State-owned oil refiner CPC Corp, Taiwan (CPC, 台灣中油) yesterday forecast up to NT$8 billion (US$262.24 million) of losses this month as international crude oil prices continue to plummet.
Based on CPC’s weighted oil price formula — composed of 70 percent Dubai crude and 30 percent Brent crude — its crude oil costs are a little more than US$30 per barrel this month, compared with its contract price of more than US$66 per barrel it bought three months ago, CPC president Lee Shun-chin (李順欽) said at a meeting of the Legislative Yuan’s Economics Committee in Taipei yesterday.
Dubai and Brent prices on Wednesday fell to about US$26 and US$31 per barrel respectively.
Lee said that the company’s main business of oil refining would likely incur more than NT$6 billion in losses this month, which is expected to widen by another NT$2 billion when combined with costs tied to the production of natural gas and inventory adjustments.
Facing such losses, CPC said it would strive to develop oil-related products to boost revenue.
The company also welcomes the establishment of an “oil price stabilization fund” as proposed by some economists, it said.
Similar to the energy price stabilization fund, which is designed to offset state utility Taiwan Power Co’s (Taipower, 台電) losses, the oil price fund would provide relief to CPC in times of need, it added.
“I believe this is a good thing ... if we put aside a cut of our profits over several years into a fund to compensate for current losses,” CPC chairman Jerry Ou (歐嘉瑞) said.
However, establishing an oil price fund would require legislative support as well as direction from the Ministry of Economic Affairs, Ou said.
“What we lack is a legal foundation to establish such a fund,” Lee said, referring to how Taipower’s energy fund was established by the Electricity Act (電業法).
CPC reported pretax profit of NT$35.22 billion for last year. In the first two months of this year, pretax profit reached NT$500 million, company data showed.
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