Caribbean Refiners To Remain Under Pressure

BMI View: Caribbean refineries have come under considerable pressure in recent years as the shale boom has benefited the US downstream sector at the expense of the rest of the Atlantic Basin. With these dynamics likely to remain in place, and much of the region's refining operations vulnerable to policy changes in Venezuela, a country's whose macroeconomic outlook is fast deteriorating, we hold a cautious outlook on the Caribbean's downstream sector.

Even after a sharp reduction in the Caribbean's crude oil distillation capacity in recent quarters, we take a cautious outlook on refining activity in the region. Through the past decade, the countries with the greatest refining capacity had been the US Virgin Islands (USVI), the former Netherland Antilles, Cuba, Aruba and Trinidad & Tobago (T&T). In recent years though, we have seen a significant shift in the downstream dynamics of the entire Atlantic Basin, as the US shale boom has bolstered US refiners' margins at the expense of competitors in Europe and the Caribbean.

This shift has already prompted the facilities in the USVI and Aruba to close, and we see the downstream capacity of Curacao and Cuba as being largely propped up by the presence of Venezuela - an unenviable position given the unstable macroeconomic position of the oil producing giant. Finally, while we are more optimistic on the longer-term prospects of T&T's downstream segment, we believe that in the short term, the country's refinery will continue to face pressure on its margins.

Caribbean Refiners Forced Out
US - Fuels Imports By Country, '000b/d (LHS) & Percent Of Total Fuels Imports (RHS)

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This article is tagged to:
Sector: Country Risk, Oil & Gas
Geography: Caribbean, Aruba, Cuba, Trinidad & Tobago, Venezuela

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