Limetree Bay oil refinery begins producing transportation fuel -sources

Jan 25 (Reuters) - Limetree Bay refinery in St. Croix, United States Virgin Islands, recently began producing transportation fuel, people familiar with the matter said, clearing one of the hurdles that had disrupted a facility restart and jeopardized its crude supply contract.

Achieving full operation is required for Limetree Bay owners’ EIG Global Energy Partners and Arclight Capital Partners to retain a crude supply and product offtake contract with BP Plc. Full startup has been delayed a year and the project has run more than $1 billion over budget.

BP is set to load ultra low sulfur diesel from the 210,000-barrel per day plant this week, according to two sources and vessel tracking data. Plant operations are “stabilizing,” according to one of the people familiar with the matter, after two fires in December.

Limetree Bay did not respond to a request for comment. BP declined to comment on Monday.

Limetree was given an undisclosed period to cure the plant’s problems after BP warned delays past mid-January would allow it to exercise a clause in its contract and exit the agreement to supply crude oil and market the resulting fuels.

The plant has been making semi-processed fuels including light-end distillate fuel oil and naphtha since restarting a crude unit in September. But it struggled to bring units online to make gasoline and diesel. It had been idled since 2012.

The refinery restart suffered repeated setbacks including high levels of corrosion in pipes and weaker-than-expected demand for IMO 2020-compliant transportation fuels, such as ultra low sulfur diesel, that the owners have sought to tap. (Reporting by Laura Sanicola; Editing by Richard Chang)