UPDATE 7-Shell shuts Singapore refinery as fire rages

* Shell says in process of shutting down whole refinery

* Could shut whole chemical complex if needed

* No force majeure declared on supplies (Updates with confirmation from Shell on refinery shutdown)

By Luke Pachymuthu and Yaw Yan Chong

SINGAPORE, Sept 29 (Reuters) - Royal Dutch Shell Plc (RDSa.L) is shutting its half-a-million barrels-per-day Singapore refinery and could also shut the linked chemical complex 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.

"We are focused on safety, and are going through the progressive shutdown of the refinery," Martijn van Koten, vice president for manufacturing operations, told reporters at a briefing on Thursday.

Shutting down the entire refinery will take two days, van Koten said. Shell Singapore's chairman, Lee Tzu Yang, said that the company has not declared force majeure on product shipments.

The fire, which started at 0515 GMT on Wednesday, has proved difficult to douse, and Shell said it had regained in intensity at midday on Thursday.

"At around noon, we experienced a surge in the fire which continues to be contained," Shell said in a statement earlier on Thursday.

Shell said the fire, being tackled by at least 100 firefighters on Bukom island off Singapore, could have started during maintenance work, although it was too early to tell.

Shipping sources have said vessels are not berthing at the refinery. One shipowner 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 said production units near the blaze remained shut, including a hydrocracking unit that helps make diesel.

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.

Shell said it continued to monitor pollution levels near the blaze, adding that these remained within acceptable levels. (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)