HOVENSA officials will meet in the near future to decide how to fund the construction of the refinery’s coker project.
Originally, financing was to be completed in December with construction starting in early January. But trouble locating a financing package with acceptable interest rates and then catastrophic mudslides in Venezuela pushed the time line back, said Alex Moorhead, HOVENSA vice president.
"We still expect to start construction this year," Moorhead said. "Sometime in the first half."
The owners of HOVENSA, a joint venture formed in 1998 by Hess Oil of the Virgin Islands and state-owned Petroleos de Venezuela S.A., decided in November not to proceed with a $650 million bond issue for the coker project because the interest rate was higher than originally planned.
Moorhead said engineering work for the coker will continue through next month.
Once underway, the construction is expected to take about two years and at the height of the project will require some 2,000 workers.
Hess Oil of the Virgin Islands entered into the joint venture with PDVSA in 1998 to recover from approximately $1.2 billion in loses since 1991. According to HOVENSA, those losses continue: For calendar year 1998 the refinery reportedly lost $31 million.
"There was a sharp drop in crude and products," Moorhead said. "That’s good for customers but not for manufacturers."
Moorhead said the coker will make the St. Croix refinery competitive with refineries with similar capabilities. It will enable the refinery to process heavier Venezuelan crude oil, for which HOVENSA has a long-term supply contract with PDVSA. Without the coker, HOVENSA is forced to process crude oil that is $2 to $4 per barrel more expensive than what competitors process.
The refinery’s earnings in 1999 were sub-par as well. Moorhead said poor margins in the refining industry and Hurricane Lenny-related physical damage and loss of production will affect the company’s bottom line.
The St. Croix refinery, the largest in the Western Hemisphere, employs between 850 and 2000 people and produces about 400,000 barrels of oil a day, although it has the capability to pump out 500,000 barrels a day.
