27 Sep 2019: St. Croix Refinery Restart Will Impact Crude and Product Flows
By the end of 2019, Limetree Bay Refining is planning to restart (part of) the old Hess, St. Croix refinery in the U.S. Virgin Islands. Limetree Bay is owned by a consortium of ArcLight Capital (79%), Freepoint Commodities (7%) and a syndicate of other investors. The initial processing capacity of the facility is 200,000 b/d. The original refinery, which was built by Amerada Hess in the 1960s, had a design capacity of approximately 700,000 b/d and was one of the largest refineries in the world at the time.
The Caribbean was a major refining center in the 1960s and 1970s, when the oil majors built refineries in Curacao, Venezuela, the Bahamas, as well as Panama, Trinidad, and Puerto Rico. Proximity to the oil resources of Venezuela and Trinidad (at the time), tax incentives as well as a large supply of local labor with relatively low wages all played a role. The Hess refinery enjoyed the advantages mentioned above, but also benefitted from its location in U.S. territory and derived significant benefits from a federal entitlement program that was meant to mitigate the disadvantages of having to source crude oil in the open market.
The Hess refinery was also exempt from the Jones Act, which meant that they could import crude oil from Alaska and export refined products to the continental U.S. on foreign flag vessels. From the 1970s until the early 1990s, Amerada Hess imported a significant portion of its crude oil from Alaska on foreign flag VLCCs. During that period, the U.S. East Coast was an important market for its products and Hess used a mix of U.S. Flag and foreign flag assets for its transportation.
Some 50 years later, the Jones Act exemption is still in place even though St. Croix is a U.S. territory since America bought the Virgin Islands from Denmark in 1917. Limetree Bay will, therefore, have some of the same advantages as Hess used to have.
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