Euro5 diesel: Dawn of a new era

0

KUCHING: As a new offering in the market, the Euro5 diesel is significantly better and may drive a long-term increase demand for diesel vehicles on the road and benefit the plantation sector via the increase in biodiesel demand.

This follows RHB Research Institute Sdn Bhd’s (RHB Research) analysis into the fuel as it observes that BHPetrol (BHP) will likely roll out its Infiniti Euro5 diesel in Klang Valley this month.

“So far, Euro5 would be offered only by BHP and Petronas in Johor Bahru, for motorists to comply with Singapore’s stricter emission standards,” it highlighted.

Being unable to find any test results comparing Euro5 B7 and the current Euro2 B7, RHB Research decided to conduct a test themselves to see if there was any difference between the two diesels.

As the research house also wanted to find out if adding palm-based biodiesel to diesel would result in any loss of power (in driving), there was a need to compare this to unblended diesel.

“For the test, we used an unnamed Malaysian Euro2 B7 diesel, Euro5 B-zero from Caltex Singapore, and BHP’s Euro5 B7 diesel, currently available in Johor Baru,” it said.

RHB Research concluded that the two Euro5 diesel variants were a significant upgrade compared to the current Euro2 B7 – in terms of better power output, lower noise level and cleaner tailpipe emission.

The differences could be felt but the research house conducted tests to arrive at its conclusions in the form of repeated dynamometer test, a scientific measure of power output, a less scientific measure for noise levels using an Android app and an unscientific visual test for emission.

RHB Research was hopeful that this will be a thing of the past with the introduction of Euro5, which will encourage automakers to bring in diesel models.

The research house believed the availability of Euro5 will encourage automakers to introduce diesel models here.

It believed the small price premium (RM0.10 per litre) for Euro5 would not hinder consumers from switching to Euro5.

“Already, Mazda will have models based on its new 1.5L and 2.2L diesel engines introduced here in end-2015 or early 2016, which is likely a bet on Euro5 availability.

“These models have already been introduced in Thailand,” it said.

RHB Research noted that the main increase in diesel models offered will come from European carmakers.

It added that the European marques with presence here – such as Audi, Ford, VW, Skoda, Renault, Citroen, Mercedes Benz and BMW – are the most likely to introduce diesel models.

The upside for increase in diesel consumption and hence biodiesel offtake, is significant, in RHB Research’s view.

The research house said that based on World Bank data, Malaysia’s road sector diesel consumption per capita stood at only 211 kilograms (kg) compared to more than 300kg for developed countries.

It estimated that the diesel car population in the country is less than 10 per cent compared to 50 to 55 per cent in Europe.

“Assuming Malaysia hits a 300kg per capita, biodiesel consumption could rise to around one million tonnes from the current 0.7 million tonnes per year,” it said.

With the introduction of Euro5, RHB Research noted that this would, in turn, boost long-term diesel consumption and, along with it, biodiesel demand – provided there is no forced implementation of B10 biodiesel.

 

 

 

The research house underlined that Malaysia’s Plantation and Commodities minister Dato’ Sri Douglas Uggah Embas has said that B10, ie 10 per cent biodiesel mixed with 90 per cent petroleum diesel, will be introduced in September this year.

“B10 will lift the country’s biodiesel consumption to 1.2 million tonnes per year,” it said.

RHB Research admittedly was surprised by the strong objection from the automotive industry to B10 implementation.

The research house noted that BMW warned of potential engine damage and other automakers have indicated various instances of issues with B7, like the fuel filter clogging among them.

It further noted that the existing issues with B7 will likely worsen with B10.

“However, unlike B10, the existing B7 implementation was actually supported by the automotive industry,” it said.

The short-term boost to biodiesel demand notwithstanding, RHB Research feared that a forced implementation of B10 without the automakers’ nod will give rise to the risk of longterm decline in demand for biodiesel.

The research house noted that this is especially so should engine failure become evident following the B10 implementation, as automakers are likely to withdraw diesel models from the Malaysian market.

“Hence, the 1.2 million tonnes of biodiesel consumption targeted could be reached but will not be sustainable,” it said.

Should the Government maintain the existing B7 blend and better-quality diesels such as Euro5 or Euro5 are introduced, RHB Research believed Malaysia will be able to consume at least one million tonnes of biodiesel per annum on a sustained basis, given time for the adoption of new diesel models.

The research house noted that the number could rise further in accordance with vehicle population growth.

“Road sector diesel consumption has risen at the rate of 3.7 per cent per annum from 2000 to 2011.

“Should this rate be maintained, diesel consumption would be 16 per cent higher by 2020,” it said.