ST. CROIX (AP) — The giant Hovensa oil refinery that has dominated the economy and part of the landscape of the island of St. Croix for decades will cease operations this month, the operator said.
Industry analysts said the closure is unlikely to have a major effect on the global oil market but Gov. John de Jongh described the announcement as “a complete body blow” for the U.S. territory. He said Hovensa generated at least $60 million a year in revenue for the government which already faces a budget crisis.
“Given what we're going through right now, this is the last bit of news that I wanted to hear,” he said in a teleconference with reporters.
The refinery, the largest private employer in the U.S. Virgin Islands and once one of the largest refiners in the Western Hemisphere, will be converted to an oil storage terminal, said Brian K. Lever, president and chief operating officer of Hovensa LLC.
Losses at Hovensa, a joint venture of U.S.-based Hess Corp. and Venezuela's state-owned oil company, have totaled $1.3 billion over the past three years and were projected to continue due to reduced demand caused by the global economic slowdown and increased refining capacity in emerging markets, Lever said in a statement.
The refinery employs about 1,200 people in St. Croix and has approximately 950 contractors, according to Hovensa spokesman David Roznowski. About 100 people, including contractors, will work at the oil storage terminal, the company said.
The refinery, founded in the 1960s, has been producing about 350,000 barrels per day during the rough economic climate.
Hovensa spokesman Alex Moorehead said the refinery equipment will shut down by mid-February but that the company will continue to provide fuel oil to the island's Water and Power Authority through the end of June.
The announcement seemed to take officials by surprise on an island already struggling with the layoffs of hundreds of state workers to offset a budget deficit.
De Jongh said he will also ask Hovensa officials if they are interested in selling the facility.
“I cannot afford to have an asset of that size sitting there,” he said.
In January, Hovensa entered into a consent decree with the U.S. Environmental Protection Agency and the Justice Department in which the company agreed to invest $700 million on pollution controls after a series of chemical releases affected people living downwind from the refinery. Hovensa also agreed to pay a $5.4 million penalty for violating the Clean Air Act.
It is unclear how the agreement will be affected by the closure. EPA spokeswoman Mary Mears said the agency would soon issue a statement, while Moorehead said Hovensa representatives were meeting with EPA and U.S. Department of Justice officials on Wednesday to talk about the issue.