Formosa Petrochemical Corp (台塑石化), the nation’s only publicly traded oil refiner, will slash spending by more than two-thirds as it awaits government approval for an expansion project.
Spending is likely to drop to NT$4 billion (US$128 million) next year from an estimated NT$14 billion this year, spokesman Lin Keh-yen (林克彥) told reporters in Taipei yesterday. Investment next year will focus on liquefied petroleum gas storage, he said.
“Capital spending is falling because there’s no new project,” Lin said. “We haven’t got approval for what we want to do.”
Formosa Petrochemical has sought approval to expand its refinery at Mailiao (麥寮) on the west coast, a project that may cost as much as NT$70 billion, Lin said. The company yesterday posted a 22 percent increase in second-quarter profit, beating analysts’ estimates, after raising prices.
The refiner plans to build a new crude distillation unit in Mailiao, Lin said. Formosa Petrochemical has three crude units with a combined capacity to process 540,000 barrels a day.
Refining margins in Singapore, Asia’s largest oil-trading center, may drop by US$2 to US$3 a barrel next year because of increasing capacity in India and China, Lin said. The company estimates Singapore refining margins at US$7 to US$8 a barrel this year.
Formosa Petrochemical’s margins are US$5 to US$7 a barrel higher than the Singapore average because the company produces more higher-value products — such as gasoline and diesel — than its competitors, he said.
The refiner expects to process an average of 456,000 barrels of crude a day this year, lower than last year’s 475,000, because of longer maintenance shutdowns, he said.
Profit from turning crude oil into fuels rose after Formosa Petrochemical boosted domestic gasoline and diesel prices in late March, the refiner’s first increase since November last year. That pushed motorists to larger rival CPC Corp, Taiwan (台灣中油) and resulted in Formosa exporting more fuels and benefiting from higher prices in the global market.
Net income climbed to NT$19.7 billion in the three months ended June 30, from NT$16.1 billion a year earlier. The number was derived by Bloomberg News from the first-half results the Mailiao-based refiner announced yesterday. That figure beat the mean estimate of NT$18.1 billion in a survey of six analysts.
The company is expanding LPG storage capacity and plans to use the fuel to replace part of the naphtha needed to produce ethylene, chairman Wang Yung-ching (王永慶) said yesterday.
“There are a lot of opportunities to use LPG in the summer,” Wang said.
Prices may be lower because of reduced demand for heating, he said.
Formosa Petrochemical and state-owned rival CPC Corp, Taiwan both have units that process naphtha, an oil product, into ethylene for making plastics and fibers.
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