| PETROJAM
ETHANOL LIMITED
BACKGROUND & HISTORY
PETROJAM
ETHANOL LIMITED is a wholly owned subsidiary of Petrojam Limited which
is a subsidiary of the Petroleum Corporation of Jamaica a statutory body
of the Government of Jamaica. The business office is located at the Petrojam
Limited Refinery compound at 96 Marcus Garvey Drive in Kingston Jamaica.
The company’s primary involvement is in the procurement of ethanol
feedstock (hydrous alcohol), the dehydration process to fuel ethanol (anhydrous
alcohol) and the marketing of fuel ethanol in the United States or other
markets. The dehydration facility was established in 1986 but started
consistent operations in 1990 when ethanol feedstock became available
through the European Commission (EC). The plant has a capacity of 41.8
million US gallons per year but has been mothballed since 1997. The company
is presently in the process of modernizing and rehabilitating the plant
to its current capacity. Production is expected to resume within the 1st
quarter of 2005.
ETHANOL - WHAT IS IT?
Ethanol
is a renewable fuel currently made from abundant agricultural and biomass
feedstocks. It is an alcohol-based alternative fuel produced by fermenting
and distilling starch crops that have been converted into simple sugars.
The feedstock (hydrous alcohol or wet ethanol) for this fuel contains
a larger proportion of water and is produced from a range of agricultural
products including sugar cane, corn and grapes. Ethanol can also be produced
from "cellulosic biomass" such as trees and grasses and is called
bioethanol.
The
fuel grade ethanol (Anhydrous Alcohol or dry ethanol) contains no more
than 0.5% water. It is used as an octane enhancer for motor gasoline.
In
the U.S., ethanol is primarily from the starch in grains such as corn
and grain sorghum through a fermentation and distillation process that
converts sugars to alcohol. In Brazil, ethanol is primarily from sugar
cane through the same process that converts the sugars to alcohol. On
average, 2.7 gallons of ethanol are produced from a bushel of corn and
85 litres (22.5 gallons) of ethanol are produced from a ton of cane. The
production process is extremely efficient, resulting in a positive fossil
energy gain.
A HIGH PERFORMANCE FUEL
Ethanol
is most commonly used to increase octane and improve the emissions quality
of gasoline. In some areas of the United States, ethanol is blended with
gasoline to form an E10 blend (10% ethanol and 90% gasoline), but it can
be used in higher concentrations such as E85 or E95. Original equipment
manufacturers produce flexible-fuel vehicles that can run on E85 or any
other combination of ethanol and gasoline.
Ethanol’s
high octane content helps your car run more smoothly. Ethanol keeps a
car’s fuel system clean for optimal performance.
•
Gasoline blended with up to 10% ethanol is approved under the warranties
of all auto manufacturers marketing vehicles in the U.S. Many even recommended
ethanol because of its clean air benefits. Approval of ethanol blends
is found in the owners' manuals under references to refueling or gasoline.
•
Ethanol-blended fuels can also be used in your yard care equipment, motorcycles
and boats.
ETHANOL
PROTECTS THE ENVIRONMENT
Ethanol
is one of the best tools we have to fight air pollution from vehicles.
Ethanol contains oxygen, which improves fuel combustion and reduces exhaust
emissions.
•
Ethanol reduces carbon monoxide, volatile organic compounds, toxics and
fine-particulate emission that pose a health threat, particularly to children
and seniors.
•
Adding ethanol to gasoline displaces toxic gasoline components.
•
Ethanol is quickly biodegradable in surface water, groundwater and soil.
•
As a renewable fuel ethanol helps reduce emissions of greenhouse gases
that contribute to global warming.
•
Ethanol helps to reduce pollution from “gross polluters,”
which are responsible for more than half of all vehicle emissions while
making up only 10% of the vehicle fleet.
THE
BACKGROUND
Ethanol has gained popularity in recent years as the preferred octane
booster for gasoline blending in North America and several other regions
of the world. This has followed a phase-out of lead as an additive due
to its polluting effects in areas of high population and motor car density,
particularly in the United States of America.
In Jamaica, several pre-conditions exist to encourage the production of
ethanol. Sugar cane, one of the crops from which ethanol can be produced,
is widely grown in Jamaica and other Caribbean territories. The technology
and skilled manpower are available.
In 1984, ethanol was included in a list of commodities for which duty-free
access to the United States was allowed under the Caribbean Basin Initiative.
The then stated intention of the U.S. legislation was to facilitate Caribbean
economic development by allowing duty-free access to the U.S. for certain
commodities produced in the Caribbean, provided that there was at least
35% value added to the commodity within the Caribbean. This meant that
Caribbean ethanol can enter the United States without paying the present
US$0.54 per gallon import duty.
HISTORY
OF PETROJAM OPERATION
In 1985, Petrojam Ethanol Limited decided to take advantage of this opportunity
and developed plans to establish an ethanol plant on its Kingston refinery
site. Construction of the plant was completed in 1986 and it began operation
in 1987, utilizing ethanol feedstock sourced in the Caribbean, Europe
and Brazil.
To
ensure an adequate supply of Caribbean sourced feedstock, two initiatives
were taken. In 1985, Petrojam's parent corporation, the Petroleum Corporation
of Jamaica (PCJ) acquired the Bernard Lodge sugar factory which was slated
for closure. The factory was rehabilitated where fermentation and distillation
facilities were installed with the capacity to produce some 15 million
gallons of hydrous ethanol each year for use by the Petrojam Ethanol facility.
In 1986, the CBI legislation was modified to require more CBI sourced
feedstock than Jamaica could produce. Petrojam then identified a recently
closed sugar factory at Libertad in Belize, with a capacity similar to
that at Bernard Lodge, and having access to abundant sugar cane production
capacity.
Petrojam leased the Libertad factory for five years initially with a purchase
option, and undertook a program of growing sugar cane and making high
grade molasses. The operation commenced in 1989 and continued until 1997.
Originally at Petrojam, the feedstock was processed in dehydration facility
consisting of two plants with a combined capacity of 52 million gallons
of ethanol per year. The first plant, purchased from Conger in Brazil,
was installed in 1985, and has an annual capacity of 10 million gallons.
The second plant, purchased from APV in the United States, was installed
in 1986 and has a capacity of 42 million gallons per year. Both plants
have similar operating conditions, using azeotropic distillation.
Currently,
the Conger plant is obsolete and the APV plant has been mothballed since
1997 because of inefficiencies in production and environmental concerns
from the use of benzene. However, Petrojam Ethanol maintained its stake
in the ethanol business through a fobbing and tolling arrangement with
ED&F Man, a commodity trading company from Europe, which owns and
operate the two ethanol dehydration plants in Rockfort, Kingston. The
source of the feedstock for this existing arrangement is the European
Commission (EC) under a tendering system for surplus wine alcohol. The
volume which Petrojam is able to access under this arrangement is limited
to approximately 5 million US gallons per year and the entire supply has
recently been discontinued as Europe is now developing their own biofuels
programme.
REHABILITATION
PROJECT
Petrojam Ethanol being a processor of ethanol in Jamaica qualifies under
the Caribbean Basin Economic Recovery Act (CBERA) of 1983, for the exemption
of duty in the exportation of fuel grade ethanol into the USA. The USA
market for ethanol has grown significantly over the past few years and
with New York, Connecticut and California banning MTBE in January 2004
along with the pending Renewable Fuels Standards (RFS) from the passing
of the US Energy Bill that is currently in US Congress, the market is
poised for continued significant growth over the next few years. At present
the quota into the USA market for ethanol from countries under the CBERA
is projected at about 200M USG per year of which only about 50% was exported
in 2003.
As
a result, Petrojam Ethanol sought to identify reliable sources of feedstock
at competitive prices in order to economically rehabilitate the dehydration
plant. Since Brazil is among the highest producers of alcohol in the world
today, it was advantageous that Petrojam Ethanol establish a strategic
alliance with potential investors/operators that will provide access to
a reliable source of feedstock preferably from Brazil where there is an
abundant supply of sugar cane.
Plans are in now in place to resume production of fuel grade ethanol by
the first quarter of 2005 using feedstock initially from Brazil and later
from domestic production.
The
rehabilitation project will include the following:
• Finding reliable feedstock sources
• Source Financing
• Modernization of the dehydration technology from the azeotropic
(benzene) process to molecular sieve
• Construction of the new plant
• Installation of additional storage tanks and pipelines
• Installation of a cooling water system
Utilities
such as electrical power, water supply, steam and dry compressed air will
be sourced from the parent company Petrojam Limited. The Petrojam Limited
dock facilities will be used for making ethanol shipments.
HOW
FUEL ETHANOL IS PRODUCED
•
Molasses or cane-juice is first fermented using yeast to produce mash
containing 7-10% by volume ethanol.
•
This mash is then distilled using steam to produce rectified spirit
(hydrous ethanol) having about 5% by volume water in it.
•
This rectified spirit is further dehydrated either by distillation or
by PSA (MSDH) techniques.
TECHNOLOGIES
USED FOR DEHYDRATION
Molecular
sieve dehydration technology utilizes micro-porous particles such as alumino-silicates,
processing a very precise pore size. The pores make it possible to separate
small molecules form large ones through selective adsorption. For example,
ethanol dehydration is accomplished with molecular sieves which have a
diameter of 3Å, which entraps water molecules which have a diameter
of 2.5Å. Ethanol molecules which have a diameter of 4Å cannot
enter and therefore flow around the material.
THE FUTURE FOR ETHANOL IN JAMAICA
Ethanol is member of a class of compounds termed oxygenates, demonstrated
by the U.S. Environmental Protection Agency to reduce urban pollution
when blended with gasoline. Up to 10% oxygenate blends are being recommended.
It is projected that the demand for ethanol will increase sharply as more
and more regions of the United States, and further a field, mandate the
use of oxygenates in gasoline blends.
With
the continued efforts from several countries around the globe to develop
their own biofuels programme, it will only be a matter of time before
Jamaica complies with this international standard and launches a programme
to ban MTBE and introduce ethanol as the replacement in gasoline. To this
end, there are many opportunities available for the Sugar Industry in
the development of this programme. Some potential benefits are as follows:
1.
Opportunity to rehabilitate the Bernard Lodge alcohol distillery to produce
hydrous alcohol from sugar cane for further dehydration at the Petrojam
Ethanol plant for use in the domestic market or for export.
2.
Upgrade other local sugar factories to produce hydrous alcohol either
from molasses or directly from sugar cane.
3.
Expand the local sugar cane production to meet the requirements of the
ethanol plants. This will provide opportunities for increased investment
in the Sugar Industry which should in turn provide opportunities for increased
employment.
The
ethanol feedstock (anhydrous alcohol) requirement for the introduction
into motor gasoline is estimated at 15 million US gallons per annum. Based
on this demand, it is understood that for Jamaica to produce all of the
feedstock it will require a minimum of 9,000 hectares (90M sq. meter)
of sugar cane farm lands. The primary supply of the feedstock (hydrous
alcohol) could therefore be sourced from the local Sugar Industry and
if there is a shortfall, this can be supplemented with imports from countries
like Brazil. A study is therefore necessary to assess the state of the
Sugar Industry as it relates to meeting the additional demand for alcohol
production and the investment that will be necessary to achieve these
objectives.
MARKETING
OPPORTUNITIES
Primary
Market
The United States market has been targeted for Jamaican ethanol in the
short term. In 2004 the demand for fuel grade or anhydrous ethanol was
estimated to be in excess of 3 billion gallons per year.
The
US ethanol market has moved from an oversupply situation early in 2003
to a position of undersupply over the past months as a result of increased
demand from California, New York and Connecticut, because of the MTBE
bans in those states since January 1, 2004. The oversupply was due mainly
to the construction of several new ethanol plants or the expansion of
existing plants in 2001 and 2002 in response mainly to the California
MTBE ban which was predicted to take effect in 2003 and which was expected
to significantly increase the demand for ethanol.
According
to the weekly Renewable Fuels News, the year 2002 saw US ethanol rack
prices averaging just over US$1.00/USG, while in 2003 the prices jumped
from a January average of about US$1.20/USG to US$1.31/USG in February.
Throughout the rest of the year the US average prices rose steadily from
a low of US$1.10/gallon in May to US$1.73/gal in December just 2 cents/gallon
short of the all-time high of US$1.75/gallon. Since January 2004, the
US average prices have been fluctuating from a low of US$1.36/USG to a
high of US$1.92/USG.
Notwithstanding,
ethanol production has been on the rise in the US as production rates
have reached an all-time high of 210M gallons per month and with the continued
growth of the market, there will soon be 100 fuel ethanol plants across
the US.
In 2002 the industry grew by 14% with the US being the primary contributor
at a growth rate of 9%. With California banning MTBE since January 2004
and the prohibition likely to follow in most north eastern states along
with the Renewable Fuels Standards (RFS) from the Energy Bill, there will
be sufficient driving force to maintain the growth rate up to 2012. The
language in the final energy conference draft of the Energy Bill included
a renewable fuel standard (RFS), requiring 3.1 billion gal/year of renewable
fuels in gasoline starting 2005 and to increase to 5 billion gal/year
by 2012.
Other
Market
The European markets are also possible targets for ACP countries in due
course as this group is exempted from duty into Europe, while for Brazilian
ethanol into Europe there is duty of approximately US$0.44/gallon (denatured)
and US$0.84/gallon (undenatured).
Included
in the European Import Regulations is a directive for all biofuel imports
into the European Union (EU). To this extent, standards are being developed
which will govern all imports and effective January 1, 2005 the EU requirements
for ethanol in gasoline will be 2% of sales and is expected to increase
to 5% of sales by January 1, 2010. The German market was launched in January
2004 and the governing standards have already been developed and accepted.
In the long term, demand for lead-free additives and for environmentally
benign octane enhancers combined with expected modification of the CBI
legislation, should ensure the marketability of Caribbean ethanol.
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