IPIC eyes big refinery stake

SINGAPORE — UAE, together with two new Taiwanese partners, are in talks to join a group of five shareholders seeking to acquire a major stake of Chinese Petroleum Corp.'s (CPC) proposed refinery and petrochemical complex in southwest Taiwan, which would change the size of stakes held by the current investors.

By (Reuters)

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Published: Sat 23 Jul 2005, 10:48 AM

Last updated: Thu 2 Apr 2015, 4:43 PM

A company spokeswoman said yesterday that the project would be further delayed "as investors renegotiate their stakes in the $11.6 billion project."

The 300,000 barrel-per-day (bpd) oil refining and 1.2 million tonne-per-year (tpy) naphtha cracker project at Taixi in Yunlin county, slated to replace an ageing complex in the south by 2014, had been stalled by land issues and protests from green groups.

An industry source said CPC was likely to give up a big chunk of its 43 per cent stake to the new investors as it had failed to secure the funds needed for the project from the government.

Other current shareholders are Oriental Union Chemical Co. and Chang Chun Group, with 20 per cent each; China Man-Made Fiber Corp. with 10 per cent, and Ho Tung Holding Co. with 5 per cent.

The UAE, represented by government-linked foreign investment arm International Petroleum Investment Co. (IPIC), would invest $2.4 billion, which would translate to a 20.7 per cent stake. Other new investors could include a local petrochemical producer, USI Far East Corporation, and a Taiwanese investment firm.

"CPC is still negotiating with IPIC, but there are no details on the new share split for the project," the spokeswoman said.

In June, government-owned CPC said it signed a memorandum of understanding with IPIC, and a final agreement could be concluded by the end of this year.

The industry source said the project, due for start-up in 2010, would be delayed by a year or more because of slow progress in the negotiations. But the spokeswoman declined to estimate how long the delay would be.

CPC aims to use the Taixi project to replace its 270,000-bpd refinery and 500,000-tpy No.5 cracker at Kaohsiung, while the other partners, who are largely petrochemical producers, want to secure cheap feedstock supplies.

The spokeswoman said the Taixi project would come on stream before the permanent shutdown of the Kaohsiung complex in southern Taiwan.

"We're still hopeful to extend the operational agreement for our No.5 cracker and refinery at Kaohsiung," the spokeswoman said. But she conceded that CPC faced an uphill task of convincing the local government to approve the extension beyond 2014.

CPC recently scrapped its plan to expand the capacity of Kaohsiung's No.5 cracker by 100,000 tpy in 2006 due to objections from the local government.

Aaron Yap, analyst at global investment banking services firm CLSA Asia-Pacific Markets said the link with UAE would help CPC, a major naphtha and crude oil importer, secure cheap feedstock and crude supplies from the Middle Eastern producer.

"It is not critical for CPC to hold a majority share in the project. CPC will get the funding it requires for the project from IPIC," he said.

CPC also needs to make this project work to keep up with the expansion plans of its rival, Formosa Petrochemical Corp. (FPCC), which is expanding its 450,000-bpd refinery at Mailiao to 540,000 bpd by 2007.

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