Taiwan plans to sell surplus diesel to China as the two sides prepare to relax trade barriers under rules that will be imposed after their entry next year to the WTO.
Pan Wen-yen (
"It's a sign of the ever-growing economic closeness of the two sides," said Gregory Lue, who manages NT$500 million (US$14.5 million) in stocks at Taiwan International Investment Management Co. "Sooner or later, both sides will agree to direct trade, transport, and postal links."
Entry to the WTO, expected by the beginning of next year, is likely to increase trade between China and Taiwan. Taiwan wants to use the framework of the global trade body to discuss with China direct transport and mail links that are now mainly routed via Hong Kong.
"China's developing fast and it's close, so we want to sell our surplus oil there," China Petroleum's Chen said. While Taiwan currently forbids the sale of oil to China, the diesel contract would become possible under the framework of the WTO, Chen said.
Taiwan's trade with China rose more than a quarter last year to US$32.4 billion. The island, which limits individual investments in China to US$50 million and forbids some investments such as infrastructure projects, said it would relax restrictions after it enters the WTO.
Selling diesel to China would help Taiwan's Chinese Petroleum to dispose of a surplus. That arose after Formosa Petrochemical Corp (台塑石油), part of Formosa Plastics Corp (台塑), Taiwan's largest plastics maker, started up an oil refinery last year to make diesel fuel and gasoline, ending China Petroleum's government sanctioned monopoly.
Production from the Formosa refinery exacerbated an oversupply as oil demand has slowed along with economic growth.
Taiwan's economy, which contracted 2.35 percent in the second quarter, is consuming less energy as companies cut production and ship fewer products.
By contrast, China's economy grew 7.8 percent in the second quarter, spurred by government spending on bridges and roads and the world's biggest consumer market.
The agreement with China National Petroleum isn't the first between Taiwan's Chinese Petroleum and a Chinese oil company.
China National Offshore Oil Co (
China Petroleum, which is awaiting government approval before it begins drilling for oil with China National, expects to receive the go-ahead before the end of the year, Chinese Petroleum Vice President Roy Chiu said.
"Both sides have already reached an agreement to test-drill for oil," Chiu said. "After we know the extent of the reserves there, we'll invest in a platform to start drilling."
Pan will also visit Daqing oil field, China's largest, in north-eastern China to study its oil production and exploration techniques, Chen said.
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