After months of preparation and searching for the right financing, HOVENSA’s multi-million dollar coker project will officially kick off on Friday.
The hope on St. Croix is that the long-awaited, $535-million project will trigger a ripple effect that will help shake the island out of its economic doldrums. At the peak of construction HOVENSA estimates that there will be 2,000 people working on the new addition to the refinery, which is expected to be completed in early 2002.
To avoid hiring problems that occurred when the former Hess Oil of the Virgin Islands constructed a catalytic cracker at the refinery in the mid-1990s, HOVENSA and the project contractor, Bechtel Corp., will instead hire almost exclusively from the local labor pool.
That will have the double effect of maximizing the impact on the local economy and minimizing the cost of importing workers, HOVENSA Vice President of Human Resources Alex Moorhead told WSTX on Thursday.
"We’ll hire everyone that is qualified locally to minimize bringing in people from the States," said Moorhead.
HOVIC entered into a joint venture with the state-owned Petroleos de Venezuela S.A. 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.
Last November HOVENSA decided not to proceed with a $650 million bond issue for the coker project because the interest rate was higher than originally planned. That delay forced the company to postpone the start of construction by several months.
In early February, HOVENSA reached an agreement for $600 million in financing underwritten by Bank of America for the construction of the 58,000-barrel-per-day coker and related facilities at the refinery and to repay existing bank debt.
Company officials say the delayed coking unit 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.
Although there have been major increases in the cost of crude oil in the last year, which Moorhead said can be good or bad for a producer, the company "still thinks the basic economics for the project are valid," he said.
"We believe the project is still essential to the future economic health of the refinery and company," Moorhead said.
Engineering for the coker and the advance purchase of equipment began last fall. About 200 workers were employed initially to prepare the site. Manpower needs will increase over a 10-month period and peak at about 2,000 workers.
Moorhead said that once construction is completed between 35 and 50 new hires will be made.
The coker project will include a petroleum coke storage facility, a dock and modifications to existing processing units. 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.
