Economy may lose more than $100m if refinery is closed for a month: Economists
Robin Chan Straits Times 5 Oct 11;
THE all clear was given on Shell's Pulau Bukom refinery site yesterday, even as operations remain in the process of being shut down.
An all-clear safety siren was sounded at 2pm. However, the area around what is known as pump house 43, which is where the fire broke out seven days ago, is still under 'strict control' according to an internal staff memo.
The local economy could suffer a hit of more than a $100 million if the massive Bukom refinery closes for a month, economists have said.
The oil giant's plant, which refines 500,000 barrels a day and is Shell's largest in the world, was shut down following a 32-hour fire last week.
Economists looked at the value added to the economy from the petroleum refining and petrochemicals industries, to estimate the cost of closing the plant.
Naturally, the costs will vary depending on how long the closure lasts and how much economic activity is lost.
Citigroup economist Kit Wei Zheng said that assuming a one-month closure, there could be a 0.04 percentage point loss in full-year gross domestic product growth.
This assumes Shell contributes about a third to petroleum refining and petrochemical manufacturing in Singapore, which is the market estimate.
Singapore's total GDP was $285 billion last year, so the loss from Shell could be about $114 million.
'This may not include indirect spillovers on other sectors tied to petroleum or petrochemicals - transport comes to mind - but given the numbers just discussed, it suggests a small dent to full year growth,' he said.
CIMB economist Song Seng Wun estimated that a one month closure could cost the economy more than that - about $200m which is roughly 0.06 per cent of GDP.
But Barclays Capital economist Leong Wai Ho also estimated the economic cost at 'about $100 million'.
While manufacturing has been supported by the pharmaceutical sector, other sectors such as electronics and chemicals have been in a slump.
OCBC economist Selena Ling said: 'In August the chemicals cluster was already contracting year-on-year. So it is not currently a key driver of manufacturing output. But this just adds to the depressing manufacturing numbers.'
Mr Song added: 'The drag in industrial output expected for September will now likely extend into October. The bottom line is that we will be affected.'
Shell, which produces petrochemicals from kerosene to jet fuel at the facility has since declared force majeure on some of its contracts.
Force majeure means the company is freed from contractual obligations in the event of extraordinary circumstances.
Singapore exported about $75 billion of oil products last year in addition to non-oil exports such as petrochemicals.
Shell exports about 90 per cent of its products to other markets in the region.
Effect of Shell fire tells on industry supplies
A week after the blaze, the extent of the disruptions to feedstock is becoming clearer
Ronnie Lim Business Times 5 Oct 11;
(SINGAPORE) The shutdown of Shell's Pulau Bukom operations has set off a chain reaction, hitting other companies and plants in the petrochemicals industry here. The fire last Wednesday resulted in Shell closing down its 500,000 barrels per day refinery and its new 800,000 tonnes per annum (tpa) ethylene cracker which disrupted the supply of feedstock to other players in Singapore.
The oil giant has declared force majeure (FM) on feedstock supplies like naphtha to Petrochemical Corporation of Singapore which operates two petrochemical crackers with a total 1.4 million tpa capacity on Jurong Island. Shell has a quarter stake in PCS.
Another plant there that has been similarly affected is Ellba Eastern (in which Shell and BASF hold a 50 per cent stake each). Both PCS and Ellba are supplied via pipelines from Bukom. When contacted, a spokesperson for Ellba, which produces intermediates for various plastics and rubber products, confirmed: 'Shell declared FM effective from last Friday after the fire at its Bukom site.'
The shutdown of Shell Eastern Petrochemical Complex's (SEPC) new 800,000 tpa ethylene cracker on Bukom has also reportedly affected ethylene supplies to SEPC's new MEG, or monoethylene glycol downstream plant on Jurong Island which accounts for half of SEPC's ethylene. In turn, the MEG plant is apparently having to declare FM on product supplies to its own customers.
Economic Development Board's director for Energy, Chemicals & Engineering Services, Liang Ting Wee told BT yesterday that 'it is still to early to determine the full impact on the industry, as it depends on the duration of disruptions to Shell's facility'.
'We are monitoring and assessing the situation closely,' said Mr Liang, in response to BT queries.
Shell's declaration of FM for petrochemical customers, follow that of its FM for supplies of middle distillates like kerosene and diesel which have also been disrupted by the earlier shutdown of a separate Bukom hydrocracker plant.
A Reuters report, citing sources, said yesterday that Shell has offered to buy back all the distillate cargoes that it has been unable to deliver and declared FM on, including to BP, JP Morgan, Hin Leong and Glencore.
A Shell spokesperson when contacted yesterday, would only reiterate that 'we confirm that force majeure has been declared on some of our customers. We are not able to comment further as this is commercially sensitive information'.
'We understand the concerns of our customers. We are in discussions with them to address their supply needs and to minimise any potential impact,' she added.
Reuters earlier cited sources saying the Shell refinery is expected to take at least a month to start operating again, and possibly even up to six months to return to normal levels.
Shell, which has started investigations into the 30-hour fire which started last Wednesday, told BT earlier this week that 'we do not expect any of the units to be restarted until a thorough investigation has been done and we are confident that it is safe to do so'.
Preliminary investigations show that the fire broke out at a pumphouse during preparation work for maintenance, which included draining of residual oil in a pipeline and removing it by a suction truck, the Ministry of Manpower said on Monday.
The Shell spokesperson added yesterday that 'we are giving the Ministry of Manpower our fullest co-operation as they conduct investigations on the Pulau Bukom fire. We hope to apply any learnings from these findings to avoid such an occurrence in future'.
