CPC, FPG vie for oil refining business from mainland oil companies

Taipei, Dec. 3, 2003 (CENS)--To boost production equipment utilization rate, the state-run Chinese Petroleum Corp. (CPC) and Formosa Petrochemical Corp. (FPCC) under the Formosa Plastics Group are vying for oil refining business from mainland China's oil companies.

FPCC said it has recently signed a contract with mainland's China Petroleum and Chemical Corp. (SINOPEC) for refining two million barrels of oil for the mainland company.

In light of FPCC's move, CPC has dispatched Huang Ching-chi, deputy executive officer of CPC's refining business unit, to the mainland to persuade SINOPEC and China National Petroleum Corp. (NPC) to let his company refine oil on a regular basis.

CPC said it launched the contract oil refining operations earlier than FPCC. The state-run oil company said it has struck two contracts with SINOPEC to refine 300,000 barrels and 600,000 barrels each. Recently the company further signed a contract with Japan's Marubeni Corp. for refining 600,000 barrels of oil per quarter.

Although it has signed contracts with SINOPEC and Marubeni, CPC is still seeking more opportunities for contract oil refining to further raise its production equipment utilization rate.

It is said FPCC has yet to refine oil for SINOPEC because of the problem in the timing and price involved. An FPCC executive said his company would complete refining two million barrels of oil for SINOPEC by the end of February next year.

FPCC said it would concentrate on oil exports rather than seek oil refining opportunities because the former secures higher profits than the latter.

In addition to oil refining business, FPCC boasted it has successfully developed export sales, and even SINOPEC, mainland's largest oil company, has purchased its oil products.

According to statistics compiled by the Directorate General of Customs under the Ministry of Finance, FPCC exported 320,000 kiloliters and 400,000 kiloliters of diesel oil in October and November, respectively. Normally, FPCC is capable of exporting 400,000 kiloliters of diesel oil per month if it doesn't undertake repair and maintenance work like done in October. At present, the company is capable of exporting over 40% of its production.

An FPCC executive said SINOPECs' procurement of its oil products was mainly fueled by the rapid growth of mainland's automobile market, as drivers in the mainland rely heavily on high-quality oil, such as No.93 unleaded oil.

FPCC said it would boost its oil export ratio to over 85% next year, in addition to enhancing contract oil refining business.

The company anticipated it would score NT$230 billion (US$6.76 billion at US$1:NT$34) in total revenue this year, up 30% from NT$169 billion (US$4.97 billion) registered last year. The projected annual revenue will help the company create after-tax earnings of between NT$18 billion (US$529.41 million) and NT$20 billion (US$588.23 million) this year.