Restart of idled St. Croix oil refinery set for early 2020 after delay

(Reuters) - A $1.6 billion plan to refurbish a long-idled Caribbean oil refinery is about 75% complete and could begin delivering fuel supplies early next year, company and government officials said this week.

FILE PHOTO: The installations of the Hovensa petroleum refinery are seen behind a locked gate in St Croix, U.S. Virgin Islands June 28, 2017. REUTERS/Alvin Baez/File Photo

The Limetree Bay Refining project is a bet on demand for low-sulfur fuels to meet a Jan. 1 global mandate for ocean-going vessels cut air pollution. The St. Croix, U.S. Virgin Islands, venture is run by private equity and commodity trading firms with oil major BP Plc BP.L providing crude oil and marketing the plant's output.

Once restarted, the plant will be able to process up to 210,000 barrels per day of oil, a fraction of the 1,500-acre (607-hectare) plant’s peak capacity in the 1970s of 650,000 bpd.

Arclight Capital Partners, a Boston-based private equity firm, acquired the refinery with Freepoint Commodities in 2015. The two operate the plant’s about 34-million-barrel oil storage terminal while resurrecting part of what once was one of the world’s largest refineries.

BP has taken a larger role as delays arose due to the aged equipment’s near eight-year closure, said people familiar with the matter. Limetree Bay had hoped to complete the restart this year with two crude processing units in operation.

Instead, it will start operations early next year with one crude processing unit and may later revive a second crude unit if profits allow, Brian Lever, Limetree Bay’s chief executive, told a St. Croix senate panel on Wednesday.

BP had no immediate comment on the change.

Lever declined comment on the delays or when product deliveries could begin through an Arclight spokesman. The company continues “to make strong progress on the refinery restart,” adding it now expects to put oil into processing units early next year.

Arclight and its partner aim to profit from expected high demand for low-sulfur marine fuels from the IMO 2020 mandate. It also could benefit from the summer closing of Philadelphia Energy Solutions’ 335,000-bpd refinery that supplied the U.S. East Coast.

Kirk Callwood, executive director of St. Croix’s public finance authority, told the senate panel that repairs will continue into December, followed by a commissioning period and then startup.

The St. Croix plant shut in 2012 facing requirements to spend some $700 million on pollution controls and a $5.4 million civil penalty to settle violations of the U.S. Clean Air Act that were levied on then-Hovensa, a venture between Hess Corp HES.N and Venezuela's state-run oil firm PDVSA.

Negotiations on an agreement with the U.S. Department of Justice and Environmental Protection Agency to settle prior violations of the Clean Air Act are nearly complete, Lever said in prepared remarks. The company must reach agreement on the 2011 consent decree before the refinery can restart operations.

Reporting by Gary McWilliams; Editing by Marguerita Choy