December 31, 2015 [OPIS] - The U.S. Virgin Islands Senate approved the sale of Hovensa assets to Limetree Bay Terminals late Tuesday, allowing the new owner to take over the oil terminal in the Caribbean immediately and begin work on restarting operations as soon as possible, a spokeswoman for Gov. Kenneth Mapp told OPIS.
Limetree Bay is a subsidiary of ArcLight Capital Partners. Freepoint Commodities will take a 20% minority stake at Hovensa and 2 million bbl of oil storage capacity. Sinopec, one of the largest oil companies in the world, will lease 10 million bbl of capacity at Hovensa under a 10-year term deal.
Hovensa has a maximum capacity of 32 million bbl, but the operational capacity is only 13 million bbl, one-third of which is for clean oil products and the rest is for dirty.
Storage tanks at St. Croix will be made available in small batches over the next few months, industry sources said. According to the operating agreement, Limetree plans to bring on the maximum capacity of 32 million bbl by late 2016.
While the operational capacity of 13 million bbl is already spoken for, the remaining 19 million bbl could be allocated to Sinopec, Freepoint and third parties.
Also, Limetree will take the next 18 months to evaluate the possibility of restarting the 500,000-b/d refinery at St. Croix.
The Senate voted 10-5 in favor of the sales agreement, the spokeswoman said. Limetree is officially the new owner of Hovensa, and it could work on restarting operations, she added.
The Senate spent the entire Tuesday deliberating and clarifying the terms of the operating agreement presented by Limetree Bay.
Some senators sought clarification on the confusion over the different names of Limetree, including Limetree Bay Inc., Limetree Bay Terminals, Limetree Bay Partners and Limetree Holdings. Limetree had used different names in the auction bid and operating agreement.
They also wanted clarification on the role of Freepoint, which is only a minority owner and terminal tenant at Hovensa under the agreement.
Limetree is the majority owner and operator of the terminal.
Senators also clarified the environmental liabilities of previous owners, Hess and PDVSA, at Hovensa.
They also discussed benefits of the operating agreement, which includes the promise to build new housing in St. Croix and building an asphalt plant.
As a result of the ratification of the operating agreement, Mapp directed the commissioner of finance to release the almost $22 million in tax refunds owed through the tax year 2014.
Hovensa could become a key terminal for clean products storage and break-bulk and build-bulk purposes in the Caribbean. Hovensa has the potential to be a “choice terminal” in the Caribbean, when compared with BORCO and Statia, for clean oil products due to its location relative to South America, in-line/closed loop blending capabilities and ship berths that are protected from weather, terminaling sources told OPIS earlier this year.
Hovensa was a refinery, and it boasted efficient logistics for crude and oil products storage as well as marine loading and unloading facilities.
Following the U.S. crude export liberalization, Hovensa could also be used for storing U.S crude if the economics work.
Also, the terminal asset at St. Croix offers room for potential storage expansion as well, depending on capitalization of the new owner.
In its bid for Hovensa, Limetree showed potential to raise terminal utilization in the future as well as establish a possible path to restart the 500,000-b/d refinery down the road.
It may take Limetree several months to restart operations at Hovensa. With the Senate’s approval in the bag, Hovensa terminal should restart sooner rather than later. Previously, some terminaling sources had expected the earliest restart at end-2016 due to possible delays at the courts and the Senate.
