“Greater regional cooperation should be strengthened during this time in terms of products, as well as storage, and even in terms of financing working capital”, says Jose Bautista, Technical Manager at the Dominican Republics’ Refidomsa.

This past September, the World Refining Association held its very first digital event –  LARTC Virtual – to facilitate knowledge sharing in the context of the Covid-19 pandemic. The WRA held a featured panel discussion on the Caribbean refining sector and how it could remain competitive both regionally and globally in the current climate.

Challenges to the Region

In 2019 the Caribbean Refining Industry was looking forward to a prospective renewal with Limetree Bay Ventures, expecting a 2.17 Billion-pound overhaul of the St. Croix refinery – once one of the largest in the world. In addition to the St Croix refinery was the Klesch Group purchase and planned revamp of the La Isla Refinery. The German company had ambitious plans to have the refinery up and running after years of it operating only as a storage facility. These investments represented an opportunity to tap into regional demand for gasoline, diesel and marine fuels in Latin-America and the Caribbean. Particularly in light of the decreased supply of crude oil from Venezuela and the challenges facing PDVSA in recent years, which has impacted the region dramatically. Latin America as a region is a net exporter of crude oil while importing refined and petrochemical products. It was also hoped that the aforementioned investment would offset this imbalance in demand with local supply. In 2019 Caribbean refiners were gearing up to prepare for the increased demand of low sulfur fuels with the IMO 2020 regulations coming into effect in January.  IMO regulations were originally perceived as one of the biggest challenges for refining in 2020. The outbreak of Covid-19 only served to exacerbate difficulties facing Caribbean refiners, who have seen several plants in the region close in recent years. Impacts to Caribbean refiners as in other regions of the world, has resulted in decreased demand, inability for refiners to run at full capacity as well as lack of storage capacity for inventory.

Throughout our live panel discussion our speakers highlighted key strategies’ they are currently following in order to meet the challenges of the unprecedented global pandemic and its impacts on the refining sector.

Conclusion

In summary, it is clear that flexibility to ever-changing market dynamics is necessary to secure short to medium term viability in the Caribbean refining sector.  Both our panelists noted concerns around storage, and the risks associated with the purchase of more storage given the uncertain roadmap for the return of regional product demand. Additional storage would allow a refinery to operate in the immediate short term, but certainly demand will have to return steadily for this to be a viable strategy. By limiting production, to some extent refineries have been able to balance production with offtake, but again, that this is only a viable strategy in the short term. Additionally, our panelists advised that stronger Caribbean focused regional cooperation could stand to provide opportunities for survival not only in the short term but with a view to synergies extended beyond a post-Covid economy. With a focus on eradicating unnecessary expenditure our Caribbean panelists have done their best to optimize efficiency during this time.