Wed, Oct 01, 2003 - Page 11 News List

Chinese Petroleum won't cut prices for Taipower

BLOOMBERG

Chinese Petroleum Corp (中油) said it can't afford to cut prices of natural gas it sells to Taiwan Power Co (Taipower, 台電), which is pushing to get its power bill cut.

Chinese Petroleum owns the nation's only liquefied natural gas receiving terminal. It hasn't much room to lower prices because it's bound to 20-year contracts signed in 1990 with Indonesia and Malaysia, Asia's only gas suppliers at that time, said Frances Fu, a Chinese Petroleum public relations executive.

"Taipower, as a state-owned enterprise, has to reflect the costs to the public though it knows about our existing contracts with Indonesia and Malaysia," Fu said. "There's not much room for profit for us."

Taipower may consider calling for public bids from suppliers of natural gas, said Huang Huei-yu (黃惠予), the head of the company's public affairs department.

The utility, which buys about NT$35 billion (US$1 billion) of natural gas annually, will require government approval to seek alternative suppliers, she said.

Natural gas accounts for almost a fifth of Taipower's generation requirements, Huang said.

Taipower, which bought about 4 billion m2 of natural gas last year, said it pays about NT$8.60 per cubic meter for gas from Chinese Petroleum. That compares with the estimated NT$5.69 a cubic meter Taipower will pay under a new Qatari contract scheduled to start in 2008.

Taipower in July selected a Qatari project that includes Exxon Mobil Corp to supply US$8.7 billion of liquefied natural gas at a price about a third lower than existing contracts.

Chinese Petroleum will supply 1.7 million tonnes of gas annually from Qatar's Ras Laffan venture for 25 years to Taipower's Tatan power unit.

Chinese Petroleum may build a gas receiving terminal in Taichung as part of the Tatan supply project, Fu said.

Chinese Petroleum last year imported 5.33 million tonnes of natural gas, which is also sold to household users, of which Indonesia supplied 3.47 million metric tonnes, Fu said.

This year, Chinese Petroleum projects to buy 5.5 million metric tonnes of the fuel.

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