Some sources familiar with the matter said that the maintenance cost of the long-idled Caribbean oil refinery has almost doubled as it prepares to get into commercial operations in the midst of supply glut.
Construction is soon be wrapped up by Limetree Bay Ventures, and investors aim to reduce project risk by outsourcing crude supply and product marketing to oil major BP Plc.
Limetree Bay Ventures President Brian Lever commented that the project would startup within the next few weeks. He denied requests to comment on the project’s economics.
Originally, the overhaul was estimated to cost USD1.4 billion. However, the overhaul cost of the St. Croix, US Virgin Islands plant formerly known as the Hovensa refinery has nearly doubled to USD2.7 billion.
The refinery was expected to benefit from the rising demand for low sulfur fuels spurred by the IMO 2020 regulatory mandate that began in January. Instead, the extensive repairs requirements drove more than USD1 billion costs overrun and delayed the first production to late summer.
According to Lever, the startup fell behind its late 2019 commencement date due to extensive metal corrosion and routine startup issues. A notable fact is that the March outbreak of coronavirus among workers did not slow the repairs.
At the moment, the plant is going to open into the weak refining market as US East Coast refining margins plunged by 40% year-on-year. BP has started delivering crude oil to the plant.
Limetree still has an obligation to come to terms with revisions to a 2011 consent decree with pollution regulators and the US Justice Department. The US Virgin Islands Department of Planning and Natural Resources must accept revisions for the plant to begin operation.
