China’s state-owned Sinopec is among the interested parties considering the acquisition of Shell Plc’s iconic Bukom oil refinery in Singapore. Shell’s review of its refining and chemicals business has led to the consideration of divesting the Bukom refinery, a strategic asset, sparking interest from various quarters.
Sources familiar with Sinopec’s internal discussions revealed that the Chinese refining giant is attracted to Bukom for the opportunity it offers in the Singapore market. Singapore, Asia’s leading hub for oil product pricing, trading, and distribution, presents a significant appeal to industry players. Shell confirmed it is undergoing a strategic review of energy and chemicals assets on Bukom and Jurong Island in Singapore.
The discussions with potential buyers, including Sinopec, are at an early stage, with no final decision made by Shell regarding the future of the assets. The potential divestment could involve selling the refinery at a nominal fee, but the buyer would also inherit the associated liabilities, which might include substantial carbon taxes, potentially exceeding $1 billion.
Bukom refinery’s history dates back to Shell’s infancy when it stored Russian kerosene. Established in 1961 as Singapore’s first oil refinery, it played a crucial role in the city-state’s emergence as a global hub for commodity trade, distribution, and pricing. In its prime, the facility was one of Asia’s most advanced refineries, contributing to Asia’s fuel and petrochemical supply.
Changing Landscape and Considerations
Over time, the Bukom refinery’s significance diminished compared to mega plants in China and India, and Singapore has set ambitious goals for achieving net-zero emissions by 2050. As part of Shell’s ongoing evaluation of its portfolio, the company has reevaluated its energy and chemicals assets, considering market dynamics and capital discipline.
Sinopec’s potential interest in the acquisition of the Bukom refinery echoes China’s growing presence in the Singaporean energy landscape. Should Sinopec proceed with a successful bid, it would follow in the footsteps of PetroChina, which acquired a stake in Singapore Petroleum Company in 2009, further solidifying China’s engagement in Singapore’s energy sector.
As discussions progress and the potential acquisition unfolds, the outcome will be closely watched by industry observers, as it represents a significant shift in the landscape of refining and energy markets in the region.