Buyer emerges for shuttered St. Croix refinery

Hovensa LLC, the joint venture of Hess Corp. and Petroleos de Venezuela SA (PDVSA), has found a buyer that hopes to restart its idled 500,000-b/d refinery on the island of St. Croix, US Virgin Islands government officials confirmed (OGJ Online, Sept. 3, 2014; Jan. 18, 2012).

Both the owners of Hovensa and the Government of the Virgin Islands have reached separate, tentative agreements for the sale and operation of the refinery with Atlantic Basin Refining Inc. (ABR), a company formed specifically to acquire the complex, according to an Oct. 28 statement from the office of Gov. John P. de Jongh Jr.

Specifically, the government has negotiated a detailed operating agreement with ABR that defines future rights and obligations as the refinery’s new owner should the transaction gain legislative approval.

Operating agreement

The operating agreement, which has a base term of 22 years but may be extended by two additional terms of 10 years each, would require the new owner to rebuild and restart the refinery, employ hundreds of Virgin Islanders, and make fixed payments of more than $1.6 billion to the government over the life of the agreement, de Jongh said.

In addition to fixed payments, the new owner also would be required to submit variable payments to the government depending on the refinery’s profitability, the governor said.

Terms of the agreement also stipulate the new owner must pay into a site restoration fund that would pay for the demolition and clearing of the refinery, as well as remediation of the site, should the purchaser either fail to restart or shut down the refinery at any time in the future.

“This will ensure that, whatever the circumstances, if there is not to be an operating refinery, we will not be left with an eyesore and a wasting asset,” de Jongh said.

Within 20 months of closing the pending transaction, the government additionally will require ABR—which plans to operate the revamped complex under the entity ABR VI—to have obtained the finances to fund both a comprehensive rehabilitation and restart plan for the refinery, as well as provide the working capital to support the company’s operations ahead of the plant’s official restart.

Engineering analysis and development of a restart plan likely will take 9-12 months, while actual construction and rehabilitation of the complex could take as long as 24 months and cost more than $1 billion, which includes costs associated with retraining refinery workers, according to the governor’s office.

The governor met with members of the 30th Legislature on St. Croix to review details of the proposed operating agreement, but no timeline was been disclosed regarding when the deal might be finalized.

ABR’s preliminary plan

Though details have yet to be revealed regarding the identities of ABR’s owners, de Jongh said the company is headed by “a group of individuals with experience in refining, energy finance, oil trading, and environmental restoration.”

According to posts on ABR’s web site, which since have been removed, the outfit is supported by “the world’s biggest refinery, energy, and financial companies, including Samsung Engineering, Barclays, AON, GE, and others.”

Additional information on the web site stated ABR intends to reconfigure the St. Croix refinery “to process US light sweet crude oil in a logical, sustainable, and locally responsible manner,” and that once reconfigured, the refinery will be “a “midcomplexity refinery with no catalytic cracking or coking operations.”

ABR’s plan to reconfigure the refinery into one that processes US light sweet crude aims to resolve many of the challenges faced by the complex’s former owners, who were obligated to process heavy, sour Venezuelan crude supplies, according to the web site.

Compared with its former operations, the reconfigured St. Croix refinery, which is to have an initial crude processing capacity of 300,000-b/d, will experience greater operating flexibility, higher clean-fuel yields, reduced power demand, and lower emissions, all of which will contribute to increased profitability, the web site said.

Contact Robert Brelsford at [email protected].