Formosa to switch to LPG, kerosene to counter high naphtha costs

Prices of naphtha in Asia rose 56% in the year 2007, mainly propped by rising crude oil values and robust demand in the region. Despite capacity hikes by several regional players including South Korea's Samsung Total Petrochemicals Co., robust demand led to total imports in Asia at about 32 mln metric tons. Naphtha prices have been steadily rising through the year, ending the year at highs of almost US$880/MT. In this scenario, Taiwans' Formosa started production in May at a 1.2 mln tpa ethylene plant, boosting its annual ethylene capacity to 2.94 million tons. The new plant increased naphtha processing by about 3 million tons. Currently, Formosa consumes almost 900,000 tons of naphtha a month at three ethylene plants operated by the company. In a bid to reduce dependence on naphtha as a feedstock, Taiwanese oil refiner Formosa Petrochemical Corp. (FPC), plans to substitute some of the naphtha used as petrochemicals feedstock with liquefied petroleum gas and kerosene. The substitution will be economically viable because LPG prices and demand for the heating and cooking gas in Taiwan are anticipated to dip as the winter season reaches its fag end. However, constraints of LPG shipping and storage will lead to a maximum 15% substitution of naphtha with LPG. Another step taken by the company in this direction is reduce spot naphtha purchases is implementation of a capacity increase at the refinery to about 22% from the typical 18%
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