Tue, Aug 02, 2011 - Page 12 News List

Formosa Petrochemical to lose NT$1.55bn a day after fire

FORCE MAJEURE:An Industrial Development Bureau official said poor maintenance caused by cost-cutting may be one reason for the fires that have plagued FPG

By Jason Tan  /  Staff Reporter

Police are confronted by protesters from Yunlin County’s Taisi, Baojhong, Dongshih and Lunbei Townships in front of a Formosa Plastics Group petrochemical complex in Mailiao Township yesterday.

Photo: CNA

Suspension of Formosa Petrochemical Corp’s (台塑石化) refinery plants in Mailiao (麥寮), Yunlin County, which came after a fire early on Saturday morning, will incur a loss of about NT$1.55 billion (US$53.8 million) a day, a company official said yesterday.

The company is also suspending export obligations on oil products from its Mailiao petrochemical complex indefinitely and declaring force majeure on “all grades” of products, according to an e-mailed statement sent yesterday to customers and obtained by Bloomberg News.

Formosa Petrochemical’s Mailiao refinery has three crude distillation units, each able to process 180,000 barrels a day. The company operates three naphtha-processing plants with a combined annual capacity of 2.935 million tonnes of ethylene, a raw material for plastics, chemicals and synthetic fibers.

The company was ordered by the government to shut its Mailiao facilities after a leak at a propylene-recovery unit on Saturday damaged some cables. Force Majeure is a legal clause that allows a company to cancel contractual obligations because of circumstances beyond its control.

“Yes, the [NT$1.55 billion] figure was more or less precise,” spokesman Lin Keh-yen (林克彥) said yesterday, adding that further calculations were being tallied and exact losses would be made public in a few days, as per a request by the Taiwan Stock Exchange.

Refinery revenue currently accounts for 70 percent of the company’s total sales, while 25 percent comes from other petrochemical products, Lin said.

Shares of Formosa Petrochemical tumbled by the 7 percent daily limit to NT$101 yesterday.

On Sunday night, the Cabinet called a three-hour meeting and later issued a four-point demand to its parent group, Formosa Plastics Group (FPG, 台塑集團), which has seen seven industrial safety mishaps in just 12 months. Saturday’s blaze was Formosa Petrochemical’s fourth fire in three months.

The Cabinet demanded all FPG’s equipment and facilities in the Mailiao petrochemical complex be suspended in stages within a year for safety inspections.

All Formosa Petrochemical’s production equipment and facilities related to the fires were suspended immediately, and the company’s containers using the same material as those involved in the latest fire were also suspended immediately pending inspection, the Cabinet said.

The safety inspections will have to be monitored and approved by domestic or international professional third parties, the Cabinet added.

In response, Lin said Formosa Petrochemical would have to speak to the authorities to fully understand the implications of the demands.

“We haven’t received formal documentation, so it is hard to comment for now,” he said.

Formosa Petrochemical has an oil inventory of more than 30 days, but Lin said that the company would suffer dire losses if the government imposed “indefinite suspension of operations” at the Mailiao complex.

“We would collapse [under such a circumstance],” Lin said.

Separately, the company said it welcomed advice from its rival, state-run oil refiner CPC Corp, Taiwan (台灣中油), on how to improve industrial safety.

“We will be totally open to working with CPC with regards to industrial safety,” Lin said, adding that the firm would have to work around some contract issues because some of the confidentiality deals it has signed with foreign technology companies forbid it to disclose information to third parties.

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