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Shell shuts most of Singapore refinery as fire rages

By Reuters
Thursday, September 29, 2011 7:31 EDT
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SINGAPORE (Reuters) – Royal Dutch Shell Plc has shut most of its half-a-million barrels-per-day Singapore refinery, sources said, as firefighters struggle to contain a blaze that has been burning for more than a day.

The plant is the largest Shell owns and makes up more than a third of Singapore’s refining capacity. The city-state is Asia’s crude and refined product trading hub and hosts the world’s largest fuel oil market.

Benchmark fuel prices across Asia are based on trade in Singapore, so interruptions in supply can trigger price moves out of proportion with the size of the refinery disruption.

Industry sources said Shell has shut two of its three crude distillation units, including the largest No 5 unit, with the third running at reduced rates.

A Shell spokesman declined comment on the shutdown of the crude units or the status of the blaze. The fire has proved difficult to douse, and Shell said it regained in intensity at midday on Thursday, nearly 24 hours after the blaze started.

“At around noon, we experienced a surge in the fire which continues to be contained,” Shell said in a statement on Thursday. “The source of the fire are remnant light fuel components within the specific area where the fire originated.”

Shell is investigating the cause of the blaze, being tackled by at least 100 firefighters on Bukom island off Singapore.

Shipping sources have said vessels are not berthing at the refinery. One ship-owner said his ship had to pull off from the loading berth at around 1000 GMT on Wednesday, more than 5 hours after the fire started, as a safety precaution.

“We had to cast off (from the berth) halfway through the loading,” the shipping source said. “Our vessel is sitting at anchorage now, waiting for further instructions from Shell’s terminal, but no indication has been given on when we can go back in.”

MARKET IMPACT

The cost for oil product cargoes for prompt delivery in

Singapore’s swaps market surged on Thursday, indicating traders expect tighter supplies even after Shell said it could continue to supply the market from storage and other refineries.

The premium of October gas oil swaps over November hit the highest for an inter-month spread in almost three years. Fuel oil and naphtha also rose to over seven-month peaks.

Shell has said some production units near the blaze were shut as a precaution, including a hydrocracking unit that helps make diesel. In the process of the closure, a larger flare would be visible, Shell said, adding that the flare would not release toxic vapors.

One Shell firefighter suffered a superficial injury, and five others had heat exhaustion and pulled muscles, the company said. Three Civil Defense Force fire engines were also damaged.

The company said the fire had damaged the pump room, which contains pipes used for blending refined fuels.

Shell is operating its ethylene cracker normally using alternative feedstock. The unit is typically fed by products from the shut hydrocracker.

The smoke plume generated from the fire has not affected Singapore so far, the National Environment Agency said. In a statement, the agency said it was keeping a close watch on the situation and asked the public to stay calm.

(Additional reporting by Harry Suhartono, Alejandro Barbajosa, Seng Li Peng, Francis Kan and Jasmin Choo; Writing by Manash Goswami; Editing by Michael Urquhart and Simon Webb)

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