HOUSTON, July 2 (Reuters) - The owners of a long-closed oil refinery on St. Croix will disclose on Monday an agreement with the Caribbean island’s governor to restart the plant and begin producing fuels late next year, according to people familiar with the talks.
The refinery would process up to 150,000 barrels per day (bpd) and supply low-sulfur fuels required by an International Maritime Organization mandate that begins in 2020, according to a U.S. Environmental Protection Agency review of the project.
The Caribbean is facing declining fuel supplies from Venezuela, which has sharply cut its shipments to the region.
Kenneth Mapp, the governor of the U.S. Virgin Islands, has scheduled a press conference for Monday morning to detail the deal with ArcLight Capital Partners and Limetree Bay Terminals LLC, which own the refinery, spokeswoman Lisa Posey said on Sunday. Any restart requires approval by the governor and legislature of the U.S. Virgin Islands.
BP Plc separately is in talks with the refinery’s owners to supply crude to the plant, said two of the people familiar with the matter. The deal under discussion would be similar to a supply and marketing arrangement BP struck with NARL Refining for the 115,000-bpd Come By Chance refinery in Newfoundland, one of the people said. That deal soured over two years ago.
BP spokesman Mike Abendhoff declined to comment.
In the 1970s, the former Hovensa refinery on St. Croix was one of the world’s largest, able to process 650,000 bpd. It halted processing in 2012, filed for bankruptcy three years later and was sold to ArcLight and trading firm Freepoint Commodities. The two companies run Limetree Bay Terminals, a 32 million barrel oil storage and marine terminal on the site.
ArcLight, which owns 80 percent of the venture, declined to comment on Friday.
Limetree Bay plans to restart one of the plant’s remaining crude units, sulfur-recovery and other facilities to produce “low-sulfur fuels, i.e. gasoline, diesel and fuel oil,” according to the EPA’s April 5 letter.
The refinery could begin production as early as next year, said U.S. Virgin Islands Senator Nereida Rivera-O’Reilly, who called the prospect “welcome news” for an island still recovering from two hurricanes last year.
The IMO’s 2020 regulation calls for sulfur content in marine fuels to decline to 0.5 percent from 3.5 percent, spurring new demand for the distillates the refinery would produce.
The regulation will mean about 3 million bpd of high-sulfur fuel oil will be displaced by low sulfur products, estimates Rob Thummel, a portfolio manager at investment group Tortoise. (Reporting by Collin Eaton and Liz Hampton Additional reporting by Erwin Seba Editing by Paul Simao)