Will St Croix loss benefit St Lucia?

The famous signing of the Hess Oil agreement by Sir John Compton.

It’s an image that St Lucians will not quickly forget: A feeble John Compton tries to put pen to paper, the aim being to afix his signature to a new deal with the Hess Corporation. At his side, his wife Janice Compton. And hovering over them the day’s Minister for Economic Planning Ausbert d’Auvergne reborn. Also at the head table was the then acting prime minister Stephenson King and Hess Oil Chairman John Hess. The date: Tuesday 24 July 2007. Barely six months after John Compton pulled off his final election victory. He died in September.
The signing was to renew Hess Oil’s arrangements in St Lucia, where the company has operated an oil transshipment terminal at Cul De Sac since 1981.
A Government Information Service release at the time quoted Hess Corporation CEO John Hess as saying: “The special agreement that we have now, we’re honoured to extend at least for 50 years, and have it be the foundation not only for an oil transshipment terminal, but gives us the economic framework to attract hopefully a partner for a world class merchant oil refinery which is very much needed in the world today.”
So wrapped up were TV viewers with the frail image of the so-called “father of nation” (at the table he sat in a wheelchair) little attention was paid the promise of an oil refinery. A year later Prime Minister Stephenson King would remind the nation that the refinery was still on the cards.
In an address to the nation in October 2008 he said he had met with officials of the oil company while on a trip to New York: “I held discussions with the management of Hess Oil who reassured me of their commitment to get that project off the ground within the shortest possible time frame. Hess oil is currently conducting their mandatory geo-technical and preparatory site works to facilitate the proposed project and the realignment of a section of the Millennium Highway. As an immediate demonstration of Hess’ commitment to the people of Saint Lucia, the company has agreed to finance the construction of the new CARE Technical-Vocational Institute, the rehabilitation of the Micoud Secondary and Leon Hess Comprehensive Secondary Schools to international standards.”
For his own part the Communications & Works minister Guy Joseph had this to say about the multi-billion dollar project. “Quite a substantial amount of money has been committed to the feasibility studies,” he said, “and the studies undertaken so far conclude that there will be no problems putting in the refinery . . . From all indications things look very good. I don’t think Hess would spend this kind of money on feasibility studies, and all that for nothing. A direction has been given mapping out the area to which the Millennium Highway will be relocated . . . The first thing that will happen is the realignment of the road. I expect this to start before the end of the year or the beginning of next year. It’s not been decided whether Hess would do the work or whether the government would do it on the company’s behalf. This will be sorted out in the days ahead.”
If all went well, St Lucia stood to gain several hundred new jobs. But that was not to be, as it turned out. The prime minister and his works minister were soon scrambling to save face after Reuters quoted John Hess   as saying Hess Corp had no current plans to build a refinery in Saint Lucia after all.
Then Opposition Leader Kenny Anthony was quick to comment:   “This is indeed shocking news. The prime minister has a lot of explaining to do. Only this week one of his ministers announced work had commenced on the clearing of the site of the proposed refinery. The government has gone as far as to repurchase from the National Insurance Corporation lands which it once held in preparation for the refinery. Something has obviously gone very wrong. The credibility of the prime minister and government stands naked, stripped of respect, trust and confidence.”
The issue died a natural death, or so it seemed until this week’s announcement of the closure of Hess Corp’s Oil Refinery in St Croix (US Virgin Islands) that made headlines around the world, causing discussion in St Croix about Hess’ plans for Saint Lucia.
Did Hess Corp lay off thousands at one of the largest Oil Refineries in the world, Hovensa LLC refinery, in order to focus its efforts on establishing an oil refinery in Saint Lucia?
A letter appearing in the St Croix Avis this week titled: “Is St Croix being set up?” by Joel Mahepath asks: “Is St Croix being set up to be a transshipment port for refined product from St Lucia to the U.S. mainland?”
The writer described the closure of the St Croix refinery as an “economic tsunami for the Virgin Islands.”
“After 45 years of operation and 42 years of profits,” he observed, “one cannot imagine that losses for three years of 41.3 billon dollars could cause this sudden closure.” Mahepath questioned whether Hess Corp was not in fact suffering because of “the consent decree with the US Environmental Protection Agency and the Department of Justice to invest $700 million in pollution controls as well as paying $5.4 million penalty for violating the Clean Air Act.”
The writer reminded St Croix readers of the deal St Lucia signed with Hess Corp in 2007 and added, “A refinery in St Lucia will not have to comply with EPA regulations.”
He further suggested the closure of the St Croix refinery could well be a “calculated move for Hess.”
Finally, he asked: “After 45 years with high profitability over most of that period don’t you think that the Virgin Islands community deserves the $700 million investment to comply with the EPA and Clean Air Act?”
Joel Mahepath listed himself as a concerned business owner. Could he right? Is St Lucia set to benefit from St Croix’s misfortune?
At press time the STAR was not able to speak on the matter with Energy Minister Dr James Fletcher.
Meanwhile as we go to press, Hess Corporation has announced that it will take a $525 million after-tax charge against its fourth quarter 2011 earnings as a result of the shutdown of the Hovensa LLC refinery, a joint venture between Hess and Petroleos de Venezuela S.A. Following the shutdown, the complex will operate as an oil storage terminal.

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