Billions of dollars lost by Caribbean’s largest oil refinery

The refinery, which is one of the 10 largest in the world and the largest in the Caribbean, is a joint venture between the Hess Corporation and Petroleos de Venezuela SA.

ST. CROIX, US Virgin Islands, Thursday January 19, 2012 — In spite of rising oil prices on the world market, billions of dollars in losses have caused the HOVENSA oil refinery in St Croix, US Virgin Islands, to be shut down the company announced yesterday (January 18).

Losses at the HOVENSA refinery have totalled US$1.3 billion in the past three years alone and were projected to continue revealed the official statement from the company.

The refinery, which is one of the 10 largest in the world and the largest in the Caribbean, is a joint venture between the Hess Corporation and Petroleos de Venezuela SA.

“We deeply regret the closure of the HOVENSA refinery and the impact on our dedicated people,” said Brian Lever, president and chief operating officer.

“We explored all available options to avoid this outcome, but severe financial losses left us with no other choice. We will provide significantly enhanced benefits for those union and salaried employees who are impacted and will work closely with the government of the US Virgin Islands to ease the transition for the rest of the community,” he said.

Weakness in demand for petroleum products due to the global economic slowdown and the addition of new refining capacity in emerging markets were cited as factors leading to the shutdown.

HOVENSA pointed out that they were not alone in the industry facing dire straits as, in the past three years, approximately 18 refineries in the United States and Europe with capacity totaling more than 2 million barrels of oil per day had also closed due to these factors.

The statement also said the low price of natural gas in the United States had place HOVENSA at a “competitive disadvantage.”

Following the shutdown, the complex will operate as an oil storage terminal.

After formal shutdown of the refinery, which will occur by the middle of February, most of those employed at HOVENSA will continue working through a transition period. Thereafter, approximately 100 people will remain to work at the oil storage terminal.

The US government had previously found the refinery to be in violation of its federal Clean Air Act, stating in August that there had been “too many chemical releases and other potentially dangerous incidents at the HOVENSA facility in recent years, including three in January 2011 alone,” according to EPA Regional Administrator Judith Enck.

It is not clear whether that played a role in the shut down. Click here to receive free news bulletins via email from Caribbean360. (View sample)