Chinese Petroleum told to become more competitive

The state-run Chinese Petroleum Corp (中油) has been asked to overhaul its bloated structure amid growing challenges that have come as a result of recent liberalization measures, it was reported yesterday.

Chinese Petroleum, which had long been one of the country's most profitable state-run enterprises, saw its after-tax profits shrink 39 percent to NT$8.3 billion (US$247.8 million) last year, a Chinese-language newspaper said.

A special investigation group of Taiwan's highest ombudsman body, the Control Yuan, had completed a report suggesting that Chinese Petroleum would hardly stay aloft once the domestic market opened to imports later this year, the report said.

Chinese Petroleum has lost about 15 percent of its market share to Formosa Petrochemical Corp (台塑石化) since Formosa was allowed to compete with Chinese Petroleum since September last year.

"The Control Yuan has asked Chinese Petroleum to come up with plans to cut staff, to sustain the domestic market share, and to tap overseas markets," the paper said.

It said the combined petroleum refining capacity of the Chinese Petroleum and Formosa Petrochemical was expected to top 10.13 million liters at the end of this year, some 3.2 million liters higher than the projected domestic demand. Their combined diesel refining capacity would be a surplus of 8 million liters, the paper said.

Chinese Petroleum is already scheduled to slash the number of its employees from the 18,300 to 15,000 sometime within the next four years.

The government has pledged to open up the domestic oil market to imports last year as part of the government's bid to meet WTO requirements.

Taiwan has completed trade talks with 26 countries and signed accession agreements with all of them except Hong Kong, which reverted to China in 1997.

Formosa Petrochemical has instituted a number of high-profile marketing efforts over the past 12 months, for which Chinese Petroleum has quickly responded with its own marketing efforts.