Formosa Plastics in talks for China refinery venture

"We are renewing our efforts to get the Taiwan government to lift its ban."

Lee Chih-tsuen, Formosa Plastics Corp chairman

Formosa Plastics Group (台塑集團), the nation's biggest diversified industrial company, said it is in talks with the Chinese government for a refinery joint venture with a state-owned Chinese oil producer.

The group could cooperate with Beijing on refining and chemicals projects, chief executive officer William Wong (王文淵) said. Formosa Plastics could partner with China National Petroleum Corp (中國石油天然氣) or China Petrochemical Corp (中國石化), the nation's two biggest oil companies, to build a refinery in China, the Economic Daily reported yesterday.

Formosa Plastics will need to overcome political obstacles to complete projects that will enable it to supply Taiwanese plastics makers that have factories in China.

Companies also want to tap demand in China, the only major market where there is a shortage of petrochemicals, Formosa Plastics Corp (台塑) chairman Lee Chih-tsuen (李志村) said.

"We are renewing our efforts to get the Taiwan government to lift its ban" on building ethylene plants in China, Lee told reporters yesterday in Mailiao, where the group has its refinery. "We've been talking with the government for too long."

Taiwan bars the nation's businesses -- which have a total of US$150 billion invested in China -- from building ethylene plants in China on grounds that they may siphon away funds and hurt Taiwanese petrochemical makers.

Taipei restricts Chinese investment because of concern Chinese companies may grab business or gain advanced technology.

Formosa Plastics' chemical project in Ningbo, including a 1.2 million-tonne-a-year ethylene plant, could cost NT$150 billion (US$4.5 billion), Lee said. That estimate didn't include an oil refinery.

Approximately 15 years ago, Formosa Plastics founder Wang Yung-ching (王永慶) proposed to build a naphtha cracker -- a plant that uses naphtha, distilled from petroleum, to make ethylene -- in China.

Ethylene is the basic raw material for plastics and chemical fibers.

Formosa Plastics has factories in China that produce PVC, pipes and fabrics. It lacks a plant making ethylene, the chief building block for these products. The mainland is the biggest overseas market for Taiwan and Formosa Plastics.

Wong said yesterday that he had visited China last week, holding talks with officials who handle Taiwanese affairs at the State Council.