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Hovensa LLC has reached an agreement in principle to sell its refinery in St. Croix, U.S. Virgin Islands, Virgin Islands Daily News reports, after a long sales process that has been running since the facility was shut down in 2012.

The unnamed buyer, described by local government officials as "a U.S.-based startup whose principals have financial and trading backgrounds, the ability to raise capital, and limited experience with refining", is due to begin negotiating with the Virgin Islands government regarding a deal this week.

According to John Percy de Jongh, Jr. [pictured], Governor of the U.S. Virgin Islands, the company plans to reopen and operate the facility as a refinery. In order to run the refinery, the interested buyer would first be required to reach an operating agreement with the U.S. Virgin Islands government.

De Jong hopes to present a proposed operating agreement to the 30th Legislature of the U.S. Virgin Islands before the end of the year. Legislative ratification is required for any such contract.

The Hovensa sales process deadline was due to expire on August 15, but the Government House released a statement on the evening of August 15 to confirm that the period the refinery would be up for sale would be extended for another 15 days, until August 30. The statement read: "Hovensa and its owners have requested additional time to continue discussions on aspects of the sales process established by the Fourth Amendment Agreement.

"In response, the parties have agreed to extend the sales process period until August 30."

On Sunday, September 14, De Jongh held a private meeting with members of the 30th Legislature at Government House in Christiansted to update them on the status of the Hovensa sales process.

The governor is reported to have told senators at the meeting that he hopes to have a proposed operating agreement ready for their consideration before November's election.

The unnamed buyer was the only company that submitted a bid for the refinery, senators were told. However, the bid amount and company name were not revealed, Virgin Islands Daily News said.

Hovensa is a joint venture between Hess Corp and Venezuelan state oil company Petroleos de Venezuela SA (PDVSA). Hovensa completed the shutdown of its producing refinery in St. Croix, U.S. Virgin Islands, in January 2012. Losses at the refinery had totalled $1.3 billion over a three-year period as a result of weak demand for refined petroleum products caused by the global economic slowdown and the addition of new refining capacity in emerging markets.

The company had been operating as a supplier of marine fuels at Christiansted, Frederiksted and Port Alucroix, sourcing product from the local refining plant.

Project plans

Senators who emerged from Sunday's meeting, provided the following information regarding the information they received:

- If the deal goes through, the company will engage in an engineering assessment of the refinery that is expected to take approximately six months. Based on that assessment, the company will determine how best to move forward.

- The company's plan - which could change based on the engineering assessment - would be to start ramping up after the sixth month, and to begin refining oil two years after the sale closes.

- The unnamed firm's objective is to gear up to refine approximately 350,000 barrels of crude oil per day, which is the level Hoevensa's production was at when it closed after cutting back on production in January 2011 from 500,000 barrels a day in an attempt to improve financial performance.

- The company plans to refine sweet, light crude oil from the United States - instead of the heavier Venezuelan crude Hovensa had been refining before it closed - and therefore would not be using the coker or the catalytic cracker at the facility. That move, senators said, would be better for the environment.

- It is estimated that reopening and restarting the refinery will cost approximately $1.2 billion and take two years.

- The company would be a merchant refiner, meaning that it would obtain its crude oil in the marketplace and sell its refined products there too.

Image: John Percy de Jongh, Jr., Governor of the U.S. Virgin Islands.