The nation’s two oil refiners are considering the possibility of cooperating in the production of petrochemical products in a bid to overcome the tough economic times they are facing, a local newspaper reported yesterday.
The Chinese-language Economic Daily News said Formosa Petrochemical Corp (FPCC, 台塑石化) and state-run CPC Corp, Taiwan (CPC, 台灣中油) are in talks to forge a supply alliance, which will lift FPCC’s utilization rate, while helping CPC meet its customers’ needs.
FPCC president Tsao Mihn (曹明) said the utilization rate of its three olefin plants was only 86 percent and that if it wanted to raise this figure to more than 95 percent, it needed to find new customers.
The company has not ruled out the possibility of selling base petrochemicals to CPC to satisfy the needs of more middle and downstream customers, the newspaper said, citing Tsao.
Meanwhile, Vincent Lin (林金柱), deputy executive manager of CPC’s petrochemical business division, said the raw materials produced by CPC were insufficient to meet the demands of its downstream customers, making it reliant on imports to make up the shortfall.
HELPING EACH OTHER
If FPCC has a surfeit of base petrochemicals such as propylene, ethylene and butadiene, then there is a chance it could sell these materials to CPC, the report said.
The best way for the two refiners to form a supply alliance would be for FPCC to sell its products to CPC so that CPC could then supply downstream makers via its pipelines, it said.
Moreover, this potential cooperation would be beneficial to the operations of downstream manufacturers, giving them stable supplies of raw materials and prices, it said.
Tsao, who formerly served as vice president of CPC, joined FPCC in October. He said that FPCC has in the past transported its base petrochemicals via tanker truck, which is a low-volume, high-cost transport method compared with CPC’s pipeline system.
Currently, the majority of the base petrochemicals produced by FPCC are supplied to companies under its parent group, Formosa Plastics Group (台塑集團), while the mid and downstream customers of CPC include 17 petrochemical manufacturers.
The possibility of a deal underscores the closer ties between the two major oil companies over the past few months since former senior CPC executives were hired by FPCC in a bid to polish its poor industrial safety image after a spate of fires earlier this year.
Meanwhile, CPC’s third naphtha cracker is set to be decommissioned next April, while a new cracker will not be able to make up for the deficit until it opens in 2013, which means that downstream petrochemical plants will face supply shortages during a six-month period next year.
CPC officials have expressed hope that cooperation with FPCC could solve this supply shortage.