One of the big shocks to the economy of the Virgin Islands was the closure of the Hovensa oil refinery in the early part of the decade. The refinery had traditionally provided a big chunk of direct and indirect jobs to the island of St. Croix on which it is located. The Virgin Islands may have finally found an employer to reopen the place:
ArcLight Capital will gamble that a brief surge in sour crude margins will recoup a $1.4bn investment in an idled Caribbean refinery.
The investment firm’s pitch this month to US Virgin Island (USVI) legislators emphasized a race to restart equipment at the former 525,000 b/d Hovensa refinery on St Croix before a potential plunge in sour crude prices and rising demand for marine fuel.
ArcLight sought speedy legislative approval of a ten-year, low-tax agreement and an untethering of the refinery from its profitable Limetree Bay terminal. USVI leaders must weigh the promise of revenue for its struggling pension system and hundreds of jobs on an island that reported 9.2pc unemployment in May. The legislature will meet tomorrow in a special session.
Changing marine emissions regulations that take effect January 2020 could justify restarting refinery units idled in 2011, ArcLight said. International Maritime Organization (IMO) rules will cap marine fuel for the global fleet at 0.5pc sulfur, down from the current 3.5pc sulfur.
Shipping companies have been slow to adopt expensive exhaust systems, called scrubbers, that allow compliance while continuing to use higher sulfur fuel, or to invest in even costlier conversions to liquefied natural gas.
“Thus, we, and many others, believe there will be a window of opportunity for this type of refinery starting in 2020 that could last for three to four years before the markets stabilize to a new normal,” consultant for the government Bill Cline told the island’s legislature.