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Shell Singapore Refinery Being Sold To JV Partners

Analyst Team trader
Updated 8 May 2024

In what has been a busy couple of days in the rebalancing of Asia-Pacific operations of energy powerhouse Shell, an agreement to sell its Bukom refinery based in Singapore has now been announced. The buyer is a joint venture that includes Indonesian company PT Chandra Asri and global commodities giant Glencore.

The decision to part with the Bukom refinery is aligned with Shell's CEO Wael Sawan's broader strategy to shrink the oil firm’s carbon footprint. This move not only aligns with environmental goals but also allows Shell to intensify focus on its most lucrative segments in the energy market. This comes hot on the heels of a rumoured sale of Malaysian petrol stations to Aramco.

At the heart of the agreement is Chandra Asri, which is taking a majority stake in the joint venture while Glencore will oversee the refinery’s operations. The partnership expects to leverage Glencore’s expertise in providing liquidity and managing logistics for crude oil procurement, while also potentially unlocking new opportunities in marketing refined fuel products via spot sales or direct deliveries.

The Bukom refinery is not a small-scale operation by any standards; it boasts a total processing capacity of 237,000 barrels per day and features a steam cracker with an annual capacity of 1 million tons. These capabilities position the new joint venture as a significant player in the regional energy landscape.

It's projected that the sale will reach completion by the close of the year, subject to the mandatory regulatory approvals. The ramifications of this deal will ripple through the markets, potentially influencing trade dynamics for both crude oil and various refined products across the region.

The strategic implications for the joint venture are noteworthy as Chandra Asri is expected to utilize naphtha from the Bukom set-up to supply its existing steam cracker. This suggests a potential pivot towards the chemical markets over time, showing adaptability in response to shifting global product demands.

With this sale, Shell is adjusting its presence in Singapore but is not leaving altogether. The company continues to own and operate over 57 retail fuel stations and maintains substantial stakes in two petrochemical plants within the city-state. Meanwhile, the landscape of refineries in Singapore remains competitive with key players like ExxonMobil and Singapore Refining Co maintaining their operations.

“We are proud of our history at Bukom and Jurong Island and our contributions to the economic growth of Singapore in this sector in the past decades. Our commitment to Singapore remains steadfast and its importance as a regional hub for our marketing and trading business remains important. As Singapore continues to decarbonise, Shell looks forward to a continued partnership with the country, and with our customers in the region.”

Shell's divestment from the Bukom refinery is a tactical move, in line with emerging trends towards sustainability and profitability within the energy sector. It underscores the evolving dynamics of the industry and highlights how companies are reallocating resources to align with future growth areas. While this deal concludes one chapter for Shell in Singapore, it simultaneously opens another for the Chandra Asri and Glencore joint venture, setting the stage for new developments in the energy and chemicals market in Asia-Pacific.

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The AskTraders Analyst Team features experts in technical and fundamental analysis, as well as traders specializing in stocks, forex, and cryptocurrency.