Petrotrin is pointing the way with ethanol

The recent opening of the $ 70 mm fuel ethanol dehydration plant at Petrotrin's abandoned Point Fortin refinery site by Trinidad Bulk Traders Ltd (TBTL) has drawn minimal attention from the national community.
The plant, the first built locally to utilise raw alcohol feedstock to produce ethanol, is in fact a significant milestone in local industry. During the opening ceremony on September 12, Energy Minister Eric Williams stated that the plant was "another avenue for making full use of local participation and content."

However, the significance of this latest investment by TBTL (a CL Financial subsidiary) goes well beyond the goal of local participation and content. There are several matters of interest. How successful can the industry be here in Trinidad and Tobago? Will it create any new opportunities for linkages with local industry and services? How will the industry benefit the community of Point Fortin?
Our discussion begins with the rudimentary question: What is ethanol?

In simplistic terms, Ethanol is an alcohol. It can be manufactured from the same process that produces rum: The thing Trinbagonians love till they die. Ethanol is used extensively as a solvent in the manufacture of varnishes and perfumes; as a preservative for biological specimens; in the preparation of essences and flavourings; in many medicines and drugs; as a disinfectant and in tinctures (e.g. tincture of iodine).
However, the fastest growing application of ethanol is as a fuel or fuel additive.

Gasohol, a blend of gasoline and fuel ethanol made popular by Brazil, is gaining market share globally particularly in North America. These blends can range from a 10 % ethanol and 90 % gasoline mix (E10 blend), up to an 85 % ethanol and 15 % gasoline mix, (E85 blend).
Interestingly, after 1998, most American made cars had the capability of using some sort of blend as their fuel, and now over 1.5 bn gallons of ethanol are blended with gasoline every year in the USA.

Ethanol has many advantages as an automotive fuel. Firstly, it reduces emissions because the oxygen present in the ethanol molecule enables the engine to combust the fuel more completely.
Secondly ethanol is produced from plants and is therefore a renewable fuel.
Given concerns about the oil "end game", ethanol seems well poised to serve as a mainstream fuel in the future. Lawrence Dupery, chairman of the Angostura Board, said that "the fuel ethanol plant was being built to capitalise on the growing global demand for cleaner motor vehicle uses."

What does this portend for Trinidad and Tobago's new ethanol initiative? The plant is designed to have a capacity of 100 mm gallons of fuel ethanol per year. The product will enjoy duty free entry into US markets, under the Caribbean Basin Initiative (CBI), supplying them with up to 7 % of their fuel ethanol requirements.
According to SJH and Co, an industry consulting firm, US demand for ethanol has risen at a compounded rate of 28 % over the period 2001-2005 and is expected to furthergrow at a rate of 10 % per annum through to 2014. The Clean Fuels Development Coalition says that this rate of increase should find total US demand for fuel ethanol at around 4 bn gallons in 2006 increasing to 7.5 bn gallons in 2012.

In response to the robust demand outlook, American fuel ethanol production nearly doubled over the last five years, from 1.6 bn gallons in 2000 to 3.15 bn gallons in 2004. Production is further set to increase to a probable 3.85 bn gallons in 2006. Ethanol imports, therefore fill a very narrow niche on the US market.
The TBTL plant faces direct competition from Jamaica, El Salvador and Costa Rica, who collectively supplied 70 mm gallons of fuel ethanol to the USA in 2004, and are also beneficiaries of CBI concessions.

The excise exemption gives CBI members a clear advantage, however, in terms of the final price of their products, and will for some time to come. It is an opportunity for producers to forge ties within the US market that would allow them to operate under competitive conditions, which are undoubtedly pending, with the ending of non-reciprocal trade schemes under FTAA rules.
Moreover, the powerful US farm lobby (US ethanol is produced from corn) is likely to begin to agitate for a levelling of the playing field sooner rather than later. Hopefully, the TBTL Group would have factored these concerns into the long-term planning for the facility.

For the people of Point Fortin, the new plant adds a fresh dimension to its rapid reindustrialisation process. Point Fortin has often been regarded as Trinidad and Tobago first industrial town. Point Fortin was the site of Trinidad and Tobago first oil refinery in 1914. It was a bustling oil town until 1974 when Shell sold off its assets to Government. When the collapse of oil prices in the 1980's threw the industry and economy into recession, Point Fortin was perhaps one of the areas worse hit.
Black City, as it is fondly called, remained very much in the doldrums until the advent of the Atlantic LNG Project. The sequential expansion of the ALNG facilities has provided continuous employment in the construction sector for many of the citizens.

However, there always has been an underlying concern about the future job prospects, particularly in light of the heavy capital intensive nature of the LNG business. The advent of TBTL ethanol facility is therefore a welcomed diversification.
The plant itself will provide only about 50 jobs, of which 27 are full time technical jobs. However, it would expand the market in Point Fortin for support services such as engineering and maintenance service firms. The increase in Port activities also will be a source of indirect job growth.

The ethanol plant raises some interesting industrial policy questions for the national economy. Can the ethanol plant be a catalyst for the revival of the sugar industry?
Alcohol feedstock for the plant is being imported from Brazil, the world's foremost producer of sugarcane and ethanol. If we look at the Brazilian example though, we see that proper planning, investment in modern technology and production techniques for sugarcane, and a supportive proactive public policy lead to a high yield, low cost, internationally competitive product.

Before the closure of Caroni, the production cost of sugar was estimated to be four times the cost of Brazil. This gives an idea of how inefficient we were at sugarcane production. Thus, if we are to harness this opportunity, a complete overhaul of our production processes and support systems is required. The prospects for such an intervention do not look bright in light of the closure of Caroni and subsequent disposal of its lands.
Although the plant's products are currently only for export, there may be opportunities for the emergence of downstream industries, at least over the medium to long-term. Food processing, paint and varnish manufacture, solvents and even medicines are among the industries that use ethanol as an input. Surpluses may occur in the future that allow for the development of new ethanol based industry.

The new TBTL ethanol plant represents another pioneering effort on the part of the CL Financial group. The Duprey outfit was the first local entrepreneurs to venture into the downstream petrochemical industry with its initial investment in methanol in 1992. It has since also led the way by taking Trinidad and Tobago capital and expertise to establish a methanol plant in Oman.
This latest initiative represents a shift away from dependence on fossil fuels for economic prosperity. Many more similar entrepreneurial initiatives are required to take advantage of emerging market niches thereby building the non oil economy. CL Financial is pointing the way, we hope others will follow.