September 30th, 2011

Update: Oil Refinery Fire, Bukom Island, Singapore

Posted at 4:36 PM ET

oil-refine-small1A large fire broke out at Royal Dutch Shell’s massive Pulau Bukom refinery near Singapore on September 28, damaging parts of the plant and prompting the closure of the entire facility. Reports said the fire at the 500,000 barrels-a-day refinery in Pulau Bukom, an island 5 kilometers (3 miles) off Singapore, started at about 13:15 local time (05:15 UTC) and burned for around 36 hours. Eyewitnesses also reportedly heard three large explosions at the facility. Shell has stated it is in the process of shutting down the whole refinery. Reports said the fire is the worst to affect the plant in 23 years.

According to Insurance Day, claims from the fire are likely to be retained by Shell’s Swiss-based insurance captive, Solen Versicherungen AG (Solen), following its decision to stop buying reinsurance for its liability and property business in 2010. At the same time, Solen also decided to increase its retention levels for its liability and property risks from USD400 million to USD1 billion, Insurance Day added. Solen has a wholly owned captive reinsurance subsidiary, Solen Insurance Ltd, to which it cedes the vast majority of non-life premiums and claims.


Shell confirmed the fire damaged the pump room at the plant, which contains pipes used for blending refined fuels. Reports said firefighters initially struggled to contain the blaze, prompting Shell to shut two of its three crude distillation units, including the largest No 5 unit, with the third running at a reduced rate. Several other secondary units, including a hydrocracker unit were also halted. Reports also said berthing operations at the refinery were suspended.

Shell has since indicated in a statement that it has started a progressive shutdown of the whole refinery. Shell added the shutdown is a safety precaution and not due to serious damage to the refinery. Reuters, citing industry sources, said the refinery is expected to remain shut for at least a month. Reuters added the impact of the shutdown of the refinery is expected to be felt mainly in the Asian gasoline and distillate markets, although the severity of the impact depends on the eventual duration of the shutdown. Shell has declared a force majeure on sales of distillates, using a clause in contracts that exempts buyers or sellers from commitments due to events that are beyond control, according to reports.

Shell said nobody was killed or seriously injured by the blaze and the company evacuated 400 nonessential staff from the refining complex as the fire burned, although some 250 workers (including its firefighting team) stayed at the refinery to oversee operations. About 80 firefighters from the Singapore Civil Defence Force (SCDF) were deployed to battle the flames. Six firefighters suffered minor injuries but have since returned to work after receiving treatment. Three fire engines were also badly damaged. The SCDF initially said the blaze had been contained within an area measuring 150 meters by 50 meters (495 feet by 165 feet). However, it later reported that the fire had intensified and that firefighting operations were still ongoing. The flames were finally extinguished after raging for around 36 hours.

Reports said the fire occurred where finished oil products are transferred from the final production unit into storage tanks by being pumped through pipelines. According to the National Environment Agency, the smoke plume generated from the fire has not affected Singapore so far. Shell said it believes the fire was an accident and said a full investigation will be conducted once the fire is put out.

According to reports, the Pulau Bukom refinery is the largest Shell owns, with a crude distillation capacity of 500,000 barrels per day. Reports said more than 90 percent of the plant’s output is destined for export markets. The facility also accounts for more than a third of Singapore’s refining capacity. In addition to refining crude oil, the complex also includes an 800,000 ton-a-year ethylene cracker and a 155,000 ton-a-year butadiene-extraction unit.

Sources: CNN News, Associated Press, Reuters News, Agence France Presse, BBC News, Platts Commodity News, Insurance Day, Standard and Poor’s

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Guy Carpenter publishes CAT-i reports for major natural catastrophes worldwide. These reports cover catastrophes including worldwide tropical cyclones, earthquakes, major UK and European floods and any other natural event that is likely to incur a significant loss to the (re)insurance industry. Please email if you wish to be added to the free email distribution list.

Guy Carpenter compiles RISK-i reports for major technological or man-made events worldwide. These reports cover risks to property, transport and life including explosions, fires, crashes, engineering disasters and terrorist attacks that are likely to incur a significant loss to the (re)insurance industry. Please email if you wish to be added to the free email distribution list.

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