EIA: This Week in Petroleum - 31 March 2021

U.S. Virgin Islands refinery resumes operation after being inactive since 2012

On February 1, 2021, Limetree Bay Ventures, LLC, announced that it had resumed refining operations at the long-idled Kingshill refinery in the U.S. Virgin Islands. Hovensa, LLC, previously owned and operated the refinery before shuttering it in 2012. Limetree Bay Ventures acquired the facility in 2016, intending to resume refinery operations. Although the COVID-19 pandemic in the continental United States and U.S. Virgin Islands caused some disruptions in the refinery’s scheduled restart, the company confirmed that the facility has resumed operations and will begin supplying refined products to the U.S. East Coast, Caribbean markets, and elsewhere.

On March 25, 2021, the U.S. Environmental Protection Agency (EPA) withdrew a Clean Air Act (CAA) plant-wide applicability limit (PAL) permit and will reassess the refinery’s technical and legal requirements under the CAA. According to EPA, the withdrawal of the PAL permit does not require the facility to discontinue operations, but Limetree Bay remains obligated to comply with existing CAA requirements.

As a refinery operating within a U.S. territory, Limetree Bay must respond to EIA’s surveys. Historically, EIA has included refinery operation data for the U.S. Virgin Islands along with Puerto Rico in Petroleum Administration for Defense District (PADD) 6. Although data about refining at Limetree Bay will fall under PADD 6, EIA does not include PADD 6 in U.S. totals when publishing statistics (such as refinery inputs or production) in the Weekly Petroleum Status Report or the Petroleum Supply Monthly. Shipments of crude oil or petroleum products to or from the U.S. Virgin Islands will continue to appear as imports and exports in these reports.

However, company-level information on Limetree Bay will still be published in EIA reports that contain company-level data, including the annual Refinery Capacity Report and Company Level Imports. EIA will publish the status of the refinery’s capacity as of January 1, 2021, as part of its Refinery Capacity Report in June 2021.

Hovensa, a joint venture between Hess and Petróleos de Venezuela, S.A. (PDVSA), the national oil company of Venezuela, terminated refining operations at the Kingshill site in 2012, at which time the refinery had an atmospheric crude oil distillation unit capacity of 500,000 barrels per day (b/d), according to EIA’s Refinery Capacity Report (Figure 1). The facility also reported 62,000 b/d in delayed coking capacity. Coking conversion units allow refineries to increase their yields of higher-value refined products, such as gasoline and distillate fuel oil, when processing heavier, more viscous crude oil grades. Crude oil sent to the refinery from PDVSA likely skewed toward heavier, sour grades that have historically constituted the majority of exports from Venezuela. In addition to its refinery facility, the site has an adjacent marine terminal, which included deepwater loading operations and crude oil and refined product storage capacity of several million barrels.

The Kingshill refinery was inactive for about four years before it was acquired in early 2016 by a joint venture between affiliates of Arclight Capital Partners, a private equity firm focused on energy infrastructure investments, and Freepoint Commodities, LLC. The joint venture restarted operations at the terminal and storage facility, which received its first shipments in March 2016, according to the company’s website. The storage facility, now operated by Limetree Bay Terminals, LLC, consists of 34 million barrels of operational crude oil, refined product, and liquefied petroleum gas (LPG) storage as well as 11 docks at its deepwater tanker port, according to the company’s public statements.

The joint venture also indicated its intent to restart refining operations, but it did not indicate that it would bring the refinery’s capacity back online with the same capacity as in 2012 (500,000 b/d). In November 2018, the joint venture’s newly formed Limetree Bay Refining, LLC, announced that it had entered into an agreement with BP Products North America (BP). The agreement secured tolling, supply, and product offtake commitments for the refinery beginning in late 2019, ensuring that the refinery would have access to a supply of crude oil and feedstock as well as a buyer for a significant portion of the refinery’s output. According to the agreement, BP will market and sell up to an agreed upon volume of the refinery’s output through its own distribution network.

When it secured financing in November 2018, Limetree Bay Refining announced an expected start date of late 2019. Initial delays later pushed that start date into early 2020. On January 1, 2020, Limetree Bay Refining reported that, at that time, it had partially restored the refinery’s atmospheric crude oil distillation capacity to 176,400 b/d, although the capacity remained idle, and the refinery had not yet restarted operations (Figure 2). The refinery brought its delayed-coking capacity back online at its 2012 level and reported slightly more diesel desulfurization capacity than in 2012. Limetree Bay Refining also reported partially restored capacity for catalytic reforming units and heavy gasoil desulfurization.

In March 2020, responses to the COVID-19 pandemic added complexity to market conditions for refiners and strained operational conditions onsite at the refinery itself. After a yearlong delay, on February 1, 2021, Limetree Bay Ventures publicly announced that the refinery had successfully restarted operations with both production and commercial sales of refined products. The announcement indicates the refinery’s intent to supply the maritime fuel sector in compliance with new international standards, likely referring to the International Maritime Organization’s specification change that went into effect in 2020 to reduce the sulfur content in international bunker fuels. The statement aligns with the return of the refinery’s diesel and heavy gasoil desulfurization capacity, which enables it to produce lower sulfur gasoil.

After Hovensa closed the refinery in 2012, U.S. imports of petroleum products from the U.S. Virgin Islands decreased to negligible volumes or—more commonly—no volume at all. Motor gasoline accounted for the largest share of imports from the islands, followed by distillate fuel oil (Figure 3). Residual fuel oil, often used as maritime bunker fuel, and unfinished oils, slated for further processing at other refinery sites in the United States, also accounted for material volumes of imports from the U.S. Virgin Islands. Limetree Bay Refining has announced it is bringing online less capacity than the facility had in 2012, so it is unlikely that the United States will import volumes of the same magnitude even after the refinery has reached its target production.

U.S. average regular gasoline and diesel prices decrease

The U.S. average regular gasoline retail price decreased more than 1 cent to $2.85 per gallon on March 29, 85 cents higher than the same time last year. The East Coast price decreased nearly 3 cents to $2.78 per gallon and the Gulf Coast price decreased more than 2 cents to $2.60 per gallon. The Rocky Mountain price increased more than 1 cent to $2.95 per gallon, the West Coast price increased nearly 1 cent to $3.47 per gallon, and the Midwest price increased less than 1 cent to $2.75 per gallon.

The U.S. average diesel fuel price decreased more than 3 cents to $3.16 per gallon on March 29, 58 cents higher than a year ago. The Midwest price decreased nearly 5 cents to $3.10 per gallon, the Gulf Coast price decreased nearly 4 cents to $2.96 per gallon, the Rocky Mountain and East Coast prices each decreased more than 2 cents to $3.29 per gallon and $3.13 per gallon, respectively, and the West Coast price decreased nearly 2 cents to $3.66 per gallon.

Propane/propylene inventories decline

U.S. propane/propylene stocks decreased by 2.0 million barrels last week to 39.2 million barrels as of March 26, 2021, 8.7 million barrels (18.1%) less than the five-year (2016-2020) average inventory levels for this same time of year. Gulf Coast, Midwest, and Rocky Mountain/West Coast inventories decreased 1.8 million barrels, 0.4 million barrels, and 0.1 million barrels, respectively. East Coast inventories increased 0.2 million barrels.

Residential heating fuel prices decrease

As of March 29, 2021, residential heating oil prices averaged more than $2.86 per gallon, almost 2 cents per gallon lower than last week’s price but more than 44 cents per gallon higher than last year’s price at this time. Wholesale heating oil prices averaged nearly $1.94 per gallon, more than 2 cents per gallon lower last week’s price but almost 77 cents per gallon above last year’s price.

Residential propane prices averaged nearly $2.30 per gallon, almost 3 cents per gallon lower than last week’s price but nearly 43 cents per gallon above last year’s price. Wholesale propane prices averaged almost $1.03 per gallon, more than 1 cent per gallon below last week’s price but more than 59 cents per gallon above last year’s price.

This data collection is the last one for the 2020-21 State Heating Oil and Propane Program (SHOPP) heating season. Data collection will resume on October 4, 2021, for publication on Wednesday, October 6, 2021.