Gas stations okayed to change suppliers

Foreign oil companies have been given around three months to woo filling stations to break their old contracts and switch suppliers without outlets being penalized, the government said yesterday.

The Cabinet-level Fair Trade Commission (公平會) decided yesterday that to allow new companies a fair chance at securing a share of the domestic oil market buyers must be allowed some freedom from current supply contracts.

Filling stations will be given 55 working days from Dec. 26, when the Ministry of Economic Affairs formally opened the market, to break contracts and switch to new suppliers with no penalty, said Cheng Yu (鄭優), vice chairman of the commission.

"We figured that as all the procedures associated with entering the domestic oil market would take around three months -- or until the end of March, not including weekends and vacations -- that buyers should be given some contractual flexibility within this period," said Cheng.

"Otherwise the market couldn't really be called liberalized," he said.

Chinese Petroleum Corp (中油) and Formosa Petrochemical Corp (台塑石化) are currently the only suppliers of oil products in Taiwan. However with the lifting of the bans on foreign oil companies selling directly into the market their grip on the market is expected to fall significantly over the next few years.

A Chinese Petroleum spokesman said that the company already has a two-month grace period written into service station contracts and the additional time wouldn't greatly impact its operations.

But Cheng said that both Chinese Petroleum and Formosa were eager to keep the grace period to a minimum.

"While the Chinese Petroleum and Formosa Petrochemical wanted to keep the grace period to two months, some of the buyers wanted six months and even a year," said Deng.

But as part of any contract gas stations sign, new suppliers must include provisions that allow buyers to break their deals mid-term without penalty to ensure complete fairness within the market, according to the commission report.

It was decided in discussions between the Energy Commission, Environmental Protection Agency and the industry that a grace period of two months written into contracts allow enough time for new companies to apply, seek buyers and sell oil in the market, Cheng said. One of the biggest foreign competitors will be ExxonMobil, who has partnered with Pan Overseas Corp (匯僑實業) to supply gasoline to some 200 service stations this year.