in 1989 impoted as much as 25,000 bid of gasol For the most pur; N'iesprodtxps areveymodest atough in 1989, theyexpored b/d of resdual fueoL

OBSERVA NS RBAR TIRE llRAISSFlt OF llUlQ

On balance, Nipma imports some ghgt pducts and expors some heavy products. It is unlikelydht Nigeia sadsfies our transfer of duiis. Nigera's only imports are gsolne which arePredominantly unleaded.

38

M ovcr, whie le quaity of Nigeia's tD r d IDuctain, th porin tothe U.S. in 1990 1l(5 7 b) was al under 1.0% u therfo, it Is kely thatfel l o d y ilowsufr. As aresu its niy a theW is even an ntallzaonof pollution. Tis is the cas with diel fel as wel

39

THAnLABMl

Thaiand has threefinerie with total crude isti capacity of 240,000 b/d. Refinryudlizadon In 1989 was oughly 86 pecenL In 1990, utilization rates wer l over 90 penant.Thaiad has little onverion capacity but a subsantial amount of hydoang, suggesing thecapabiity to desuffne. he baown oThalands reining capacity is folows:

58,900 b/d vacuum disladon;17,600 b/d of theumal o peations;26,100b/dofcat-cmcg;27,550 b/d of cat-reforming12,550bd of cat100,800 bid o£ cat-hydiueng

Plans ae undemway to build two new refinies and epand an ean refinery. Tbe toal increasein distfllao caai woud be on the order of 370,000 bid by the mid 1990s.

lhbaias refineries run 40,000 bid of dome crude which is basicay condensate. Th rest oftheirefiney iVput comnes from the Middle East or other Asian producers, such as Maaysia adBnel. Te Malaysian and Brune crudes are light and sweet, whie the Middle Eser crudes arepredominantylight- both high and low sulfr. n1aiands condensate produon alw them torun heavir crudes that may be blended with the condezsat.

(in xusands b/d)

RIEINERY PRODUCTIONmos 39 42 44 47 51MidDist 63 64 59 72 75FbelOil 38 38 44 58 60

DOMESIC SALESMOPS 39 45 50 57 63MidDist 99 111 126 149 167FuelOil 42 38 48 62 86

NET TRADE POSITION: EX(M)Mogs 0 (3) (7) (10) (12)MDist (36) (46) (67) (77) (92)FbelOil (4) 0 (3) (5) (25)

Thalhns refinery input is p anty light and low sulfuz the product yield weeks out toapproximatly 22 pacent gasoline, 32 peraent middle disdllates, and 25 peaent fuel il ThiandimpOtS sml volumes of gasoline and fuel oil, as well as sign t volumes of middle ditlate.Most, ff not all of thes imports, come fium Singpore or the Middle East, and they are bdieved tobE ofrlatively poor quality.

40

ThPiq^d i Mt and conducts vey lttle, if any, trd with OECD counufea, so in thismgaitltmhes Islite ieceo plutiotanse. Howeve, ThIa idImport polluion tha is,poor quaHty fuls

41

Thnkdad has two _finies wih a combind na t caty f 300,0 b/d and an tngcapcity of 246,O0 b/d. Both refin ae oedb compan, Tthethruput has ot exceeded 200,000W since 1980 a low of 75 ,bd or30utiliationin 1984. UdHzon rates rose modesdy (up to 35 percent or 8,000 W as arel of a cmde procesing ded widi Venela Another f4ocessign 5nsidiVeLis epcd inc ruput 30,000 b/d to 1 15,000 b/d 1991.

In 1990, about half of te crude input to Tidds refineries was domcstic crude (31.6 deg. APIand 029% Sul.) and the oder half was Venezelan crude ao Treco at 31 deg API and 123%suL). be limited cenversion capacyof 116000 bd Pie a Pierefiney is ly utilized26,000 b/d of cat-cracking, 8,700 bMd of refomin and 26,100 bid ofh Ydtreadn e tenew prcessgdedwith Venemla, inidad will begin proesng a lighter V eancrude(Lago Ctnco 35.2 deg. API and 1.23% SuL).

ERQD= 19N95iJ99l

1985 1986 1987 1988 1989

REFINERY PRODUCMIONmoa s18 17 23 17 13NMfdD!st 12 11 13 13 12FuelOil 48 44 53 52 49

DOMESTCSALESblqm 9 9 9 9 8

-Diist 3 3 3 2 3FuelOil 2 1 3 3 4

NET TRADE POSMTION: EX(IMmos 8 8 14 8 5MidDist 8 7 10 11 9FbelOil 46 43 50 49 45

With tese crudes and limited conv capaity, Tr"ndacs residual fiel oil productio hsequaled 45 percent of Inlffs product l e am alU of d fuel odlprducto as well as very small volume of gasline anddiesel oiL

With very LtWle de-s--lfrIz _Trinds fuel ol a mix of high and mediuml1fur. Approximately one half of Tindad's resid to OECD coutes while the

rest g t o Cribbea ati Aeican countes r is used as bunk fule. The volumeseapoed to dte United States (15,000 b/d) are aprximately 1.5% sulu, dt wvlumes exported to

42

Nafthwest Europ (10,000 W/d) ane roughy 2.0 to 2.1 peen solfur, and the volumes exported tothe other e countres ame about 3.0% sulfur.

n P~~WI TST iuUA RM2 AD RODUCr TAE

Mh mos nab feature of Tndas efining sectw unter-tlian oi crude dillationcapcity. Becaus its conversion ca y is ng fl out any in=ase in crafd dtuputprwducs 45 perent residl fuel oil, most of which is 2.5% sufur or above. As a reult dePointe a Pleie reiey run at ony 35 bO 40 peenutilization becas it is unprt topiuluce even more bigh sulfr fuel oil. l s smaller rfinery (Point Forn with 80000 b/dcapacit) is usd ID tefine th heavy prducts xt come out of the Pointe a Piee efinery.

other sg feati Of Tnidas fi gsector s that with crude input of 29% to 1.23%ulfur, the lack of. capacity euts resid e with a sulfur content of 1.5 to

3.09 ent bw gt. Td s fuel ol e busin is d or de qualty sp nOlf countrieses io, ts it sel t 1 product to the U.S. and -t 3.0pmduct t Cabbe and Lan i .

Tnlad has negDatd a $400 mgion dolar loan fium the Inter-Amecan dee Bank, dtF -mpo bank Of apan and the Euopem invesment bank to urade the Poit a irele" by la e 1993. Tis upgrding would include rmmiog a 75,000 l/d a oil

d__dsu ter as a hydO and icasing the capacity of e Poi a P] renery to160,00X hd

FueOiOl

Over te lt six yea, Tidad has prduced 40,000 to 50,000 b/d of residual fuel oil for expotk is tae hat te vdms tat are xed to oher Caibbean couies have a sulfur contnt of3.0% while the volumes eoted to the U.S. and Eupe are 15 to 2.1 pecent sulfur. Cilery,ftChaportWVrMU"UUxonfoning Trinidad have favored keeping the high sulfur prduct in theCaribbean. In other words, inidad can make more money selling low sufur fuel oil to the U.S.and Euope thn seig it locally.

As of this wriig, it is uncertain if the finery upadig po uderway u primaily c edwithredui te mild and ing d ligher pd t with re g the

sulfur ctof tered r We exect the In of tbis proectare a con ofdhe to, but the p y obive is to ise the volumes of lght p s avalable for expr

Unless sb d-sulfur aton cpacity is put into lac or Trinidad begins running the moreCosty Cai1 crudes fom Wet Afica or the North Sea, we can epect Tnidad wil continue toproduce high sulfur uindd tat may only be mked to Other i counties.

GaslineandDiesel Fuel

Tinbidad condluety lHide tade in goline and diesel and does not appear to support the transferof pddon Ibdsi wfth eidkerprduct

43

VgeNFl7

Venezuela bas 6 rfri es with a combined crude ddiaton cacityf 1.17 milion bd Refinyutiltons iugbly 85 dtrefoen, Venezuea tdnuput ara shy of I million b/d.Vene_kh dy e d refining compad to its oeghbQx ic

548,000 b/d vacmm disillation;134,000 b/d dtemal oons;139,000 b/d of catclng6,O ob/def lm277,700 b/d of cat-hd ng;700 b/d of cat-h ti

PdVSA is plannig t inease cmde distillation c ity by 400,000 bd by 1996 d_oughaditions t its existing refinerieIn addition, PdVSA bas ecently aui dexpedire on abnd new 180,000 b/d eey on the Noreast cosL PdVSA is i _ In ex g mme

dct and le crude.Total ct ng capcty I expected to increase by at last 23400 b/d;tho end of 1992.

(in thunds b/d)

1985 1986 1987 1988 1989

RENERY PRODUCIIONmom 267 286 297 310 329-^k1Dist 254 240 211 259 232Fuel 0 296 262 204 282 267

DOMESIC SAISmiomas 163 164 167 174 162b"DisNbt 51 58 63 61 57FuelOl 50 52 42 40 43

NETl TRADE POSITION: EX(IM)moms 104 122 129 136 167MikdDist 203 181 148 198 175PFueiOl 246 210 162 243 224

As appaet fiomn de table above, Veneazula is a spignficant pn dut exportr. Desite the facV _nezelan crude prodacion is relivey heavy and sour, pnoduc yidds favor the lght end of thebanel r e Venezlanrfining secor poducs on ave 33 peroent gasoi percentmiddle distllas and 27 percent redual fiel odL

Mot of Venezuelasxposgo to the U.S. In 1989, U.S. importsom Vaen included83,000 bid of fue ol, 76,000 bofsof ne and 107,000 b/d of disel fuel In 1990, the

44

volm were 6000 d, 9O W and 114,000 bAviv The gsol was allfidsbd unbaded 7I fut offwas at kwe 2wS powt sHr, andL dieds oil was to.5Pa soulfr.

Venolmia b a swwsdcarefie and -IgN canm poduct epter. Ovr the O Venezewsun WUNAURM um UDspecficaIons custmer. Even

t It m"8i=*s8 ha8 dchehl OD mohcs Of eedomestic crude pd ion meansthatthe ds hbavetof inet inmor cai to be a pr t suppler flowsufr ful oil the U.S. at lurmpe. Untl tben the pimary mat for Venezues fiuel oil will bete Guf and Wost Coas bunker m_8s.

Gasolne

Sine Veneiuel a dable nUt expter of pewDuu podu and since it has a rldvelyc~~~~~~dt Iltducp foarbod inm c npd 6e4

Venmela_s gasoline umdws no dsu i the Ulnsfer of poui be y pmaiy eaport

FueadOiandDlFue

he5 xa i a w _ r ea of bi# sufur fue oil and diesel fel to dte OECD counriesWb3le tbete is no evidence6of a ansfr c poludon fom the OBCD to Venezuela, one oould arguethe is a rever naf from Ven ito the OEB and them is some intunali n OfpBlltio to th ie at Veneulaexprts el oil tos I aDn Amican ibor

45

CHAPTER V

US. DEVELOPING COUNTRY FUEL TRADING PATTERNS

Based on de lates (1989) tra data available fim the U.S. Go nt (USO)the Unied Staes imp substata volumes of peoum fuels - 629,000 b l dy d d oresdu fuel oil (resid) and small volumes of g and dieseL Overa the trade patterns hanot chagd over the last seval yas. Hiowe, fom the evidce gined fom fte e igstate oil companies and fim the exeenc ofthe U.S. indusMA, it appes tha there havebeen some shfts in the tiunds These suppor the io and efct theio withn the d g countes oe pol probem.

This secton is intned to omple te case studies of the delog counriesby prviding a crmss reference of their tr patterns with an OECD im . le U.S. wasseled becuse the data wee more dei iy avaable.

Net importu of esidual fuel oil (mid) tota 414,000 bid (629,000 b/d impor less215.000 b/d exprts). Of this amount, the U.S. imports 265,000 bid of high sulfu msid, but thisis mis due to a definitonal problem. he TJ. S. Govermnm (USO) clasifies resid withover 1% slfu content as "high suW; .3 - 1% as "medium sulfur and under .3% as "lowslu. Tbis study used 1% as the breaking point between high and low sulfur resid. Part of theresAch int ude data was to try to p ot the sulfur conent of the "high sulfr impors from

lect developing counti (Seeata te)

The reuaon of the sulfur content of U.S. residual fuel oil is indirect.v-mental regulations limit S02 emissis, therefore, udties and mn g can either

limit the sulfur cont of their inpt or scrub thek effluet Most udHtes in the United Staes haveopted to unm cleaner fuels and esc y scrubbing teconosly alt this may cbaneas

a result of the 1990 Amendments to the Clean Air Act Most U.S. utiles are rn1i1mid but some large utlites import 2 l1Z% resid on the spot maket when the suur speads(difen ae acve; the sues of the hiUher sufur conent tesid ar Argentina, Bi and

rndoesa Higher sulfur (34%) eid from Mexco and Venezuela is no longer imported.

Besides federal laws, the utilities must meet state sandas generaly, they aretoughest in the coastal areas. In some cases, i.e., the Mid-West, the restricdons are more lenientbut there is an abseMe of scrubbing technology. The fuel oil input to U.S. utilities by sulfurcontet and region is oudined below fr the last fou y

46

Table IFued on put to Us. Utlies

1986 1987 1988 1989avg avg avg avg

ROg* YoL hL YAL &L YnL hi YaL hi

NewEngland 169 1.3 139 1.3 165 1.3 161 1.3MidAtnc 220 0.9 199 0.8 239 0.7 246 0.7E.N. Central 1S 0.6 17 0.6 15 0.7 16 0.6W.N. Contra 2 0.9 2 1.0 2 0.9 1 0.7S. Atandc 159 1.1 132 1.1 148 1.1 174 1.2ES. eantrl 7 2.4 2 0.9 4 2.0 5 2.1W.S. Cental 5 0.5 2 0.4 4 0.5 9 0.5Mouan 3 0.3 3 0.5 4 0.6 3 0.6Pacific 21 0.3 9 0.3 41 0.3 31 0.4PacficOdter 26 0.4 28 0.4 27 0.5 28 0.5

Total 627 1.03 533 0.97 649 0.91 675 0.94Avg)eliveredCost $15.30 $19.06 $15.33 $18.17

1. *These reio are eNuIvaet to the Census Buraus "Census Divisions."2. Volume is expmssed m 000 b/d.; sulfur is % by wt.

SOURCE: U.S. Deparment of Energ

a ewdma de rasfRer }a gPBd uel Oil EWilutimn

aThere is evidence that the higher sulfur residual fuel oi rS are bign divetdy m dte United State ed, the high sulfur resid once = = fthe U.S. and otber

OECD counties) is being used domestically by the developing comtries or is being exported toother developin blenient environmenal regulations. Evnce rwe dthe tmend of selling igh sulfur resid into the bunkers markt although volumes proved diffclt toquaniy. Tiian, Venezula and catding patterns especialy sppote the ferpollion tesis; it could be true for odher counties but it was not docentable.

TIinidad expot 15,000 Wd of primarily 1.5% sufur contn resid to the U.S. and2.0-2.1% rMid to North Ws Europe is 2.0-2.1%, where it is blended down to 1.5%. Highsulf (3%) resd is exord to other Caribben couti. (lue sulur conte comes fromVe la Lago Traco crudes as a result of the 40,000 b/d Trintwc processing agreement withML

The sulr content of Venezuelan resid to US. udtlies is generay 2%. Resid of2.8% sulfur cone is expr to odter Caribbean and South American counties and 2% mid isexported to Puo Rico. There is a change in tading pa in that the big gmwth maiet forVenezuelan mdd is for bunke in North Wet Europe and the Far East - 8,500 b/d to eahmakt I addidon, some 10-15,000 b/d of poor qui, igh (2.8%) sulfur iesid ae now beingexported as bunke fuel to the US. West Coas Global sales to the bunker market ae expected tonwr, Petoleo de Venezuela has invested heavily in facilities in the Caribbean where theVenuna reid is blended into IoM I IIlly viable bunker l.

47

Meico (Pome) has had similar e ces i e e of residal fe o totie U.S. Pemex has been able to export some high sufrsid to a Coastefiny, but mostisousd r--pdomsicicalyly,exoedto odherLatnAmeriancomuntrisorsldint te bunkersmarkt.

Tbe U.S. Impot over 300,000 b/d of gasoline and in exports on aageabout 40,000 b/d. his compares to totgasoline demand of over 7 MMB/D. Ve ela heblgesn s7 pr, furning about 70,000 b/d of finished unladed gasoline Brail aep about

2S,0 bd wichisbelieved to be ethanoL The U.S. exot were mosty leaed gsoliewithsome unleaded ss the borde t Me and small volumes Ve a Sinar Aspart of the environmental cleanup of Mexico Cit, unladed gasoine, perha ite rne of20,0-30,000 b/d will b importe fm the U.S.

The diesel trade data revealed interes_ng results althogh some p had tobe made with rspect to fuel quWiy. U.S. regulatos uire that the diesel sulfr conte can notexceed .5% by weight and this limit will be reduced to .05% of weit as of October 1993. It isassumed hat the impots of diesel fuel meet this standad. It has boen esmatedat the Caibbenexporting refrs alone will have to spend over $1 biin i order to meet de momn stint 1993regulations.

Te U.S. impots of diesel (ncluding equal amou of heatig oil and automoivefuel) sig dramatcally month-omonth but have a d about 250,000-450,000 b/d. TheVirgin Ilands and Venezuelan (115,000 b/d) refineries are the biggest supple. Developingcountry exporters include Trinidad and Tobago (1,6 bId), Meico (7500 b/d) and Algeria(12,000 b/d).

Diesel e va month-tomonth as well, but the U.S. adionally expor60,000 - 100,000 b/d of high qua diesel, mosdy to the Europe. Odter customay buyers areKorea (5,30 b/d), Meoico (1,100 bld and up), Peru (1,000 b/d) and Venezuela (4,200). Disate

osince the M s siuation have more dtan tripled to 300,000-400,000 b/d levels. Indiahas become a huge importer (60,000 b/d) due to loss of supplies from the MidEast, creditprblems with supliers an increasd demand.

_iP~on u e *o afn adDee

Until the time that Mexico indicated that it would import unleaded gasoie, teU.S. gasol ading pans indiced a tansfer of polution in that the U.S. imported bighquality product and eally eoed the leaded fueL With respect to filel, a d nce sulfur quality of dslm w not noted althou definitive data wern lacingt TheU.S. diesel Tre patterns appa to be based on market rather tian envi t fc

48

E ~~~kM

Unde .39ECnan

Agesia 44300ABgentina 100Brarzil 18,000CQkwbia 1,400Cong 3,650Ghana 1,300Indoneha 16400Nigeria 8,000Lper 1,000Singapoie 13,350

Vea 2,5007Aire 300

Bahms 700No&i Anulle 500Vrugin Ilands Mes) 45,260

Total 157,000

.3% - 1% Sulfur Cntent

Alka 5,000Arntn 9,000Brazil" 7,300Colombia 1,100

100Meioo 30NIleia 3,700Peru 7,400sing 700Tua 750Vezuela 2,100

Bahmas 11,100Nei Andtes 3,100Vir& Nds 26,000

ToWal 77,200

49

MiloI Tmm ima lw smK. Mm

Alria 3,100 (1%?)B1l 100Colombia 31,700 -Bcusdo 9,300 2.2%Indonesia 1,100Mexico 9,000 2.2%N'igeia 250 -

Panama 1,800 -PNM 18,S00 1.3-1.5%Sinppore 1,50-Syia 3,700 -'frmnidad 14,600 1.5%Turkey 4,200VenYula 79,000 2.0% - 2.5%

Bahamas 21,000Neth Andtile 22,600v,ri Ilds 43,800

TOW 265,000

IaaLBaaidmIE13ueI= 629,000

LcaEz2ca 215,000

so BADidual.EUOUIDDDUI 414,000

No. 1 ErgY Isues in dhe Developing Word, FebruY 1988.

No. 2 Review of Wold Bank Lending for Elctric Power, Ma:h 1988.

No. 3 Some Coniderions in Collecting Data on Housebold Energy Consumption,Mich 1988.

No. 4 Inp¢aving Power System Efficiency in the Developing Countries toughrform ance Contrctng, May 1988

No. 5 Impat of Lower Oil Prices n Renewable Eneg Technologies, May 1988.

No. 6 A Comparison of Lamps for Domesti'n Lighting in Deveoping Coutraies, June1988.

No. 7 Recent Wod Bank Actvities in Energy (Revised Oc*oer 1989).

No. 8 A Visal Oveiew of he Wod Oil Markets, July 1988.

No. 9 Ort I Gas lhdes and Prices, November 1988.

No. 10 Pmoting Inestment for Naturl Gas Explaion and Prduton inDeveloping Countrie, January 1988.

No. 11 Techology Survey Report on Electric Power Systems, Febuay 1989.

No. 12 Recent Del s in the U.S. Power Sector and Their Rdeeva for theDeveloping Countre, Feruary 1989.

No. 13 Domesc Energy Pricing Policies, Aprl 1989.

No. 14 FIancing of dte Enegy Sector in Deveoping Conies, April 1989.

No. 15 Te Futur Role of Hy owerin Deveoping Countie Aprl 1989.

No. 16 Fuelwood Stumpagc for Deveoping Couniy Energy PlangnJune 1989.

No. 17 I ng Risk and Unainty in Power System Planing, June 1989.

No. 18 Review and Evaluadton of Hiorc Electricy Forecting Expeence, (1960-1985), June 1989.

No. 19 Wood Supply and Man July 1989.

No. 20 The Malawi CaOl Project - Eeience and Lessons January 1990.

No. 21 C for Electric Power in te Develping Comnties in th1950W, a , 1990.

No. 22 A Review of of tde Power Sctors in Developing CountieiFebPUay 199I

No. 23 S qummy Dam Shaee of 1987 Power and Conunercia EnerW Ststics for 100Develping Counties, Mmch 1990Q

No. 24 A Review of dhe Dutmen of Etwtumet4 Apects of Bank EnergyProjects,Mach 1990.

No. 25 Te Status of qlfied NatlGasWodwide, Mch 1990.

No. 26 Poulatio Grwth, Wood Puels, and Resoumce Problems in Sub-SahannAfiica, Much 1990.

No. 27 The Stts of Nuclear Power Technolw - An Updfte, Apdl 1990.

No. 28 Doni ngof NucW Power FPaci, Apri 1990.

No. 29 tWel Subston and Canges in the Way Housholks Use Energy: IheCa of Cooing and iting Bevior in Urba Java, O ber 1990.

No. 30 R , D guon, or P aohat is Needed in IDCs PowerSeorw? July 1990

No. 31 nsdiS dhe Cos and Scheduls of Word Bank Suppored HydIectricPfcs MY 1~990.

No. 32 Reviewof ETariffs in Dvelopig Coumries During the 1980s,NJovember 1990.

No.33 Pkvat Sector Pari pation in Power tbogh BOOT Schems Dember 1990.

No. 34 Ide B scCoitinfi eonof Public Electriiyfrom Surplus Bagsse in Sugar Ml, Apri 1991.

No. 35 Prspect for Gas-Fueled Combined,-Cyc Power Generaton i te DevelopingContris, May 1991.

No. 36 Radioacve Waste - -A Study, June 1991.

No. 37 A Study of te Tnsfer of FP_em Fuels Pouon, July 1991

Not: For a copies of these p plase cal Pamela Sawhney on etension 33637FAX No. (202)47745W.

nINDUSR SERIS PAI

No. 1 Japanese Direct Foreign Investment: Patterns and Implicaions forDeveloping Countries, Februay 1989.

No. 2 Emerging Patterns of International Competition in Selected IndustrialProduct Groups, February 1989.

No. 3 Changing Firm Boundaries: Analysis of Technology-Sharing Alliances,February 1989.

No. 4 Technological Advance and Oranizational Innovation in theEngineering Industry, March 1989.

No. 5 Export Catalyst in Low-Income Countries, November 1989.

No. 6 Overview of Japanese Industrial Technology Development, March 1989.

No. 7 Reform of Ownership and Control Mechanims in Hungary and China,April 1989.

No. 8 The Computer Industry in Industrialized Economies: Lessons for theNewly Indutrialiin& February 1989.

No. 9 Institutions and Dynamic Comparative Advantage Electronics Industtyin South Korea and Taiwan, June 1989.

No. 10 New Environments for Intellectual Property, June 1989.

No. 11 Managing Entry Into Internadonal Markets: Lessons From the EastAsian Experience, June 1989.

No. 12 Impact of Technological Change on Industrial Prospects for the LDCs,June 1989

No. 13 The Protection of Intellectual Property Rights and IndustrialTechnoiogy Development in BrailA September 1989.

No. 14 Regional Integration and Economic Development, November 1989.

No. 15 Specialization, Technical Change and Competitiveness in the BrazilianElectronics Industry, November 1989.

No. 16 Small Trading Companies and a Successful Export Response: LessonsFrom Hong Kong, December 1989.

No. 17 Flowes: Global Subsector Study, December 1989.

No. 18 The Shrimp IndustW. Global Subsector Study, December 1989.

No. 19 Garments: Global Subsector Study, December 1989.

No. 20 World Bank Lending for Small and Medium Enterprises: Fifteen Yearsof Experience, December 190.

No. 21 Reputation in Manufactured Goods Trade, December 1989.

No. 22 Foreign Direct Investment From the Newly Industialized Economes,December 1989.

No. 23 Buyer-Seller Link for Export Development, March 1990.

No. 24 Technology Strategy & Policy for Industrial Competitiveness: ACase Study of Thailand, February 1990.

No. 25 Investment, Productivity and Comparative Advantage, April 1990.

No. 26 Cost Reduction, Product Devlopment and the Real Exchange Rate,April 1990.

No. 27 Ovrcoming Policy Endogneity. Strategic Role for DomesticCompetition in Industrial Policy Reform, April 1990.

No. 28 Conditionality in Adjustment Lending FY80-89: The ALCID Database,may 1990.

No. 29 International Competitiveness: Determinants and Indicators,March 1990.

No. 30 FY89 Sectr Review Industy, Trade and Finance, November 1989.

No. 31 The Design of Adjustment Lending for Industry Review of Current Practice,June 1990.

INDU1 Y IhPAPEI RSU et'd

No. 32 National System Supporting Technical Advance in Industir. The BrazilianExperience, June 26,1990.

No. 33 Ghanaes Small Enterprise Sector Survey of Adjustment Response andConstraints, June 1990.

No. 34 Footwear. Global Subsector Study, June 1990.

No. 35 Tightening the Soft Budget Constraint in Refoming Socialit Economies,May 1990.

No. 36 Free Trade Zones in Export Strategies, December 1990.

No. 37 Electronica Development Strategy: The Role of Government, June 1990

No. 38 Export Finance in the Philippines: Opportunities and Constrints forDeveloping Country Suppliers, June 1990.

No. 39 The US. Automotive Aftermarket Opporunities and Constraints forDeveloping Country Suppliers, June 1990

No. 40 Inwestment As A Determinant of Industrial Compettiveness and ComparativeAdantage: Evidence from Six Countries, August 1990 (not yet published)

No. 41 Adjustment and Constrained Response: Malawi at the Threshold ofSustained Growth, Octobe 1990.

No. 42 Export Finance - Issues and Directions Case Study of the PhUlippines,December 1990

No. 43 The Basics of Antitrust Policy: A Review of Ten Nations and the EEC,February 1991.

No. 44 Technology Strategy in the Economy of Taiwan: Exploiting Foregin Linagesand Iwvestig in Local Capability, January 1991

No. 45 The Impact of Adjustment Lending on Industry in African Countries,June 1991.

For extra copies of these papers please contact Miss Wendcy Young onetension 33618, Room S-4101