State-owned CPC Corp, Taiwan (CPC, 台灣中油) said yesterday that the company’s purchase of crude oil from Saudi Arabian Oil Co (Saudi Aramco), also a state-owned oil company, was based on long-term contracts and would not be affected by Taiwan Power Co’s (Taipower, 台電) intention to bid on building the Ras Azzour Independent Water and Power Plant (IWPP) in Saudi Arabia.
CPC’s response came after the Chinese-language United Daily News reported yesterday that the Saudi government could halt its supply of crude oil to Taiwan if the nation’s bidding team, which consists of three state-owned companies including Taipower, Taiwan Water Corp (台灣自來水) and Taiwan Cogeneration Corp (台汽電), backed out of the bid.
A high-ranking economic official said yesterday that such a scenario was highly likely.
“I have never heard of such a thing,” Vice Minister of Economic Affairs Hsieh Fa-dah (謝發達), told the legislature’s Economics Committee yesterday.
“From a professional standpoint, such a thing is very unlikely to happen,” Hsieh said.
CPC said the two oil companies had maintained a good business relationship over the past few decades and had never encountered a cancelation of contracts.
Aside from the three state-owned companies, Taiwan’s bidding team also cooperated with two Saudi firms, Al Rajhi and Al Khorayef, to form a Taiwan-Saudi Arabia bidding team.
The state-owned Water and Electricity Company of Saudi Arabia announced on May 30 last year that the Taiwanese-Saudi bidding team was among the 11 international teams that were qualified to bid for the Ras Azzour IWPP project.
The Ministry of Economic Affairs said the total investment in Ras Azzour IWPP — a build, operate and own project — would be about US$4 billion and was expected to generate NT$500 billion (US$16.2 billion) in revenue in 20 years. Its return of equity (ROE) is expected to be 15 percent, the ministry said in its latest report.
“It is uncertain whether we [the Taiwanese-Saudi bidding team] will win the bid. But, if the ROE can be guaranteed at 15 percent, we should be able to generate profits,” Taipower chairman Edward Chen (陳貴明) said yesterday.
The Economics Committee said yesterday that Taiwan’s bidding team could continue preparations for the bid.
However, whether it could make its bid on June 2 — the deadline for the Ras Azzour project — would be a decision the new administration will have to make after it comes into office next Tuesday.
If Taiwan’s bidding team decided not to place a bid, the government would face a loss of NT$240 million for breaking the contract, Hsieh said.