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Petrojam Ethanol reluctant to relocate

Published:Friday | May 15, 2015 | 12:00 AM
Petrjam Ethanol's dehydration plant in Kingston.

The planned expansion of the Petrojam oil refinery will result in the physical displacement of sister company and tenant Petrojam Ethanol Limited (PEL), but the biofuel trader says it is yet to craft plan for the relocation, even though the refinery is working with an ultimatum from the energy minister to show progress on the upgrade programme this year.

PEL is situated at Petrojam's complex on port-facing lands at Marcus Garvey Drive, Kingston, but the refinery expansion from 35,000 barrels per day to 50,000 barrels will require land space on which PEL sits. Both companies are subsidiaries of state-owned Petroleum Corporation of Jamaica.

General manager of Petrojam Ethanol, Ricardo Neins, says the company's preference is not to move at all, but is otherwise hoping to find a location in proximity to a port in order to manage transport costs and other risks.

The PEL dehydration plant, which produced fuel-grade ethanol, was ramped down in 2009, after its Brazilian market for feedstock or wet ethanol dried up.

PEL did one tolling contract in 2012 and has been in mothballs since. Its operation is now confined to importing fuel-grade ethanol for distribution to local petroleum marketing companies and Petrojam, whose refined gasolene includes a 10 per cent ethanol blend - a 17-million gallon market.

Petrojam Ethanol occupies a total area of 36,340 square metres at the Petrojam complex. Its lease agreement with Petrojam Limited gives it access to the land and Petrojam's pier.

The Ministry of Energy, which has told Petrojam that the Jamaican Government would consider locking down the facility if it does not get moving on the expansion programme, says on its website that to facilitate the refinery project, some aspects of PEL's operations would have to be moved elsewhere.

awaiting board approval

PEL assets include the 40-million gallon operating plant, cooling tower, pipelines and tank.

"Taking structural factors into consideration, it may not be practicable to remove the tanks, but the plant equipment would be relocated, if necessary," the ministry said.

At last report, Petrojam Limited was waiting for board approval of the latest proposals for the refinery expansion. Prescreening studies of the plant's configuration have been completed.

"As you would recall, funding is the problem for financing the whole project. What they are trying to do now is find someone who will put in funding, ether using the original design or a new one," said Neins. "The plan has always been to work around PEL being at the same place, and manage any risk that may result from the operation being there, if any."

The refinery expansion has been talked about for close to a decade. Previous estimates have priced the project at around US$750 million.

Neins says other workable options for relocation would include the sugar belt, which could potentially be a source of cane for ethanol production. He has raised the possibility of an internal market for feedstock in the past, but so far it has had no traction, since it would require farmers to invest in the production of an additional one million tonnes of cane.

For now, the ethanol trader has no workable option for a new home.

"If and when there is an upgrade, which we expect to happen, we will look at the options and decide. We have no land set away," he said.

A move away from Petrojam's port facilities is expected to add to transport costs and potentially lead to losses, including from pilferage, with Neins noting that, like rum, the alcohol-based fuel may be prone to theft.

"When we look at all those risks, we might just have to sell the plant, if we have to move. But we hope it remains where it is, near to the port, for all intents and purposes," he said.

Petrojam Ethanol has been a wholly owned subsidiary of the Petroleum Corporation of Jamaica since 2008, having previously been wholly owned by Petrojam Limited.

The company's operations were expanded in 2004 to include the processing of ethanol, a project which was backed by Coimex of Brazil.