For now, they are retaining their Singapore GDP growth estimate of 4.5% for 2011, but add that the forecast could be downgraded pending the extent of the damage arising from the Shell incident and troubles in Europe and the US. “The temporary loss of refinery capacity and petrochemical output thus does not bode well for Singapore’s manufacturing and exports in late September and possibly for most of October,” according to Song and Ching. For the first eight months of this year, oil made up 27% of Singapore’s total exports, while petrochemical products accounted for 7.5%. The chemical sector accounted for 10.7% of Singapore’s manufacturing output and 2.8% of GDP in 2010. They say they turned bearish on Singapore’s manufacturing sector even before this incident, warning that the industry’s performance in 4Q2011 and beyond could be wobbly as their channel checks suggest weak technology output going into 1Q2012. “The extent of the damage is still unclear, but what is certain is there will be unplanned downtime with supply disruptions to chemical-related producers,” say CIMB economists Song Seng Wun and Ching Quan Jian in a note to clients. Singapore is Asia’s largest oil trading and storage centre.
While a Shell executive has said the incident won’t affect the supply of gasoline or gasoil in Singapore, the impact on export markets is less clear as most of the refinery’s output is meant to be sold in the region. The refinery can process 500,000 barrels of oil a day. The company has yet to disclose its losses so far, but a complete shutdown could be costly, not only for Shell but the industry as a whole. Pulau Bukom is located more than five kilometres away from Singapore’s shores. Shell has already closed several refinery units in the vicinity of the fire and says it’s prepared to shut down the entire refinery operation for safety reasons. The area affected is about 150 metres by 50 metres in size.
The blaze at the Pulau Bukom facility - Shell’s largest refinery worldwide - was finally extinguished on Thursday, but the oil giant says traces of fuel vapour remain, although it claims they’re non-toxic. But there’s one new domestic development that could further fuel anxieties about the country’s near-term economic prospects.Ī potential plunge in output at Royal Dutch Shell’s Singapore refinery after it was engulfed by fire on Wednesday (Sep 28) is threatening to crimp the city-state’s industrial production. Europe’s deepening debt crisis and the increasingly despondent US economy have been keeping investors and government officials here on their toes for months.
THE RISKS TO the economy of trade-dependent Singapore have been well flagged.