Downstream plants hit by Shell outage at Pulau Bukom

Ronnie Lim Business Times 21 Apr 11;

(SINGAPORE) An outage at Shell's ethylene cracker on Pulau Bukom - which has gone beyond a month now and expected to stretch at least for a second - has hit other downstream chemical plants on Jurong Island which rely on ethylene feedstock from the upstream Shell plant.

One such casualty is Ellba Eastern which has also been forced to declare 'force majeure' on supplies to its own customers.

Force majeure is a common clause in contracts that frees both parties from liability or obligations when an extraordinary event or circumstance beyond the control of the parties prevents one or both from fulfilling their contractual obligations.

Reflecting difficulties getting the cracker back up on stream, Shell - which first declared its own force majeure on March 21 for some of its contracted chemical supplies to customers due to the plant's 'operational issues' - yesterday indicated that it expects further delays.

'Our current estimate is that the earliest possible cracker start-up date is not expected before middle of May,' a Shell Singapore spokesperson told BT.

'Our manufacturing and technology teams have been working round-the-clock and continue to work hard to determine the cause of the technical problems,' she said.

These technical issues - which the company declined to specify, nor its level of seriousness - had forced Shell to earlier execute an unplanned shutdown on the ethylene cracker.

'Repairs are being carried out with the utmost urgency to fix these technical problems,' the Shell spokesperson added.

The Shell cracker - which produces 800,000 tonnes per annum of ethylene, 450,000 tpa of propylene and 230,000 tpa of benzene - is the main plant of the new US$3 billion Shell Eastern Petrochemicals Complex which the oil giant started up in March last year.

Earlier reports said that the cracker outage had also affected downstream production like that for monoethylene glycol (used to produce final products like polyester for clothing and bottles) as Shell's new MEG plant also uses ethylene feedstock from the cracker.

Meanwhile, the ethylene feedstock problem has also spread to Ellba Eastern - a BASF-Shell joint venture on the petrochemicals island.

Ellba coincidentally suffered its own technical outage at its catalyst plant on March 22 and had declared force majeure then for its supplies of styrene monomer, which is used by manufacturers for various plastic and rubber products.

When contacted yesterday, a BASF spokesperson told BT that Ellba then took the opportunity to carry out an unscheduled 2-3 week maintenance of its plant.

'This has since been completed,' she said, adding however, that Ellba has still been unable to lift its force majeure on its styrene monomer supplies to customers 'as we still can't get ethylene from the Shell cracker'.

Ethylene prices have spiked due to Shell's cracker outage, among other factors. Reports last week said that spot ethylene prices in South-east Asia on a cost-and-freight basis were estimated at around US$1,475 a tonne versus about US$1,325 a tonne in early-March.