Govt's proposed fuel changes a ticking time-bomb - Naamsa

Cape Town - Time is running out for government to avoid the oil currently refined in SA from becoming illegal, Stuart Rayner, chair of the fuel and emissions committee of the National Association of Automobile Manufacturers of SA (Naamsa), told Fin24 on Wednesday.

Rayner explained that Naamsa basically has two concerns relating to the proposed Clean Fuels 2 (CF2) programme of the Department of Energy (DoE). The programme is scheduled for introduction in July 2017 and would bring a major reduction in fuel sulphur in SA, which is necessary for the introduction of newer tech, low-emission vehicles to the domestic market.

It is, according to Rayner, not possible anymore to introduce CF2 by July 2017, because government has not reached an agreement with local refineries yet on the financing of the necessary investment to bring about this programme.

READ: Our refineries must be upgraded to produce cleaner fuel ... Who will pay?

"Naamsa's concern going forward is that, if the cleaner fuels are not being produced and sold in SA, it will restrict newer technology and lower-emission vehicles from coming into the country and being manufactured here. In a few years' time we will then see that European specified (spec) vehicles won't be able to be sold in SA without some type of disablement of vehicle emission system," Rayner told Fin24.

"The problem is to make these fuels as determined by CF2 local refineries need to make major investments. The question still remains how they can recover these investment costs. The oil industry has been in negotiation with Government on how some type of cost recovery would work, but no finality has been reached."

If the CF2 regulations are not changed before July 2017, all the fuel currently sold in SA would technically become illegal.

Metal additives

A second issue of concern for Naamsa on the topic is actually for Rayner the more urgent of the two.

It seems a given that government would have to change the current CF2 regulations to delay the now impossible-to-meet July 2017 introduction deadline.

The DoE is now proposing that, when the CF2 regulations are changed, it also makes provision for the reintroduction of metal additives into unleaded petrol. Metal additives have actually been prohibited in SA since 2006.  

"We don't really understand why the department wants to allow this again. The only explanation we can think of is that there is some vested interest somewhere. It would be a completely retrograde step and will compound the problems for the auto industry," said Rayner.

The DoE wants to allow a manganese additive of which SA is a major supplier.

READ: SA auto industry in for another bumpy year - Naamsa

"The argument does not add up as the amount of manganese used in fuel is so tiny - only an estimated two truckloads a year. Refiners like to use the metal additive as it reduces the cost of manufacturing petrol. Of course in SA it would not necessarily mean a reduction in fuel prices, which are set by government," said Rayner.

"Most oil companies indicated that they won't use these metal additives. Naamsa is, however, cautioning that, if the metal additives are permitted in the CF2 regulations, one cannot guarantee that some companies will not make use of it as it would save them money.

"Even if these oil companies don't use metal additives, the fact that the SA Government allows it would classify the country as a dirty fuel market by parent companies. That would be bad news in terms of restrictions on the use of new technology and makes vehicle manufacturers concerned too."

Naamsa is particularly concerned that the newer tech vehicles will be affected, even during the warranty period.

Submissions

Naamsa made submissions to the DoE in the latter part of 2016 and was subsequently asked to provide more information.

"We have provided the department with test reports from around the world, which clearly show that manganese additives result in damage to the vehicle emission system over time," said Rayner.

"There are increasing concerns among vehicle manufacturers and in the oil industry, which government seems to ignore. It is now a waiting game.

"Government has indicated that it will issue a final statement by March, but the issue is heating up. Even if government decides just to move the implementation date of CF2 - which I think they should do - SA will still have problems regarding newer tech vehicles in the medium to longer term."

Fin24 contacted the DoE on Wednesday, but was informed that the relevant people who can comment are still on leave.

BusinessTech, however, reported that the DoE's deputy director general of planning and policy‚ Ompi Aphane‚ had indicated that government was "keeping an open mind" about the fuel regulation proposals. He said “significant capital investment in refineries would be financed by a higher consumer fuel price”.

“In the end‚ we will take the decision which is best for the country‚ obviously taking into account the impact on the export market,” said Aphane.