Shell shuts Singapore refinery; fire finally out

SINGAPORE Thu Sep 29, 2011 1:20pm EDT

1 of 6. Smoke billows from Royal Dutch Shell's Pulau Bukom offshore petroleum complex in Singapore September 28, 2011.

Credit: Reuters/Edgar Su

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SINGAPORE (Reuters) - Royal Dutch Shell Plc finally put out a blaze at its massive Singapore refinery after firefighters struggled to contain it for a day and a half, forcing the firm to start shutting its biggest plant worldwide.

The closure of the 500,000 barrel per day refinery, which makes up more than a third of Singapore's capacity, drove up benchmark fuel prices in the city-state, hub for Asian fuel trade. Officials said earlier on Thursday that they were shutting down all refining units and may shut the attached chemical complex.

The company said in a statement later that the fire, which had started at 0515 GMT on Wednesday, was extinguished, but that there were still traces of fuel vapor. It said it was prepared to shut down all units if necessary for safety, but gave no further details on operations.

"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 has proved difficult to douse, and Shell said it had regained in intensity at midday on Thursday.

It 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 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

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.

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 and Naveen Arul; Writing by Manash Goswami; Editing by Michael Urquhart, Simon Webb and Alden Bentley)

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