Taiwan's Mailiao Petrochem Complex Completing $3.6 Billion Phase with a New $3.7 Billion Refinery Mooted on Nearby Site

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Researched by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). The fourth phase of the development of the industrial complex in Mailiao, Yunlin County, Taiwan, should be completed by the end of 2006, after an investment of $3.66 billion by the Formosa Plastics Group (FPG)(TAIWAN:1301)(Taipei). Wu Shin-jer, FPG vice president of management, told the Press in mid-December 2004 that pending environmental approval, the complex will become the world's largest petrochemical industrial park, with an estimated output value of $26 billion. FPG began operating the complex in 2001 and has invested $17 billion in the first three phases of development.

Formosa Petrochemical (FP) (TAIWAN:6505)(Taipei) has invested about $1.7 billion in the complex and is planning to increase refining capacity at its Mailiao plant to 550,000 bpd from 450,000 bpd the company's executive vice president Su Chi-yi said. In 2005, the company will further develop its ability to compete in the industrial diesel and fuel oil markets. "Because the demand for diesel in Asian countries is high, we hope to take advantage of price gaps by exporting diesel to neighboring countries," he said. Currently the only other refining capacity in Taiwan is the combined 770,000 bpd of the state-owned Chinese Petroleum Corporation's (CPC) (Taipei) three plants.

The Mailiao complex on the west coast of the island state covers 2,096 hectares of reclaimed land and is the site for a number of FPG's petrochemical and plastics subsidiaries. These include two naphtha cracking plants producing 1.22 million tons of ethylene a year. Mailiao also has its own power cogeneration pant and a harbor, which is Taiwan's deepest and is capable of handling vessels of 260,000 tons. The harbor's annual capacity has increased from 179,000 tons in 1997 to an estimated 41.2 million tons in 2004.

There is a range of high-tech joint ventures in the complex including Formosa Komatsu Silicon Corporation, which has a plant with a production capacity of 2.4 million eight-inch wafers per annum and Formosa Plasma Display with a plant capacity for the production of 120,000 plasma display screens per annum.

The importance of the Chinese market was stressed by FPG's Wayne Hsiao to the Taipei Times. He said that market demand in the petrochemicals industry in the next 10-15 years hinges on the Chinese market. The world's five largest petrochemical players were geared to develop in the Chinese market in the next five years. The Mailiao developers believe that they have advantages in the competition for Asian markets because of multi-functional industrial harbor for oil shipments, low-cost electricity, automated oil refining processes and market orientated strategies to produce refined oil of high quality at low cost. For related news item see February 24, 2004 - Taiwan Studying Two Industrial Petrochem Complexes Worth $48 Billion.

FPG is reported to be planning a new 600,000 bpd refinery on another 2,000-hectare site not far from Mailiao. Although not fully confirmed by the company, industry sources say that FPG will invest $3.7 billion in the project which when complete will become Asia's fourth largest refinery and give FPG the refining top spot in Taiwan.

A Formosa Petrochemical's source told the local Business Times that FPG might have extreme difficulties on obtaining a positive environmental impact assessment for a second refinery so close to an existing plant and some analysts observed that there would be a lot of new capacity coming online in the next two years. China is expected to add 86.5 million tons of refining capacity by 2008.

On the positive side for the project, analysts say that the expansion would ensure the integrated FPG secure upstream feedstock for its petrochemical operations in the long term despite some short-term pain in the light of additional capacity.

Playing it cool and close to the chest a FPG spokesman said, "That (the project) is just one of the many plans we are considering, but there are no solid plans so far."

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