National fuel standards will soon become mandatory to help fight China's polution.
National IV standard gasoline will be the legal standard as of the 1st of January 2014, with National IV standard diesel being introduced 12 months later in a bid to curb stifling pollution in China's major cities.
The National Development and Reform Commission (NDRC) has brought forward deadlines for introducing higher quality fuels. National V standard for both gasoline and diesel will likely come online in 2018.
In most big cities, between 22% and 34% of PM2.5 emissions comes from vehicles, especially those using fuels with a high sulphur content. As particle emissions from diesel vehicles are typically 100 times higher than their gasoline counterparts, the new regulations may not have an immediately noticeable effect.
State-owned oil majors CNPC and Sinopec have drawn criticism for failing to invest in the costly upgrades required to produce National IV and V standard fuels, but, ironically, they will be the most likely to profit, claims energy analyst Ren Haoning of CIConsulting in a recent Caijing interview.
Fuel prices will also rise to cover the cost of the upgrades.
With the new regulations becoming enforceable in January, many smaller players may not have the resources to invest in new facilities and will no longer have a domestic market for their products. Talent will also be difficult to source as the nation's top engineers and scientists head to China's large state-owned firms.
Ren expects there to be an increase in M&A activity and consolidation in the energy sector over the coming years as smaller firms are taken over or priced out of business.