Welcome to the Jungle - Limetree Bay Restart Shores Up North American Refinery Stack

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.

This blog is based on research from Morningstar Commodities and Energy. Click here for a copy.

A year ago in Meltdown, we detailed new investment proposals for Caribbean storage and refining that might fill Venezuelan national oil company PDVSA’s shoes in the Caribbean, since that country’s political and economic unraveling. The most advanced of those proposals — the Limetree Bay refinery — is currently set to commence operations at the end of 2019. Limetree Bay is located on St. Croix, one of the U.S. Virgin Islands, and was historically operated as a joint-venture refinery by Hess Oil and PDVSA (Hovensa) until its closure in 2012 after three years of losses. At its peak, the plant processed up to 650 Mb/d, making it the largest refinery in the Americas, but it was only running 350 Mb/d when it shut. In December 2015, the refinery was sold to Limetree Bay Ventures, owned by a consortium consisting of ArcLight Capital Partners (79%), a syndicate of other investors (14%) and Freepoint Commodities (7%).

Limetree Bay’s initial commitment was to operate the site as a storage terminal (Figure 1) and review the potential for reopening the refinery. The terminal executed a 10-year agreement for 10 MMbbl of storage capacity with China Petroleum and Chemical Corp., or Sinopec, in 2016. A second storage contract for 3 MMbbl of capacity was also signed with part-owner Freepoint. The terminal currently has 74 tanks with over 20 MMbbl storage capacity, including 8 MMbbl crude and 12 MMbbl refined products, according to a 2017 company presentation. Ten petroleum loading docks can handle vessels up to Suezmax size (55-foot draft).

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