Fire intensifies at Shell's biggest refinery

Reuters News
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Posted: Sep 28, 2011 9:03 AM
Fire intensifies at Shell's biggest refinery

By Yaw Yan Chong and Alejandro Barbajosa

SINGAPORE (Reuters) - A fire has intensified at Royal Dutch Shell's largest refinery, its half-a-million barrel per day Singapore plant, sending a plume of black smoke over the city-state.

Shell has evacuated non-essential staff from the refining complex, Singapore's Civil Defense Force said.

"There is a fire and it grew significantly, but I am not aware of an explosion," said Lee Tzu Yang, chairman for Shell Companies in Singapore told Reuters.

"My understanding is that there are no people injured."

The company declined to comment on what impact the fire was having on operations at the plant, which accounts for more than a third of the island nation's total refining capacity.

Singapore is the world's biggest market for fuel oil and as Asia's hub for crude and product trading, any disruption may have an impact regional prices out of proportion to the capacity taken offline.

A dark cloud of smoke could be seen over mainland Singapore and the Jurong Island oil hub, about five hours after the fire started at the refinery at 0515 GMT.

"The smoke has become much thicker and flames are rising up five to eight storeys every 15-20 minutes," said a Reuters witness.

NAPHTHA STORAGE HIT

"The fire at the manufacturing facility on Pulau Bukom is still on-going. The fire involves petroleum products from pipes in the tank farm at the manufacturing facility," a Singapore Civil Defense Force spokesman said.

Refinery sources said the fire occurred where finished oil products are transferred from the final production unit into storage tanks by being pumped through pipelines.

"There are a lot of pipelines in this area. And there are residues of flammable oil trapped in them. The fire got worse because it spread into the pipes, and that's what caused the explosions," said the refinery source.

The sources said that the damage was quite extensive as a result of the second fire, which was more intense than the first, and it would take some time before the area is able to resume operations.

Traders said Shell, one of the largest naphtha traders and suppliers in Asia, sold an usually heavy volume of at least 40,000 tonnes of prompt October/November naphtha swaps, implying that it is taking a bearish view of the market.

The damage to the area is expected to lead to inventories of naphtha being stuck in storage, and in a market where prices for prompt cargoes are stronger than for forward delivery, the stocks would lose value over time, traders said.

Some traders view Shell's move to sell an unusually-high volume of naphtha's October/November swaps, at higher price levels of $4.75-$5.00 a tonne versus week-ago levels, as a move to lock in higher profit levels for the inventories.

(Additional reporting by Seng Li Peng, Francis Kan and Luke Pachymuthu; Writing by Manash Goswami; Editing by Michael Urquhart)