07 October 2016, Switzerland — Swiss commodity trading companies take advantage of weak fuel standards in Africa to produce, deliver and sell diesel and gasoline, which is damaging to people’s health. Their business model relies on an illegitimate strategy of deliberately lowering the quality of fuels in order to increase their profits. Using a common industry practice called blending, trading companies mix cheap but toxic intermediate petroleum products to make what the industry calls “African Quality” fuels. These intermediate products contain high levels of sulphur as well as other toxic substances such as benzene and aromatics.
Fuels have been on the agenda for some time already. Beginning in 2002, the UN Environmental Programme (UNEP) conducted a ten-year campaign that led in most countries to a ban on lead in gasoline. However, fuels still account for other severe health issues. The issue of sulphur content must be urgently addressed.
This report is the result of three years of research by Public Eye (formerly the Berne Declaration). It highlights the contribution by the commodity trading industry to outdoor air pollution in Africa and the related health effects.
The Issue: Sulphur, A Ticking Bomb that Needs Defusing
African mega-cities such as Lagos or Dakar already have worse air quality than Beijing. Rapid urbanisation, the growing numbers of cars, and the poor quality of these cars, which are mostly second hand, partly explains the worsening air pollution in African cities.
The crucial factor though is that most African countries still permit the use of high-sulphur diesel and gasoline. On average, African sulphur limits in diesel are 200 times above the European limit, in some countries this figure is as high as 1,000.
Sulphur in fuels is crucial to air pollution because of its direct health-damaging effects but also because it destroys emissions control technologies in vehicles. As long as fuel sulphur content remains so high, any efforts to reduce air pollution (for example, by modernising Africa’s car fleet) will be in vain. Without rapid and meaningful improvements in fuel quality, traffic-related air pollution will soon be a major health issue (see chapter 3). Respiratory diseases such as asthma, chronic obstructive lung diseases, lung cancer and cardiovascular diseases will rise.
On the other hand the use of ultra-low sulphur fuels (10 parts per million [ppm] sulphur) would immediately halve the emissions of pollutants. If done together with the introduction of cars that use existing emissions control technologies, the emission of pollutants could be reduced by 99 percent.
The Players: The Swiss Trading Companies
The fuel business in Africa is very opaque. Over the past decade, important shifts have happened, almost unnoticed. As oil majors pulled out from Africa’s retail business, Swiss trading companies moved in, expanding downstream to control key as sets such as storage facilities and hundreds of petrol stations across Africa (see chapter 4).
Hidden from view by operating behind the Shell and Puma Energy brands, two big Swiss trading companies Vitol and Trafigura, together with smaller Swiss companies, have a dominant position in the import and distribution of petroleum products in many African countries, especially in West Africa. Other heavyweights, namely Glencore, Mercuria and Gunvor, that don’t own petrol station networks, are equally important in supplying African markets. To access markets and increase their market share, they often rely on dodgy local door-openers or other politically exposed persons (see chapter 5).
The Test: Sampling at the Pump
Public Eye tested fuels sold at the pump by Swiss trading companies (see chapter 6). Countries were selected based on their weak fuel standards and on the presence of petrol stations owned by Swiss trading companies. We analysed samples from eight coun tries: Angola, Benin, the Republic of the Congo, Ghana, Côte d’Ivoire, Mali, Senegal and Zambia. The trading companies sampled were Trafigura (operating through Puma, Pumangol, Gazelle trading, UBI), Vitol (Vivo Energy with Shell brand), Addax & Oryx Group (Oryx) and Lynx Energy (X-Oil).
More than two thirds of the diesel samples (17 out of 25) had a sulphur level higher than 1,500 ppm, which is 150 times the European limit of 10 ppm. The highest level of sulphur was in a diesel sample from one of Oryx’s petrol stations in Mali, where the sulphur content was 3,780 ppm. Almost half of the gasoline samples (10 out of 22) have a sulphur level between 15 and 72 times the European limit of 10 ppm. Worryingly, we also detected other health damaging substances in concentrations that would never be allowed in a European or US fuel. These substances include polyaromatics (diesel), aromatics and benzene (gasoline). In a number of samples, we found traces of metals that would also contribute to higher emissions of pollutants and damage car engines too.
The Context: Toxic Fuels Brought to Africa
West Africa is a significant producer of crude oil. But due to its lack of refining capacity, the region must import roughly half of its diesel and gasoline, which is high in sulphur, mostly from Europe and the US.
Around 50 percent of the fuels imported to West Africa come from Amsterdam, Rotterdam and Antwerp, collectively known as the “ARA” region (see chapter 8). Trade statistics show 80 percent of the diesel exported from ARA to Africa has sulphur content at least 100 times above the European standard. This figure soared to an average 90 percent for West Africa, with Ghana (93 percent), Guinea (100 percent), Senegal (82 percent), Nigeria (84 percent) and Togo (96 percent) receiving the biggest volumes.
Based on specific cargoes, official documents from Ghana show that, in both 2013 and 2014, diesel imports contained sul phur levels extremely close to the legal limit. This all happened even as specifications were changed between 2013 and 2014. This shows how trading companies are able quickly to adapt to new standards, sticking as close as possible to the limit (see chapter 7). Swiss trading companies play a major role in transporting fuel from the ARA region, and from the US, to West Africa. In the case of Ghana, these companies delivered most of the known high sulphur cargoes in 2013 and 2014.
The Business: Blending Fuels
Contrary to what most people might think, fuels such as diesel or gasoline tend not to come straight from refineries. Instead, the refineries produce intermediate products, which are then mixed together, occasionally with intermediate products from other sources (such as the chemical industry). This process is called “blending” (see chapter 9). To make matters more com plex, different types of refineries produce different intermediate products or “blendstocks”.
Gasoline is always a blended product because vehicle engines require a particular mix, which usually consists of between six and ten blendstocks. By contrast, diesel does not need to be blended. However, since blending is a profitable activity and since refineries do not produce enough diesel by them selves, diesel is also blended. It usually consists of between four and six blendstocks.
Blending does not require a huge infrastructure. A few pipes and tanks are usually enough to prepare a specific blend of diesel or gasoline. It can be done in tank terminals, onboard ships, or at the interface between the two while still in port.
Having become giants with revenues of hundreds of billions of dollars, Swiss commodity trading companies have more oil tankers at sea and own more storage capacity than the oil majors. Storage capacity is key not only to trading but also to blending.
The Illegitimate Business: Making “African Quality” Fuels
As trading companies (and other blenders) explain, they “tailor” fuels to meet the standards of the country they supply. They call this blending “on-spec”, or according to required specifications. This can refer to the required specification of sulphur content, or to the content of any other regulated substances, such as ben zene or aromatics.
Differences between national fuel quality regulations offer opportunity for companies to profit from a form of regulatory arbitrage. With weak standards, Africa is an excellent example. And industry uses the term “African Quality” (see chapter 10) when referring to low-quality fuels, characterised primarily by their high sulphur content, although the term also refers to fuels with other low-quality aspects.
Africa’s weak fuel standards allow traders to use cheap blendstocks, dropping production costs and making the produc tion of low fuels a lucrative business model.
These cheap blendstocks are also of poor quality and, most importantly, they damage health through their high levels of sulphur, aromatics and benzene. Such blendstocks could never be used in European or American markets. Sometimes fuels also contain waste and recycled blendstocks from the chemical industry and elsewhere, posing additional risks.
Traders and other blenders, who have a below specification petroleum product on their hands, will search the market for other blendstocks (nicknamed “tasty juices”) that will enable the production of an onspec fuel. The closer to the specifica tion boundary the product lies, the larger the potential margin for the trader. On the other hand, if the trader has a product that is above the specification, then it may be able to purchase cheap, low-quality “juices” to blend in. The process of lowering product quality is known in the industry as “filling up quality give-away”.
In principle, blending is a legitimate and necessary technical process, but there is a large margin for abuse when it comes to blending low-quality blendstocks – a practice we call “blend dumping”. We consider this to be an illegitimate practice. Con taminants present in any blendstock, such as sulphur and benzene, should be minimised or fully eliminated by further refining, not diluted to meet the weak standards of African countries.
The Hub: Where African Quality Fuels Are Produced
While African Quality fuels could never be legally sold in Europe, they are produced in Europe nevertheless. The ARA region has become the main hub for the blending and shipping of fuels, especially diesel, to West Africa for a number of reasons, includ ing its extensive refining and blending capacity, its strategic po sition (which allows it to receive petroleum products and blend stocks from the UK, Russia and the Baltic countries), and its geographic proximity to West Africa (see chapter 11). The Swiss trading companies own or hire extensive blending facilities in ARA and we can prove for the first time that they dominate the export of African Quality fuels to West Africa.
Besides Europe, the blending is also done offshore the West African coast. Most West African ports are too small to receive a large number of tankers or have limited draft, which prevents the larger European tankers from entering. Mostly coming from the ARA region, these oil product tankers sail across the Atlan tic Ocean and meet in the Gulf of Guinea. Mostly in Togolese waters, they transfer petroleum products from one vessel to an other in an operation known as ship-to-ship (STS) transfer. The usually smaller tankers then sail off, discharging the products to different countries in the region. These STS operations are also a common way to blend products.
The Conclusion: Ban All Dirty Fuels
Now is the time for African governments to act. They have the chance to protect the health of their urban population, reduce car maintenance costs, and spend their health budgets on other pressing health issues. By moving to ultra-low sulphur diesel, Africa could prevent 25,000 premature deaths in 2030 and al most 100,000 premature deaths in 2050. An examination of past experience, the price structure of diesel, and recent developments on the continent show that African leaders shouldn’t fear significant price increases from improving the standards of fuel (see concluding chapter 12).
In January 2015, for example, five East African countries adopted low sulphur fuels with no impact on prices at the pump, or on government spending through subsidies. A limited increase of prices at the pump should in any case be balanced with the health and associated savings of reducing air pollution from high sulphur fuels. The savings from better health are by far higher than the effects of the potential costs of cleaner fuels.
Four different sets of actors should take decisive steps immediately:
African governments (and others with weak fuel standards) should set stringent fuel quality standards of 10 ppm sulphur for diesel and gasoline, and introduce European limits on other health damaging substances. Whether or not they have sufficient refining capacity in the country or can only import, governments should be strict with implementing fuel standards. If not, their fuels will quickly contain bad blendstocks. The blenders know exactly which standards apply where, and how best they can dump their African Quality blends.
Swiss trading companies should stop abusing Africa’s low fuel quality standards, recognize that if left unchanged their practices will kill more and more people across the continent, and immediately produce and sell to African countries only fuels that would meet Europe’s high fuel quality standards.
Governments of export hubs for African fuels (such as Amsterdam, Antwerp or the US Gulf) should prohibit the export of any health damaging fuels or blendstocks, which would never be used in their own country.
The Swiss government should implement mandatory human rights and environmental due diligence requirements for Swiss companies, covering the entire supply chain and including potentially toxic products.
*Marc Guéniat, Marietta Harjono, Andreas Missbach, Gian-Valentino Viredaz – Public Eye