Rising construction costs halt expansion of CPC naphtha cracker in Kaohsiung

11-Apr-05

Chinese Petroleum Corp had planned to invest US$61 million (NT$1.93 billion) towards capacity expansion, starting next month. The expansion was aimed to boost its ethylene production from 500,000 tpa to 600,000 tpa. However, sky rocketing costs of construction have put on hold expansion plans of the Fifth Naphtha Cracker plant in Kaohsiung. With steel prices still rising, CPC estimates the project cost to rise to NT$2.43 billion. This would make it difficult for CPC to break even by 2015, the year in which the company promised Kaohsiung residents it would relocate the plant to dispel their environmental concerns. Instead the petrochem major has decided to start to tear down seven factories at the plant this year in accordance with its relocation schedule, raising concerns over the possibility of supply shortages among downstream petrochemical companies. However, CPC remains committed to moving its Third Naphtha Cracker plant to Kaohsiung County's Linyuan township in the next four years. The dismantling of the factories at the Fifth Naphtha Cracker will cut CPC's oil output from 270,000 bpd to 220,000 bpd, to be compensated by setting up a petrochemical company to be located in Yunlin County, and represents an investment of NT$370 billion. The first stage of construction is scheduled to be completed in 2012.