On August 22, Premier Li Keqiang of the State Council presided over a State Council executive meeting in Beijing, during which the overall layout for the biofuel ethanol industry was finalized. The meeting emphasized adhering to the principles of total volume control, limited designated sites, and fair market access; making appropriate use of idle alcohol production capacity; moderately expanding the production of grain-based fuel ethanol; accelerating the construction of cassava-based fuel ethanol projects; and launching industrial demonstration projects for producing fuel ethanol from crop straw and waste gases from the steel industry. The meeting decided to expand the promotion and use of ethanol-blended gasoline for vehicles in an orderly manner. In addition to the 11 pilot provinces, including Heilongjiang, Jilin, and Liaoning, the initiative will be further expanded this year to 15 provinces, including Beijing, Tianjin, and Hebei. It is reported that the Tianjin Municipal Government had previously issued the “Implementation Plan for the Promotion and Use of Ethanol-Blended Gasoline in Tianjin,” requiring the city-wide rollout of ethanol-blended gasoline to begin by August 31 of this year and to achieve city-wide exclusive operation by September 30.

　　According to the “Implementation Plan for Expanding Biofuel Ethanol Production and Promoting the Use of Ethanol-Blended Gasoline” issued by 15 national ministries and commissions in 2017, key air pollution control regions—including the Beijing-Tianjin-Hebei region and its surrounding areas, the Yangtze River Delta, and the Pearl River Delta—will begin promoting fuel ethanol in 2018 and achieve full coverage by 2019; nationwide coverage of fuel ethanol will be achieved by 2020. Statistics show that in 2017, China’s fuel ethanol production capacity was 3.045 million metric tons, while national gasoline production that year was approximately 130 million metric tons. Assuming a 10% blending ratio, the corresponding demand for fuel ethanol by 2020 will exceed 13 million metric tons, with a supply gap of 80%, indicating enormous market potential.

　　In fact, thanol-blended gasoline is not a new concept. As early as 2001, the state issued the national standard “Ethanol-Blended Gasoline for Vehicles,” and began promoting its use on April 15 of that year, expanding the pilot program in 2004. Currently, six provinces (autonomous regions)—Heilongjiang, Jilin, Liaoning, Henan, Anhui, and Guangxi—have rolled out ethanol gasoline province-wide. Additionally, 31 prefectures and cities in Hebei, Shandong, Hubei, Jiangsu, and Inner Mongolia have also adopted ethanol gasoline.

　　Cao Jianjun, Deputy Director of the Optimization Consulting Center at the Sinopec Economic and Technical Research Institute, pointed out that by 2020, the market will consist almost entirely of ethanol-blended gasoline, with virtually no “motor gasoline” products remaining; refineries will no longer produce motor gasoline products but will instead switch entirely to producing blending components for ethanol-blended gasoline; The point at which the final market product takes shape has shifted from refineries to ethanol gasoline blending centers. As a large number of refineries switch to producing blending components for ethanol gasoline, they must consider ceasing production or converting their operations. The demand for facility upgrades in the refining industry is more urgent than ever!

　　Analysts note that for the refining industry, the promotion of ethanol-blended gasoline presents both an opportunity and a challenge. According to the national standard *Blending Components for Ethanol-Blended Gasoline* (GB 22030-2017), which governs the production of blending components for ethanol-blended gasoline, the addition of oxygenates is prohibited, and the mass content of organic oxygenates must not exceed 0.5%. The oxygenates in refineries’ automotive gasoline products are primarily ethers, including MTBE, ETBE, TAME, and etherified light gasoline. In China, these are mainly MTBE and etherified light gasoline, which will no longer be permitted for addition once the standard takes effect.

　　The phased rollout of fuel ethanol gasoline involves corresponding market entry barriers, and the supply landscape of the refining industry will also be profoundly affected in the long term. On the one hand, as distribution centers are brought in to handle blending and supply, refineries will be further removed from the end market, leading to greater diversification in market operations. On the other hand, with the government placing increasing emphasis on environmental safety, the promotion of ethanol-blended gasoline will inevitably raise the entry barriers for the fuel blending industry and intensify regulatory inspections. As a result, some small and medium-sized blending operators may gradually exit the market, leading to a major shake-up in the industry.