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BUNKER INDEX :: Price Index, News and Directory Information for the Marine Fuel Industry
Home » News

Hess quashes St. Lucia rumours

26 Jan 2012 10:55 GMT

Oil company says it has 'no plans' to build St. Lucia refinery following the decision to close its bunker-producing Hovensa plant.

Hess Corp. has quashed rumours that it is planning to construct a multibillion dollar oil refinery in St. Lucia, following the announcement last week that it will be closing the bunker-producing Hovensa LLC refinery in St. Croix, U.S. Virgin Islands [pictured].

Company spokesperson Jon Pepper is reported to have told The Virgin Islands Daily News on Monday that the company has "no plans to build a refinery on St. Lucia."

Rumours linking Hess Corp. to the construction of an oil refinery in St Lucia apparently resurfaced after an old article published by the Oil & Gas Journal in October 2008 began circulating a few days ago on email chains, Facebook and other social media sites.

The article in question quotes a St. Lucia government minister as saying that the company had begun preparatory work for the construction of a $5 billion refinery in St Lucia, not far from the fuel storage terminal Hess Corp. currently operates on the island.

However, the following day Reuters published an article quoting Hess Corp. Chairman and Chief Executive Officer John Hess as saying that, while the company has the option of building a refinery on the island, it had no plans to do so.

It is understood that the option had been included in a 2007 renegotiated agreement between St. Lucia and Hess Corp., and the company maintains that option for several decades.

According to the Hess Corp. website, the Hess Corp. oil storage terminal in St. Lucia has the capacity store 9 million barrels of petroleum products.

Hovensa LLC refinery shutdown

Oil refiner and bunker supplier Hovensa is a joint venture between Hess Corp and Venezuelan state oil company Petroleos de Venezuela SA (PDVSA). The company delivers marine fuels at Christiansted, Frederiksted and Port Alucroix.

Last week, Hovensa announced that it will commence the shutdown of its refinery on St. Croix and that the complex will operate as an oil storage terminal.

"Losses at the Hovensa refinery have totaled $1.3 billion in the past three years alone and were projected to continue.These losses have been 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. In the past three years, these factors have caused the closure of approximately 18 refineries in the United States and Europe with capacity totaling more than 2 million barrels of oil per day. In addition, the low price of natural gas in the United States has put HOVENSA, an oil-fueled refinery, at a competitive disadvantage." Hovensa said in a statement last week.

"We deeply regret the closure of the Hovensa refinery and the impact on our dedicated people," said Brian K. Lever, President and Chief Operating Officer of Hovensa. "We explored all available options to avoid this outcome, but severe financial losses left us with no other choice. We will provide significantly enhanced benefits for those union and salaried employees who are impacted and will work closely with the government of the U.S. Virgin Islands to ease the transition for the rest of the community," added Lever.

Earlier this week, Hovensa announced the commencement of a cash tender offer for any and all of the outstanding Refinery Facilities Revenue Bonds.

The tender offer is being made pursuant to an Offer to Purchase, dated January 23, 2012, and a related Letter of Transmittal, which set forth a more detailed description of the tender offer.

Upon the terms and subject to the conditions described in the Offer to Purchase, the Letter of Transmittal and any amendments or supplements, Hovensa is offering to purchase for cash any and all of the $355,683,000 outstanding aggregate principal amount of Tax-Exempt Bonds at a purchase price of $1,000 per $1,000 in aggregate principal amount of Tax-Exempt Bonds, plus an amount equal to accrued but unpaid interest up to, but not including, the date the Tax-Exempt Bonds are purchased.

The offer will expire at 11:59 p.m., New York City time, on February 17, 2012, unless extended or terminated earlier.

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