October 3, 2011 / 8:01 AM / in 8 years

UPDATE 1-Shell Singapore cancels crude, petchems deals

(Adds details, comments, background)

* Cancels lifting 4 million barrels of October Saudi crude

* Shell begins shutting down Singapore chemical cracker

* Says it cannot meet naphtha, MEG supply commitments

By Yaw Yan Chong and Alejandro Barbajosa

SINGAPORE, Oct 3 (Reuters) - Royal Dutch Shell’s (RDSa.L) Singapore refinery has cancelled the lifting of four million barrels of Saudi Arab Light crude and is in the process of shutting down a chemical complex after a fire forced the closure of its biggest refinery.

Shell has already begun winding down operations at the chemical plant because it can’t supply feedstock to it as the adjacent 500,000 barrels-a-day refinery is down, and has said it can’t meet supply commitments on naphtha and monoethylene glycol — an input in making textiles — for October, industry sources with direct knowledge of the situation said on Monday.

Shell said it declared a force majeure, a clause provided in contracts to allow buyers or sellers to renege on commitments due to events that are beyond control. The refinery is expected to stay shut for at least a month, after the fire was put out late on Thursday night following a blaze of more than 30 hours.

“The cracker is as good as stopped, it’s just being run down slowly and will reach zero in a week or so, when the balance of naphtha supplies left in tank finishes,” the source said.

“The feed from the cracker to the MEG plant is also similarly slowed, and will also reach zero at some point.”

Monday’s move follows the declaration of force majeure on at least 1.5 million barrels of mostly distillate cargoes, for loading between Sept. 28 and Oct. 6, transacted over the end-of-day pricing window.

Force majeure has been declared for October naphtha supplies to Petrochemical Chemical of Singapore (PCS) and to customers who buy the MEG, the sources said.

The naphtha production of the shut 500,000 barrels-per-day refinery is mainly supplied to the chemical complex, which includes an 800,000 tonne-per-year (tpy) ethylene cracker and another 750,000-tpy petrochemical plant, and PCS.

The cracker, commissioned last March, uses up to about 210,000 tonnes of naphtha per month at full capacity, and has been running at 80 to 85 percent of capacity, traders said.

The refinery, on Singapore’s Bukom island, is estimated to yield 200,000 to 250,000 tonnes of naphtha per month.

“We confirm that force majeure has been declared on some of our customers,” Lee Tzu Yang, chairman of Shell Companies in Singapore, said on its website.

“We continue to be in discussions with our customers to address their supply of product needs and to minimize any potential impact to them.” (Additional reporting by Seng Li Peng and Alejandro Barbajosa; Editing by Manash Goswami)

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