Effects of Shell fire 'will extend to other firms'

Aaron Low Straits Times 7 Oct 11;

ACCOUNTANTS at oil giant Shell are probably still tallying the costs of last week's fire at the Pulau Bukom refinery, but a research company said the effects, good and bad, will also extend to other companies.

DMG and Partners Research said the fire that raged for a day and a half has already caused a short-term squeeze on the supply of petrochemical items, as the plant was Shell's biggest regional refinery.

Singapore refining margins have surged 40 per cent to US$7 to US$8 a barrel, from US$5, said DMG.

Engineering and construction companies in the oil and gas sector may benefit from the inferno, as orders to repair and rebuild the refinery come in, it added.

'Although the extent of rebuilding the Shell refinery is not known as yet, we think this incident may bring new business opportunities to companies providing civil engineering, construction, equipment rental and/or structural steel works services to the oil majors,' said DMG.

Hai Leck Holdings, Hiap Seng Engineering, Mun Siong Engineering, OKP Holdings, Rotary Engineering and Yongnam Holdings are locally listed companies that provide maintenance services to the oil and gas sector in Singapore, and may thus benefit.

For example, Hai Leck is an integrated service provider of scaffolding, corrosion prevention, thermal insulation, fireproofing and general civil engineering services. It also provides related maintenance services.

Hiap Seng Engineering provides mechanical engineering, plant fabrication, and installation and plant maintenance services.

But the positive effect of the rebuilding effort may be offset by less maintenance work for these same energy companies, as the refinery shuts down.

Shell has shut down its refinery as a safety precaution. Six people suffered superficial wounds and three fire engines were damaged in the fire. At the same time, it appears that maintenance work caused the fire to start.

DMG noted: 'However, it is not known which companies were the ones providing maintenance services for the units affected by the fire/shutdown, or the company that was performing the maintenance job that allegedly sparked the fire.'

DMG said it had contacted some companies to find out more, but they refused to comment any further.

Bukom order flows to contractors expected
But maintenance contractors are hit by refinery's temporary shutdown
Ronnie Lim Business Times 7 Oct 11;

SINGAPORE contractors like Rotary, PEC, OKP, Hai Leck and Tiong Woon, to name just a few, will likely see some order flows following the Shell Bukom mishap, although in the short term, those doing maintenance work there will be affected by the refinery's shutdown, says DMG & Partners Research yesterday.

'In the next few months, the contractors providing civil engineering, construction, equipment rental and structural steel works services will likely see some order flows... however, in the near term those doing maintenance works for the oil major will be affected with the shutdown, which will likely last at least a month,' the research firm said.

'The party found responsible may face more dire consequences... we contacted some companies to obtain more insights but they have refused to comment,' said Selena Leong and Terence Wong, the authors of the research paper.

The 34-hour fire at Shell which started at a pumphouse there last Wednesday afternoon was believed to be accidental and caused by a maintenance job.

'But the company performing the maintenance job that potentially sparked off the fire may suffer loss of status as Shell's qualified contractor, in addition to a blemished safety track record and reputational loss,' DMG said.

'This may result in loss of future business opportunities with the oil majors.'

DMG said that as there are only a handful of listed players providing maintenance services to the oil and gas sector here, it believed that most of the contractors cited, including others like Hiap Seng Engineering, Mun Siong Engineering, Tat Hong Holdings, TTJ Holdings and Yongnam Holdings, 'have some exposure to Shell'.

There will be some short-term pain in that 'companies providing maintenance services to the affected units of the Bukom refinery would likely suffer a reduction in their maintenance revenue, until the refinery is up and operating normally'.

But in the longer term, there will be a positive impact from rebuilding the affected units, DMG said.

'Although the extent of rebuilding ... is not known as yet, we think this incident may bring new business opportunities to companies providing civil engineering, construction, equipment rental and structural steel works services to the oil majors,' it said.

'Some of the beneficiaries of the rebuilding effort may include Hai Leck, Hiap Seng Engineering, Mun Siong Engineering, OKP, PEC, Rotary, Tat Hong, Tiong Woon, TTJ Holdings and Yongnam Holdings,' DMG added.