Economic Impact of Pulau Bukom Oil Refinery Fire

Ms Sylvia Lim asked the Minister for Trade and Industry if he would provide an interim assessment on the impact of the Shell oil refinery fire and facilities shut-down at Pulau Bukom on the Singapore economy, in particular on energy supplies and prices.

The Second Minister for Trade and Industry (Mr S Iswaran) (for the Minister for Trade and Industry): Mr Speaker, Sir, our assessment at this juncture is that the shutdown of the Shell refinery on Pulau Bukom is likely to have a minimal impact on the overall economy. And there are several reasons for this assessment.

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First, even though there is a loss of petroleum output in the short term, the impact on downstream chemicals plants is small as there are alternative sources of feedstock. Furthermore, while the refinery accounts for a significant portion of the chemicals cluster, the cluster as a whole accounts for less than 3% of Singapore's GDP.

Second, Shell's efforts at restarting the refinery remain on track. On 10 October, Shell partially restarted its largest Crude Distillation Unit which accounts for 20% of its refining capacity. Shell is working closely with the relevant authorities to safely re-start additional processing units of the refinery as soon as possible.

Third, the incident is not likely to affect the chemicals cluster in the longer term. Investor confidence in Singapore remains strong and new investment projects will continue to be developed.

Finally, the Pulau Bukom fire incident does not affect Singapore's electricity supply. The primary fuel for generation of electricity is natural gas. While fuel oil is used for some power generation, our generation companies do not have any existing supply contracts with Shell for fuel oil. The generation companies also maintain a stockpile of fuel oil and diesel, in line with the Energy Market Authority's licence requirements. These are not stored on Pulau Bukom and hence the fuel reserve for electricity generation was unaffected by the fire.

Fuel oil prices are used to set our electricity and town gas tariffs. Members would be aware that this is because of the link between the natural gas we use for our power generation and fuel oil prices. The Pulau Bukom fire has not had any impact on fuel oil prices, which continue to be driven by global demand and supply trends. Based on currently available data, we do not expect the Pulau Bukom fire incident to have an impact on electricity and gas tariffs.

Ms Sylvia Lim (Aljunied): Sir, two supplementary questions for the Minister. First, there have been private sector economists' estimates about how much has been lost to the economy due to the shut-down. The figures that were cited were between $100 million and $200 million, depending on how long it goes on and what facilities are affected. So, I would like to ask the Minister whether the Government has an estimate of how much has been lost so far, in dollar terms, to the economy in terms of output. Second question, Sir, is: there are obviously Singaporeans working in Shell and Singapore businesses supplying services to the Shell operations. Given that these livelihoods are affected, how is the Government working with Shell to ensure that the operations come up online and in the safest way possible?

Mr S Iswaran: Sir, I thank the Member for the supplementary questions. Let me take the second point first. As far as the coordination of the recovery effort is concerned, there are two aspects to this: one is the fire safety and technical aspects, which we will address subsequently in another Parliamentary Question. As far as the economic aspects are concerned – because this is part of an integrated value-chain for us – EDB is working very closely with Shell and with the downstream companies that rely on some of the products in order to ensure that there is a smooth transition. I think, in the first instance, the key point is that there are feedstock supplies. So, in other words, there are inventories that can support the activities. So, a lot of the measurement of the outcome or the impact will really depend on how smoothly and quickly Shell can restart its operations. So, when the Member refers to private sector estimates, well, it really depends on the assumptions on which they rely. As of now, the Government's estimation is that the impact would be minimal but we are reluctant to put an actual dollar value until we know the exact duration and rate of response in recovery.

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Ms Sylvia Lim: Sir, thank you and just one more supplementary question. I understand that it would take time for this thing to pan out, but what I was asking was whether, to date, the Government has an estimate of how much has been lost.

Mr S Iswaran: Sir, if we think about the economy and the size of it – 3% of GDP and this is just a component of that – and then we can do some estimations based on that. But, really, this is guesstimation. I do not think they are reliable numbers because you are not really looking at what is happening on a day-to-day basis. You want to look at the total impact. So, I would be reluctant to give a dollar value at this stage, but I can assure the Member that we are working on this and we are tracking the effects closely.