The disclosure, included in a presentation by parent company Buckeye Partners at a recent corporate access event, reveals specific details on the facility’s push to “connect the dots” and meet a growing demand.
“Recent announcements of Northeast U.S. and Caribbean refinery shutdowns have created a need for new sources of product supply,” the document read. “New global refining capacity coming online will seek deficit markets.”
While the presentation doesn’t delve into specifics on the refineries in question, on the minds of investors is the impending shutdown of the HOVENSA oil refinery in St. Croix, U.S. Virgin Islands.
Back in January, the Hess Corporation, a key stakeholder in the refinery, said the low price of natural gas in the U.S., new refining capacity in emerging markets and the economic crisis had placed HOVENSA at a “competitive disadvantage.”
The refinery is one of the 10 largest in the world and the biggest in the Caribbean.
Meanwhile, Buckeye Partners, listed on the New York Stock Exchange (NYSE), is expected to provide 7.9 million barrels of additional storage capacity at BORCO in the near term.
The Grand Bahama facility now includes 80 tanks, providing 21.4 million barrels of crude oil, fuel oil, and refined petroleum product storage. While the current expansion calls for adding 7.9 million barrels of capacity, there is “room to ultimately double the existing storage capacity.”
The impending project is to be completed in phases, according to the presentation. Phase one, adding capacity for an additional 3.5 million barrels, was initiated in the second quarter of last year.
The first incremental capacity is expected to be online soon, by the second half of this year, which includes a combination of refined products and fuel oil. “Later phases” will bring in an additional 4.4 million barrels of storage, although it is unclear as to the exact timeline.
The $350 to $400 million build-out, once completed, is expected to bring $70 to $80 million in additional revenue before interest, taxes, depreciation and amortization. In addition to the BORCO expansion, Buckeye’s Perth Amboy acquisition also features prominently in the parent company’s strategy going forward.
The purchase, estimated to close in the second quarter of this year, involves a New York Harbor marine terminal for liquid petroleum products. Buckeye acquired this facility from Chevron for $260 million, in cash.
The presentation detailed the acquisition as a “unique opportunity” to acquire a key link in the product logistics chain and “unlock significant long-term value across the Buckeye enterprise.”
The buy, according to the company, will represent hundreds of millions in future growth over the next several years. The four docks, with pipeline, water, ray land truck access, is in close proximity to Buckeye’s Linden complex.
Buckeye made the point that BORCO and Perth Amboy are central to the parent company developing a fully integrated and flexible network of global operations. “Execution of this strategy will continue to differentiate Buckeye’s service offerings and provide sustainability and optionality for further growth in our core businesses,” the document said.
The BORCO storage expansion in Grand Bahama should continue to boost this area of the enterprise. In fact, 83 percent of its revenue came from storage, while 11 percent came from berthing and six percent “other ancillary” services.
Buckeye, according to representatives from the company, have paid cash distributions to unit holders each quarter since its formation in 1986 and has increased distributions for the past 31 consecutive quarters.
