Hovensa to close 500,000 b/d Virgin Islands refinery

Hovensa LLC is closing its 500,000 b/d refinery at St Croix, USVI, the joint venture of Hess Corp. and Petroleos de Venezuela SA reported. After the shutdown, the Hovensa complex will operate as an oil storage terminal.

Hovensa said its losses at the refinery totaled $1.3 billion in the past 3 years alone and were projected to continue. The firm said its losses were caused primarily by “weakness in demand for refined petroleum products due to the global economic slowdown” and “the addition of new refining capacity in emerging markets.”

It said, “In the past 3 years, these factors have caused the closure of approximately 18 refineries in the US and Europe with capacity totaling more than 2 million b/d of oil,” Hovensa said. It also noted that the low price of natural gas in the US has put its St. Croix facility, an oil-fueled refinery, at a “competitive disadvantage.”

The firm said it explored “all available options” to keep the refinery operating but that the “severe financial losses left it with no other choice” than to shutter the facility.

Hess said it will take a $525 million aftertax charge against its fourth-quarter 2011 earnings as a result of the shutdown.

A Hovensa spokesman said the refinery equipment will shut down by mid-February, but that the company will continue to provide fuel oil to the island's Water and Power Authority through end of June.

According to OGJ’s Worldwide Refining Survey, the St. Croix facility includes 55,000 b/cd of delayed coking, 37,000 b/cd of visbreaking, 140,000 b/cd of fluid catalytic cracking, 105,000 b/cd of semiregenerative catalytic reforming, and 435,000 b/cd of various hydrotreating.

In January, Hovensa entered into a consent decree with the US Environmental Protection Agency and the Department of Justice, agreeing to invest $700 million on pollution controls as well as a $5.4 million penalty for violating the Clean Air Act.

EPA said it will soon issue a statement on how the closure will affect those agreements. Hovensa representatives were reported to be meeting with EPA and DOJ to discuss the issues.

Contact Eric Watkins at hippalus@yahoo.com.

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