HOVENSA, a joint venture between Hess Corporation and Petroleos de Venezuela S.A. announced in January 2012 that it would shutdown its refinery on St. Croix, United States Virgin Islands. Following the shutdown, the complex will operate as an oil storage terminal. Losses at the HOVENSA refinery totaled $1.3 billion over the past three years and were projected to continue. These losses were 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 18 refineries in the United States and Europe with capacity totaling more than 2 million barrels of oil per day. In addition, the low price of natural gas in the United States put HOVENSA, an oil-fueled refinery, at a competitive disadvantage.

Hess' Port Reading, New Jersey, fluid catalytic cracking (FCC) facility located near New York Harbor produces gasoline and fuel oil primarily for markets in the Northeast United States. The facility averaged feedstock runs of about 63,000 barrels per day in 2011 versus 55,000 barrels per day in 2010. Feedstock runs were higher in 2011 due to a planned major turnaround the previous year.

Hess operates a network of 20 refined product terminals on the East Coast of the United States, as well as an oil storage facility in St. Lucia. Our East Coast terminals provide the company a competitive advantage in the supply of refined products to our Retail and Energy Marketing businesses.

Hess Energy Marketing is a major supplier of natural gas, electricity and fuel oil to commercial, industrial and utility customers in the Eastern United States. In 2011, natural gas and electricity volumes grew and operating margins improved due to strong supply optimization results. In 2011 construction continued in New Jersey on the Bayonne Energy Center, a 512-megawatt, natural gas fueled electric power plant 50 percent owned by Hess Corporation. Once operational in mid-2012, the facility will generate enough electricity to power approximately 500,000 homes in the New York City area.

Retail Marketing is the leading independent gasoline convenience store retailer on the East Coast with 1,360 Hess branded locations. Annual convenience store revenues in 2011 excluding petroleum products were approximately $1.2 billion, a decrease of 2 percent from 2010. Overall store gross margins, however, increased in 2011 versus the prior year, driven by improved store offerings including development of a new fresh food concept and testing of nationally branded quick-serve restaurant concepts.

In addition, during the year the company opened three new HESS EXPRESS locations and expanded its successful Dunkin' Donuts offering to a total of 555 Hess and WilcoHess locations.