Legislative report criticizes CPC for underperformance

By Su Yung-yao and Stacy Hsu  /  Staff reporter, with Staff writer

Tue, Dec 18, 2012 - Page 3

State-run oil refiner CPC Corp, Taiwan’s (CPC) performance is unsatisfactory and the firm has been outperformed by the US’ 50 largest oil companies and a Chinese state-owned oil corporation in terms of success and profit ratios in oil and gas exploration, a report released by the legislature’s Budget Center showed.

“Taiwan is a nation desperately lacking energy, where about 99 percent of its energy supplies are imported, which is why the country has made increasing energy self-sufficiency ratio one of its national priorities, the report said.

There is still plenty of room for improvement in CPC’s performance and the company has requested NT$5.61 billion (US$187 million) from the government for oil and gas exploration, including NT$3.1 billion for overseas exploration projects, for the next fiscal year, the report said.

The report described CPC’s business performance as “requiring desperate improvement” after conducting a comparison between the achievements of the state-run oil refiner and the US’ 50 largest oil companies and China’s biggest offshore energy explorer, China National Offshore Oil Corp (CNOOC).

CPC’s gas and oil acquisition cost is US$10.11 per barrel, while it only costs US$8.18 per barrel for US companies and about US$5 for CNOOC, the report showed.

CPC has underperformed in its overseas exploration projects due to the unstable political conditions in regions it has been exploring, despite having invested large amounts, the report said.

The report cited as an example the expropriation of state-run oil company’s exploration sites in Venezuela following the Venezuelan government’s policy to nationalize its mining industry.

An amendment to Ecuador’s oil law in recent year also effected CPC’s exploration rights in the area, the report said.

In addition, the company’s Libya branch was also forced to relocate to Taiwan after civil war broke out in the country last year, only five years after it won the bid to explore for oil in Murzuq, Libya, the report said.

“As of June this year, CPC has invested US$30.96 million into the Libyan block and is set to pay US$6 million in default compensation to terminate its exploration contract as Libya remains an unstable state,” the report said, adding the company might not be able to recover any of its investments.