China’s state-owned Sinopec is among several parties circling Shell Plc’s storied Bukom oil refinery in Singapore, an asset the company has placed under review as part of a revamp of its refining and chemicals business.
People with knowledge of Sinopec’s internal affairs said the Chinese refining giant was interested in Bukom for the exposure it can provide in the Singapore market, Asia’s no. 1 pricing, trading and distribution hub for oil products such as gasoline and diesel. They could not be identified due to company policy.
A Sinopec spokesperson declined to comment. A Shell spokesperson said the company has initiated a strategic review of its energy and chemicals assets on Bukom and Jurong Island in Singapore.
“Our strategic review is ongoing and we are exploring several options including divestment,” according to Shell in an email response to questions.
According to people with direct knowledge of the review, discussions with interested parties are in the very preliminary stages, and Shell has yet to make a final decision on the fate of the assets.
The refinery could be sold for a nominal fee, the people said, though a buyer would take on the plant’s liabilities including possible carbon taxes, which together could run past $1 billion. Sinopec, as well as another company that received details of the pricing structure, said there were concerns around the level of uncertainty and risk around the carbon component.
In 2021, Shell planned to build a biofuels plant at Bukom to help meet its own target of halving emissions by 2030. That operation would have focused on producing sustainable aviation fuel and biodiesel. Earlier this year, however, those ideas were dropped.
“This review is in response to the ongoing high grading journey of Shell Group’s Chemicals and Products portfolio over the years, the current challenging market conditions and enhanced capital discipline,” Shell said.
A Page in History
The Bukom plant has a storied past. A store of Russian kerosene in Shell’s infancy, it became Singapore’s first oil refinery, opened in 1961, developing lock-step with the city-state as it rose to become one of the world’s most important hubs for commodity trade, distribution and pricing.
In its heyday, the complex was among Asia’s most advanced refineries, alongside Exxon Mobil Corp.’s Jurong Island plant, turning crude oil into fuels and petrochemicals for the rest of Asia, to be supplied via a key maritime route known as the Malacca Strait.
Decades on, the Bukom facility now pales in size and complexity when compared to mega plants in China and India. Meanwhile, Singapore has ambitions to achieve net zero emissions by 2050.
Sinopec, should it bid and succeed, would not be the first Chinese state oil company to bet on Singapore. In 2009, PetroChina acquired a stake in Singapore Petroleum Company, which currently runs a joint-venture oil refinery in the city-state with Chevron.
--With assistance from Elffie Chew, Archie Hunter and Laura Hurst.
Author: Serene Cheong, Alfred Cang and Dong Cao
