Aug 05, 2021 News
– New owner files for bankruptcy amid similar circumstances
By Carlos Gonsalves
Kaieteur News – The owners of a Caribbean oil refinery that was once the largest refinery in the Western Hemisphere has filed for bankruptcy after a series of environmental breaches and a government-ordered shut down, highlighting pressures faced by the oil industry to curb its environmental impact, according to international media company, Bloomberg.
Limetree Bay Refining LLC sought creditor protection on July 12 after the US Environmental Protection Agency halted its operations earlier this year. The St. Croix, US Virgin Islands-based refinery had also filed for bankruptcy in 2015 under previous ownership. The refinery was previously owned under a joint venture between the US oil giant Hess and Venezuelan state oil company Petróleos de Venezuela (PDVSA) and had a refining capacity of 650,000 barrels a day – making it the largest refinery in the Western Hemisphere at the time. After a series of pollution incidents and a number of pending lawsuits against it, the former owners had declared bankruptcy. At the time, it said it owed US$1.86 billion; however, it sold its oil terminal and storage facilities to Arc Light Capital Partners and Limetree Bay Holdings for US $184 million. As a consequence, plaintiffs who had been seeking damages from the refinery, then named Hovensa had received a mere fraction of what they had sought.
The refinery has stated that it is seeking bankruptcy “due to severe regulatory and financial constraints” that forced it to suspend its refinery operations indefinitely, and has lined up as much as $25 million of so-called debtor-in-possession financing that will help it maintain the refinery through the process of declaring bankruptcy, according to the statement.
According to Reuters, lenders balked at putting new cash into the project which has a history of being dogged by environmental violations, cost overruns and regulatory troubles.
The refinery, which had restarted operations in February after years of inactivity, was well positioned to process sour crude oil supplies from South America and meet fuel demand in regions such as the US East Coast.
According to Reuters, the refinery in May was forced to halt operations following incidents that included contamination of drinking water, noxious gas releases and the emission of oil droplets that rained down on various areas. On June 21, the company said it was suspending plans to restart the business and cutting more than 270 workers after efforts to raise capital founder.
Reuters reports that the St. Croix refinery overhaul was the most expensive effort in nearly a decade to expand refining capacity in the hemisphere. Investors plunged more than $4 billion into the project, focused on taking advantage of its prime location along shipping routes in the Caribbean. The plan fizzled after construction delays and the COVID-19 pandemic, which slashed demand for fuel worldwide.
Limetree’s woes have prompted investigations by the EPA and the Virgin Islands Department of Planning and National Resources, according to court papers. The Office of the US Attorney in the Virgin Islands also requested to visit the refinery, and the company faces multiple class-action lawsuits related to the alleged pollution problems, the company’s chief restructuring officer, Mark Shapiro, said in court documents.
Limetree is controlled by EIG Global Energy (EIG) Partners, which said in an emailed statement that it became the “reluctant” owner of the troubled refining operation in April as part of a restructuring. EIG had previously led a group of Limetree’s so-called mezzanine lenders and has been involved in efforts to revive the refinery since 2018. EIG, based in Washington D.C., specialises in private investments in energy infrastructure. The bankruptcy comes at a time when the industry is struggling with shrinking profitability, excess production capacity and rising competition from mega-refineries in Asia amid a push by the Biden Administration to move the US away from fossil.
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