Biofuels perspectives Biofuels perspectives

in Guyanain Guyana

INDEX:INDEX:

•• The transition to a The transition to a ““new energy eranew energy era””

•• Bioethanol in the worldBioethanol in the world

•• ECLACECLAC’’s study in Jamaicas study in Jamaica

•• ECLACECLAC’’s study in Guyanas study in Guyana

Impacts of oil imports Impacts of oil imports

•• In 2005, more than In 2005, more than 220220 M US$M US$ ( i.e. ( i.e. 29%29% of countyof county’’s s

imports) have been spent for purchasing oil derivatives.imports) have been spent for purchasing oil derivatives.

•• In the last 4 years, this number grew In the last 4 years, this number grew 100%,100%, with with

significant impacts on national economysignificant impacts on national economy

•• In 2005, gasoline imports represented In 2005, gasoline imports represented 7%7% of GNP of of GNP of

GuyanaGuyana

•• National gasoline consumption: National gasoline consumption: 115.900115.900 MM litreslitres

OIL DERIVATIVE OIL DERIVATIVE IMPORTSIMPORTS IN GUYANAIN GUYANA

0

50,000

100,000

150,000

200,000

250,000

1997 1998 1999 2000 2001 2002 2003 2004 2005

1000 US$

0%

5%

10%

15%

20%

25%

30%

35%

value

% of total imports

Sugar Industry in GuyanaSugar Industry in GuyanaPROsPROs

•• 15%15% of GNP and of GNP and 40%40% of national agriculture productionof national agriculture production

•• 50,00050,000 hectares under productionhectares under production

•• 20,00020,000 direct jobsdirect jobs

•• 75.875.8 tons cane/hectare (yearly average productivity)tons cane/hectare (yearly average productivity)

•• 90%90% of sugar is exported (60% to the European Union)of sugar is exported (60% to the European Union)

CONsCONs

•• 210.000210.000 of the 300.000 tons of exported sugar, are sold under of the 300.000 tons of exported sugar, are sold under

Special Preferential Sugar agreements with US and EUSpecial Preferential Sugar agreements with US and EU

•• In 2009, SPS & EUIn 2009, SPS & EU preferential price quotas = preferential price quotas = 0 0 , with relevant , with relevant

impact on profitabilityimpact on profitability

Need for entering in a Need for entering in a ““market & efficiency philosophymarket & efficiency philosophy””

GuysucoGuysuco’’s strategic plans strategic plan

•• Extend sugar cane plantation of Extend sugar cane plantation of 50%50%

•• Produce Produce refined refined sugarsugar

•• Introduce Introduce ethanolethanol production production

•• Increase electricity production with bagasse Increase electricity production with bagasse ((cogenerationcogeneration))

On the other hand:On the other hand:

•• World Bank did not approve a loan for restructuring the World Bank did not approve a loan for restructuring the

industry ( 2001)industry ( 2001)

•• A recent study proposed closing 4 of the 8 Guysuco cane A recent study proposed closing 4 of the 8 Guysuco cane

central factories ( = central factories ( = -- 9000 jobs in Demerara)9000 jobs in Demerara)

Assessing ethanol potential Assessing ethanol potential

TARGETTARGET:: to substitute to substitute 10%10% of national consumed gasoline of national consumed gasoline

with (bio)ethanolwith (bio)ethanol

11.511.5 MM litres of ethanol are neededlitres of ethanol are needed

•• From the exhausted molasses of 1 ton of sugar cane, From the exhausted molasses of 1 ton of sugar cane,

8.8 lts8.8 lts of ethanol can be producedof ethanol can be produced

•• Considering a national, average production of Considering a national, average production of 3.53.5 MM tons of tons of

sugar cane, sugar cane, 30.830.8 MM litres of ethanol from molasses can be litres of ethanol from molasses can be

produced produced (almost (almost 33 times more than required)times more than required)

National bioethanol requirement could be met National bioethanol requirement could be met without without

expanding current cultivated area !! expanding current cultivated area !!

Assessing ethanol costs Assessing ethanol costs Considering an average price (2005) of Considering an average price (2005) of 8383 US$US$/tons for the molasses /tons for the molasses

and an average productivity of and an average productivity of 260 lts 260 lts of ethanol per ton of molasses, of ethanol per ton of molasses,

the cost of producing 1 lt of ethanol would be close to the cost of producing 1 lt of ethanol would be close to 0.392 US$/lt0.392 US$/lt

The same exercise yields an average cost of The same exercise yields an average cost of 0.4080.408 US$/ltUS$/lt

of ethanol produced of ethanol produced directlydirectly from sugar cane juicefrom sugar cane juice

COMPONENT ESTIMATED COSTS (US$/lt)

Molasse 0.321

Energy 0.018

Chemical products 0.031

Wages 0.009

Maintenance 0.008

Other costs 0.005

TOTAL 0.392

Assessing ethanol competitivenessAssessing ethanol competitiveness

Given that 1 lt of ethanol requires 1.67 kg of sucrose for beingGiven that 1 lt of ethanol requires 1.67 kg of sucrose for being produced,produced,

an an Indifference Price for EthanolIndifference Price for Ethanol (IPE) can be related to the (IPE) can be related to the

price of sugar:price of sugar:

IPEIPE (US$/lt)(US$/lt) = = 1.67 1.67 * * PPsugarsugar

The same way:The same way:

IPE IPE (US$/lt)(US$/lt) = 2.98 * P= 2.98 * Pmolassemolasse

FOB sugar price in FOB sugar price in ““preferential/quotapreferential/quota”” markets: markets:

0.37 0.37 -- 0.56 US/kg0.56 US/kg 0.62 < IPE < 0.93 US/lt0.62 < IPE < 0.93 US/lt

FOB sugar price in FOB sugar price in ““openopen”” markets : markets :

0.13 0.13 -- 0.40 US/kg 0.40 US/kg 0.22 < IPE < 0.67 US/lt 0.22 < IPE < 0.67 US/lt

FOB FOB molassemolasse price in the Caribbean: price in the Caribbean:

60 60 -- 120 US tonn 0.18 < IPE < 0.36 US$/lt120 US tonn 0.18 < IPE < 0.36 US$/lt

BREAKBREAK--EVEN VALUES FOR ETHANOLEVEN VALUES FOR ETHANOL

0.00

0.25

0.50

0.75

1.00

molasses sugar free market sugar quota market

US$/liter

Gasoline price 2005

Under the existing condition, in Guyana is more attractive to prUnder the existing condition, in Guyana is more attractive to produce oduce

gasoline from molasse than directly from sugar canegasoline from molasse than directly from sugar cane

(which would mean reduce the production of sugar(which would mean reduce the production of sugar…….).)

Assessing ethanol economics Assessing ethanol economics

•• To produce the required To produce the required 11.511.5 M litresM litres of ethanol, a of ethanol, a 65.00065.000

litres/day distillery would be sufficient litres/day distillery would be sufficient (under a 180 days/year operation scheme)(under a 180 days/year operation scheme)

•• Related investment would be close to Related investment would be close to 6.56.5 MM US$US$

•• Average price of gasoline of Average price of gasoline of 0.4630.463 US$/litre US$/litre

Average Average ethanolethanol--fromfrom--molassesmolasses cost at cost at 0.3920.392 US$/litreUS$/litre

•• If If you sell 11.5 M lt ethanol at the same price of gasoline, the you sell 11.5 M lt ethanol at the same price of gasoline, the

net net (*) (*) estimated earning would be close to estimated earning would be close to 800.000 800.000 US$/yearUS$/year

•• Under these conditions, payback period for the distillery would Under these conditions, payback period for the distillery would be be

something more than something more than 11 yearyear

(*) (*) a detailed analysis of the a detailed analysis of the ““overalloverall”” national earning should be performednational earning should be performed

Ethanol & Kyoto protocolEthanol & Kyoto protocol

•• For every litre of a 10% ethanol/gasoline blend, For every litre of a 10% ethanol/gasoline blend,

0.40 kg0.40 kg of COof CO22 are are notnot emitted to the atmosphere.emitted to the atmosphere.

•• If we substitute 11.5 millions litres of gasoline with ethanol, If we substitute 11.5 millions litres of gasoline with ethanol, a a

significant significant 46004600 tons of COtons of CO22 per year (i.e. 4600 Certified per year (i.e. 4600 Certified

Emission Reductions) could be Emission Reductions) could be ““tradedtraded”” under the Clean under the Clean

Development Mechanism of the Kyoto Protocol.Development Mechanism of the Kyoto Protocol.

•• At a At a very very conservative price of conservative price of 5 US$/tons5 US$/tons COCO22, ,

23.000 US$23.000 US$ could be added to the national cash flow could be added to the national cash flow

as a net, positive incomeas a net, positive income……..

Other bioenergy options: Other bioenergy options: RICERICE

•• Rice production in 2004: Rice production in 2004: 500.000500.000 tons tons

•• Rice exports: Rice exports: 70%70% of the national productionof the national production

•• Rice waste (Rice waste (huskshusks) availability: ) availability: 110.000 tons/year110.000 tons/year

•• Energy content of the rice waste: Energy content of the rice waste: 36.400 teps36.400 teps

(=(=11%11% diesel consumption in Guyana)diesel consumption in Guyana)

The biofuel produced from rice husks could be easily used The biofuel produced from rice husks could be easily used

for producing electricity in (small ?) for producing electricity in (small ?) cogeneration plantscogeneration plants, ,

possibly linked to the rice facilitiespossibly linked to the rice facilities

Other bioenergy options: Other bioenergy options: WOODWOOD

•• Wood production in 2005: Wood production in 2005: 1.350.0001.350.000 m3m3

•• 30%30% of the processed wood is waste (of the processed wood is waste (sawdustsawdust))

•• Energy content of sawdust: Energy content of sawdust: 1.551.55 M M teps teps

((300%300% diesel consumption in Guyana)diesel consumption in Guyana)

The biofuel produced from sawdust could be easily used for The biofuel produced from sawdust could be easily used for

producing electricity in (small ?) producing electricity in (small ?) cogeneration plantscogeneration plants, ,

possibly linked to the wood facilitiespossibly linked to the wood facilities

Final considerationsFinal considerations

•• Guyana currently counts on Guyana currently counts on excellent conditionsexcellent conditions (both internal (both internal

and external) for producing bioethanol from sugar cane and external) for producing bioethanol from sugar cane (mainly (mainly

form exhausted molasses)form exhausted molasses)

•• The proposed distillery would create a significant volume of newThe proposed distillery would create a significant volume of new

jobsjobs ( between 300 and 900, depending on the applied scenario)( between 300 and 900, depending on the applied scenario)

•• Penetration of ethanol would yield country benefits, both at Penetration of ethanol would yield country benefits, both at

economic economic (savings on imports, carbon credits, etc..) and (savings on imports, carbon credits, etc..) and

environmentalenvironmental (lower hydrocarbon consumption) level(lower hydrocarbon consumption) level

•• It is of paramount importance the creation of a It is of paramount importance the creation of a ““adad--hochoc””

managing entitymanaging entity (a Biofuel Executive Commission ??)(a Biofuel Executive Commission ??) , in charge of , in charge of

coordinating the process related to the coordinating the process related to the sustainablesustainable production production

and use of biofuels in the country.and use of biofuels in the country.

Final considerationsFinal considerations

Among others tasks, this hypothetical entity should:Among others tasks, this hypothetical entity should:

•• HarmonizeHarmonize entrepreneurial with governmental interestentrepreneurial with governmental interest

•• Design a plan (time, resources, responsibilities, tec..) for Design a plan (time, resources, responsibilities, tec..) for

progressive introductionprogressive introduction of ethanolof ethanol

•• Establish fuel specifications and logistics Establish fuel specifications and logistics standardsstandards

•• Design Design ““adad--hochoc”” programmes for the information of the programmes for the information of the society society

and and ““inin--countrycountry”” technological technological developmentdevelopment

•• Propose new form of Propose new form of financingfinancing for supporting the sugar cane for supporting the sugar cane

industryindustry’’s modernization & transformations modernization & transformation