Expansion of Kaohsiung naphtha cracker halted

Chinese Petroleum Corp (CPC, 中油) has decided to suspend the expansion of its Fifth Naphtha Cracker plant in Kaohsiung because of skyrocketing construction costs, the state-run company's vice president Lin Chien-hsiung (林正雄) said yesterday.

The company previously planned to invest NT$1.93 billion (US$61 million) to expand the plant, starting next month, to boost its ethylene production from 500,000 tonnes to 600,000 tonnes per year.

But with steel prices still rising, CPC estimates that the project will now cost NT$2.43 billion. This would make it difficult for CPC to break even by 2015, the year in which the company promised Kaohsiung residents it would relocate the plant to allay their environmental concerns.

"We decided not to expand the plant and will start to tear down seven factories at the plant this year in accordance with our relocation schedule," Lin said.

The announcement that CPC will be dismantling factories raised concern over the possibility of supply shortages among downstream petrochemical companies, but Lin said that CPC will move its Third Naphtha Cracker plant to Kaohsiung County's Linyuan township in the next four years.

The dismantlement of the factories at the Fifth Naphtha Cracker will cut CPC's oil output from 270,000 barrels per day to 220,000 barrels per day, but Lin said that the company is compensating by setting up a petrochemical company with a capacity of 450,000 barrels per day.

The new company will be located in Yunlin County, and represents an investment of NT$370 billion. The first stage of construction is expected to be completed in 2012.