Petrojam Ethanol in search of new supplier
Published:Wednesday | May 12, 2010 | 12:00 AM
Mark Titus, Business Reporter
Petrojam Ethanol Limited (PEL), the government's alcohol dehydration facility is now on the hunt for a supplier of hydrous or wet alcohol, the feedstock from which it produces fuel-grade ethanol, having lost its supplier in Brazil last year.
The lack of raw material has forced the plant on Marcus Garvey Drive in Kingston to ramp down.
"PEL is currently seeking to enter into a toll processing agreement in order to guarantee restart of operations at the earliest possible time," said manager Ricardo Neins.
PEL is a subsidiary of Petrojam Limited, whose majority ownership has been transferred to Venezuela's state-owned PDV Caribe, after Jamaica's oil supply partner stepped in earlier this year with capital under a rescue deal to fund the ongoing US$1.2 billion oil refinery expansion project.
Neins said the new ownership of the oil refinery should not affect the operations of PEL.
The ethanol producing plant has been out of operation since November 26, last year.
Adversely affected
"Raw material from Brazil was adversely affected by excessive rain during their harvesting period, as well as the high price of sugar on the world market," Neins said in an email to Wednesday Business.
According to the PEL head, because of the attractive sugar prices, Brazilian producers opted to produce more sugar and less ethanol of all grades resulting in a shortage of ethanol products and accompanying high prices for supplies.
This situation affected the entire Caribbean ethanol industry, he said, and left PEL without a raw material supplier.
Petrojam Ethanol was established in the 1980s to take advantage of United States concessions under the Caribbean Basin Initiative (CBI), extended to regional trading partners who are expected to supply up to seven per cent of the American market with fuel-grade ethanol duty free. Jamaica is the largest supplier of fuel-grade ethanol to the US under the CBI.
The last supply arrangement PEL had was a short-term one which ended when the facility was closed.
Funding rehabiliation
Prior to that, its last three-year supply deal with Coimex, a Brazilian sugar and ethanol producer, saw the South American firm agreeing to fund the Jamaican plant's rehabilitation, while it took a 20 per cent stake in the factory's operation and provided feedstock for the 40-million-gallon-a-year facility. The Jamaican Government undertook to repay Coimex's share of the US$10.5 million factory repair bill over a three-year period.
Coimex had wanted to continue the partnership, but Jamaica chose instead to throw PEL in as sweetener for a sugar divestment deal it negotiated with Infinity Bio-Energy, but that deal went sour before final consummation, leaving the state still in possession of the plant.
This time around, Neins said, PEL is not seeking any partnership.
The expectation is that the situation in Brazil will return to normal when harvesting starts this month, and Neins is optimistic that feedstock will become available at prices that will allow viable operations for CBI entities.
PEL made a loss of J$366 million for the financial year 2008/09, but returned to profitability last year, reporting a surplus of J$100 million and is projecting 39 per cent more profits this year.
Ethanol is currently selling on the world market at or around US$1.63 per gallon.