May 14, 2012 [OPIS] - Hovensa has shut its 500,000-b/d St. Croix refinery permanently in February due to poor refining economics, but it is not wasting any time in making plans to convert the facility to a full-fledged merchant oil storage terminal. Hovensa has begun soliciting storage interest from oil players in the market, trading sources told OPIS on Friday.
Hovensa is offering about 16 million bbl of storage capacity or about 50% of its maximum capacity of 32 million bbl. The balance of unused capacity will be mothballed.
The company considers the offer of 16 million bbl to be the optimal capacity based on practical operational costs and regional market demand, they said.
“Hovensa has been asking people to register their interest (for storage). The Hovensa team is getting put together and will be coming back to interested parties soon,” a source said.
Of the total capacity offered, about two-thirds will be dedicated to clean oil products and the remaining one-third to crude oil and fuel oil.
Most of the clean product tanks are already operational, and the shut-in capacity is for mostly dirty products and crude.
A Hovensa spokesman said on Friday that the company had preliminarily planned for 10-15 million bbl of storage capacity and its long-term plans hinge on signing a new agreement with Virgin Islands’ government to operate that facility as a storage terminal.
“We have some short-term current customers at this time, but won’t disclose volumes and customers,” he added.
Currently, Hovensa only has an interim agreement with the Virgin Islands’ government to operate as a storage terminal until Dec. 31, 2012, he said.
Hovensa cannot make any long-term arrangements for 2013 and beyond until it has a permanent agreement with the territory government.
Hovensa is currently engaged in ongoing negotiations with the Governor’s office to make changes to the third concession agreement that would allow us to operate long-term as a financially viable storage terminal, the spokesman said.
More Work Ahead
In February, OPIS reported that terminaling sources estimate it would take Hovensa about 18 months to get the refining facility up and running as a commercial oil storage terminal. This would put the possible start-up date in the second half of 2013.
The Hovensa oil terminal would offer a strategic storage space in the Caribbean, which could be used to build bulk or break bulk of oil cargoes as seen with BORCO terminal in the Bahamas.
“A lot of work would need to be done for the conversion. Vessel draft is also an issue that needs to be addressed,” a source said then. The refinery is designed more for receiving crude for processing and crude storage for PDVSA rather than import/export activities for crude and oil products.
Hovensa would need more pipelines to facilitate oil deliveries to the port.
Currently, the refinery has leased limited storage space under short-term contracts to existing tenants, including PDVSA, Hess and Vitol.
In April, Hovensa released about 1,000 employees, two months after shutting down oil processing and associated auxiliary units at the refinery on Feb. 21.
Following the mass layoff, the company has retained a small transitional team of about 175 employees through end of July.
After July, Hovensa will cut that already reduced workforce further to 100, and it will use about 30 contractors. At its peak when operational, Hovensa employed about 1,200 people at St. Croix. In addition to employees, it also had about 950 contractors.
