CPC Corp, Taiwan (台灣中油) chairman Tai Chein (戴謙) yesterday confirmed that the company has inked an agreement with the Indonesian government to build a naphtha cracker in the country, marking a milestone in the government’s New Southbound Policy.
While the investment was reported as early as last week during Indonesia’s infrastructure forum alongside the IMF and the World Bank annual meetings in Bali, Tai said that CPC had kept silent to prevent Chinese interference.
The state-run refiner has inked a memorandum of understanding with PT Pertamina, its Indonesian counterpart, to invest NT$200 billion (US$6.47 billion) in the project, Tai said.
CPC and Pertamina would each take a 45 percent stake in the plant, with the remaining 10 percent earmarked for Taiwanese and foreign petrochemical investors, Tai said.
CPC has begun feasibility studies and assessing five sites proposed by the Indonesian government for the project, Tai said, adding that its investment plans would begin to take shape in the middle of next year.
The project is expected to produce nearly 1 million tonnes of ethylene annually and meet the demands of Indonesia’s population of 261 million.
The project would also benefit from Indonesia’s incentive package for petrochemical investments, which waives all corporate income taxes for the first 20 years, followed by a 50 percent tax cut the next two years, CPC said.
Meanwhile, Tai said that CPC’s decision to freeze fuel prices until the end of this year was not politically motivated.
The company’s mission is to ensure the people’s livelihood, support industry and maintain the nation’s strategic fuel reserves, not to make a profit, he said.
The company, which recorded NT$45.6 billion in pre-tax profits between January and last month, is fully prepared to absorb impacts stemming from its price freeze, given rising global oil prices, Tai said.
“CPC would be able to meet the government’s minimum annual earnings requirement of NT$12 billion,” Tai said during a radio interview yesterday. “Estimates show that the company can absorb anticipated losses in the final quarter.”
The price freeze was decided by the company, and no instructions were given by the Executive Yuan, Tai said, adding that lawmakers would decide if CPC could extend the price freeze through next year.
Minister of Economic Affairs Shen Jong-chin (沈榮津) during a question-and-answer session at the Legislative Yuan yesterday said that the price freeze could lead to NT$8 billion in losses for CPC in the final quarter.
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