The US Virgin Islands has signed a $800m deal to sell the Hovensa oil storage facility in St Croix to private equity firm ArcLight Capital and commodities trader Freepoint, bringing it out of bankruptcy.
The companies further plan to convert the refinery into an oil storage hub.
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China-based oil refiner Sinopec has leased 75% of Hovensa’s existing crude oil storage capacity in a deal for ten years.
Hovensa currently has a capacity of 13 million barrels of crude and oil products, Reuters reported.
Freepoint plans to lease two million barrels of fuel oil storage at the site and ArcLight will serve as majority owner of Hovensa.
Sources with knowledge of the matter told the news agency that the partners plan to invest at least $125m to increase storage and tanker loading and unloading capacity at the site by 2016-end.
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By GlobalDataThis is expected to bring Hovensa’s total oil storage capacity to 30 million barrels.
Following weak demand and high operating costs, the Hovensa refinery was closed in early 2012.
In September 2015, the US Virgin Islands filed a lawsuit against Hess for over $1bn, alleging that the company abandoned the oil refinery it had pledged to run through 2022.
Following the filing, Hess subsidiary, which owns the refinery, announced that it plans to file for Chapter 11 bankruptcy and will go ahead with the refinery sale.
Hovensa is a petroleum refinery and is a joint venture between Hess Corporation and Venezuela’s state oil company Petroleos de Venezuela.
The refinery supplied heating oil and gasoline to the US Gulf Coast and the eastern seaboard with the crude mainly sourced from Venezuela.
Image: Hovensa petroleum refinery in St Croix, US Virgin Islands. Photo: courtesy of Cumulus Clouds
