Formosa Petrochemical Corp (台塑石化), Taiwan’s only publicly traded oil refiner, plans to spend NT$26 billion (US$803 million) by the end of 2012 to upgrade its oil-processing plant to help meet regional fuel demand.
The refiner will enlarge the capacity of its existing three crude-oil processing units to a total of 593,000 barrels a day by 2012, chairman Wilfred Wang (王文潮) told reporters yesterday. The company plans to invest an additional NT$130 billion in new refining units in Mailiao (麥寮), Yunlin County, pending approval, including a crude-oil processing plant, he said.
Formosa Petrochemical exports more than half of its products and competes with refiners including China Petroleum & Chemical Corp (中國石化), whose parent said this month it had successfully completed a trial run of a 300,000 barrel-a-day plant. The investment will help boost competitiveness, Wang said.
TIMING
“The timing of the Formosa investment is good as it avoids the time when international capacity would rise a lot, including the second half of next year,” said Huang Lan-ying (黃嵐霙), a Taipei-based analyst at Capital Securities Corp (群益證券), who has a “neutral” rating on the stock.
Formosa Petrochemical currently has a processing capacity of 540,000 barrels a day, while rival CPC Corp, Taiwan (CPC, 台灣中油) can refine 720,000 barrels daily. A fourth crude unit will eventually be built, boosting Formosa’s daily capacity to 764,000 barrels, spokesman Lin Keh-yen (林克彥) said.
OTHER PROJECTS
Other planned projects include a delay coker and a hydrocracker, which converts heavy gas oils to gasoline and diesel, Wang said. A delay coker processes fuel oil into lighter products and petroleum coke.
The company’s shares fell 0.4 percent to NT$81.7 in Taipei trading yesterday. The stock has climbed 21 percent this year, lagging behind the 72 percent gain in the benchmark TAIEX.
The refiner’s nine-month profit dropped to NT$29 billion, or NT$3.04 a share, from NT$45.6 billion, or NT$4.78 a share, a year earlier, a stock exchange filing showed on Oct. 28, as the recession cut fuel demand.
The company expects its refining margin to improve next year from US$5 to US$6 a barrel this year, Lin said.
Formosa Petrochemical and unlisted CPC also have units that process naphtha, an oil product, into ethylene for making plastics and fibers. Growing competition from Asian and Middle Eastern producers will weigh on Formosa’s earnings from petrochemicals, Wang said. The global annual capacity of ethylene will increase by 9 million tonnes next year, he said.
Profit from petrochemicals may decline next year, after “an unexpectedly [good] market this year” because of stimulus packages by governments around the world, Lin said.
Formosa Petrochemical exports 55 percent to 60 percent of its refined products, Lin said.
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