Thu, Aug 03, 2006 - Page 12 News List

National Petroleum and Formosa in cooperation talks

By Jessie Ho  /  STAFF REPORTER

National Petroleum Corp (全國加油站), a major gas station operator, said that it was in talks with its supplier, Formosa Petrochemical Corp, (台塑石化) to strengthen cooperation, a move that could consolidate the nation's retail gasoline market.

"We do not rule out the possibility of a merger with Formosa Petrochemical's gas station chain before the end of the year," Lai Cheng-shih (賴正時), chairman of National Petroleum, told reporters on Tuesday when launching its co-branded credit card.

With oil prices hovering at high levels, National Petroleum hoped to lower its costs by integrating its upstream and downstream operations, Lai said.

"We welcome any form of cooperation ? but we will not relinquish our leadership," he said.

National Petroleum is Formosa Petrochemical's largest client and operates 96 gas stations with daily sales of more than 2,300 kiloliters, according to the company Web site.

Formosa Petrochemical, the nation's only private oil refiner, commands nearly 30 percent of the market and runs 156 outlets through its Formosa Life Station (台亞石油) chain. It acquired a 6.47 percent stake in National Petroleum through stock purchases in April.

Lai said National Petroleum was planning to raise NT$600 million (US$18.26 million) by issuing convertible bonds to pave the way for the alliance.

A company official at Formosa Petrochemical, however, said yesterday that cooperation in marketing was more likely than a merger.

"When considering a merger with other companies, we [the Formosa Group (台塑集團)] usually prefer to take control," the official said on condition of anonymity.

Formosa Petrochemical also has no plan to expand in the domestic market at the current time due to low margins, he said.

To compete with state-run Chinese Petroleum Corp (CPC, 中油), Formosa Petrochemical pegs its wholesale prices of gasoline and diesel at the same level as CPC.

While CPC, which sells almost all of its oil products to the local market, reported a loss of NT$19.6 billion for the first half of the year, Formosa Petrochemical earned around NT$23 billion during the same period by selling 70 percent of its product overseas.

As National Petroleum is good at marketing, the two parties may establish a strategic alliance in this area, such as allowing members of both gas station chains to enjoy the same bonus and benefits, he said.

National Petroleum shares rose NT$0.1 to close at NT$23.9 yesterday; Formosa Petrochemical shares ended at NT$57.2, up NT$0.6.

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