Introduction
Before considering options for the way forward in the sugar industry, I shall first examine challenges posed by its underperformance as revealed in the behaviour of the standard performance measures since the 1990s as well as last week’s analysis of Guysuco’s predicament. Taken together these two items elaborate clearly several strategic mis-steps, which Guysuco has made since the mid 1970s.
The most striking of these lies in the design and execution of the Skeldon Sugar Modernization Project (SSMP). For all intents and purposes Guysuco had intended the SSMP to be its defining response to the several difficulties facing the industry during the 1990s. The project was initiated under Guysuco’s Ten-year Strategic Plan, 1998-2008 (which was approved by the then PPP/C Government of Guyana). In that Plan the SSMP was identified as first priority for restructuring and placing the industry on a globally competitive footing.
SSMP
However it is not widely appreciated that, as initially formulated, the SSMP had two essential features. The first was, the construction of a brand new factory at Skeldon (Its specifications are indicated at the end of this column), and the second was the expansion of cultivated cane acreage amounting to about 13,000 hectares. Achieving the latter required substantial complementary investments in infrastructural works (especially drainage and irrigation) as well as the deliberate fostering of a cadre of private farmers to cultivate and harvest the newly planted acreage.
Regrettably, factory construction did not commence on schedule. Indeed it was not until 2005 that construction began under a “turnkey arrangement” with the China National Technical Import Corporation (CNTIC). The factory was completed and commissioned on August 22, 2009.
Further to the point, the original design of the SSMP had also envisaged 1) the complementary expansion of Albion estate cane acreage from 14,394 hectares to 17,115 hectares 2) the modernization of the Albion factory to supplement the one being constructed at Skeldon and 3) the closure of the Rose Hall factory. When completed this would have resulted in an overall factory capacity of 415 tonnes cane per hour in that area.
As I have previously indicated (August 7, 2011), the Plan included the results of a cost-benefit evaluation of the Skeldon project and three other options; namely to: 1) expand Albion and secure Rose Hall 2) create a new Albion factory as a stand-alone or 3) provide a new factory at Rose Hall. The results favoured the Albion expansion and Rose Hall closure and this was recommended in the 1998-2008 Plan.
The proposals in the Plan were scheduled to come on stream by 2008. It is therefore an indication of how far Guysuco has departed from their original proposals that none of these have come to fruition on schedule. Furthermore, except for the Skeldon factory delays, none of the other failures are acknowledged in current debates on the sugar industry!
Defects
Readers would know that immediately after the Skeldon factory was commissioned in 2009, many defects emerged. These led to heated legal and public controversies among the principal parties to the project: Booker Tate, the Project Manager; the Government of Guyana; and, the executing corporation, CNTIC.
With the benefit of hindsight, we can note other miscalculations that were made in regard to this Project. Firstly, the Government at the time was too readily seduced by the promise of a vibrant sugar industry, despite the grim warnings evident, if a sober appraisal of Guysuco’s operations was undertaken. Second, Guysuco’s management (Booker Tate) exploited this gullibility for its own commercial benefit. This was possible because Booker Tate was not required to take an equity position in the SSMP, which it proposed and managed; the Government carried the full risk of project failure! Third, as the 1990s was coming to an end, it became increasingly evident that the EU Sugar Protocol (SP) was in great jeopardy. As we now know, the SP was unilaterally denounced by the EU with the complicity of the ACP Group of Countries (including Guyana).
Conclusion
If one recalls how aged and inefficient the factories were in the 1990s, one can perhaps understand the temptations of the SSMP. Skeldon had at that time a rated capacity of only 90 tonnes cane per hour, when the industry norm was around 350-420 tonnes cane per hour! New sugar factories offered centralized process control, which relies on the efficiency of digital technology. Continuous vertical crystallizers are installed to improve sucrose recovery; while, continuous vacuum pans enhance product quality and stabilize steam flows. Furthermore, short retention clarifiers are installed in order to impede colour formation, thereby improving sugar quality. Sugar driers are also routinely installed to improve sugar quality. None of these applied at the then Skeldon factory.
Further, as is now widely appreciated in Guyana, capacity to cogenerate electricity through the installation of high pressure boilers and pass out/condensing turbo alternators is also standard. These add value to the sugar factory operations. Unit capital and operating costs of factories are also reduced with the complementary installation of 1) continuous ‘B’ centrifugals, 2) diffusers to enhance sugar extraction and 3) punt dumpers.
The Schedule below indicates the new Skeldon factory specifications.
Schedule: Skeldon Factory Specifications
Skeldon Sugar Modernization Project – New Factory Statistics
■ Sugar production 116,000 ts/y
■ Cane consumption 1,115,000 tc/y
■ Cane processing rate 8,4000 tc/d
■ Hourly processing rate 350 tch
■ Sugar production 35.5 tch
■ Pol extraction 97.00
■ Overall recovery 85.5%
■ Boiling house recovery 88.10%
■ Sugar quality Pol – 99.30%
Colour – <1,350 Icumsa
Moisture -,0.18%
Grade – VHP
■ Steam pressure 54 bar
■ Boiler capacity 2X 125 ts/h
■ Boiler efficiency 86.0%
■ Steam temperature 485 deg C
■ Power generation capacity (steam) 2 X 15 MW & 1X5.0 MW
■ Power generation capacity (diesel) sets
■ Total generating capacity 40 MW
■ Export capability 25 MW
Source: Y. Abdul (Guysuco) and D. Munasinghe (Booker Tate Ltd.).
Next week I shall summarily indicate a few of the other remaining challenges.
