Kuokuang Petrochemical Project May Be Relocated Abroad

Taipei, April 7, 2011 (CENS)--The Kuokuang petrochemical project may be relocated to some Asian country, should it fail to pass the environmental impact assessment, revealed Shih Yen-shiang, economics minister, yesterday (April 6).

State-run CPC Taiwan, mastermind behind the project, has selected a number of sites for the relocation of the project, including mainland China, Vietnam, Indonesia, and Malaysia, with Malaysia being the frontrunner on the list, according to the Chinese-language Economic Daily News (EDN), sister publication of Taiwan Economic News (TEN).

During a meeting with the press, Shih noted relocation of the project abroad is an inevitable consideration, underscoring a major change in the government's policy towards the mega project.

The minister noted that the project has been scaled down and relocation abroad is an option, should it still fail to win the approval for its environmental impact assessment or the approval be attached with stringent conditions, unacceptable to private-sector shareholders.

The project has been stalled for years due to environmental concern and its fate will be finalized in April or May, when the environmental assessment meeting under the Environmental Protection Administration will decide whether to endorse its environmental impact assessment.

Shih revealed that the project will be relocated to Asia, when necessary, due to the consideration of supply safety, transportation cost, and proximity to markets. “Mainland China and the Middle East are not on the list of priority choices,” said Shih.

Insiders pointed out that as a state enterprise, CPC Taiwan cannot make massive investment in mainland China, and Indonesia suffers from water shortage and unstable politics. As a result, Malaysia has emerged as the primary candidate site for the relocation.

The concept of overseas relocation, said Shih, has already existed for the island's fifth naphtha cracking complex in Kaohsiung, which will be decommissioned in 2015. Plus the uncertain fate of the Kuokuang project, the government has realized that the domestic petrochemical industry must embrace a two-pronged policy for its future development, “seeking quality improvement domestically and volume expansion abroad,” according to Shih.

In line with the two-pronged policy, CPC Taiwan recently signed a contract with Kaohsiung harbor bureau for building a petrochemical logistics center on a reclaimed land spanning 200 hectares in space. The land-reclamation work for the project is scheduled for completion in 2016 before the launch of the facility in 2019.

Shih admitted the failure of Kuokuang project will slash the amount of major domestic investment projects, as it involves NT$600 billion of investment in the first stage and NT$800 billion in the second stage. It will also affect CPC Taiwan in its competition with Formosa Plastics Group, making the latter the dominant player in the domestic market.