Caribbean

Limetree Bay Refining’s plans to restart the former Hovensa plant in St. Croix, U.S. Virgin Islands, at the end of 2019 will add significant refining capacity to the North American stack, helping to offset the loss this year of the 335-Mb/d Philadelphia Energy Solutions plant in Pennsylvania. Limetree Bay is also poised to fill a void in Caribbean refining that’s been left by Venezuela’s economic collapse as well as the International Maritime Organization’s 2020 changes to the bunker fuel market. But the facility is not without its challenges, from high fuel costs and stiff competition from Gulf Coast refineries to tropical storms. Today, we conclude an analysis of the operation and potential markets for the refinery.

Limetree Bay Refining plans to restart a former Hovensa plant in St. Croix, U.S. Virgin Islands, at the end of 2019. The refinery’s initial processing capacity of 200 Mb/d represents a significant addition to the North American stack, helping to replace the loss this year of the 335-Mb/d Philadelphia Energy Solutions plant in Pennsylvania. If it opens on time before the year’s end, Limetree will be well-positioned to fill a void in Caribbean refining that’s been left by Venezuela’s collapse as well as the International Maritime Organization’s (IMO) 2020 changes to the bunker fuel market. The plant’s location in the middle of world trade routes conveys some advantage, but it must compete with U.S. Gulf Coast refineries to supply regional markets. While higher input costs compared to U.S. rivals will dampen margins, a tolling agreement with BP could insulate Limetree from market exposure. Today, in the first of a two-part blog series, we review the operations and potential product market for the refinery.

The Caribbean is strategically located at the crossroads of international trade routes between the Northern and Southern hemispheres, as well as the Atlantic and Pacific oceans. It has traditionally attracted oil trading, blending, and refining activity to meet the needs of local and international markets. Lately, the meltdown of Venezuelan national oil company Petróleos de Venezuela SA (PDVSA) — previously a dominant player in the region — has left refineries and storage terminals underutilized and starved of investment. U.S. Gulf Coast refineries have partially filled the gap by increasing product exports to the region, but an opportunity now exists for private investment to fill the refining and storage void left by PDVSA, and also to meet new demand for low-sulfur bunker fuel arising from stricter International Maritime Organization shipping regulations, which will come into effect in January 2020. Today, we review the impact of the PDVSA meltdown and new investment projects being pursued.

For several years now, power generators and other major energy users in the Caribbean have been working to shift from diesel or fuel oil to alternative fuels — mostly natural gas delivered by ship as liquefied natural gas (LNG), but also propane. A few significant projects have advanced, and new infrastructure to receive LNG and propane has been put in place to support additional fuel imports into the region. But other projects have been delayed or even scrapped because of financial or regulatory troubles. Today we update the laid-back region’s efforts to wean itself off diesel- and fuel-oil-fired power.

With crude storage tanks along the U.S Gulf Coast nearly full, the nine storage terminals currently operational in the Caribbean offer an advantageous close-by alternative. Right now these terminals are heavily used by Venezuela for oil blending and distribution, but there has been growing interest and investment from outside the region. China is now neck and neck with the U.S. as the world’s largest crude importer and is making a significant strategic investment in Caribbean storage to cement crude supply deals with Latin American producers. Private equity fund ArcLight Capital and trader Freepoint Commodities together purchased a huge terminal and shuttered refinery in the U.S. Virgin Islands in January of this year (2016) and have leased most of the working storage to Chinese-owned Sinopec. Today, we examine the growing role of Caribbean crude terminals. (This blog is based on Morningstar’s recently published Caribbean Crude Storage Outlook [1], which provides a comprehensive analysis of this evolving market.)

It’s only natural that high-volume markets like Asia and Western Europe are the focus of most discussions about exporting US liquefied natural gas  (LNG) and natural gas liquids (NGLs) like ethane and propane. But the Caribbean, a market much closer to home, is attracting more attention lately, as infrastructure is developed to share America’s hydrocarbon bounty with the outside world. For decades, the Caribbean has been heavily dependent on oil-fired power generation and, as a result, its electric rates are among the highest anywhere. Now, the region is looking at alternative fuels for power generation, including LNG, compressed natural gas (CNG) and believe it or not, ethane. Today we consider the potential for fuel switching in the Caribbean, and the challenges involved.

“Aruba, Jamaica, ooo I wanna take ya. Bermuda, Bahama, come on pretty mama …” While most of us trapped in the icy grip of this winter’s Polar Vortex can only dream of cruising from Florida to the Caribbean, “tropical drink melting in your hand,” Nova Scotia-based Emera Inc. has a plan to do just that (minus the drink), and on a regular, ferry-like schedule. Emera wants to export compressed natural gas from the Port of Palm Beach to its Grand Bahama electric utility and other Caribbean buyers starting as soon as 2015. The volumes of natural gas involved aren’t huge, but the plan is an example of market innovation driven by the US shale revolution. Today we examine Emera’s plan to move US gas to “the islands.”

Several large deep-water terminals located strategically on Caribbean islands play an important role in the international fuel oil trade. These terminals can berth larger vessels than most Gulf Coast ports – making them ideal staging points for transshipment of ocean bound cargoes coming and going from Europe, Asia or Latin America. With its recent acquisition of the Hess East Coast terminal assets, Buckeye looks set to become a dominant player in the Caribbean terminal and storage market. Today we conclude a two-part survey of Caribbean fuel terminals.

Last Wednesday (October 9, 2013) Buckeye Partners announced an agreement to purchase Hess Oil’s East Coast terminal assets – including a crude and fuel oil terminal on the Island of St Lucia in the Caribbean. Buckeye already own a large oil storage terminal in the Bahamas, known as BORCO so with the new acquisition they will become the largest storage and terminal player in the Caribbean market. The fuel oil trade in the region is a combination of local bunkers supply, fuel oil for power plants and larger scale transshipments of fuel oil for international markets. Today we look at fuel oil terminal facilities in the Caribbean.