OREANDA-NEWS. China?s state-owned Sinopec plans to lease more than three quarters of the operational storage at the Hovensa oil terminal in the US Virgin Islands, under the terms of a proposed sale of the underutilized complex to Limetree Bay Holdings.

Limetree is owned by US private equity fund ArcLight Capital Partners and minority investor Sinopec.

The comprehensive $800mn agreement would wind down outstanding tax and environmental litigation dogging the islands and the Hovensa owners, US independent Hess and Venezuelan state-owned PdV. The value includes legal, environmental and labor costs associated with the transaction.

At a press conference today, US Virgin Islands governor Kenneth Mapp highlighted the potential to develop other industries on the St Croix south shore site, including an asphalt plant and an LNG terminal.

The US Virgin Islands government would receive around $220mn in cash immediately upon closing of the transaction, Mapp said.

Sinopec already signed a 10-year agreement to lease 10mn bl of the facility?s 13mn bl of operational storage, out of a total of 32mn bl of storage on the site. Freepoint Commodities would take another 2mn bl.

ArcLight would invest more than $125mn to rehabilitate and possibly expand the storage facilities.

Mapp said Sinopec subsidiaries are interested in transshipment opportunities at the terminal. Sinopec is a major buyer of Latin American crude, including Venezuelan and Ecuadorean grades acquired until long-term oil-back loans.

Hess would drop a $184mn tax-related lawsuit against the local government, and PdV would drop an identical claim after the country?s 6 December legislative elections, Mapp said. In turn, the local government would drop its tax claim against the company.

ArcLight would provide gasoline, diesel, jet fuel, propane and other fuel to the US Virgin Islands for three months under a rack system.

The proposal is now in the hands of the US Virgin Islands? legislature, which must approve an operating agreement by 31 December, Mapp said. A vote is expected to take place in mid-December. The 25-year agreement would have an option for a 15-year extension.

A year ago this month, the legislature rejected an operating agreement with Atlantic Basin Refining (ABR), which had planned to restart the refinery.

ArcLight outbid US midstream company Buckeye Partners in a sale carried out under the supervision of a US bankruptcy court.

Under the proposed agreement, Sinopec?s participation appeared to have clinched the deal for ArcLight.

Mapp said ArcLight would build a 100,000 b/d bitumen plant on the site to replace imported asphalt, bringing the price down from a delivered $110/bl to $34/bl.

Mapp did not mention the possibility of restarting the 350,000 b/d Hovensa refinery, which has been mothballed since early 2012. Under the agreement, he said ArcLight would have two years to assess what provisions would be utilized and what would be dismantled and removed. ArcLight would keep the first $5mn from the sale of scrap metal. The US Virgin Islands government would have a right to 50pc of the proceeds after that threshold.

"We?re going to look at the entire south shore area and pursue other business and opportunities," Mapp said.

He said an LNG terminal would cut electricity costs on the islands and would be part of a larger long-term transfer of power generation to the industrial south shore.

There was no immediate comment from Hess or PdV on the proposed agreement.

"It was a very collegial undertaking," ArcLight Capital partner Jay Erhard said at the press conference today. "It?s been a lot of work and we have a lot of work to continue to do."

Speaking on behalf of partner Sinopec, Freepoint vice chairman Sheldon Pang said the Chinese firm sees Latin America and the Caribbean as a "strategically growing area" and aims to "double their business in this region within five years."