Fuel economy: from the tank to the bank

PMV explores the issue of rising fuel costs across the Middle East

ANALYSIS, PMV, Bank, Tanks

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The construction industry has long had to weather the storm of fluctuating fuel costs, with the plant, machinery, and vehicles sectors being particularly vulnerable.

But that doesn’t mean to say that sudden price hikes come as any less of a shock for end users. Construction firms in Qatar – an Emirate in the midst of building boom ahead of the 2022 FIFA World Cup – had a rude awakening in May when Qatar Fuel (WOQOD) raised the price of diesel by 50%.

It was the first hike since January 2011, when the cost of petrol, diesel, and kerosene climbed more than a quarter. Prices have also been creeping up elsewhere in the region. Last year, Bahrain announced controversial plans to gradually increase the price of diesel, almost doubling it by 2017, in a bid to reduce the heavy subsidy burden on the state.

The authorities there argued that despite the hike, the price of local diesel is still cheaper than in neighbouring countries. In Dubai last September, the price of diesel at ENOC and EPPCO pumps went up by AED 0.2 per litre.

High fuel prices can have a devastating effect on the building industry, especially in a region where the pace of construction is at the breakneck speed last seen in 2008, with fleet companies either having to absorb the burden or pass it on to their customers.

As well as the impact they have on transport, building material costs, and project estimates, fuel prices can also throw building projects into disarray, with contractors either delaying work or downing tools completely due to increased costs.

However, hikes can also have a positive impact, forcing car buyers to replace fuel-guzzling vehicles with more efficient ones. The fleet industry has also had to come up with novel ways to manufacture fuel-efficient plant, machinery, and vehicles.

This only really started to happen in the Gulf at the height of the last construction boom in 2008, a year when the cost of heavy oil jumped by two thirds within ten months in Dubai alone. But even in an oil-producing region, the construction sector has realised that high fuel costs are here to stay, and it is taking steps to produce cleaner, more efficient vehicles.

One company that has adopted this approach is India’s Tata Motors, which has been operating in the Middle East since the early 1990s. Gurshaman Singh, the company’s area manager for the UAE and Oman, told PMV that fuel efficiency has become a pressing priority for GCC fleet operators.

“Fleet owners tell me they spend about 30% of the total expense of a vehicle’s operations on fuel,” he explained.

“With fuel prices rising, the total expense is bound to go up until – and unless – we look for products that are more fuel efficient,” he added.

Tata Motors, the world’s fifth-largest truck manufacturer, is “always looking at making more fuel-efficient vehicles using the latest technology in diesel engines in order to keep operating expenses under control,” according to Singh.

In March, the company unveiled 10 heavy-duty trucks as part of its Prima LX range of vehicles. These trucks have been designed with the combination of “power, fuel efficiency, and affordability” in mind, he told PMV.

The company is also working on alternative fuel variants for its Prima-model trucks, which will be available commercially in the GCC in the medium-to-long term, whilst plans are also underway for the introduction of diesel-electric hybrid trucks from Tata.

“These days, there is a trend of deriving extra power from smaller cubic-capacity engines, unlike in the past where bigger engines meant more power,” Singh said.

“With latest technology, like variable geometry turbines (VGT), power losses are minimal and more power is derived from smaller engines. This means that they are more efficient. Also, the maintenance cost of smaller engines is less, as they have smaller sump capacities. Hence, engine oil capacity will also be lower. This will further reduce operating costs,” he added.

Meanwhile, cleaning up diesel engines, which in the past were amongst the largest contributors of noxious emissions, has become a major focus for manufacturers. With the introduction of increasingly rigorous emissions requirements, vehicle and machinery makers have poured money into creating cleaner units.

From 2006, almost all petroleum-based diesel fuel available in the UK, most of Europe, and North America has followed the ultra-low-sulphur diesel (ULSD) standard, which is defined as fuel with sulphur content in the 10 to 15 parts per million (PPM) range.

Consequently, the industry’s biggest equipment manufacturers have been investing in technology that has allowed them to produce cleaner machinery, such as Tier 4 engines, which emit lower levels of nitrogen oxide (NOx).

The ULSD standard is yet to be adopted in the Middle East; many countries in the Gulf, for example, have fuel with sulphur content in the 351ppm-to-500ppm range.

The 2014 list of the top 100 countries in the world ranked by diesel purity, published in April by the International Fuel Quality Center (IFQC), contained no GCC countries in the top 50. The UAE came 55th, followed by Qatar at 68th, and Kuwait at 73rd.

Meanwhile, Singapore, which did not regulate gasoline sulphur until October 2013, joined the list in 49th position, and China jumped eight places to 44th position after reducing its nationwide limit from 150ppm to 50ppm. Germany, meanwhile, maintained the top position, followed by Japan, Austria, Denmark, and Estonia.

There has, however, been some regional progress. The UAE, for instance, is in the process of implementing – and enforcing the use of – Euro 5 diesel [page 14].

Although the ULSD standard is beneficial for the environment and public health, Singh believes it has little impact when it comes to decreasing the operating costs of vehicles.

“In fact, fuel efficiency goes down by approximately 1% as cleaner fuels tend to be low-energy fuels,” he said.
“This efficiency loss, however, is almost negligible. The positive effect that these fuels have on the environment, meanwhile, is not. This is what makes them attractive,” he added.

Perkins produces engines for off-highway equipment with applications across a number of industries, and fuel efficiency represents a significant focus for the company.

“Perkins has focused its efforts on delivering greater power density from its diesel engine range, providing more power from a compact solution and therefore ensuring greater fuel efficiency,” commented Annette Ward, head of communications at the firm.

One example is the 1106A-70TAG4 ElectropaK, which is designed to meet the needs of the electric power market and can be adjusted to differing fuel qualities around the world.

The 1106A has so far only been manufactured in China, but Perkins will eventually produce the engine from its UK facility in Peterborough, and its Curitiba plant in Brazil. The increased production will help the manufacturer to meet growing demand in the Middle East, South America, and Europe.

Ward added that the Perkins’ focus is on “delivering greater power density from our engines”. This includes an overhaul of its 1100 Series engines for gensets in the Middle East and Africa.

“Targeted at non-regulated countries, the three-cylinder Perkins 1103A-33TG1 ElectropaK model has been overhauled to ensure generator set packagers have access to an engine that meets the electric power market’s specific requirements,” concluded Ward.

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PMV Middle East - May 2018

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