West Indies Petroleum, the Jamaica-based petroleum refining and distribution company, has described its pending takeover of the Limetree Bay refinery in St Croix, Virgin Islands, as a “game-changer” for the company, Jamaica and the region.

The company won the auction on December 18, 2021 to acquire the refinery at a cost of US$62 million and must make that payment by January 21, 2022 or the sale will go to the next highest bidder, St Croix Energy, which placed a bid of US$57 million for the assets.

However, West Indies Petroleum, in an interview with the Jamaica Observer on Friday, not only exuded confidence that it will be able to pay the money on time for the refinery, but has also outlined plans for the facility, which includes it being a major player in the regional petroleum market.

Charles Chambers, the president and CEO of West Indies Petroleum, in an interview with Sunday Finance outlined, “First of all, it is the only refinery of any real size that is left in the Caribbean and it therefore [will] allow us to produce petroleum products at a far cheaper rate than is available to the Caribbean at the moment.”

He also said the company is committed to, and is confident about, successfully closing out the sale and moving towards maximising the potential benefits that the refinery may have on improving not just local or regional but also global energy security.

The Limetree Bay refinery, which was shuttered in 2012 due to “severe financial constraints”, has a capacity to store up to 32 million barrels of oil and at its peak was refining about 650, 000 barrels per day. “I don’t think people fully appreciate the gravity and the size of this refinery. This refinery was the third largest in the hemisphere,” stated Chambers.

Petrojam by comparison has a storage capacity of about 240,000 barrels of oil and a refinery throughput of 30,000 barrels per day.

West Indies Petroleum, which began operation in 2013 to supply ships with fuel, currently has storage capacity for 785,000 barrels of oil at three locations in Jamaica, the largest being its South Terminal at Port Esquivel in St Catherine which can store 650,000 barrels of crude. The company also hosts storage of 63,000 barrel tanks on the north coast and a further 72,000 barrels over two tug and barges in Kingston Harbour.

At the time of its closure, the Limetree Bay refinery was, however, producing 220, 000 barrels per day. West Indies Petroleum says it intends to double that output to 450,000 barrels per day and market the fuel to the Caribbean and Central America.

“First thing we need to do is get it open and running and there is a clear pathway to doing that,” Chambers added, before proferring a timeline of nine months to do that. “There is a massive opportunity to distributing products in the Caribbean, directly right next door into Puerto Rico, but also a massive opportunity to distribute into the US east coast cheaper than if the oil was being shipped from a port in the US,” he said.

Trinidad and Tobago and Central America are other markets being targeted.

“For our own country, Jamaica, we think that our ability to provide energy security is dramatic. Being two days’ sail from Jamaica, producing fuel in a much, much more efficient way than Petrojam could ever produce that fuel, we think that we would have the ability to provide energy security to Jamaica. Our long-term vision is to provide cheap, clean energy to Jamaica and the Caribbean. And we think we have an amazing plan to achieve that.”

West Indies Petroleum currently supplies service stations on the island outside the multinational corporations. Chambers estimates the company’s stake in the retail fuel market at “about 17 per cent”.

“We didn’t get here by accident, we had a plan. We started out as a bunker company, but we needed our own storage so we can be in charge of our own logistics… give ourselves a base to grow from… then create distribution across the Caribbean and Central America,” he said.

West Indies Petroleum has an almost exclusive agreement to supply cruise ships to the island with fuel.

Danville Walker, senior vice-president at West Indies Petroleum, said the bunkering business was hampered by the novel coronavirus pandemic. “We took a heavy hit when the cruise ship industry went into hiatus. It is just starting to sputter back into life. Just last week, a cruise ship was turned back from Ocho Rios and we fuel a number of ships from that pier. So that has been a challenge,” he explained.

But the company has since diversified from bunkering and now have ambitions to “…be the one to supply the fuel to Petrojam” as part of its plans for the Limetree Bay refinery. Walker went further to describe the strategic investment plans as “potentially game-changing, not only for St Croix, Jamaica and the region, but a host of countries across the globe”.

“Fuel in Jamaica is quite expensive and we think that the future has to be about providing clean energy at a reduced cost,” added Chambers.

Walker agreed. “When we are operating that refinery, we can purchase fuel in very large quantities. And the unit cost of running that refinery is one of the lowest in the world, so we will be able to sell cheaper than anyone else in the region,” he explained.

Due to its location, the Limetree Bay refinery can bring in some of the biggest crude tankers in the world which hold up to 3 million barrels of oil and can ship 1 million barrels at any one time. By comparison, because of the 11 metre draft in the Kingston Harbour where Petrojam is located, it can only accommodate ships with up to 250,000 barrel at any one time.

“Being able to bring fuel to Jamaica cheaper is a matter of scale,” Walker said of the size of the task ahead.

“We did a 10-year deal with BP two years ago which gives us certain exclusivity to distribute products across the Caribbean and Central America,” Chambers said. The CEO made it clear that the plan “would be way more advanced if it weren’t for COVID and restrictions on travel”, but outlined that the entity is “getting back into that space, full steam ahead”.

He said also that the opportunity to acquire the refinery will be a big boost for the plans, especially with the other large refineries in the region based in Trinidad, Aruba, Curacao and the Dominican Republic all closed.

While West Indies Petroleum plans, it admits that things are not rosy at the Limetree Bay refinery in St Croix. “We have some environmental issues to address and that is the number one thing to do after we complete the acquisition,” said Walker. “We will sit down with the US Environment Protection Agency and work out a plan forward to fix the issues. The sooner we can do that, the better.”

The good news is that though the refinery has been shut, the hedge fund which acquired it spent upwards of US$4 billion to modernise it. On top of that, it costs US$3 million per month to maintain the refinery and ensure it is in good working order. That cost will become West Indies Petroleum’s costs as soon as the deal is consummated, which means the company has to move fast to get it up and running again.

Walker argued further that, “if the support of policymakers is had, we at West Indies Petroluem hope to use the refinery to, over the medium to long term, create an environment which augurs well for the reduction in electricity costs in several countries.”