By Type: Case Study

Authentix uses its advanced and innovative fuel authentication solution to help the nation of Ghana combat adulteration of its petroleum products and recover lost revenue.

THE CHALLENGE

With a population of almost 28 million, Ghana is one of the fastest growing nations in Africa. It has moderate fuel taxes compared to its neighbors and limited fuel subsidies. The government of Ghana discovered that the adulteration of petroleum products offered for sale at retail outlets was degrading the quality of the available supply, while depriving the nation of significant tax revenue. In fact, baseline testing demonstrated that 32% of fuel stations had at least one tank showing dilution. Government officials estimated that the tax losses incurred because of this adulteration was more than USD 10 M annually. Ghana was in urgent need of a solution to combat adulteration of its petroleum products and recover fiscal tax revenue that was sorely needed for economic development.

THE SOLUTION

Since 2013, Authentix has been providing the Ghana National Petroleum Authority (NPA) with a fuel authentication solution. The program’s objectives are reducing deterioration in the quality of petroleum products due to dilution and adulteration whilst ensuring the appropriate recovery of fiscal tax revenues from the sale of petroleum and diesel for passenger vehicles.

Full-taxed domestic fuels are marked with a field quantitative marker for screening and dilution detection, and a forensic marker for lab confirmation. Subsidized products are marked to detect adulteration in domestic fuel. The Authentix solution is comprised the following core components:

MARKERS & DEVICES

Authentix LSX field analyzer detects dilution of taxed road fuels at fuel stations. Authentix MSX analyzer provides quantitative, forensic results in a laboratory environment. MSX analyzers are also used to measure the concentration of the MSX fuel marker that is added to fuel at the depot with the LSX marker. MSX analyzers were placed in regional labs in the largest cities in five regions of Ghana.

SERVICES & SUPPORT

• Marking operations (marker storage & reconciliation, logistics, hand-marking trucks, warehouse management, etc.)
• Field testing/sampling implementation, training, auditing and maintenance
• Laboratory implementation and maintenance
• Program management and reporting

THE OUTCOME

With the adoption of the Authentix fuel authentication program in Ghana, there has been a marked improvement in the quality of the fuel supply of the country. Additional benefits include:

• A 78% reduction in adulteration of sampled products
• An increase of excise tax collection estimated to be almost USD 9 M annually
• Improved environmental and public health benefits: In most cases, the adulterant used to dilute either gasoline or diesel affects the quality of the product resulting in vehicle engine failures and harmful environmental emissions
• The program was originally planned to mark two billion liters. Today, over three billion liters of fuel is marked, with continued
  reduction in contraband and the preservation of authentic, marked fuel on the market.

The program designed and implemented by Authentix has established an international reputation as a best-in-class fuel authentication program because of its continuous improvement over time, consistent increases in recovered volumes and taxes of excisable and subsidized fuels, and the reduction in the number of samples and retail outlets showing signs of dilution or adulteration.

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Authentix uses its fuel authentication solution to uncover pervasive product smuggling and reduce smuggling losses by 80%.

THE CHALLENGE

The sole provider of petroleum products in its country, this Middle Eastern national oil company, one of the largest in the world, also manages the distribution of these products to major and remote bulk plants via pipeline networks, trucks, and marine shipments.

Through their internal monitoring process, the company suspected that some domestic use subsidized products transported to and from the company’s refineries and bulk storage plants by third-party-operated trucks were being diverted and sold to unauthorized entities to be used as feedstock or was being smuggled. In addition, it was alleged that:

• Product was being tampered or mixed with other products to alter and degrade specification for exporting purposes at higher profit margins
• Product that was sold to customers for their own use was being diverted and resold to unauthorized dealers
• Different products were illegally blended (low price low quality fuel/products) and sold for higher product prices
• Products were being stolen during delivery process in the supply-chain
• The average yearly revenue losses to smuggling and product diversion was in the hundreds of millions of U.S. dollars.

THE SOLUTION

Since 2014, Authentix has been providing an advanced fuel authentication program to the national oil company. The program marks subsidized diesel fuel at multiple locations, in order to detect the smuggling and product diversion as industrial feedstock of the refined product, or its distilled extracts smuggled out of the country through border crossings. The major components of the program consisted of the following:

MARKERS & DEVICES
The amount of fuel to be marked requires large-volume production of the markers. This was readily achieved early into the program and the marker concentrate is now securely blended in country. The fuel marker is added to the diesel fuel at seven locations (refineries and a bulk tank farm). Auto-injectors are used to simplify the process.

Authentix MSX 2000 analyzer utilizes gas chromatography-mass spectrometry (GC-MS), which Authentix considers to be the ideal analytical technique for the unambiguous identification and quantification of markers in unknown petroleum samples. All diesel samples are analyzed directly via GC-MS. Four large independent labs are equipped by Authentix to conduct tests. Fuel specification testing is conducted using proprietary Authentix methods and established ASTM methodology are used.

SUPPORT & SERVICES
Fully-integrated lab testing system with over 15 MSX 2000 analyzers, a laboratory information management system (LIMS) to manage the lab workflow and web based management reporting dashboards were built and installed providing near real-time reports. Samples are taken at all borders, ports and suspected industrial sites and sent for testing and analysis at the 4- independent labs. Additionally, quality control tests are conducted on marked diesel at all marking sites to maintain correct marker dosing rates.

THE OUTCOME

Once deployed in the field, the Authentix solution proved to be highly effective in detecting and measuring marked diesel. The authentication program revealed the losses to be far greater than originally conceived. Through limited enforcement efforts and ongoing monitoring, the oil company was able to significantly curb smuggling at the country’s border, with the estimated savings of over $1 million per day. This represents a program return on investment of over 10X. Additional positive results include:

• A substantial reduction in smuggling in the border area, due to 14 smuggling-implicated plants being closed by the nation’s government
• Several hundred million U.S. dollars in subsidies are saved every year
• A reduction in diesel demand with the reduction in smuggling and product diversion
• Revocation of the export permits of the companies involved in illicit activity

The sampling component of the program has also demonstrated great success. Over the course of the program, the number of samples that fail testing has decreased, as well as the volume of suspect samples. In fact, at this point, less than five percent of samples fail. The losses, measured in U.S. dollars, are now less than 20 percent of what they were before the fuel marking program was originally put in place. Based on the demonstrated success of the Authentix fuel authentication program, the oil company extended the program beyond the initial contract period and it is now a nationwide program which is extended every year due to the benefits realized.

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Authentix solution uses authentication technology and transfer of knowledge to build a reliable, best-in-class program for a developing country.

THE CHALLENGE

A West African country was experiencing a significant deterioration in the quality of its petroleum products due to adulteration. Consumer confidence in the fuel supply was rapidly diminishing as adulterated fuel damaged vehicle engines resulting in a flood of consumer complaints. In most cases, the adulterant used to dilute the fuel can result in the release of harmful emissions to the detriment of the environment and public health. Before the implementation of a fuel authentication program, the recorded level of fuel adulteration was 32%. Illicit trade also impacted the appropriate recovery of fiscal tax revenues and government subsidies from the sale of petroleum and diesel for passenger vehicles. A country’s excise tax on petroleum products is diminished when fuels are diluted with products subject to a lower tax rate. National subsidies are negatively impacted when subsidized fuels are smuggled to countries where prices are higher.

In 2012, in response to this crisis, a government agency was created to ensure the efficiency and profitability of the local petroleum industry, ultimately working to safeguard the quality of petroleum products placed on the local market. The agency’s goal was to halt the adulteration of petroleum products and ensure that subsidized products were reaching the intended consumers. An official fuel authentication scheme was enacted by the government agency to achieve these goals. The scheme was introduced in 2013 and awarded to Authentix as prime contractor, a leading global authentication program and information services company.

THE SOLUTION

Authentix works with governments to ensure authentic products are sold in-country to benefit law abiding citizens – not criminals. Fuel marking solutions enable governments to collect more excise taxes without raising taxes for the benefit of citizens and legitimate industries. By delivering technology and partnership strategies, the Authentix fuel authentication program is financed and operated by Authentix with a program of knowledge and skill transfer so governments can independently operate their own fuel authentication initiatives. The Authentix end-to-end solution uses chemical markers built to withstand adulteration and illicit filtering methods, the AXIS Information System, an integrated set of software applications, and in-house services and support (advisory, design, implementation and operational) to customize security solutions for its customers. Authentix, as prime contractor, designed, financed, built, and managed the operations together with the customer of the entire program before transferring it to a local partner after several years.

As this program was the first in the country, Authentix designed the program based on the national mid and downstream fuel distribution networks and implemented the infrastructure and operations to maximize the efficiency and minimize interference with the local operators. Initially, fuel marking was rolled out to ten fuel depots. The program was expanded to all 13 national depots with additional sites coming online as they become operational. Authentix trained the government customer for field testing which was initially conducted to set the baseline for fuel adulteration occurring and subsequent subsidy and revenue recovery calculations.

Markers and Devices – A machine-readable marker was added to the fuel supply at test retail stations (and later to the national supply at fuel depots) where unannounced checks could be conducted. A layered testing approach used the LSX 2000 field portable analyzer to screen samples. Failures were retested and, if failed a second time, were sent to a local lab for forensic testing. This layered solution provides scalability at a low total cost with enforceable results for legal prosecution.

AXIS Information System – Expansion of the program required more efficient ways to operate the program daily. Authentix deployed the Marking Operations Management System (MOMS)  module of the AXIS Information System when it was determined that manual completion of truck marking orders and certificates wouldn’t meet the needs of fuel depot personnel. The digital database eliminates the need to manually input data from forms, a tedious process subject to error. Legible printed orders and certificates resulted in a higher professional standard of  documentation. Data from the depots is compiled and sent to the government agency for analysis and official record keeping.

Services and Support – Under the guidance of the government agency, the fuel authentication program has followed a process of continual improvement and stakeholder engagement, including changing elements of the program, adapting to the actual conditions of the fuel supply chain and the agency’s desire for a greater role in daily operations. Authentix supported this process
by providing training and guidance to transition to government agency-led management and implementing significant improvements to the analyzers, chemometric testing methods and depot operations.

THE OUTCOME

The Authentix fuel authentication program successfully identified product adulteration, earning back consumer confidence, recouping lost tax revenue and creating a significant number of highly skilled jobs for local people. The increase in tax revenue assisted government investment in critical infrastructure projects including roads, health posts, and schools. Over time, the Authentix build-operate-transfer fuel authentication model moved the operational workload of the program to the government agency. This approach supported the agency’s goal of independently operating its own fuel authentication program. Authentix as prime contractor delivered the following measurable successes from 2013 to 2017 have included:

• A steady decrease in adulterated samples from 15-19% in 2013 leveling off to 3-5% in 2017.
• A year-over-year reduction (196 million liters in 2013 to 95 million liters in 2017) of legitimate non-taxed product in the supply chain.
• An increase in consumer confidence as evidenced by a reduction in consumer complaints in an annual customer satisfaction survey.
• Generation of more than USD 200 M in additional excise revenue retention and subsidy recovery.
• A 50% increase in the number of retail outlets tested and year-on-year increases in testing frequency. This in combination with actively sanctioning those found with adulterated fuels, has resulted in a strong deterrent effect.
• Increase in the programs reach by deploying higher numbers of analyzers in the field and labs. This has driven the creation of local maintenance and auditor jobs.

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Fuel authentication solution by Authentix used to combat commingling achieves a seven percent decrease in failure rate for a major US fuel marketer. 

THE CHALLENGE

In the early 2000s, our customer, a major Fortune 20 fuel marketer, acquired the retail operations of another large fuel marketer. This purchase increased our customer’s retail operations footprint substantially. The acquisition added new complexities to the fuel marketer’s supply chain, including:

• • Adding over 10,000 stations to the retail network
  • Consolidating two branded additives to one third-party additive package
  • Using more than 100 unmonitored, third-party fuel terminals
  • Continued divestiture of company-owned stations to franchise ownership

  THE NEED

  Consequently, the company became concerned about the integrity of their combined gasoline supply chain, the possibility of commingling, and of fuel terminals running out of gasoline.

  The fuel marketer required that any fuel marker selected to combat commingling meet all U.S. E.P.A. standards, as well as more rigorous California E.P.A. Air Resource Board (CARB) standards. This required a marker chemistry that would not harm the environment or cause adverse health effects through combustion and evaporative emissions.

  Able to meet all requirements, Authentix has been the fuel authentication solutions partner since 2002 for this company, which today involves nearly 15,000 branded sites in the United States.

  THE SOLUTION

  The Authentix fuel authentication solution developed for this large fuel marketer is an advanced solution that includes a fuel marking system consisting of physical markers added to fuel; information systems including proprietary software, data collection, and reporting; and services including:

  • Lab testing and sample analysis
  • Program management and sampling oversight
  • Results analysis and reporting
  • Sample collection in the field

  The Authentix solution uses a mass differentiated molecular marker with gas chromatography-mass spectrometry (GC-MS) analyzers, considered to be the gold standard for forensic analysis. At the additive facility, the marker is added to the customer’s additive package. It is then shipped to over 100 terminal facilities across the country, where it is injected into the base fuel according to prescribed treat rates.

  Samples from approximately 400 retail stations are delivered to the Authentix Analytical Laboratory for analysis. Using three Agilent GC-MS analyzers, a sample analysis is conducted for the customer’s fuel and additive.

  THE OUTCOME

  Since developing and implementing the fuel authentication program in 2002, Authentix has marked more than 200 billion gallons of gasoline to all 50 states with outstanding results:

  • Decrease of seven percent in failure rate directly attributed to a reduction in the commingling of non-branded gasoline with branded product
  • Greater integrity within the complex fuel supply chain
  • Increase in consumer brand confidence and competitive advantage across the U.S.

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