Dilemma in oil upgrades: quality improvement, supervision, and cost commitment

On September 23, 2013, the National Development and Reform Commission issued a circular on the policy of achieving higher prices for higher quality oil products. Except for Beijing, Shanghai, etc., which have been upgraded to the fourth phase, the nationwide upgrade of gasoline and diesel oil to the fourth phase of the oil products RMB 290 and RMB 370 per ton were increased from the fourth phase to the fifth phase of gasoline and diesel for 170 yuan and 160 yuan per ton. Although the process of upgrading oil products varies from place to place, the introduction of the policy does not mean that local governments will implement fare increase immediately, but it also means that the era of high quality oil and gas products nationwide has arrived. However, experts believe that oil price increases are easy, upgrades are difficult, availability of higher prices, and strengthening supervision is the key.

The standard is easy to rise

Although the introduction of the national fourth-phase and fifth-phase gasoline and diesel quality standards and the development and implementation of the circuit diagrams have undergone years of research and investigations, they have also been motivated by debates in the automotive and petrochemical fields, but compared to the oil upgrade itself, Obviously much easier.

Li Xihong, a well-known energy economic expert and president of the China Petrochemical Economic Research Institute, told reporters that the quality of gasoline has been upgraded from the third phase to the fourth and fifth phases. There are several major changes from the main indicators: First, the sulfur content has been greatly reduced. The 150ppm of the country's three countries dropped to 50ppm of the country's four countries and 10ppm of the country's five countries. The second is that the olefin index has also declined, from 30% of the country's three countries to 28% of the country's four countries, and 25% of the country's five countries; It will be reduced from the national level of 0.016g/L to the national level of 0.008g/L.

From the point of view of the process and installation, there are several points that must be fulfilled: First, in order to reduce the sulfur content of gasoline, the catalytic gasoline needs to be hydrogenated. Second, after the hydrogenation of catalytic gasoline, the octane number (the core indicator for measuring the quality of gasoline) is lost by at least one unit (different process losses), and the decrease in the amount of added manganese additive also reduces the octane number of gasoline, and therefore needs to be increased. High octane gasoline components require the creation or modification of catalytic reformers and MTBE units. Third, there is a need to build and improve on-line gasoline blending facilities.

For the upgrade of vehicle diesel oil quality, the main indicator changes are to reduce the sulfur content, increase the cetane number (49 from the original 45 to the fourth, and 51 to the national five), and reduce the aromatic hydrocarbons. Sulfur reduction requires hydrofinishing. Moreover, due to the low cetane number of domestic catalytic diesel, high-pressure hydrogenation and upgrading of catalytic diesel oil are required to produce qualified automotive diesel fuel.

In addition, the upgrading of gasoline and diesel will not only need to increase the corresponding supporting public works, but also must build hydrogen production equipment with very high investment intensity to produce high-purity hydrogen. At the same time, hydrogen sulfide, which is a toxic gas generated during the hydrogenation process, must be recycled to build a recovery device.

More importantly, the quality upgrade of gasoline and diesel makes the production process complicated, the production cycle lengthens, and the production efficiency declines, directly and dramatically increasing the operating cost.

Therefore, upgrading is far from simple.

Policies are easy to implement

Despite the long-term cost calculation, demonstration and discussion of the oil upgrading and price increase policy issued by the National Development and Reform Commission, the Ministry of Finance, and various local authorities, the formation of today's more mature and scientific pricing policy is not easy, but if it is to achieve high quality oil products Better price regulation is still much easier.

Professor Wang Zhen, executive director of the China Energy Strategy Research Center of China University of Petroleum, believes that the biggest issue to ensure quality and higher prices is regulation. The U.S. government can dynamically monitor every oil price, real-time monitoring from production, quality, and environment, but our regulatory capacity is far too short. After the introduction of the premium price policy, the spread of oil products of different qualities will increase, and profit margins for fraud will increase. If supervision is weak and penalties are weak, it is easy for bad money to drive out good money.

Dong Xiucheng, a professor at China Petroleum University, said that supervision is divided into two levels. One is price regulation, which is relatively easy; the other is quality supervision, which is very difficult. The status quo is that oil products are exempted from the supervision by the quality supervision department, and they are usually entrusted by the enterprises to self-inspection; the oil commerce departments responsible for wholesale, transportation, and gas stations are responsible, and the quality management is the responsibility of the industrial and commercial department. Multi-headed management is prone to problems.

Professor Yunyun Yun, director of the International Laboratory of Automotive Power and Emissions Testing at Beijing Institute of Technology, said that even if the supervision of each link is in place, under the current mechanism, oil testing costs may be unbearable. The testing cost for a business entity and a brand of oil-related product specification indicators is at least 10,000 yuan. With more than 200 refineries and nearly 100,000 gas stations, the cost will be astonishingly high even if it is checked occasionally. Moreover, each test cycle is two or three weeks, and other issues emerged. The oil product has already been sold and excess emissions have already formed.

Understanding the significance of oil upgrades is easy to bear costs

Oil upgrades use environmental protection, use purified air quality, and high quality and favorable prices are conducive to energy conservation. It is easy to understand important meanings, but it is relatively difficult for all stakeholders, relevant regulatory bodies, and even every consumer to consciously perform their duties and willingly bear the corresponding costs.

First, will the refinery or installation that has not been upgraded be able to stop production as soon as the deadline? If the company does not stop production, will the local government be able to increase penalties and stop and switch firmly? Will the notion of sacrificing the environment and paying attention to GDP for a long time will change the policy?

Secondly, will there be similar phenomena such as pollution discharge? When strictly supervised, the refinery strictly follows the process and procedures for production, and when the supervision is relaxed, it cuts down on work and shoddy, and shoddy?

Third, can the relevant regulatory and monitoring agencies cooperate with the introduction of policies to substantially increase supervision, detect costs and investment, and truly assume corresponding responsibilities?

Fourth, when faced with the temptation of abnormally low oil prices, is every consumer willing to pay a high price for ensuring the quality of oil?

All of these will determine the speed and effectiveness of the oil upgrade process.

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