Shell’s Refinery Fire in Singapore: Implications
October 2, 2011 § 1 Comment
Singapore is a key hub for the entry of energy into the Asia-Pacific. The majority of crude oil coming from the Middle East stops by Singapore in order to be traded, refined into oil products, and exported to countries in the region. The Shell refinery alone, accounts for about 500,000 barrels of oil per day (bpd), which is roughly one-third the capacity of all the refineries in Singapore.
So, when a fire broke out at Shell’s largest refinery in the world on September 28, 2011, governments, companies, and traders sent out shock waves of concern, as it forced those in the industry to comprehend the ramifications of this event. As Shell slowly closed down unit after unit on its refinery complex, customers began to wonder if Shell would able to deliver the contracted products on time? Or would oil prices rise in the region? Even worse, how long would these refineries close and if Shell would be forced to declare “force majeure,” where this unforeseeable event would make Shell incapable of fulfilling its contract obligations?
While none of these questions have been answered, Shell is starting to take action. For instance, Ann Koh from Bloomberg reports that Shell has started to buy gasoline only two days after the fire. Shell has also stated its commitment to obtaining additional oil products from their international refinery facilities and storage stockpiles. These strategies, I believe, will be used to offset the impact of the temporarily closed refinery, allowing Shell time to deliver its current contracts while redoubling its efforts to investigate the causes of the fire and deem the refinery safe for operation.
While these efforts will help the Shell and the refinery normalize business, what about the environmental impacts this single fire will have on the region? The fire took 48 hours to contain and was widely visible from the Singaporean mainland. Concerns about air pollution migrating from Singapore to Indonesia and Malaysia are real, as are the effects of the fire’s byproducts on the wildlife and waters surrounding Singapore and the Pacific Ocean. These effects have yet to be investigated or measured, and Shell and the Singaporean government should be cautious to implement additional infrastructure or processes to limit the negative effects of future accidents.