Impact On St. Croix

The Virgin islands have come a long way since hurricane Irma and Maria caused widespread devastation in the islands of St. John, St. Thomas and St. Croix. As the Islanders rebuild, it seems the government has managed to broker one of the best economic deals in the region. On July 2018, U.S Virgin Islands announced a $1.4 billion deal to reopen the former Hovensa refinery that was closed in 2012 when the company faced declining demand and had to file for bankruptcy. Back in 1970, the refinery was the biggest in the world, processing 650,000 until its ultimate closure. The Refinery was later bought by ArcLight Capital Partners, LLC who own Lime Bay Terminals on 32 million barrels oil marine terminal on St. Croix. 

The Caribbean has been facing declining fuel supplies as a result of Venezuela cutting its shipments to the Caribbean. The refurbished refinery will operate to meet International Marine Organization’s 2020 regulations that require the sulfur content in marine fuel to be cut from 3.5 percent to 0.5 percent. 

This deal will boost the recovery efforts in the Islands and improve the economy of the Islands. The refinery is expected to produce 200,000 barrels of oil daily which works out to more than $600 million over the first decade. 

As part of the deal, half of these revenues will go into funding the embattled Government Retirement fund that has been facing the prospect of bankruptcy by 2025. Part of the revenue will be used to allow the Waste Management Authority to service some of its debts. The deal will also see the development of a 110-room hotel in Yacht Haven on St. Thomas. This will be the largest development in the area in 38 years. 

Regarding the employment of residents, 2,000 of whom lost their jobs when Hovensa closed down in 2012 – the new refinery is set to create 1,200 jobs at the construction phase and generate approximately 750 permanent posts. 

Limetree Bay Terminals LLC, an ArcLight subsidiary, currently owns an oil storage terminal that generates $11.5 million annually for the government. The company will further play an annual base rate of $22.5 million a year. This could go up to $70 million depending on how well the refinery performs. 

The Governor has painted a rosy picture of what could happen. When the Senate ratifies the agreement, work is expected to commence in the first half of 2019. This is a good way to accelerate the Island’s recovery after the hurricanes and to drive the economy forward.

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