Singapore — Pakistan's Ministry of Petroleum is unlikely to see its new requirement for zero manganese-based additives in all grades of gasoline sold in the country enforced from the original effective date of May 1, 2019, as the industry struggles to find economical solutions for meeting the new requirement.
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The existing requirement is for a maximum 24mg/liter of manganese-based additives in gasoline after automobile manufacturers complained to the government that high concentrations of manganese in gasoline was damaging car engines.
There was no limit prior to mid-2018.
Domestic refiners depend on the addition of manganese additives into gasoline to raise the RON of gasoline to the required level. Elimination of the RON booster would require refiners to substitute it with other high-RON materials, which are too expensive for them.
The country has limited capacity of naphtha isomerization and reforming.
"They will have to produce less gasoline," a source close to national oil company PSO said of domestic refiners. "And they will export naphtha." The usually significant price spread between gasoline and naphtha means such a possibility would hurt refiners' margins badly.
As Pakistan relies on imports for the more than half of its gasoline demand, compliance by foreign suppliers is crucial to the effectiveness of the new rule.
"[It's a] money spinner for traders," a gasoline trader in Singapore said of the favorable economics of supplying PSO with manganese-added gasoline.
Pakistan's gasoline consumption in 2018 was around 190,000 b/d, according to S&P Global Platts Analytics. This was against total imports of about 5.11 million mt (about 118,000 b/d), according to Pakistan's Oil Companies Advisory Council.
The import premium over Platts spot assessments of 24mg/liter manganese-limit gasoline could go as much as $0.75/b higher than gasoline with no manganese limit, a PSO source said.
One Middle Eastern trader put the price spread between 24mg/liter manganese grade and zero-manganese grade above $1/b.
With higher pump prices due to stronger crude, slow economic growth as well as a weakening Pakistani rupee -- at a more than 10-year low against the dollar -- affordability of more expensive gasoline in the country could be problematic.
Some suppliers said the country's gasoline importers are not sticking to the zero-limit requirement on manganese-based additives when they are buying May-arrival cargoes from the international market.
The import specifications for May have remained unchanged, according to traders in Singapore and the Middle East, indicating a potential lapse of the May mandate.
Domestic refiners are also expected to wait for further clarity on how the economics of implementing the new requirement could improve, pending a possible government subsidy for refinery unit upgrades.
Few countries in the region allow manganese-based additives in gasoline as a RON-booster.
--Dexter Wang, firstname.lastname@example.org
--Edited by Jonathan Fox, email@example.com