Forecourt
July/August 2003
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Ethanol,
leaks and rationalisation
thanol update
In the debate over ethanol, one view is unanimous - the need for labelling.
On 7 April, the Victorian Government was first out of the blocks with
a requirement that, as from 1 May all service stations that sell ethanol-blended
petrol have to display labels at the pump revealing the level of ethanol
to motorists. The new regulations set minimum text sizes and colours
for the labels to ensure they would be easily identified by motorists.
Petrol stations caught selling fuel without displaying labels revealing
ethanol levels will face hefty fines of up to $60,000 and individuals
face fines of up to $24,000 under the Fair Trading Act. A fact sheet
for fuel suppliers and retailers is available on the website, www.consumer.vic.gov.au.
Some four days later, the Federal Government announced it would amend
the Fuel Quality Standards Act 2000 to require labelling of ethanol
blends. At the same time, the Government set a 10% limit for the blend
of ethanol in petrol. Recent tests found that 20% ethanol could cause
hesitation and problems with starting in very cold conditions, and could
cause deterioration of metal, plastic and rubber components in some
older vehicles.
Newer vehicles did not demonstrate problems with 20% per cent ethanol,
although durability testing will not be complete until mid-2004. Preliminary
testing with one type of marine two-stroke engine has revealed that,
even with a 10% blend, some effects on parts and operation were detected,
and a number of marine and other two-stroke motor manufacturers advise
against use of even low ethanol blends.
"A 10% limit on ethanol blends, combined with mandatory Commonwealth
labelling of ethanol blends, will restore confidence in the use of ethanol
blends among consumers and industry," the Minister for the Environment,
Dr David Kemp, said.
The loss of consumer confidence affected sales of labelled ethanol
blends. Although the BP trial at six service stations in Brisbane was
both a technical and marketing success (some ten million litres of ethanol-blended
petrol sold), sales fell after the adverse publicity in late 2002.
"We now have no immediate plans to supply ethanol-blended petrol
in Australia," says Bill Frilay, Manager Government Relations,
BP Australia. "At the moment, it is a big risk for little reward.
We will, however, be assessing it further - taking into account financial
viability, environmental impact and operability issues. The main obstacles
are low demand due to confused and reluctant customers, and uncertainty
over supply in the longer term with the application of excise from 2008."
Caltex is hopeful that its trial of E10 Unleaded (10% ethanol-petrol
blend) at six sites in Cairns will help restore confidence with distinctive
branding and local promotion.
"If enough consumers switch to the new fuel for their regular
purchases that will be a critical step in making it a viable, commercial
product," says Jeet Bindra, Managing Director, Caltex Australia.
"If the trial is successful, there is potential for expanded use
of ethanol as a fuel to make a useful contribution to the economy of
regional Queensland. Consumer response data from this trial will help
Caltex develop the next steps in the wider introduction of E10 Unleaded."
The commencement dates for the cap and labelling should be finalised
soon, and you can expect the new requirements to be in place by mid-year.
Where the requirements are in conflict, Commonwealth regulation will
override the Victorian labelling requirements.
More on leak detection … they mean it!
EPA Victoria undertook an audit of 22 retail sites and did not like
what they saw. One-third of the sites use old steel petrol storage tanks
without corrosion protection: These are generally believed to present
the greatest risk of developing leaks. They also found:
- Rural sites have a lower standard of environmental risk management
than most metropolitan sites;
- There was inappropriate disposal of the waste generated from cleaning
up a spill;
- The majority of outlets used inventory control as the sole means of
leak detection to prevent soil and groundwater contamination; there
were many different methods of inventory control, of varying accuracy,
being used; and
- A high risk to surface water as a result of inadequate spill management
provisions.
EPA Chairman, Mick Bourke said, "It is imperative that owners
and operators take responsibility for these sites and the protection
of their local environment. They should be aware that EPA will take
enforcement action if they cause or allow breaches of the Environment
Protection Act 1970 or subordinate legislation."
Green stamp goes national
The MTA-WA, on behalf of the six other MTAA-affiliated associations
around Australia has developed an eco-efficiency agreement with the
Commonwealth Government. This partnership includes the development and
distribution of a range of resources and initiatives such as those developed
by the Green Stamp Program to assist you to identify and reduce the
environmental impacts of your business. Green Stamp was featured in
the January/February issue of Australian Convenience Store News.
Refineries rationalise
Change is slow in the highly capital-intensive refining sector, but
it is happening. Refinery exchange was defended as an essential part
of the Australian refining industry for many years. It was held to lower
the cost of supply to a large nation with a dispersed population. On
1 July 2002, refinery exchange - whereby refiners swapped product, litre
for litre - was replaced with transactions between refiners on a commercial
basis, due mainly to the increasingly different interstate fuel standards
and the introduction of differentiated products such as high octane
petrols.
More significant is the closure of the Port Stanvac refinery in Adelaide
that will reduce domestic supply by 78,000 bpsd (barrels per stream
day), bringing the domestic fuel market close to balance. According
to numbers provided by the AIP, by the end of December 2001, nameplate
capacity had increased about 20,000 bpsd in two years due to increases
associated with upgrades at Lytton, Kurnell and Bulwer Island. There
was more than 100,000 bpsd (barrels per stream day) of supply in excess
of domestic demand (slightly less after exports), before the closure
of Port Stanvac.
Even so, these changes are not expected to have a big impact down the
supply chain. "The impact of the Port Stanvac closure on retailers
should be negligible," say Tony Cudmore, Government Relations Adviser,
Mobil Oil Australia. "We have made arrangements to supply Mobil
customers in South Australia from our regional supply network, and it
is likely that mostly fuel will be sourced from Singapore refineries.
The Australian market is no longer a national market, but is integrated
into the regional market and prices already reflect the Singapore market.
Port Stanvac refinery was not financially viable. Mobil Oil Australia
lost $208m in 2001 and $91m in 2002, mostly in the refining business.
A major part of the loss was performance of Port Stanvac. Operations
at the refinery will cease progressively over the next few months.
Dennis Boldock, Deputy Executive Director, MTA(SA), agrees: "Some
50% of fuel already comes from outside the State, and Port Stanvac has
not been in the refinery exchange system for some time. Retailers will
notice a change in the extent of temperature correction - the hot fuel
from the refinery is being corrected a lot more than the imported fuel.
However, neither the closure nor the end of refinery exchange is a big
deal for retailers. We are more concerned about the prospects of the
Coles-Shell deal and other impending supermarket-fuel combinations.
Last but very far from least, supermarket fuel
The Coles-Shell alliance announced in May will be the single biggest
change in the recent history of the Australian petrol market. In the
next issue of Australian Convenience Store News, we will feature a comprehensive
article that asks (and answers) the question, "What does the alliance
mean to retailers?"
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