Refinery restart (?) Lime Bay, St. Croix, US Virgin Islands

[Bob]

In beautiful St. Croix, US virgin Islands, a massive 500,000 barrels per day (about 23,000,000 million gallons) of heavy sulfur crude from Venezuela will potentially be processed.

ArcLight Capital Partners LLC, Boston is wooing the government with a proposed $1.4-billion operating agreement - something that legislatures would have a hard time saying NO to..

Here is the map showing relative locations of where the refinery (currently shut-in, idled) is located and prominent locations.

The "plan" proposes millions of $ of revenue coming into the local government, and many hundreds of jobs.. (see below) Up to 2000 people were laid off when the refinery went idle..

Here are the details:

The oil refinery and related installations at the site that, together, could restart in about 18 months, according to Gov. Mapp’s office.

Alongside reopening the refinery, the plan, if approved, would create hundreds of jobs in the Territory and inject hundreds of millions of dollars into the local economy, generating new tax revenues as well as shore up solvency of the Government Employees Retirement System (GERS), Mapp said.

Under the agreement, ArcLight—owner of Limetree Bay Terminals LLC (LB Terminals), which in 2016 restarted terminal assets connected to the former Hovensa LLC-owned refinery at Limetree Bay—would invest more than $1 billion between now and 2020 to rehabilitate, restart, and operate the refinery, creating about 1,400 jobs during the construction phase and 700 full-time jobs once the refinery restarts.

Upon closing of the proposed transaction, newly created ArcLight subsidiary Limetree Bay Refining would pay the government $70 million, and upon restart of the refinery, annual payments in lieu of taxes of $22.5 million, with an adjustment based on the refinery’s performance that could raise the annual payment to as much as $70 million but never below $14 million in normal circumstances.

If the refinery performs as the government’s industry experts at Gaffney, Cline & Associates have projected, the government would receive more than $600 million during the first 10 years after restart vs. the $330 million Hovensa—a joint venture of Hess Corp. and Petroleos de Venezuela SA—paid the government in corporate income taxes in the more than 30 years it operated the refinery, according to Mapp.

The $600 million in payments would be in addition to the income generated by LB Terminals’ oil storage terminal, which will continue to make payments currently amounting to about $11 million annually as promised under the original terminal operating agreement (OGJ Online, Jan. 8, 2016; Jan. 4, 2016).

To date, LB Terminals has invested about $260 million in capital improvements to the terminal operations and presently is in the final stages of building a single-point mooring buoy that will allow the terminal to handle the world’s largest tankers, Mapp added.

New refinery operating agreement

Alongside minor amendments to the existing terminal operating agreement, the new deal establishes a refinery operating agreement, under which LB Terminals will transfer its ownership of the refinery to LB Refining, which in turn will enter into a separate operating agreement with the government as well as assume independent financial and other obligations, according to government documents.

Under the refinery operating agreement, LB Refining will:

• Pay the government $70 million at closing, consisting of $30 million to purchase government-owned lands surrounding the refinery and another $40 million in prepayments of future taxes.

• Pay the government annual payments of $22.5 million, adjusted based on refinery's performance to a maximum of $70 million and a minimum of $14 million in most circumstances.

• Pay the government a 10% commission if the refinery is sold at a profit, with a minimum payment of $12.75 million (one-half the original $25.5 million minimum payment, with the other half coming upon a sale of the terminal).

• If the refinery fails to restart, or if the refinery restarts and then shuts down permanently, decommission and deconstruct the facility at its own expense.

Regarding issues of employment for USVI residents—more than 2,000 of whom became jobless following Hovena's 2012 closure of the refinery and one of the most recurrent hurdle facing the original 2016 terminal operating agreement—the new refinery operating agreement requires LB Refining to aggressively advertise open positions, to give preference to qualified local residents over nonresidents, and to use commercially reasonable efforts to ensure that at least 80% of workers are USVI residents.

Qualified residents of St. Thomas and St. John interested in working during reconstruction of the refinery also will be offered a place to live while working on St. Croix without charge, according to the governor.

Schedule

The parties intend that the amended terminal operating agreement and new refinery operating agreement will close simultaneously subject to execution of both agreements by the parties, the legislature's approval of the two agreements, and finalization by LB Refining of certain unidentified contracts with long-term supply and offtake contracts.

Ideally, the new deal would result in the refinery’s restart by year-end 2019 with an initial crude processing capacity of about 200,000 b/d, Gov. Mapp’s office said.

“The objective of the overall strategy is to have refined product from the St. Croix refinery in the market come January 2020,” the governor said.

The deal also would help fund a new 110-room upscale hotel on St. Thomas—its first new hotel development in more than 38 years—as well as provide an infusion of cash to help resuscitate GERS, which is currently scheduled to run out of money in 2024.

Combined, the amended terminal operating and new refinery operating agreements could bring an estimated $775 million in revenues to the government during the next 10 years, of which more than $600 million would be generated entirely by the refinery, the governor’s office said.

Given ArcLight’s plan to commit a massive capital investment in a compressed time period to capture market opportunity in the oil industry, timing is of the essence in completing the turnaround and restart of the refinery, according to Gov. Mapp.

“This landmark deal to jumpstart our recovery and to pave the road to better times requires us to move expeditiously if the refinery is to restart on schedule,” Mapp said, noting the 2-year process of complex negotiations required to reach the deal via collaboration between his administration, ArcLight, US President Trump’s administration, the US Environmental Protection Agency, the US Department of Justice, and other unidentified major players in the global oil industry.

“More work remains to be done, but this agreement allows the Virgin Islands to accelerate its recovery, grow its economy, create jobs for its people, propel new startup businesses, as well as support existing businesses, and ultimately provide revenues for our government and our retirement system,” Mapp added.

ArcLight will detail its strategy and schedule for construction activities during the special legislative session.

Petroleum composition of "Heavy Crude"

It is not the cleanest nor the easiest crude to process - that's why it cost's less to buy from the producer..

When it comes to general properties, heavy crude is thicker, more resistant to flow, and usually contains higher levels of sulfur and other contaminants than does light oil.

For heavy oil to be made into gasoline, it has to be refined, cracked to make large hydrocarbons smaller, and treated to remove contaminants like sulfur. All of this extra refining requires more energy input for the same energy output, which reduces the energy returned on energy invested (EROEI) ratio. EROEI helps to determine how valuable a barrel of crude is because crude that requires more energy input is more expensive to refine, which reduces profit. Beyond the need for additional refinement, heavy crude also poses extraction and transportation issues that are not present with light crude.

Extraction of heavy crude requires higher energy input.

Heavy crude does not flow like light crude. In fact, its consistency is often compared to that of molasses at room temperature and it is even occasionally solid if not heated. The field of petroleum chemistry has its origins in attempts to make heavy crude easy to extract and transport. Current methods of extraction include open-pit mining, steam stimulation (to make it less viscous), the addition of sand to the oil, and the injection of air into wells to create fires that burn heavier hydrocarbons and degrade them into lighter, more easily pumped varieties.

Transporting heavy crude often requires the addition of diluting agents, particularly in pipeline transport. These diluents are referred to as Heavy Oil Drag Reducing Agents or DRAs. Most pipelines were initially designed for light crude and thus cannot accommodate heavy crude unless it is modified. Often times, heavy and light crude are mixed to promote transport through pipeline. This, of course, results in contamination of the light crude and a reduction in its value.

The other major drawback to heavy crude is its environmental impact.

Two specific aspects of heavy crude contribute to this.

First, it is contaminated with sulfur and heavy metals, both of which must be removed. Heavy metals are often toxic and their removal from crude presents disposal issues. The sulfur content of heavy oil may be as high as 4.5%.

Sulfur contributes to acid rain and in combination with hydrogen, produces hydrogen sulfide, which can be deadly. Sulfur is corrosive to pipeline metal and refinery components.

The other environmental impact of heavy crude is carbon dioxide output, which can be as much as 3 times that of light crude of the same quantity. There are two reasons for this. First, more energy must be input to generate the same quantity of useable material from heavy crude compared to light.

This means more carbon dioxide is released for the same amount of useable energy produced. In addition, heavy crude has a higher carbon to hydrogen ratio than light crude.

In other words, it contains less hydrogen per carbon than does light crude, which means that when it is burned, more carbon dioxide is created.

Most heavy crude is found in Canada and Venezuela, though there are deposits throughout the world. It is generally divided into two categories based on sulfur content.

Low sulfur heavy crude has less than 1% sulfur and is primarily found in Africa.

High sulfur crude is found throughout the rest of the globe, with Venezuela having the largest single deposit.

In fact, the deposit of heavy crude in Venezuela is greater than any recoverable deposit in the world, including Saudi Arabia and Canada.

- - - - Welcome to Paradise - - - -

[Cardillac]

@Bob

if my read sources are correct Venezuela has the largest oil reserves in the world- is this true?- please inform!

Larry

[Bob]

Hi Larry - https://www.rigzone.com/training/hea...t.asp?i_id=185

Faja, Venezuela's heavy oil belt that runs east to west, half way across the country along the lush Orinoco River valley. The Faja holds more than one trillion barrels of oil. Developing the resource is making the region a focus for new technology and turning Venezuela into the world's largest producer of heavy oil.

Outside the Faja, Venezuela has 80 billion barrels of proven crude reserves, and currently estimates that producers in the Faja can extract at least 237 billion barrels of the extra heavy crude with existing technology.

With nearly 320 billion barrels of recoverable oil, Venezuela will become the world's largest holder of petroleum reserves.

The Faja's crude is what producers call extra-heavy. Oil from this tar belt averages about 8.5 API gravity, which means that it is heavier than water and oozes rather than flows. This type of oil is difficult to produce and transport, and few refineries in the world will take it. But producers in Venezuela have plenty of experience with heavy oil, and their success so far has been world-class.

No doubt the above is a key motivating factor for restarting the St. Croix refinery.

The rank of production is Venezuela, Saudi Arabia, Canada and Iran, in order of reserves. Although I've heard that Saudi Arabia's reserves are dwindling.. That would make the most interest in tar sands production very high for Canada, and heavy sulfur crude from Venezuela.

[Foxie Loxie]

I wonder where on the island TargeT lives & what he has heard about it?

[Bob]

I believe he is over by Rainbow Beach about 15 kilometers away. Not sure about which way the winds blow if there would be emission from the refinery reaching him. One could do a google earth satellite search and see the area for oneself. Street view is interesting too..

[TargeT]

Lots of "pie in the sky" here... haha

I'll take some REALITY pictures tomorrow... the refinery is HUGE.. 10 acres IIRC... but I'd say 1/8th of that MAY be able to start working again, the VAST majority has turned into rusty crap.

however, they are spending money there, there is a lot of activity, I think that 1/8th will open, and they will produce a product, the storage on site and the fact that this is (i think the only) a port that does NOT fall under the Jones act, which is INSANELY lucrative to any oil importer.

I think it will be a great thing for the island, but NOTHING like the old refinery (used to be the 4th largest in the world). either way, i'm keeping an eye on it... maybe they need an IT guy

---- Wandering Rogue (my wife) reminded me... none of this is as interesting as the following:
I think the VASTLY more interesting story is WHY the refinery closed in the first place (largest in the US, IIRC)... How/When did Chaveze die again? When Did Hovenza close? Why wasn't this HUGE news?

Who's opening it again? Why now?

Who's benefiting?

FAR more interesting...... every thing is connected
-----

[Bob]

I think the VASTLY more interesting story is WHY the refinery closed in the first place (largest in the US, IIRC)... How/When did Chaveze die again? When Did Hovenza close? Why wasn't this HUGE news?

I was hoping that would be brought up.. Possibly looking at CitGo Oil Venezuela would an interesting research project. If one recalls at one time during the awfully high artificially speculator pushed oil prices a few years back (before the crash started to reveal a bit of the 'who' behind the price fixing), Chavez was offering energy starved US citizens discount heating fuel in NY.. It wasn't long before Chavez died.

The death of Hugo Chávez happened in 2013, the subsidy campaign for US citizens who couldn't afford heating oil started about 2006.

I see the wind blows from east to west.

[Bob]

The St. Croix Refinery and the Lynching of Chavez -

"LYNCHING" CHÁVEZ

Late last year as oil prices spiked, a dozen U.S. senators asked 10 major oil companies to donate a portion of their record profits to help the poor. As USA Today reported, "Only Citgo [a subsidiary of Venezuela 's state-owned oil company] responded, dispatching tankers to housing projects in New York and Massachusetts in what Felix Rodriguez, the company president and chief executive, called a purely 'humanitarian' gesture.

"Rodriguez said that Chávez had ordered the giveaway so poor Americans wouldn't have to choose between food and heat."

But rather than showing appreciation, the USA Today article by David J. Lynch carried a photo of motorists pumping gas at a Citgo gas station with the alarming caption, "Chávez could destroy the U.S. economy in 90 days, an energy banker said."

"What if Chávez closed Citgo's refineries?" the CIA-linked newspaper asked?

"He'd only have to do that for 90 days, and he'd destroy our economy," Matthew Simmons, "a prominent energy investment banker," told Lynch. "He actually has our livelihood in his hands," Simmons said.

"At the high point of oil and gas prices, a dozen U.S. senators of both parties appealed to oil companies' 'sense of corporate citizenship' to help less fortunate Americans get through the winter in the face of cuts in federal assistance," Fadi Kabboul of the Venezuelan Embassy in Washington wrote to USA Today in response to the Lynch article. "Citgo did its part. No other oil company has done so. It makes the criticism in the article seem petty."

So why is the Bush administration so hostile to Chávez? Why is a government that shares its oil wealth with its people and neighbors considered a threat? Why is the foreign leader who was first to offer help to the hurricane ravaged Gulf Coast viewed as harboring evil intentions by the controlled media and the federal government whose own response to the dire plight of its citizens has been called "late, uncertain and ineffective," by Senator Susan Collins (R-Maine)?

The answer to these questions is obvious. Venezuela , the world's fifth-largest oil exporter with the largest proven reserves outside of the Mideast , has long been considered by the "big oil" companies as America 's own privately-run gas station. Chávez, however, has put an end to foreign control and plundering of Venezuela 's oil resources and the immense profits they generate. One does not have to look far to see that, over the decades, very little of this nation's oil wealth has trickled down to the average Venezuelan.

Venezuela is particularly strong in refining capacity. As I rode past the sprawling refinery outside of Puerto de la Cruz, I was amazed at the size of Venezuela 's second largest refinery, which covers thousands of acres. Venezuela 's largest refinery, the Paraguana Refining Center is five times larger with a capacity of nearly 1 million barrels per day.

Venezuela also owns a 50 percent equity interest in the Hovensa refinery on St. Croix in the U.S. Virgin Islands, which has a capacity of 500,000 barrels per day, and it leases the huge Emmastad refinery on the nearby island of Curacao . Over decades, most of the products produced at these refineries have been exported to the U.S.

The Bush administration and the "big oil" money behind it are clearly displeased with the change in ownership, the nationalization of Venezuela 's oil fields, which Chávez brought about. These plutocrats are now engaged in an international political and propaganda campaign to malign the popular leader who has stood up to their global tyranny.

New Year's Day 2006 saw the return of Venezuelan state control over 32 privately operated oil fields. Venezuelan oil minister Rafael Ramirez said the state successfully completed "the recovery" of the 32 fields whose control had been ceded to private hands in the 1990s under concessions allowing companies to independently pump oil under contract.

In 2001, Venezuela passed a law requiring oil production to be carried out by companies majority-owned by the government. The deadline for converting the privately-owned operating agreements into joint ventures in which the state oil company, Petroleos de Venezuela SA (PDVSA), would hold the controlling stake was Dec. 31.

While other oil companies went along with the conversions, Exxon Mobil Corp. of Irving , Texas , resisted the contract changes, the Associated Press reported on Jan. 4. The conversions to joint ventures with PDVSA "will significantly reduce the oil companies' share of profits and control over operations and could also undermine the value of their Venezuelan assets," AP reported.

ref: https://www.facts-are-facts.com/news...from-venezuela