Formosa seeks US$2bn Texas expansion

GRAND SCALE::The chemical producer has requested approval from US regulators for plans for an ethane cracker unit and downstream derivatives, a company official said

Bloomberg

Sat, Nov 23, 2013 - Page 14

Formosa Plastics Group (台塑集團), Asia’s largest chemical producer, is seeking US permits for US$2 billion expansion of its Texas operations as cheaper natural gas prices make US production more competitive.

The Taiwanese company asked US federal and state environmental regulators to approve plans for an ethane cracker unit and downstream derivatives, Formosa Plastics vice chairman Susan Wang (王瑞華) said in an interview in Washington on Thursday.

She is visiting the US as part of a business delegation led by former vice president Vincent Siew (蕭萬長).

“Because of shale gas, the cost of making petrochemical and plastic-related products is becoming very competitive here in the United States,” Wang said. “It’s probably as cost effective as in the Middle East.”

Formosa Plastics’s proposed US investment comes as Taiwan seeks to diversify business and trade ties beyond China, which has become its largest trade partner.

Taiwan this year resumed trade talks with the US after a five-year halt and the US House Committee on Foreign Affairs this week agreed to introduce a bill to allow the sale of four frigates to Taiwan’s navy.

Siew, Far Eastern Group (遠東集團) chairman Douglas Hsu (徐旭東) and CX Technology Co (錩新) chairman Albert Ting (丁廣欽), joined Wang for the interview with Bloomberg News.

The investment is bigger than was previously planned by Formosa Plastics as of February last year, when it said it would spend US$1.7 billion to build two factories and a polyethylene plastics plant in Texas.

Formosa Plastics’s Wang said the Taipei-based company expects to receive the environmental permits for an expansion at its Point Comfort facility, about 200km southwest of Houston, sometime within the next year.

Construction can begin immediately thereafter, she said.

Environmental regulations in the US are “quite reasonable,” Wang said.

The hurdles in Texas are a shortage of skilled labor, due to the number of competing facilities that need workers, and the relatively high cost of shipping products by rail in the US, she said.

The diversified industrial company is one of the world’s largest chemicals producers, behind BASF SE and Saudi Basic Industries Corp, with the combined NT$2.18 trillion (US$74 billion) market capitalization of its four listed companies: Formosa Petrochemical Corp, Nan Ya Plastics Corp, Formosa Chemicals & Fibre Corp and Formosa Plastics Corp.

In the US, the group owns petrochemical plants, plastic processing facilities and natural gas wells. Last year, it applied to boost capacity in two Texas chemical plants.

Wang said Formosa Plastics is “at a crossroads” in determining whether to build or invest in an ethylene plant in China.

Taiwan last month lifted the ban on investing in Chinese ethylene plants, also known as “naphtha crackers” for the use of the petroleum distillate naphtha.

China has yet to ease its rules on ethylene investment across the Taiwan Strait.