Hovensa will soon begin shutting down its St. Croix refinery in the US Virgin Islands, the joint-venture company announced.

The complex will operate as an oil storage terminal following the shutdown, according to Hovensa, a joint venture of Hess Corp. and Petroleos de Venezuela, S.A. (PdVSA).

The refinery – built by Hess in 1966 – has a capacity of about 500,000 bpd, according to media reports.

Losses at the Hovensa refinery have totaled $1.3 billion in the past three years alone and were projected to continue, the venture said.

These losses have been caused primarily by weakness in demand for refined petroleum products due to the global economic slowdown and the addition of new refining capacity in emerging markets.

In the past three years, these factors have caused the closure of approximately 18 refineries in the US and Europe with capacity totaling more than 2 million bpd of oil.

In addition, the low price of natural gas in the US has put Hovensa, an oil-fueled refinery, at a competitive disadvantage, officials said.

“We deeply regret the closure of the Hovensa refinery and the impact on our dedicated people,” said Brian K. Lever, president and chief operating officer of Hovensa.

“We explored all available options to avoid this outcome, but severe financial losses left us with no other choice,” he continued.

“We will provide significantly enhanced benefits for those union and salaried employees who are impacted and will work closely with the government of the US Virgin Islands to ease the transition for the rest of the community.”

After formal shutdown of the refinery, which will occur by the middle of February, most of those employed at Hovensa will continue working through a transition period.

Thereafter, approximately 100 people will remain to work at the oil storage terminal.