German refiners cut greener gasoline production on slower demand

LONDON, May 7 (Bloomberg): German refineries are reducing output of cleaner, high-ethanol gasoline known as E10 after motorists shunned the fuel. E10 hasn't met our expectations and refinery production has been adjusted accordingly, a BP Plc (BP) official said yesterday from Bochum, Germany, declining to be identified in line with company policy. BP owns a stake in the Schwedt refinery northeast of Berlin, the first plant to switch to E10 production. "Production of E10 has been scaled back," said Sigrid Pook, head of the German fuel retailers' association, which represents 4,500 pump stations. Refiners switched back to so- called Super gasoline, which contains 5 percent of ethanol, half the amount of E10, Pook said. Germany introduced E10 gasoline this year as it sought to cut carbon emissions from transport fuel. About 57% of German drivers said in March they wouldn't buy the fuel, fearing it may damage their cars, according to Mineraloelwirtschaftsverband, the country's Berlin-based petroleum industry association. Motorists bought 114,000 metric tons of E10 in February compared with 1.13 million tons of Super, or E5, government data show. Total gasoline sales were 1.43 million tons. "The German government made mandatory the use of E10, which the bulk of the German drivers with big, sophisticated gasoline engines refused to use," Jean-Paul Vettier, chief executive officer of Petroplus Holdings AG, Europe's biggest independent refiner, said yesterday on a conference call. Royal Dutch Shell Plc (RDSA), which had planned to make E10 available at all its 2,200 retail stations, halted the roll-out of E10 last month, Cornelia Wolber, a spokeswoman, said from Hamburg. The fuel is available at about 1,000 of its stations in Germany, she said. The introduction of E10 began in southern and eastern parts of Germany, after refineries in those areas including Schwedt and the Miro plant in Karlsruhe started production of the grade. Bayernoil Raffinerie GmbH, which operates plants in southern Germany, also produces E10. The European Union has pushed for a portion of motor fuel to come from renewable sources as it seeks to combat climate change. Germany has a 6.25 percent target for biofuels, which is met by adding ethanol to gasoline or rapeseed oil to diesel. While the sale of E10 isn't compulsory, it would be difficult for oil companies to meet their renewable obligations if they don't sell it, Thomas Hagbeck, a spokesman at the Environment Ministry, said from Berlin yesterday. Petroplus, which operates a refinery at Ingolstadt in the southern German state of Bavaria, said it has benefitted from strong demand for Super grade gasoline. Increased demand for E5 was a "market opportunity that we grasped," Vettier said. Germany's 6.25 percent target on biofuels is a measure of energy content. To meet that target on gasoline, 10 percent of ethanol by volume must be added to the fuel. E10 is sold at the pump under the Super E10 brand and has an octane of 95. An octane number is an indicator of a fuel's performance.