Lead additive firm profits from tighter regulations

UK-based chemicals firm Associated Octel, best known for making lead fuel additives, has seen its share price more than double since its relaunch as Innospec two years ago. Several of the firm’s new products fill niches created by tighter environmental regulation, but its refusal to set a deadline for the phase-out of lead additives has attracted criticism.

The firm that used to put the lead in leaded petrol - and still does in some parts of the world - is now profiting from tighter environmental regulations. Formerly known as Associated Octel, the company was restructured two years ago and renamed Innospec.

Its annual sales have since risen 14% to just over $600 million and its share price soared from around $8 (£4) to more than $20.

Innospec still depends on sales of the lead-based octane enhancer tetraethyl lead (TEL) made at its plant in Ellesmere Port, Cheshire. But the firm is building up the range of its other fuel additives and developing specialty chemicals at its seven plants.

These include products that improve vehicles’ fuel efficiency and assist reductions in particulate and sulphur emissions. "Legislation is a key driver for growth," chief executive Paul Jennings told ENDS, citing the 15 parts per million sulphur limit for diesel vehicle fuels introduced in the US last year. Sulphur acts as a lubricant and Innospec was the first firm to produce an additive that replicated this effect. It also has a range of products designed for diesel vehicles with particulate filters that help keep the filters clean.

A scoping study of the future fuel mix has also prompted new products, including additives for ethanol and biodiesel fuels, said Mr Jennings. He believes early action in this area and on the requirements of the EU’s REACH chemicals regime act as selling points.

Most of the firm’s other non-fuel products offer fewer environmental benefits. But one, a biodegradable chelating agent called EDDS, has won the firm praise (ENDS Report 366, p 34 ).

EDDS was designed in 1996 for Procter & Gamble to use in detergents instead of phosphonates, which can pass through sewage works and persist in the environment. It can also replace EDTA and DTPA - chelating agents used in industrial processes such as paper-making that are also attracting attention from regulators.

More than 40% of Innospec’s 2007 sales revenue came from products introduced in the last five years. However, TEL remains the most profitable part of its business, responsible for around 15% of the firm’s revenue but 50% of its profits.

The phase-out of leaded petrol began in the UK in 1986 following concerns about the health effects of lead and its incompatibility with catalytic converters. The EU banned leaded ‘four star’ from general sale in 2000, but a small amount of TEL - around a barrel a year - is still sold in the bloc for use in vintage cars.

There are also a few countries that have not yet phased out leaded petrol, often because of problems with the quality of their petrol supplies or the age of their vehicle fleet. The Lead Group, an Australian NGO, has compiled a list of 17 countries thought to use leaded petrol. They include a number of former Soviet states, several African countries, parts of the Middle East and North Korea. Mr Jennings will not say where Innospec’s customers are but rules out supplying the Americas, Asia and the EU.

The other major use of TEL is in the 100 Octane LL fuel used by piston-engine aircraft. These planes are used for crop-spraying and fire-fighting, with lifespans of up to 50 years. There are no safe alternatives to TEL available and the use of 100 Octane LL is mandated by civil aviation authorities, said Mr Jennings.

Innospec’s Ellesmere Port site is the only chemicals plant in the world still legally producing TEL and the firm was called to address the government’s Chemicals Stakeholder Forum at the end of January after some members raised concerns about the ethics of producing such a widely-banned chemical in the UK.

Richard Shone, responsible for safety, health and the environment at the firm, told the forum that production of TEL had fallen from 30,000 tonnes in 2003 to around 8,000 tonnes last year. He anticipated a further reduction to 4,000 tonnes by 2010.

About a third of the current sales are for aviation and it should represent half of all annual sales by 2010. TEL’s use in vehicle fuel is expected to tail off rapidly beyond that point, but Innospec anticipates only a 2.5% per annum fall in aviation sector consumption.

The firm does not actively promote TEL and only sells it to long-standing customers that meet the requirements of its product stewardship scheme, said Mr Shone. TEL falls under the Rotterdam Convention on Prior Informed Consent so Innospec also has to inform the governments of countries where it is sent.

In addition, the firm helps countries with the phase-out of leaded petrol and clean up of contaminated sites.

"I would ask you to view us as responsible stakeholders in the phase-out of TEL," he told the Forum. Removing it from the market entirely would be dangerous for aircraft users and have "unacceptable socio-economic" impacts on developing countries, he said. It might also encourage unsafe black-market production. "It’s better to have a responsible, visible, highly regulated industry."

However, Greenpeace chemicals campaigner David Santillo told the Forum there should be a final cut-off date to send a clear message to users and stimulate the creation of alternatives. "Without a sunset date, there’s a danger it’ll keep running on and on."

Mr Shone also outlined the regulatory controls covering the Ellesmere Port plant for Forum members. Workers’ blood lead levels continue to fall and air quality monitoring around the plant, carried out by the local council, shows ambient lead levels well below the environmental quality standard, he said.

But while emissions from the plant have undoubtedly dropped, the annual figures listed in the Environment Agency’s pollution inventory are substantial. For 2006, the inventory records lead emissions to air and water of 3 tonnes apiece.

Please sign in or register to continue.

Sign in to continue reading

Having trouble signing in?

Contact Customer Support at
report@ends.co.uk
or call 020 8267 8120

Subscribe for full access

or Register for limited access

Already subscribe but don't have a password?
Activate your web account here