Valero Energy Corp. (VLO) said it will convert its Caribbean refinery in Aruba into a terminal while it continues seeking a buyer for the plant-the latest casualty of the sweeping changes rocking the North American energy industry.

Valero in March suspended refining operations at the 235,000-barrel-a-day facility. The recent boom in U.S. domestic oil production, along with stagnant fuel demand, has made offshore refining less profitable. Hess Oil Corp. (HES) in January shut down the 350,000-barrel-a-day refinery it ran with Petroleos de Venezuela S.A. in the Virgin Islands after it racked up $1.3 billion in losses over the previous three years.

The U.S. markets where Aruba normally shipped fuel are oversupplied, while U.S. exports are dominated by Gulf Coast refineries that can produce the fuel cheaper, Morningstar analyst Allen Good said Tuesday, following Valero’s announcement the day before.

“It’s just a case of where it is – it has that island effect,” Mr. Good said. “The Atlantic basin is oversupplied, and the people exporting from the Gulf Coast will have a cost advantage.”

Valero for years has been trying to sell the Aruba plant, located on the southern strip of the Caribbean island. In 2008, Brazilian oil company Petroleo Brasileiro S.A. (PBR, PETR3.BR, PETR4.BR) was in talks to buy it for $2 billion; in May China’s state-owned PetroChina Co. Ltd. (PTR, 0857.HK, 601857.SH, K30D.SG) offered $350 million for the plant.

Valero bought the Aruba refinery in 2004 for an estimated $465 million. It used the Aruba refinery to partially refine the heavy, sour crude it received from Venezuela, sending the half-finished product to refineries in other regions, including its own Gulf Coast operations to finish the process.

The tougher-to-process heavy, sour crude years ago traded at a wide discount to light, sweet blends of crude. That difference narrowed dramatically during the economic downturn thanks to the growing supply of light, sweet crude available in the U.S. The refinery also depends on burning fuel oil to power operations, compared to the much cheaper natural gas available onshore, Valero spokesman Bill Day said Tuesday.

“It’s not the least expensive way of doing things,” Mr. Day said.

The Aruba plant has a history of shutdowns. Built in 1929 by Standard Oil, it was shut down in 1985 by successor company Exxon, now Exxon Mobil Corp. (XOM), only to reopen five years later. Valero bought it in 2004, closed it in 2009 because of challenging economics and then restarted it again in 2011.

Valero is still in talks to sell the plant but no deal is imminent, Mr. Day said. Valero said it will keep the Aruba refinery ready for a restart in case it can reach a deal to sell the plant.

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