FPCC Adopts LPG to Reduce Costs and Boost Earnings

Taipei, March 10, 2011 (CENS)--As the selling price for naphtha has hit a 29-month high, Formosa Petrochemical Corp. (FPCC), one of Taiwan's leading oil refiners, has resolved to use liquefied petroleum gas (LPG) to partly replace naphtha, in an attempt to reduce material costs and boost earnings.

Recently, international crude oil price has broken the US$100 per barrel mark, leading to a drastic price spike in naphtha, gasoline and diesel oil. Of them, the naphtha is quoted at US$991 per ton, almost reaching the US$1,000 mark.

Faced with the price hike on raw materials, FPCC has decided to use LPG as materials for the production of such key petrochemical products as ethylene. The move will also benefit FPCC's affiliated firms including Formosa Plastics Corp., Nan Ya Plastics Corp. and Formosa Chemical & Fibre Corp., which heavily rely on ethylene in production.

At present, LPG is quoted US$84 per ton lower than naphtha. If FPCC uses LPG to partly replace naphtha, it will be able to increase gross profitd by US$21 million per month in producing ethylene.

FPCC's earnings mainly come from the production of naphtha, gasoline and diesel oil. The price hike on naphtha will help FPCC score handsome earnings as it currently exports five million barrels of diesel oil per month.

Institutional investors believed FPCC can recognize NT$3 billion in gross profits from sales of diesel oil per month. Besides, it can grab NT$600 billion in gross earnings from sales of gasoline as its monthly export volume of gasoline reaches two million barrels, per month.