Reopening Refineries: A Complex Challenge
Limetree Bay Refinery Faces Uncertainty
St. Croix’s Limetree Bay refinery may lose its main supplier of crude, the British multinational oil and gas company BP, if it will not be able to continue operations by December, according to two Reuters sources.
A Delicate Situation
In the news wire’s exclusive report, the owner of the Caribbean refinery, Limetree Bay Ventures, has already spent almost $2.7 billion renovating the facility, initially hoping to tap the markets in Latin America and the Caribbean along with the rise in demand for low-sulfur fuels. Unfortunately, the plant’s resumption date has been delayed by nearly a year now.
BP’s Contract
The plant received an investment by BP Plc BP.L with a contract that promised crude supply and marketing for the fuels produced in hope of a late 2019 startup. If the plant cannot reach a certain production target by the end of 2020, BP can cease that contract, threatening the future of the largest new refining capacity in the Americas.
Challenges Ahead
EIG Global Energy Partners and Arclight Capital Partners, owners of Limetree Bay Ventures, took on the overhaul in expectation of an increase in demand for marine fuels that follow revised maritime rules for low sulfur content. BP’s investment was to be repaid from those product sales.
However, due to the COVID-19 pandemic crushing refining margins for fuels across the globe, the goal of 210,000 barrels of product per day has been gravely affected.
Restart Issues
From an exclusive source to Reuters, Limetree recently experienced problems trying to restart the crude unit. A series of delays followed due to corrosion uncovered during renovations.
BP’s Future Plans
BP is at a cusp of a global revamp in its operations and with the issues the refinery is having; it is less attractive for them to remain in the deal. With plans to further invest in renewable energy and cut fossil fuel development back, BP could potentially see this decision through.
Recent Developments
According to two sources and data from Refinitiv Eikon, a vessel carrying crude oil booked by BP has been secured outside the refinery since the end of August, waiting to unload crude loaded from Guyana. The companies usually pay demurrage fees of idle and unloaded ships.
Refinery History
The refinery’s previous owner, Hovensa, shut the plant in 2012 due to poor refining economics, though it did process more than 500,000 barrels of crude per day.
Private Equity Involvement
Private equity group EIG took majority control of Limetree Bay Ventures, the parent of the refinery and the nearby oil terminal, earlier this year. Another private equity firm, Arclight Capital Partners, acquired the site in 2016 with Freepoint Commodities and remains a chief investor.
Expert Insights
John Auers, executive vice president at refining consultancy Turner, Mason and Company, told Reuters that reopening decommissioned refineries is a challenge even though several Limetree units are only about 20 to 30 years old, which are relatively new for its kind.
“Problems are not uncommon with startups, even at new facilities because of all the moving pieces, high pressures and high temperatures,” Auers stated.
Conclusion
Reopening refineries is a complex challenge, and the Limetree Bay refinery’s situation is no exception. The refinery’s struggles to restart operations and meet production targets, combined with BP’s plans to invest in renewable energy, raise questions about the refinery’s future.
FAQs
* What is the current status of the Limetree Bay refinery?
+ The refinery is facing challenges in restarting operations and meeting production targets.
* What is the significance of the refinery’s contract with BP?
+ The contract is crucial to the refinery’s future, as it provides a guaranteed source of crude supply and marketing for the fuels produced.
* What are the main challenges facing the refinery?
+ The refinery is struggling to restart operations due to corrosion uncovered during renovations, and the COVID-19 pandemic has affected refining margins for fuels globally.
* What are BP’s plans for the future?
+ BP is planning to invest in renewable energy and cut fossil fuel development back, which may impact its involvement with the refinery.