Government committee recommends Ethanol-Petrol blending: what does it mean for consumers?

A government committee, headed by Minister for Petroleum Ali Pervaiz Malik, has recommended last week that refineries in Pakistan be allowed to voluntarily blend 5% ethanol with domestically produced petrol, contingent on commercial viability. 

The recommendation follows a detailed examination of options for ethanol-petrol blending and has been submitted to the Prime Minister’s Office. The report has since been referred to the deputy prime minister for further deliberation.

Ethanol is a by-product of sugarcane crushing, a powerful industry in Pakistan, and Pakistan’s annual production stands at around 400,000 to 450,000 tonnes, with most of this output currently being exported due to more lucrative international prices. 

The committee’s analysis revealed that while ethanol is consistently cheaper than petrol by an average of $225 per tonne, its lower energy content means that ethanol would need to be priced 20% to 30% below petrol to be cost-effective for blending. However, the committee also noted that substantial investment is required in infrastructure for ethanol storage and blending.

The committee also examined vehicle compatibility with ethanol-blended fuels. It found that newer vehicles could handle E5 and E10 ethanol blends (containing 5% and 10% ethanol, respectively), but older vehicles and two-wheelers may not even be compatible with such fuels. 

This raises concerns for Pakistan’s largely older vehicle fleet. Pakistan had previously piloted a 10% ethanol blend (E10) in collaboration with Pakistan State Oil between 2010 and 2012, but the initiative was halted when the supply of ethanol became scarce, and producers preferred to export it due to higher international prices.

Understanding Ethanol Blending: What Does It Mean?

Ethanol-blending in petrol is the process of mixing ethanol, a type of alcohol-based fuel, with gasoline to form a blended fuel, often referred to as E5 (5% ethanol blend) or E10 (10% ethanol blend). 

This blending serves two main purposes: reducing the dependence on fossil fuels and reducing emissions. Ethanol mix, being derived from renewable sources like sugarcane, offers a greener alternative to pure gasoline.

In Pakistan’s context, the introduction of E5 (5% ethanol blend) into the market could be an important step toward diversifying energy sources and supporting the local ethanol industry. 

If refineries voluntarily adopt this blending strategy, the domestic market could witness a shift in fuel composition, where a portion of petrol will now come from domestically produced ethanol, potentially reducing reliance on imported oil. 

The plan depends heavily on commercial viability, which requires ethanol to be priced competitively and the infrastructure to be adequately developed. Currently, our refineries face uncertainty around blending standards and a lack of clear mandates, making voluntary blending a risk rather than a business decision. A complete ethanol blending policy with defined targets and pricing frameworks is needed if Pakistan is to take this up seriously. 

Another, rather important consideration, is infrastructure investment. Fuel‑grade ethanol (anhydrous ethanol at ≥99.7% purity) requires distilleries to install additional dehydration units and quality control systems, which can cost millions of dollars per plant to upgrade from industrial‑grade ethanol produced locally. A cost that requires assurances to be given to whichever stakeholder is willing to incur it.

Ethanol blending increases margins for ethanol producers by offering a steady domestic market for ethanol, reducing reliance on exports. However, for Oil Marketing Companies (OMCs), the impact is unknown. It might slightly decrease margins due to ethanol’s lower energy content, requiring higher volumes to match petrol’s performance, or it might increase margins too.

Impact on Performance and Vehicle Compatibility

For a consumer, the most important question is how this blending can affect them. The inclusion of ethanol in petrol, especially in the form of E5 and E10 blends, has both benefits and drawbacks when it comes to vehicle performance. 

Ethanol has a higher oxygen content compared to petrol, which helps the engine burn fuel more efficiently, leading to a reduction in emissions of harmful gases such as carbon monoxide, nitrogen oxides, and hydrocarbons. This makes ethanol-blended fuels a greener alternative to traditional petrol.

However, the effect of ethanol blending on engine performance varies depending on the age and condition of the vehicle. Newer vehicles, typically designed to meet modern emissions standards, are often built with ethanol-blended fuel compatibility in mind. These vehicles can handle E5 and E10 blends without any noticeable issues in performance or fuel efficiency. 

On the other hand, older vehicles and two-wheelers, especially those built before ethanol blends became common, are not compatible with these fuels. Ethanol can cause issues in older engines, particularly those that have rubber seals and gaskets, which may deteriorate or crack due to the solvent properties of ethanol. 

Ethanol also has a lower energy content than petrol, which means older vehicles may experience a decrease in power and fuel efficiency when running on ethanol-blended fuels. This discrepancy could also cause various problems, like starting problems in older engines, especially in colder weather conditions.

Who Does This Affect?

The introduction of ethanol-blended fuels is likely to affect consumers in different ways, depending on their vehicle type and usage. For newer car owners, the impact will likely be minimal, as their vehicles are designed to run on E5 or E10 fuels. In fact, eco-conscious consumers may welcome the change, as it would allow them to use a more environmentally friendly fuel that produces fewer emissions compared to regular petrol.

However there is another problem, according to 2022-23’s vehicle sales data, 70-90% of Pakistan’s vehicle fleet consists of two and three-wheelers, like motorcycles, scooters, autorickshaws, and loaders, most of which run on older carburetted engines. These vehicles, especially two-wheelers (which make up the bulk of the fleet), are largely non-compliant with modern emissions standards, and their engines aren’t designed to handle ethanol-blended fuels. Retrofitting older engines could be costly and technically challenging for many owners, especially in rural areas.

While newer vehicles, including those in the higher-income quintiles, are more likely to adopt E5 or E10 ethanol blends without significant issues. Cars and newer autorickshaws are often only Euro 2 or Euro 4 compliant, making them more adaptable to ethanol use. The petrol engine retrofitting trend could further enable a smoother transition to ethanol, especially for vehicles already retrofitted to run on CNG or LPG.

For motorcycles and older cars, though, ethanol blending may face more resistance. The cost of retrofitting engines or replacing parts could be prohibitively high for low- and middle-income households. 

Therefore, while ethanol blending could work well in newer models or high-end vehicles, adoption in the broader fleet could be slower without targeted government policies, infrastructure development, and support for retrofitting programs.

For the poorer consumers, switching to ethanol-blended fuels could lead to higher maintenance costs, as their vehicles may require modifications or repairs to handle ethanol. In the worst-case scenario, they might be forced to use non-ethanol petrol or modify their fuel systems to accommodate the new blend, both of which could be costly.

Rural areas, where a larger proportion of the population owns older vehicles, may face greater difficulties adapting to the new fuel standard. These households often rely on motorcycles and older cars for transportation, and the transition to ethanol-blended fuels could prove challenging, particularly if the infrastructure for ethanol blending and distribution is limited in these regions.

Why is ethanol blending important?

The move towards blending ethanol with petrol isn’t just about fuel efficiency or vehicle compatibility, it’s mainly a step towards sustainability. As global concerns about climate change and carbon emissions grow, nations around the world are looking for ways to reduce their reliance on fossil fuels. Ethanol, a biofuel made from renewable sources, offers an important opportunity for countries like Pakistan to reduce greenhouse gas emissions in the transportation sector.

In addition to lowering carbon emissions, ethanol blends can help reduce the use of imported petroleum, making countries less reliant on foreign oil and boosting local industries. In Pakistan’s case, with an annual ethanol output of 400,000 to 450,000 tonnes, a portion of this could be used to blend with domestically produced petrol, helping the country achieve a more sustainable energy future while boosting the local ethanol production sector.

The shift towards ethanol blending also signals an effort to create a greener and more diversified energy portfolio. While ethanol does have a lower energy content than petrol, its environmental benefits, along with the potential to help Pakistan meet international climate commitments, make it an attractive alternative to conventional fuel sources.

Ethanol blending, particularly the proposed 5% ethanol mix, presents a complex challenge for Pakistan’s consumers, with both environmental benefits and potential costs. While the move could lower emissions and reduce reliance on imported oil, the success of this transition will depend largely on the compatibility of existing vehicles, the development of infrastructure, and the ability of the ethanol market to compete with traditional fuels. 

It presents yet another catch-22 environmental debate. And it will only make sense if keeping a cleaner fuel mix also becomes the best financial interest of the average Pakistani. As the government moves forward with this proposal, it is crucial to strike a balance between sustainability and consumer interests, particularly for those who may find the transition more difficult.