Glencore enters race for Shell Singapore Bukom refinery: report
Quantum Commodity Intelligence – Commodities giant Glencore has entered the race to buy the Shell Bukom refinery in Singapore, potentially pitting it against fellow top-tier trader Vitol for what is viewed as a prized trading asset.
According to a Reuters report Wednesday, Glencore is working with Indonesia's PT Chandra Asri Petrochemical in a possible bid for assets, which include a slimmed-down 237,000 bpd refinery on Pulau Bukom island and the adjoining 1-million-metric-ton-per-year ethylene plant.
The interest from Glencore, which Morgan Stanley is advising, possibly puts it in a three-way race with Vitol and private Chinese chemicals firms Eversun Holdings, with Reuters reporting that earlier interested parties CNOOC and Befar had withdrawn from the process.
Trading house Trafigura and Chinese major Sinopec were also previously named as potential suitors, but the latter ruled itself out last August.
Shell has been reviewing its entire global portfolio as part of a strategy to cut costs, focus on high-margin assets and transition to providing more low-carbon products, including repurposing many of its production facilities to renewable fuels.
As part of the review, Shell hired Goldman Sachs to explore the potential sale of its Singapore refinery and petrochemical complexes, with analysts expecting a sale to go through this year.
Weakest
A report published by Wood Mackenzie in September 2023 described Pulau Bukom as by far the weakest integrated refinery-petrochemical site in Shell's portfolio, making it a prime asset for disposal.
"To make matters worse, carbon taxes in Singapore are projected to increase substantially in the coming years, which will have a further detrimental impact on the site's profitability," added Wood Mackenzie.
"Shell have already cut crude distillation unit (CDU) capacity at the site and reconfigured the refinery to increase its chemicals yield– this has reduced the site's carbon emissions by 45% compared to a 2018 pre-pandemic baseline."
But the Bukom site has a major upside for a trading company in that its location makes it a prime asset for trading in the Platts market-on-close (MOC) window, given its refining capacity and access to storage.
The refinery was Singapore's first, starting operations in 1961 and was one of the key pillars that helped make the island state the trading hub it is today, having processed more than 500,000 bpd before scaling down.
According to Reuters, the plant could be sold for a nominal fee, although the buyer would take on the plant's liabilities, including possible carbon taxes, which together could run past $1 billion.
