Market and product

Shell Chemicals faced an "operational upset" at one of its production units at the Singapore Pulau Bukom petrochemical complex Tuesday afternoon, a company spokesperson said Wednesday.

The upset "had resulted in flaring with dark smoke. This has since subsided," the spokesman said, adding that the rest of the site was running normally.

The statement did not specify the unit affected, whether or not it has resumed operations, or how long the shutdown will last.

Trade sources said the outage could be due to a compressor trip and that the unit could be down for about a month.

Shell Chemicals had resumed production from its naphtha-fed steam cracker at Pulau Bukom around mid-July following a long outage, and had lifted a force majeure on olefins supply from the cracker on August 18.

The force majeure was declared last December following mechanical problems at the cracker, S&P Global Platts has reported.

The petrochemical complex comprises a steam cracker which is able to produce 960,000 mt/year of ethylene, 540,000 mt/year of propylene, 186,000 mt/year of butadiene.

The site also has a 276,000 mt/year benzene unit and a 750,000 mt/year monoethylene glycol plant.

Traders said that Shell Chemicals could be informing customers about possible reduced nominations of ethylene and propylene, but this could not be confirmed.

While some traders said the outage would impact Shell's purchase of naphtha feedstock, others said the bulk of the major's feedstock comes from its own refining system and imports account for just a small volume.

They added that the naphtha market turned bearish Tuesday after a recent brief resurgence largely on concerns over the outage at the Shell Chemicals unit.

"It's because of the Shell Bukom trouble and Shell sold a lot [of naphtha swaps] yesterday [Tuesday]. Other physical players were also sellers [of swaps]," one market source said. "And the market has no confidence to keep its strength for long may be."

Other sources said that a Japanese trader was also selling a lot of intermonth spreads.

The naphtha market flipped back to a contango structure Monday, which steepened further Tuesday, from a backwardation over Thursday and Friday, due to a brief rebound sparked by tightening prompt supply and firm buying interest, Platts data showed.

The weak market has also sent the front-month naphtha East/West spread -- the differential between the Mean of Platts Japan naphtha marker and the CIF North West Europe naphtha cargo assessment -- to multi-year lows of $5.50/mt Wednesday, tightly closing the Western arbitrage window, data showed.

The CFR Japan naphtha crack versus front-month November ICE Brent crude, which hit a four-month high on September 22, continued to narrow Tuesday to $57.03/mt and was notionally valued at $52.4/mt Wednesday morning. - Platts