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Sunday, May 14, 2006

The Guyana Sugar Cor- poration is considering having an ethanol plant with a 130 million litres per year capacity but it does not propose utilising any of its present sugarcane production in the process as it aims to remain competitive in the sugar market.

Chief Executive (CE) of GUYSUCO, Nick Jackson told Stabroek News in an interview on Tuesday that the company will seek assistance from the European Union (EU) for the possible establishment of the ethanol plant at a cost of some US$20M, as part of its diversification programme to deal with the EU's staggered 36% sugar price cuts.

"GUYSUCO views the potential of this market with much interest as an opportunity for increasing the diversity of products from sugarcane. The corporation has conducted a number of in- house studies that indicate that ethanol production from cane would satisfy requirements for 10% substitution of gasoline in the domestic market and would be technically feasible," a brief review of the company's ethanol plan said.

The 10% substitution referred to is also known as E10, a fuel of 90% conventional gasoline and 10% ethanol. Many cars old and new can run on this fuel. With spiralling oil prices many developing countries have been contemplating ethanol production as a means of cutting their fuel bill. Jamaica announced last week that it was embarking on an ethanol pilot programme and the World Bank has said that it is getting numerous requests to finance ethanol production projects. The Bank cautioned that if these projects were not likely to produce ethanol at less than the cost it is produced in Brazil, seen as the global bellwether for ethanol, the projects were unlikely to be funded.

Jackson pointed out that Guyana as a beneficiary of the Caribbean Basin Initiative (CBI) and the African, Caribbean and Pacific countries (ACP) agreements would be allowed to export any ethanol produced in Guyana in excess of the 10% domestic substitution market to the USA and the EU duty free.

He said there was land behind the Albion and Rosehall sugar estates farther up the Canje River which had minimal bush and could be readily laid out for mechanised production of sugarcane. The land is owned by government and has room for expansion.

Nevertheless, Guysuco would like to undertake a feasibility study this year that would cost US$150,000, but it is still looking for the funds to do this. According to the review, the study would consider the capital, operating cost, and economic viability of a 130 million litres per year ethanol plant.

It would also consider the legal and infrastructure requirements for implementing the 10% substitution of gasoline in Guyana and the market potential for ethanol in Guyana, the wider Caribbean and probable export under the CBI and ACP agreements to the USA and EU. In addition the study will examine production trends among competitor countries.

Should the study indicate a feasible outcome, GUYSUCO "would seek to move quickly," the review said, to develop a 25,000 hectares cane cultivation. The estimated cost for this would be about US$100M, US$20M for production facilities while the plant and equipment would be in the region of US$20M.

"If I had the money in my hands now the plant would not take less than about two years though. You have to wait for the cane to grow in a year anyway," Jackson said.

Technology transfer

agreement

Guyana and neighbouring Brazil, the world's leading producer of ethanol, signed a technology transfer agreement in September last year for the production of the alcohol.

Joseph O'Lall, CEO of the Guyana Energy Agency (GEA), told this newspaper in a recent interview that according to Guyana's energy policy if oil were found it would be sold and renewable energy endeavours continued with.

He said he knew of about three entrepreneurs expressing interest in converting some of GUYSUCOÆs output into ethanol production plants.

Meanwhile, Jackson noted that GUYSUCO plans to remain viable and competitive in the sugar market via value-added initiatives, such as increasing packaging of Demerara Gold sugar from the current 4,000-5,000 tonnes to 80,000 tonnes. When it starts to refine sugar, it plans to sell an average of about 70% of it, Jackson said, to manufacturers and put the other 30% on the retail market.

US55M upgrade

The company intends to also increase its production through a US$55M upgrade of its sugar mills, an agricultural improvement plan, and mechanisation of its operation.

He told Stabroek News that the company's plan was to get the cost of sugar-production to about 12 US cents per pound. At present it hovers around 18 US cents per pound. He noted that at the end of the EU's staggered 36% price cut in October 2009, the company would be paid 18 US cents a pound for its sugar which is "still a good price." The first cut in price of 5% is set for the first of July this year, a 20% cut in October 2008, and 11% in October 2009.

When the price on the world market for sugar would be in the region of five to ten US cents a pound, Europe would pay sugar-producing African Caribbean and Pacific (ACP) countries 25 US cents a pound.

GUYSUCO exports half of its production, about 169,000 tonnes, to Europe, Jackson said. The other half is split between the USA, the Caribbean and the domestic market.

The EU has earmarked 40 million euros for this year to be divided among the 18 sugar-producing ACP countries as a first allocation to help them adapt to the price cuts but it is still to hand over the money. GUYSUCO is to get five million euros of that, Jackson said. He noted too that the EU has cut back from its original 190 million euros for the 18 countries for 2007, to 165 million euros.

"We would like the money front-loaded," Jackson said. He said the first set of money still to be received would go into increasing the amount of GUYSUCO's packaged sugar.

He noted that it had been thought that there would have been some laying off of workers owing to GUYSUCO's mechanisation programme. "First we had to turn away people. Now we are not getting the turnout of workers."

He noted too that frivolous strikes have been hurting sugar production. "Sometimes you burn the cane and then for some reason the men decide to not work. All that cane stands there. It's dead, you burnt it. It's like a body - it starts to degenerate."

Mechanised harvesting

Land is being laid out for mechanised harvesting and husbandry at the Enmore estate, East Coast Demerara.

Under the agricultural improvement plan, the company is "flood fallowing" most of its lands from which it expects to benefit in a number of ways, including an increase in sugar-production capacity. Among the benefits would be an increase in soil nutrients for the sugarcane, and a low weed pressure having killed off the weeds in the flooded lands.

Flood fallowing entails leaving the tilled lands completely under fresh water for about six months before draining it for subsequent planting.

Jackson noted that Guysuco needed to complete every time its 20% tillage and replanting "retunes" in the five-year cycle. He said the weather has been the main constraint for GUYSUCO recently being unable to complete the 20% tillage and replanting. The yield now was 70 to 80 tonnes of cane per hectare but the company wants to get this to 90 tonnes per hectare. The CEO couldn't say offhand how much GUYSUCO earned from selling its molasses but averaged the price on the world market to be between US$30 to US$80 per pound.

Meanwhile, the US$55M upgrade of the company's sugar mills would increase sugar output by about 2%, according to Jackson who has a degree in Biochemistry from the University of Lancaster in England. He has been in the sugar business for over 20 years.

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