Crude and naphtha markets affected by Shell Singapore fire

The crude and naphtha markets are beginning to feel the impact of the fire at the Royal Dutch Shell’s refinery in Singapore, and traders said that this has strengthened the price spreads for both markets in October. Shell had to shut down operations at its 500,000 barrel-per-day refinery, the company’s largest. The oil major also had to cancel the lifting of four million barrels of crude, wind down operations at its petrochemical complex and declare force majeure on some deals, mostly pertaining to distillates.

Shell’s largest refinery heavily damaged

The fire that broke out in late September heavily damaged equipment that controls the outflow of most of the company’s clean oil products such as gasoline, naphtha and middle distillates. This is known as the “Offsite Area,” and includes the pump house. There are 35 specialized pumps in the area where the fire started and these pumps regulate the flow of clean oil from the process units to the pipelines and into the storage tanks. The fire, which blazed for more than 30 hours, badly damaged several pipelines. But sources said that the area for dirty products like fuel oil was not damaged. Shell’s Singapore chairman, Lee Tzu Yang, did not give details but confirmed the force majeure. Both Shell and the government’s Ministry of Manpower are investigating the cause of the fire. Repair work remains on hold pending the investigations. (October 3, 2011)