Thursday, October 30, 2014

US Virgin Islands: PDVSA, Hess Corp. to Find Buyer for Defunct Refinery Shutdown in 2012

According to The Latin American Tribune, the US Virgin Islands announced that Venezuelan state oil company PDVSA and Hess Corp have reached a tentative agreement to sell the now-idle Hovensa refinery to Atlantic Basin Refining.

Located on the south shore of Saint Croix, Hovensa has the capacity to process 500,000 barrels per day, but PDVSA and Hess shut it down in 2012 amid weak demand.

Atlantic Basin Refining is “a company formed specifically to acquire the shuttered refinery,” Virgin Islands Gov. John de Jongh Jr. said in a statement.

“The company is headed by a group of individuals with experience in refining, energy finance, oil trading and environmental restoration.”

The new owners will be required to “to rebuild and restart the refinery, employ hundreds of Virgin Islanders and make substantial payments to the government totaling over $1.6 billion in fixed payments over the life of the agreement and additional variable payments depending on the refinery’s profitability,” according to the statement.

COMMENT: The new owners “will be required to take the facility down and clean up the site if they do not restart the refinery or if it is again shut down 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.

The US Virgin Islands’ legislature must approve the deal.

The construction and rehabilitation of the refinery is expected to take as long as 24 months and to cost more than $1 billion.

The operation's agreement’s initial term is for 22 years.

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