2nd Minister S Iswaran's reply on the impact of the Shell oil refinery fire and facilities shut-down at Pulau Bukom on the Singapore economy

Question No 7 of Notice Paper No 68 of 2011

Name and Constituency of Member of Parliament 
Ms Sylvia Lim, Member for Aljunied GRC

Question
7. Ms Sylvia Lim: To ask the Minister for Trade and Industry if he will 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.

Answer

1. 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.

2. 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 per cent of Singapore’s GDP.

3. Second, Shell’s efforts at restarting the refinery remains on track. On 10 October, Shell partially restarted its largest Crude Distillation Unit which accounts for 20 per cent 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.

4. 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.

5. 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.

6. Fuel oil prices are used to set our electricity and town gas tariffs. This is because our natural gas prices are linked to 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.