Wary of the negative effect that sharp increases in oil prices could have on Jamaica’s fledgling economic recovery, and the likelihood of a fall in sugar export prices, Prime Minister P J Patterson says the Government is serious about growing additional acreages of sugar cane for the production of ethanol as an additive to displace up to 10 per cent or 375,000 barrels a year of imported fuel.

“The outlook for African, Caribbean and Pacific (ACP) sugar in Europe is not very bright,” Patterson told journalists at his post-budget press conference at Jamaica House yesterday.

“In addition, there are 15 new members of the European Union (EU), a significant number of them are beet sugar producers who will resist current preferences to ACP sugar.”

He added that notwithstanding the recent windfalls for the sugar industry, the result of an appreciation in the value of the euro against the US dollar, there needed to be diversification of the industry.

Jamaica currently has an increasing appetite for oil, moving from 22.9 million barrels to 27 million barrels between 1998 and 2003. During that five-year period, the cost moved from US$313 million in 1998 to US$813 million in 2003, outpacing the growth in export earnings, Patterson said.

However, he declined to give a time-frame for when the country could achieve the targeted production levels for ethanol, saying only that he would shortly set up an Alternative Sugar Sub-Committee with that mandate, among others.

“I am confident that we will soon be able to up the limit (of ethanol) from five per cent to 10 per cent,” said the prime minister.

Nearly two decades after making its first halting entry into the sector, Jamaica is considering a new big foray into the ethanol industry involving upgrading the blending facilities of the Government-owned Petrojam oil refinery through a Sugar Industry Authority (SIA) initiative.

SIA chairman, Derick Heaven, told the Observer recently that the project was “just one area that we are considering for the future use of sugar cane… but it is an area on which we have signed off on”.

The state-owned Petroleum Corporation of Jamaica (PCJ) is overseeing the project on which it has begun preliminary work, using the advanced state of the industry in Brazil and India as models.

The main problem in the equation for Jamaica is how to compensate for any losses accruing to the sugar industry resulting from possible fallout from a US$100- million export sector which directly employs about 40,000 people, mostly in rural communities where jobs are scarce.

This year’s sugar production is estimated to be at about 180,000 tonnes, a 20 per cent increase over last year’s output, which was the lowest in years. But even with this increase, Jamaica will still have to import around 50,000 tonnes, primarily to meet local demand for refined sugar; and the country’s production costs at US$0.23 per pound, are three times that of prevailing world market prices.

Patterson, expanding on his budget presentation Tuesday, said that “ethanol production from sugar cane would produce a significant market opportunity for the industry, as in the case of Brazil and India”.

Noting that whenever oil prices moved above US$25 a barrel the Government became “very anxious”, Patterson said that the country had to be prepared for such a possibility, which could materialise due to production cuts by OPEC producers in order to boost price.

However, he emphasised that Jamaica’s gas prices were the lowest in the region, except for Trinidad and Tobago, which is a major producer of the commodity.

Patterson also emphasised that the ethanol initiative was within the context of an evolving energy policy that looks at conservation and “pricing questions through an improvement in the road network”.

Also under consideration is the development of a regulatory framework to introduce natural gas into Jamaica’s energy supply mix by 2005, he said, as well as exploratory moves into wind and solar energy.