HOUSTON, Oct 28 (Reuters) - Venezuela’s PDVSA and Hess Corp have reached a tentative agreement to sell their 350,000-barrel-per-day Hovensa refinery to Atlantic Basin Refining, the U.S. Virgin Islands’ governor said in a statement on Tuesday.
The facility on the south shore of Saint Croix has been idle since 2012. The owners announced negotiations with a potential buyer in September, after they hired Lazard Ltd in November 2013 to manage the sale.
A “detailed operating agreement” with the U.S. Virgin Island requires Atlantic Basin Refining, which was formed specifically to acquire the shuttered facility, to rebuild and restart it, employ local personnel and pay the government more than $1.6 billion over the life of the deal.
The operational agreement would be for 22 years, renewable for two additional 10-year terms.
Additional variable payments will also be required, depending on the refinery’s profitability, Governor John de Jongh Jr. said in the statement.
Owners of the refinery must take down Hovensa, which has been used as a terminal in recent years, and clean up the site if they do not restart the refinery or if they shut it down at any time in the future.
“This will ensure that, whatever the circumstances, if there is not to be an operating refinery, we will not be left with an eyesore and a wasting asset,” de Jongh said.
Legislative approval is also required.
The statement said an engineering analysis and a restart plan are probably take nine to 12 months, while construction and rehabilitation would take another 24 months and would cost more than $1 billion. (Reporting by Marianna Parraga; Editing by Jessica Resnick-Ault and Lisa Von Ahn)