State-owned oil refiner CPC Corp, Taiwan’s (CPC, 台灣中油) accumulated losses reached NT$75.1 billion (US$2.53 billion) as of the end of last month, mainly due to its absorption of international oil and gas price hikes to avoid passing the higher costs to local consumers, it said yesterday.
The losses represented more than 50 percent of the company’s paid-in capital of NT$130.1 billion and expanded from losses of NT$64.5 billion a month earlier, CPC said in a statement.
The company’s board is to meet today to discuss ways to improve its financial condition, it added.
Photo: Huang Mei-chu, Taipei Times
Global natural gas prices have skyrocketed following Russia’s invasion of Ukraine on Feb. 24, CPC said, adding that its obligation to absorb part of price hikes has been the main reason behind its increasing losses.
In the first quarter of this year, CPC spent NT$51.7 billion to absorb gas price hikes by providing subsidies, which was equivalent to about 50 percent of the NT$104.8 billion it spent for the same purpose for the whole of last year.
The company has been increasing natural gas purchases to comply with the government’s policy of reducing coal use while increasing the share of natural gas.
About 80 percent of its natural gas purchases have been used for electricity generation.
The total volume of purchases this year is expected to surpass 20 million tonnes, which could add pressure to the company’s bottom line, CPC said.
The company has been buying natural gas at a price of more than NT$20 per cubic meter, but selling it to power plants at only NT$16.75 per cubic meter, meaning it has incurred greater losses as gas consumption continues to grow in Taiwan, it said.
CPC expressed the hope that it would be allowed to raise the natural gas price to cushion the financial impact.
The company added that while international oil prices have trended lower in the past few weeks amid worries over the global economy, it would not benefit because it takes about nine weeks to refine the oil into gasoline and ship it to gas stations.
The company is still shouldering the burden from earlier high crude prices when it sold products last month and this month, CPC said.
Analysts have estimated that if the company raises its natural gas prices for electricity production, it could cut its losses by NT$4 billion.
As CPC must subsidize local natural gas sales, it incurred a loss of NT$43.4 billion last year.
Its losses from natural gas and gasoline sales totaled NT$120 billion last year, it said.
The government requires CPC to keep gasoline and natural gas prices lower than neighboring markets to decrease the financial burden on consumers.
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