Sinopec to clean up its gasoline

Sinopec Corp, Asia's largest refiner, announced over the weekend it plans to sell gasoline that meets a higher environmental standard in 2014 amid public concerns over oil quality, one of the factors blamed for China's lingering smoky haze.

But industry observers noted this move would certainly push up gasoline prices, as the refiner's cost burden will increase in upgrading its facilities to produce cleaner oil products.

By the end of this year, upgraded desulfurization facilities will be built and begin operation in Sinopec's 12 subsidiary refineries, and starting from 2014 the refiner will sell oil products meeting National Standard IV for pollutant emissions across the country, Sinopec said in a statement Friday.

The statement came only one day after the refiner's Chairman, Fu Chengyu, said that oil refiners were among those bearing direct responsibility for the haze.

Although Fu has denied the widespread accusation that substandard oil products are directly responsible for the severe air pollution, he was quoted by China National Radio as saying Thursday that the country's low oil standards should be blamed for the smog shrouding big parts of the country.

Instead of enforcing a nationwide standard on sulfur content, the country applies different standards varying by region.

Beijing is currently the only city in China that uses National Standard V, which is equivalent to the Euro V standard for vehicle emissions and caps oil products' sulfur content at below 10 parts per million (ppm), while other developed regions including Shanghai, Jiangsu and Zhejiang use National Standard IV of 50 ppm or below.

The rest part of the country still uses National Standard III, which allows the maximum sulfur content to hit 150 ppm.

Fu's remarks quickly aroused public contention, with Zhao Jingwei, a Beijing-based lawyer specializing in environmental protection, arguing that Sinopec is trying to pass the buck, while it actually has control over how the national standard is revised, the Legal Daily reported Friday.

Sinopec could not be reached for comment on Sunday.

China National Petroleum Corporation, another major State-owned refiner, has yet to respond to the public outcry against poor oil quality.

Sinopec's surprise announcement on Friday also reinforces concerns about price hikes in gasoline.

"Oil refining firms would certainly pass on to consumers the rising costs of upgrading oil quality," Lin Boqiang, director of the Center for Energy Economics Research at Xiamen University, told the Global Times Sunday.

Sinopec would have to spend big to upgrade its facilities, which could translate into a price hike of around 0.35 yuan (6 cents) per liter of gasoline if National Standard IV is adopted nationwide, predicted Chen Qing, an oil product analyst with Shandong-based commodity consultancy Sublime China Information Co.

Over 200 billion yuan have been invested in upgrading related facilities in the past few years, Lü Dapeng, a spokesperson for Sinopec, told the Global Times last week, calling for policy stimulus measures from the government to help allay the cost pressure on the refiner.

Restructuring the country's energy sector to favor the use of clean energy will be of vital importance in handling the issue, Lin said.