A New Ethanol Industry for Armenia

Background Information

The groundwork needed to determine the feasibility of a new Armenian Ethanol Industry has been done, through a prolonged period and by many of the very best international specialists, although the original objective was not the production of ethanol.

Re-establishing the Armenian Sugar Industry was the original objective, when during 2000 and 2001 a U.S. Trade Development Agency funded Feasibility Study determined that a new Armenian sugar industry would be financially sustainable and it would improve the lives of thousands of Armenians living in the most depressed regions.

But the Armenian authorities turned down offers from Serious Foreign Investors to build a New Armenian Sugar Industry.

In 2003, Sudeco International Ltd. (Sudeco), one of the World's most prominent sugar industry specialist companies, submitted a proposal to the Armenian Government to build a sugar factory and refinery. Sudeco’s project cost was significantly lower than that estimated by the feasibility study, the proposal featured all new machinery and equipment, with the very latest technology, and Sudeco committed to manage the development stages of a new Armenian sugar industry, through to full production capacity - and beyond.

Sudeco agreed to make a significant investment into the multi-million dollar project, to produce 110 thousand tons of sugar each year. A comprehensive Business Plan was developed, a brand new factory and refinery was designed, including the latest Sudeco 'Continuous-Flow' technology, and arrangements were made to build a new factory and refinery on a 62-hectare site at Akhuryan, near to Gyumri.

Through 2002 and 2003, Agricultural Specialists came to Armenia from the UK, America, Germany and India, to determine the requirements for the major Agro-Development Program needed to effectively re-introduce sugar beets into Armenia's Northern agricultural plains. Discussions were held with the USDA, the USAID and IFAD, all of which expressed an interest to support the Agro-Development Program.

But Armenia's sugar market is one of the many Import Monopolies, and although the project was Approved by a Government Commission, the Government did not stand by its written commitments of support. So Armenia's farmers did not get their new sugar industry.

Now Armenia can draw on that groundwork to Build a New Armenian Ethanol Industry - Producing Ethanol from Sugar Beets

A New Armenian Ethanol Industry will give local producers the opportunity to supply Armenia's fuel importers with a significant proportion of their gasoline - Cheaper, Cleaner - and Domestically Produced.

Armenia depends on imports for energy, including fuel products which are strategically vital, for daily life, for commerce and for security reasons. Armenian Ethanol Production will replace a substantial part of those vital fuel imports and keep Millions of Dollars within the Republic.

A New Ethanol Industry will Target the Earthquake Zone and will respond to three priority objectives:

1. It will establish the Domestic Production of an Ecologically Clean Renewable Fuel Substitute
2. It will create a wide range of new opportunities – in the Agricultural sector, at the factory and in a multitude of support activities which will develop around the new industry
3. The Thousands of Work Opportunities will Reduce the Poverty Level in the Earthquake Zone

World Ethanol Development

World Ethanol Production has been projected to increase by a factor of Three Times from 20 million tons in 2003, to 60 million tons in 2010

Brazil has been using Ethanol for the past 30 Years

Brazil has developed Ethanol through the past 30 years as an alternative to petrol. Brazil now produces 18 million tons of ethanol each year and uses as much ethanol as it does gasoline.

America is catching up fast

America has followed the Brazilian trend and is expanding its ethanol production at a rate of 20% each year. Today America produces almost as much ethanol as Brazil.

Europe also getting involved

Europe has recently embarked on an Ethanol Development Progam, with plants already operating in France, Spain, Sweden and the UK.

Subsidies and Special Directives

In 2000, the EU introduced a Biofuel Directive and as a result European Ethanol Production is projected to expand to more than 12 million tons per year by 2009.

Ethanol development is also important for Far Eastern countries. China has the World's largest Ethanol Refinery, producing up to 800, 000 tons a year, whilst Japan's imports of Ethanol are expected to increase beyond 6 million tons by 2012.

What is Ethanol made from?

Brazil makes its ethanol from Sugar Cane whereas America uses Corn and Europe uses Sugar Beet as the agricultural feedstock.

How is Ethanol used?

Brazilian vehicles are flexi-fuel and run on almost pure ethanol, - switching to petrol when ethanol is not available. America mixes 15% ethanol with its petrol - and standard petrol engines run nicely on the mixture without modification. Europe is developing both philosophies.

Irrespective of how it is used - the ethanol fuel is ecologically cleaner than unblended petrol.

Ethanol can be a New ‘Core’ Industry for Armenia

Ethanol has been proven as a Realistic Alternative to Gasoline - and now Armenia has a real opportunity to establish a new ‘Core Industry' - to produce this Ecologically Clean Fuel Substitute.

The Reasons for Producing Ethanol

Brazil has a massive surplus capacity to grow sugar cane, so they developed the production of ethanol, which turned out to be a marvelous idea and very cost-effective. America uses enormous amounts of fuels and is burdened with ever-increasing fuel imports. So they developed ethanol production in an attempt to reduce their reliance on imported fuels. Europe is more concerned about the environment, so it developed ethanol production to take advantage of the distinct ecological benefits.

Armenia has a multitude of reasons to develop an ethanol industry. Firstly, Armenia is landlocked and ethanol will reduce the dependence on imported fuels; Secondly, to create work opportunities in the most depressed regions; Thirdly to reduce Armenia's 'Ecological Footprint'; Fourthly and most importantly, to stop soil degradation in the Northern agricultural plains through the re-introduction of sugar beets.

The development into ethanol has already been done and although some questions still remain, in the right circumstances ethanol can be an attractive proposition. Armenia can now become a part of the ethanol revolution.

The principal of using ethanol as a fuel additive would no doubt be best for Armenia - especially for the first few years of production.

What is the Cost of Ethanol?

The cost to produce ethanol is made up of two prime factors;

Firstly; the processing cost

Secondly; the cost to get the agricultural feedstock to the factory

Making Ethanol from Sugar Beets is Cheaper

The processing cost for sugar beets is similar to that for corn but less than for sugar cane - and by using recently developed ‘Continuous Flow’ technology the processing cost can be reduced to the absolute minimum.

Making Ethanol from Sugar Beets is Best for the Farmer

On a Hectare-to-Hectare basis, Sugar Beet is the most land-efficient agro-based feedstock for ethanol production.

A hectare planted with sugar beets produces more ethanol than a hectare planted with sugar cane and more than twice as much ethanol as a hectare planted with corn.

The Economic Research Service of the U. S. Department of Agriculture

• 7.85 Tons of ethanol are produced from each hectare of Sugar Beets
• 6.75 Tons of ethanol are produced from each hectare of Sugar Cane
• 3.40 Tons of ethanol are produced from each hectare of Corn.

Plus, Growing Sugar Beets requires Less outlay and provides More Income for the Farmer

Farmer receipts for sugar beets are considerably greater than for both sugar cane and for corn, plus the cost of growing sugar beet compares very favourably.

Ethanol is a Very Attractive Proposition - All Round

These factors make a new Armenian ethanol industry a very attractive proposition – for the factory, for the farmer and ultimately for the Armenian economy.

Establishing Ethanol Production must include Two Major Components:

Firstly: A New Ethanol Processing Plant.

Secondly: A Wide-Ranging Agro-Development Program

New Ethanol Processing Plant

Sudeco proposes building a New Ethanol Processing Plant to produce 30,000 Tons of ethanol each year. This is a very worthwhile quantity and will provide a 15% ethanol additive to the 200,000 Tons of gasoline presently used in Armenia.

The Factory should be Located near to the centre of the sugar beet region, so agreement has been reached with the Akhuryan authorities to use a 30-hectare site next to the railroad near to Akhuryan.

The Latest Continuous Flow Technology should be used to keep production costs to the very minimum.

The factory will have an Independent Power Supply to ensure continuous thermal and electrical energy supplies for the production processes.

International and local Emissions Standards need to be observed throughout all stages of the production process.

There will be Sugar Beet Depots for reception of the beets, and quality will be chaecked in laboratory facilities, before the beets are stock-piled ready for processing.

The Ethanol will be mixed with Petrol at the factory - and pumped into railway cisterns. The factory will be located near to the main railroad lines which bring imported petrol from the Black sea. And they go through the earthquake zone.

The Ethanol will need to be Stored in Tanks - because the operation is seasonal and it will be necessary to maintain continuous supply right through the non-operational period.

Future Increase in Production Capacity will be built in to meet any increases there may be in the demand for ethanol and in the supplies of sugar beets.

The Agro-Development Program

There are a number of reasons why the Agro-Development Program is so Important

Armenia has been 20 Years without Sugar Beets

The Spitak earthquake of 1988 destroyed the Armenian sugar factory and since then sugar beets have not been grown in large quantities in Armenia.

Re-introducing sugar beets after a period of nearly 20 years will be a wide-ranging commitment, - especially taking into account the implications of land privatisation of the mid 90’s.

Armenia’s Farmers have been totally dependent on Potatoes - as the only realistic means to make a worthwhile income. The incessant cultivation of potatoes has led to Very Serious Soil Degradation - reducing the ‘Black Soils’ of the northern agricultural plains to a light brown sandy substance. If nothing is done to halt the process the degradation will simply continue.

The USDA Knows the Importance of Sugar Beets

Studies by the U.S. Department of Agriculture have shown that when sugar beets are taken out of crop rotation, the result is inevitably a Degradation of soil quality, which is followed by lower crop yields - and reduced quality of the farm produce.

Armenia needs to stop the Rot and an effort is now vitally important to prevent further deterioration. The lands in the earthquake region have already suffered too much since the absence of sugar beets.

Sugar Beets are not Potatoes and the farmers cannot simply grow a few tons and sell them on the wholesale market like they do potatoes, so they are waiting for their new sugar beet market. The new ethanol factory will give Armenian farmers the Market they Need, but they will only get that market if they guarantee to grow tens of thousands of tons of sugar beets.

It is a Chicken and Egg situation

The factory will need 300,000 tons of sugar beets to produce 30,000 tons of ethanol. That means that 4,285 hectares of land will need to be planted with sugar beets each year, and so assuming a 3-year crop rotation, 12,855 hectares of land will be needed for the proposed ethanol Program.

But as long as there is no factory the farmers will not grow sugar beets and as long as there are no sugar beets there will be no factory.

Sudeco has Studied the Problem

Sudeco has been studying this problem for several years and knows that it should be attended to as soon as possible. Today ethanol production can be the answer - using sugar beets as the feedstock material.

Sugar Beets will bring Enormous Benefits

The inclusion of sugar beets in a crop rotation introduces valuable nutrition which will halt the ongoing soil deterioration.

The sugar beet leaves are also a great benefit - and can be used as a fertilizer or as animal feed.

Improved Quality and Yield of the Potato Crop will inevitably follow re-introduction of sugar beets in the crop rotation cycle, because of the nutritions sugar beets add to the soil.

Animal Husbandry will be given a Great Boost because the pulp residue from the processed beets makes a large volume of High Value Animal Feed.

ATTENTION !! This is a Most Competitive Option.

Sudeco has already Developed and Used Innovative ‘Biotechnology' in which the Sugar Beet Leaves, the Pulp, and other Organic Materials are used in a process to make Methane. The Methane is then transferred to a Continuous Heat and Power (CHP) engine which Generates Electrical Energy, Hot Water and Hot Air, which are used for ALL the Process Power Inputs. In this way, the Factory Produces ALL its Own Power, Free of Charge. No Boilers are Needed - which Eliminates the Expensive Fuel Usually Used to fire them. Energy is the Single Most Expensive Input Expense in Ethanol Production.

In recent years, hailstones have been common in the Northern regions of Armenia through the growing months of June and July. And unlike potatoes, hailstones do NOT harm sugar beets.

There are more than 45,000 hectares of irrigated Land Available - in the northern agricultural region of Armenia, plenty to start a very worthwhile ethanol industry and sufficient for future expansion.

Major Investments have already paved the way

The Spitak earthquake destroyed the majority of the irrigation infrastructure in the region, including numerous water reservoirs and hundreds of kilometres of water channels.

But most of those irrigation systems have now been reinstated thanks to nearly $200 million dollars worth of investments from the World Bank and other Governmental and non-Governmental organizations.

Plus, other important components of the region’s infrastructure have been built or re-furbished, including numerous apartment buildings, schools, clinics and roads.

Armenia now needs to build on that Investment

Despite all that money spent and despite all the work that has been done, the soils will simply continue to deteriorate if there isn’t proper crop management.

A new Ethanol industry is the Ideal Opportunity for Armenia – to grow sugar beet in rotation with potatoes and re-introduce the nutrition which is now so urgently needed for the soils.

A new ethanol industry therefore represents the ideal opportunity to revitalize agriculture in the region and build on the considerable investments already committed.

Ethanol can also precipitate other agro-related fuel substitutes. Brazil’s buses are already running on a bio diesel mixture, which they make from Soya and other bean crops. These crops will undoubtedly fit in nicely with sugar beets and potatoes, so a future bio diesel project could become a real opportunity.

Sudeco has looked at the Initial indicators - and initial studies show that a New Armenian Ethanol Industry will not only be Financially Viable but it will undoubtedly bring Tremendous Economic and Social Benefits to the Earthquake Region of the Republic.

Enormous Economic and Social Benefits

Because despite all the tremendous efforts to date in the Shirak and Lori regions, the number of unemployed and those living under the poverty level are still amongst the highest in Armenia.

Tremendous Work Opportunities

A new and substantial ethanol industry will create Tremendous Work Opportunities, during the factory construction period and on through the Long Years of Ethanol Production at the factory. But the greatest benefits will be seen as a result of Revitalizing the Vitally Important Agro-Industry.

Living standards for up to 15,000 families Will Improve because of the new Armenian Ethanol Industry, using sugar beets as raw material.

Armenia's farmers now need the Fuel Importers to agree to purchasing 15% of their gasoline requirements locally and for the Armenian Government to add their backing, through Ministry of Agriculture cooperation and with help securing support for the Agro-Development program.

Together with Sudeco, we continue to Lobby the Government, Hoping for a Positive Response