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About Commodity Insights
08 May 2024 | 08:45 UTC
Highlights
All of Shell's interest will be transferred to CAPGC
Chandra Asri owns majority stake, operates joint venture
CAPGC could cut costs following transaction: traders
Shell Singapore has confirmed the sale of its Energy and Chemicals Park in Singapore to CAPGC -- a joint venture between Chandra Asri Capital and Glencore Asian Holdings -- following a competitive bid process.
The transaction will transfer all of Shell's interest -- including physical assets and commercial contracts -- in the Shell Energy and Chemicals Park Singapore to CAPGC, which includes a 237,000 b/d refinery and a 1.1 million mt/year ethylene cracker on Pulau Bukom, as well as downstream chemical assets on Jurong Island.
The transaction is expected to be completed by the end of 2024, subject to regulatory approval, Shell said in a statement May 8.
The CAPGC joint venture is majority-owned and operated by Indonesia's Chandra Asri Group, while Glencore owns a minority stake through its respective subsidiary companies, both companies said in a joint statement.
"[Shell Energy and Chemicals Park Singapore] is a prime asset in Southeast Asia, uniquely and strategically located in Singapore, which is the preeminent energy trading hub in Asia," Glencore Singapore Managing Director Quek Chin Thean said.
"It plays a critical role in serving the essential and growing energy needs of consumers in Asia."
"This integration of our new energy and chemicals platform in Bukom and Jurong Island, Singapore with our established presence in Cilegon, Indonesia will drive expansion of product offerings and service enhancements, enabling us to capture new opportunities in growing Southeast Asian markets," Chandra Asri Group President Director and CEO Erwin Ciputra said.
Chandra Asri's complex in Cilegon can produce 900,000 mt/year of ethylene, 490,000 mt/year of propylene, 100,000 mt/year of butadiene, 400,000 mt/year of linear low density polyethylene, 336,000 mt/year of high density polyethylene and 590,000 mt/year of polypropylene.
"This agreement marks a significant step in Shell's ongoing efforts to high-grade our chemicals and products business and is a testament to our commitment to deliver more value with less emissions," Shell Downstream, Renewable and Energy Solutions Director Huibert Vigeveno said.
This comes after Shell Singapore said in December 2023 that it was prioritizing divesting the assets following a strategic review, in line with plans to reduce investment in chemicals amid a focus on lower-carbon products.
In June last year, Shell CEO Wael Sawan said that Singapore lacked an advantage in feedstock as well as energy or utility costs.
The Singapore complex is Shell's largest petrochemical production site in Asia and was its biggest ever downstream and petrochemical investment when completed in 2010. Shell's Singapore chemical assets, including its share of joint ventures, produce roughly 1.4 million mt/year of ethylene, or 18% of its current global capacity.
Shell added that Singapore remains an important regional hub for its marketing and trading business, and it looks forward to a continued partnership with the country as it progresses in its decarbonization efforts.
In March, Singapore's Economic Development Board signed an agreement with a consortium formed by Shell and ExxonMobil to study the feasibility of a cross-border carbon capture and storage project.
Trade sources that S&P Global Commodity Insights spoke to say they do not expect any major changes for now following the sale of Shell's Singapore assets, although some anticipate the new owners to cut costs.
"I think there would be no big changes this year as contractual volumes [are] being [commissioned] without change," a trader in Singapore said.
"Glencore doesn't have experience with petrochemicals, but it's good they're partnering with Chandra, as they [Chandra] have the experience. But it remains to be seen whether the plant can survive in [Singapore] because of higher carbon taxes, etc.," an analyst at a major trading company in Singapore said.
This comes as Singapore raised its carbon tax to S$25/mtCO2e ($18.75/mtCO2e) this year, and this will be further raised to S$45/tCO2e ($33.18/mtCO2e) in 2026 and 2027.
Another petrochemical trader said that although Chandra Asri has experience running a petrochemical complex, operating a refinery may be a new challenge for the company.
"I'm sure they will look at the cost centers, including feedstock, fixed costs and storage arrangements. A lot of changes will have to happen," a petrochemicals trader in Singapore said.
Meanwhile, Shell Singapore said that its staff at the Energy and Chemicals Park in the city-state will remain employed under the new ownership, ensuring continuity and contributing to ongoing operational reliability and safety.