CPC Venture Shifts to Gas to Save $19 Billion Oil, Petrochemicals Project

A venture led by Taiwan’s CPC Corp. will switch to cleaner-burning natural gas from fuel oil to run a planned $19 billion refining and chemicals project in a final bid to win government approval after a four-year wait.

Stakeholders in Kuokuang Petrochemical Technology Co., including the Far Eastern Group and Fubon Financial Holding Co., have agreed to shut the company should the plant fail to get environmental approval by Nov. 17, Chen Bao-lang, chairman of the 43 percent CPC-owned venture, said in Taipei. Switching to imported gas from fuel oil produced at the refinery may increase costs by NT$7.5 billion ($236 million) a year, he said.

“Kuokuang is paying higher costs to protect the environment,” Chen, 67, a former CPC president, said in an interview at his office yesterday. “The company doesn’t want to be a heavy burden for the society.”

A government-appointed panel comprising academics and bureaucrats has raised concerns ranging from carbon dioxide emissions to protection of endangered dolphins and conservation of wetlands. Kuokuang has pledged to use gas for 60 percent of its needs to help halve emissions, and will buy the fuel from CPC, Chen said.

State-run CPC, Taiwan’s largest refiner, is counting on the project’s 300,000 barrel-a-day refinery and an ethylene plant to compete with rival Formosa Plastics Group. The Kuokuang venture will help CPC make up for lost capacity when one of its refineries in the south of the island is decommissioned.

“Without the Kuokuang project, CPC and its customers will be half dead,” J.H. Shieh, executive manager at Petrochemical Industry Association of Taiwan, said in Taipei by telephone. “Formosa Plastics would be the only dominant player in Taiwan’s petrochemical industry.”

Replacing Lost Capacity

Formosa Plastics Group’s unit Formosa Petrochemical Corp. and CPC are Taiwan’s sole refiners and producers of ethylene, a raw material used to make plastics and chemical fibers.

CPC has three refineries -- Kaohsiung, Talin and Taoyuan -- with a total daily capacity of 720,000 barrels of crude. It has three naphtha-processing plants with a combined annual capacity of 1.1 million metric tons of ethylene.

The Kuokuang project will make up for capacity from the Kaohsiung facility, including a 220,000 barrel-a-day refinery and a 500,000 ton-a-year ethylene plant, which CPC has pledged to shut by 2015 amid complaints from residents about pollution.

The venture was set up in January 2006 to build a refinery, a 1.2 million ton-a-year ethylene plant and factories to produce 20 varieties of chemical products, Chen said.

Kuokuang relocated the project in 2008 to Changhua county in western Taiwan, from Yunlin to the south, to address concerns about water usage.

The construction cost of the project may climb to NT$600 billion from NT$400.5 billion previously estimated because of increased raw-material prices, he said.

Kuokuang will install “fish aggregating devices” to prompt dolphins to circumvent the company’s plants and port, Chen said.

To contact the reporter on the story: Yu-huay Sun in Taipei ysun7@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.