A shift to cleaner fuels is filled with delays and missed deadlines.
This year was supposed to be the last before Ukraine switched to high-quality, environmentally friendly gasoline and diesel fuels for cars. But the industry-wide move to Euro-4 standard fuel, originally set for Jan. 1, 2011 by the government, could be postponed until 2013, as many fuel producers say they are not ready and need more investment in production.
The rising use of automobiles by Ukrainians, in tandem with continued use of low-quality fuels, is a major cause of the choking pollution experienced in cities across the country. And use of low-quality fuels can also negatively affect the performance of some modern cars that are made to run on the latest fuels.
Ukraine has been gradually moving toward cleaner fuels since 2000, when it declared its plan to follow European emissions standards. In 2005, the country signed a roadmap with the European Union aimed at improving fuel quality and reducing harmful emissions according to the “Euro” scale.
“The movement toward more clean fuel has slowed due to little encouragement from the government and lack of motivation to invest into modernization from owners.”
– Serhiy Kuyun, head of the A-95 consulting group, which specializes in the oil and gas sector.
Euro-4 fuels, which became standard in Europe in 2005, emit less than half the amount of toxic carbon monoxide as Euro-2 fuels, the current standard in Ukraine.
While there has been some movement in the right direction, overall progress seems to be hitting road blocks along the way.
“The movement toward more clean fuel has slowed due to little encouragement from the government and lack of motivation to invest into modernization from owners,” said Serhiy Kuyun, head of the A-95 consulting group, which specializes in the oil and gas sector.
Spluttering progress
One of the major steps forward was made when the government approved the Euro-2 standard in 2006 and set the goal to move to Euro-4 from the 2008.
“Then the industry first asked for additional time – three years – to conduct the necessary modernization on production, and the government agreed [to push the date back to] January 2011,” said Kuyun.
As the deadline approaches, industry experts say only two fuel processing plants in the country are prepared for Euro-4 standard: TNK-BP’s plant in Lysychansk, which has a 23 percent market share, and Lukoil’s plant in Odesa, which controls 8 percent of the market.
Other major fuel-processing plants, such as Privat Group’s plant in Kremenchuk, which has a 25 percent market share, and state-owned plant Shebelynka, with a 6 percent market share, as well as the smaller Nadvirna and Drohobych plants, also controlled by Privat Group, are not ready to produce Euro-4.
“Many work with old-fashioned equipment because legislation is weak and doesn’t set responsibility for polluting the environment, meaning modernization is [the company’s] decision.”
– Oksana Volosko-Demkiv, partner at the Center for Environmental Consulting and Auditing.
Oksana Volosko-Demkiv, partner at the Center for Environmental Consulting and Auditing, which works in environmental protection, said most fuel processing plants in Ukraine haven’t carried out overhauls – not because of a lack of financial assets, but due to a lack of business culture and responsibility.
“Many work with old-fashioned equipment because legislation is weak and doesn’t set responsibility for polluting the environment, meaning modernization is [the company’s] decision,” said Volosko-Demkiv.
Ukrtatnafta, the subsidiary of Pryvat Group that operates Kremenchuk fuel processing plant, couldn’t be reached for comment.
In response to this situation, the Ministry of Fuel and Energy last month suggested moving the deadline later – to Jan. 1, 2013.
The ministry didn’t respond to emailed questions. Although the final decision is still being made, market insiders expressed concern.
Fuel producers are concerned that after pumping millions of dollars into modernization, they will now be in a disadvantaged market position.
“Our main refinery [in Lysychansk] will produce only Euro-4 standard from the 2011. And we will have to sell it for the same price as other players sell Euro-2 fuel,” said Dmitri Zverev, TNK-BP’s press-secretary in Ukraine.
Negative effects
The postponement of the shift toward Euro-4 has a significant ecological impact because it slows the movement to more ecologically friendly fuel consumption in Ukraine. If the government approved Euro-4 standards enforcement from 2011, old-fashioned and polluting patrols, like the A-76-80 would disappear completely, explained TNK-BP’s Zverev.
“The quality of fuel significantly affects the functioning of engines in new diesel and petrol models. Because of this we don’t import specific models that are sensitive to quality.”
– Oleksiy Litvinov, product and pricing manager at Toyota Ukraine.
The market of low quality fuel also affects car imports, especially those with more ecological engines.
Oleksiy Litvinov, product and pricing manager at Toyota Ukraine, says that low official standards of fuel in Ukraine can mean that car producers don’t offer their latest, best products. “The quality of fuel significantly affects the functioning of engines in new diesel and petrol models.
Because of this we don’t import specific models that are sensitive to quality,” said Litvinov.
And it’s not just commitments to the EU that the government will be lagging on if the bar is not raised soon. A commitment was also made to the World Trade Organization when Ukraine joined in 2008 to bring the country into line with European standards by 2012.
“We are not sure that the next deadline [possibly in 2013] will be kept,” said Zverev. “This significantly halts the development of the overall market.”
Kyiv Post staff writer Olga Gnativ can be reached at [email protected].
