Argentina LSFO to US Virgin Islands to drop: Correction

Market: Oil products
20/12/19

Corrects St Croix refinery Jones Act status in paragraph 4.

Exports of Argentinian 0.5pc low-sulphur fuel oil (LSFO) to the US Virgin Islands for utility power generation could drop once Freepoint's St Croix refinery starts up next year.

Freepoint has an agreement to supply LSFO for power generation to Virgin Islands Water and Power Authority (Wapa). Freepoint shipped 11,348 b/d of sweet residual fuel oil to the US Virgin Islands in the first nine months of the year, according to US Energy Information Administration (EIA) data. Of that 4,538 b/d were sourced from Argentina, up by 36pc compared with the same period last year. Freepoint also imported low-sulphur residual fuel oil from Algeria, Congo, and northwest Europe.

Limetree Bay Ventures, which Freepoint is part owner of, secured financing in December 2018 to restart about 200,000 b/d of capacity at its mothballed 350,000 b/d St Croix refinery in early 2020. The refinery is expected to produce 0.5pc sulphur residual fuel oil, some of which will meet Wapa's demand.

Freepoint also has an agreement to supply 0.5pc sulphur fuel oil to Puerto Rico Electric Power Authority (Prepa). To avoid steep Jones Act oil tanker freight costs, residual fuel oil is imported into US Caribbean territories from foreign countries, instead of from the US. But as the St Croix refinery is in a US jurisdiction with a Jones Act waiver, low-sulphur residual fuel oil from the St Croix refinery could be shipped to Prepa without added financial constraints. This means shipments from the US Virgin Islands could displace some of Puerto Rico's demand for Argentinian fuel oil.

Freepoint brought 15,425 b/d of resid to Puerto Rico in the first nine months of the year. Of this quantity, 4,486 b/d was from Argentina and 3,055 b/d from Brazil, among others.

The International Maritime Organization's low sulphur marine fuel regulation will go into effect on 1 January, capping the maximum sulphur content to 0.5pc from the current 3.5pc, and likely driving up demand for LSFO. The displaced Argentinian resid will likely be sold for bunkering in the Americas.

By Stefka Wechsler

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