News Post
Sinopec to lease former St. Croix refinery in Virgin Islands as oil terminal
By DAN MURTAUGH
Bloomberg
In a world awash in oil, Asia’s biggest oil refiner just locked down more places to store it.
China Petroleum & Chemical Corp., known as Sinopec, agreed to be the anchor customer at an oil terminal in the US Virgin Islands to be refurbished by an affiliate of ArcLight Capital Partners LLC and Freepoint Commodities LLC. Sinopec will lease 10 MMbbl of the terminal’s initial 13 MMbbl capacity, according to Dan Hecht, general counsel for Freepoint.
The affiliate, Limetree Bay Holdings LLC, was named the winning bidder on Monday by a US Bankruptcy Court judge for the former Hovensa oil refinery in St. Croix. The terminal is located at a shuttered refinery, formerly owned by Hess Corp. and Petroleos Venezuela SA that was once the largest in the world.
“We see it as a great asset to build a world-class terminaling and storage business around,” Hecht said by phone from St. Croix. “We see it as a very strategic opportunity in its current configuration with the possibility for future growth.”
Space to store oil has become increasingly scarce as the US shale boom and production from Organization of Petroleum Exporting Countries has increased global supplies of oil and refined products such as gasoline and diesel to about 3 Bbbl -- a record, according to the International Energy Agency.
Sinopec declined to comment on the specifics of the deal. The company “conducts commercial activities in accordance with the company’s overall strategy and business needs,” it said in an e-mail.
Virgin Islands
The former refinery covers 330 acres on an island in the Caribbean Sea about 500 miles north of Venezuela and 1,500 miles south of New York. Limetree, which is 80% owned by ArcLight and 20% by Freepoint, agreed to pay up to $370 million for the facility. Of that, $235 million will go to the Virgin Islands government and $135 million to the bankruptcy estate.
The agreement still needs final approval from the Virgin Islands legislature. Once approved, Limetree will be able to bring about 2 MMbbl of storage online quickly, with another 11 MMbbl following in the ensuing months, Hecht said.
Sinopec agreed to a binding 10-year contract to take 75% of that, or about 10 MMbbl initially, Hecht said. Freepoint will lease another 2 MMbbl of capacity for fuel-oil storage, and the remaining 1 MMbbl will be marketed to other customers.
After the first phase is online, Limetree plans to expand storage capacity up to as much as 30 MMbbl at the facility, Hecht said.
New Dock
The company has agreed to invest at least $125 million in facility enhancements, including the constructionof a new dock to accommodate the largest crude tankers in the world.
Limetree would purchase the refining equipment as well, and will evaluate restarting some or all of it after getting the terminal running. The eastern part of the refinery, with about 360,000 bpd of crude processing capacity, has the highest potential for being restarted, according to the presentation.
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