UPDATE 3-China oil storage lease helps revive Caribbean refiner Hovensa
(Recasts, adds details of agreement, background)
By Joshua Schneyer
NEW YORK Dec 1 (Reuters) - A long-sought deal to bring a Caribbean oil refinery out of bankruptcy emerged on Tuesday, unexpectedly including a partnership with U.S. commodity trader Freepoint and handing Asia's biggest oil refiner, Sinopec, access to a huge oil storage facility.
U.S. private equity firm ArcLight Capital, together with Freepoint, unveiled plans on Tuesday to buy the Hovensa refinery complex in St. Croix, U.S. Virgin Islands, and turn it into an oil storage hub. ArcLight's interest in buying the facility was well known, but Freepoint's and Sinopec's roles in the deal had not been previously reported.
The deal includes a 10-year Sinopec lease for most of Hovensa's enormous oil storage tanks, and marks the latest move by a Chinese firm to expand in the Americas as an oil trading powerhouse. China needs storage space in the region since it is trading growing volumes of Latin American crude oil it controls, including shipping it to U.S. markets.
The partners said Sinopec would lease 75 percent of Hovensa's existing oil storage capacity. The site has operational crude and oil product storage tanks with capacity to hold 13 million barrels, according to a news release. The partners also plan to more than double storage capacity at Hovensa with new investment.
The purchase of Hovensa, a refinery and tank farm emerging from bankruptcy after halting crude processing in 2012, appears to end a long period of uncertainty over the future of the site. It is perched strategically near U.S. oil markets and can also serve as a staging point for crude and fuel shipments between Latin America, Asia and other regions.
Crude storage tanks in the Caribbean have been in high demand even as global oil prices have plunged. In the current oil market, companies can profit by storing oil and selling it for future delivery at a higher value than spot sales.
In recent years, China has made billions in loans to state-run oil producers in Venezuela, Ecuador and other Latin American countries in exchange for crude. Continuación...