ANALYSIS-‘Zombie’ Hovensa refinery could live again due to shale | Reuters

Reuters) – The mothballed Hovensa refinery, once the largest in the Western hemisphere, could be the latest “zombie refinery” to come back to life, revived by the U.S. shale boom.

Hess Corp and Venezuela’s state-run Petroleos de Venezuela (PDVSA) have found an interested buyer for their 350,000 barrel per day (bpd) Hovensa refinery in the Virgin Islands, sources close to the deal told Reuters on Wednesday, confirming a local news report that said the plant would use U.S. crude.

Refining at the plant has been halted since 2012, but its owners have been using it as a terminal. The Virgin Islands government has sought a buyer who will return the plant to its former status as an active refinery, according to a person familiar with refinery sales.

The identity of the buyer was not known, but sources told Reuters it would be a private equity firm. PDVSA declined to comment and Hess was not immediately available to comment.

Cheap U.S. crude and natural gas, available because of the shale boom, have created an advantage for U.S. refiners who have access to relatively inexpensive feedstock needed to fill refineries and a cheap furnace fuel to power them.

A four-decade ban on exporting U.S. crude has made it lucrative to produce gasoline, diesel and other refined products domestically, which can then be exported legally.

Restarting Hovensa on an island considered to be part of the United States could be a bet on the law remaining in place, even as it is being hotly debated from Texas to Washington.

Several “zombie refineries” on the East Coast have been restarted or saved from shutdown, according to Paul Sankey at Wolfe Research who coined the term, since the start of shale revolution.

Zombies that have reopened include the Delaware City refinery, which PBF Investments bought and restarted in 2010 after Valero shut it down, and the idled 185,000 barrel-a-day Trainer, Pennsylvania, refinery rebooted by Delta Airlines in 2012.

Hovensa’s ability to benefit from plum U.S. refining conditions might prove more challenging, according to industry analysts and consultants. Hovensa is oil-fired and does not benefit from vast U.S. gas fields.

via ANALYSIS-‘Zombie’ Hovensa refinery could live again due to shale | Reuters.