Asean refineries shut units and cut output in fight for survival

Refineries across Southeast Asia are shutting units and cutting production as the disruption of Middle East crude supplies forces operators to prioritise survival over normal business conditions.

The pressure has intensified as Asia, which depends heavily on oil and gas moving through the Strait of Hormuz, continues to feel the aftershocks of the US-Israeli war with Iran and the resulting surge in crude prices.

The war and the halt in flows through the Strait of Hormuz have triggered shortages of feedstock and pushed up shipping and energy costs across the region.

That has not only tightened crude availability for Asian refiners, but has also raised broader concerns over inflation, transport costs and delays in deliveries of petroleum and petrochemical products.

Among the most badly affected are major refineries in Malaysia and Singapore, where operators have been forced to scale back sharply.

• In Malaysia, Pengerang Refining and Petrochemical, or PRefchem, has shut its 300,000-barrel-per-day crude unit and was preparing to halt more downstream units because of a lack of crude feedstock. The refinery had already been running at around 50% capacity before the full shutdown.

• In Singapore, Singapore Refining Co has cut runs at its Jurong Island refinery to around 60%, down from about 75% previously, while ExxonMobil has reduced crude runs at its Singapore site to roughly 50% or lower from more than 80%. The cutbacks reflect delivery delays and tightening crude supplies linked to the Middle East disruption.

The disruption is particularly severe because refiners in Southeast Asia rely heavily on Middle East crude. More than 70% of Prefchem’s seaborne crude imports last year came via the Strait of Hormuz, while much of the region’s refining system depends on the same route for regular feedstock flows.

As a result, refineries across the wider Asia-Pacific region have also started cutting runs or temporarily shutting units, with operators increasingly focused on commercial survival and cost control.

That has led to output reductions in several countries as companies try to conserve limited feedstock and contain mounting losses.

Thailand’s PTT, however, has continued operating normally, arguing that national energy security must come first even as other operators place greater emphasis on business management.

On April 11 the tanker Serifos, chartered by PTT, was carrying up to 2 million barrels of Saudi and UAE crude and had exited the Gulf during the ceasefire window.  The ship was headed to Malaysia and is expected to reach Thailand soon.

PTT’s decision to secure crude during a period of extreme market tightness would have come at a high cost, with buyers competing for limited supply as prices climbed sharply.

Crude touched about US$130 a barrel and PTT could face a short-term risk of losses worth around 500 million to 1 billion baht if global oil prices fall later.

Still, the broader picture is clear: Thailand is trying to protect domestic energy security even as refiners across the region retreat to preserve operations.