CPC to set up naphtha cracking plant in Saudi Arabia

Taipei, Sept. 13, 2004 (CENS)--The state-run Chinese Petroleum Corp. (CPC) will cooperate with the Saudi basic Industries Corp. (SABIC) to set up a joint-venture naphtha cracking plant in Saudi Arabia with an annual output of 1.2 million metric tons of ethylene, and some other middle- and downstream petrochemical plants.

CPC said the cooperation with SABIC is focused on establishing a vertically integrated petrochemical production facility there. Total investment in the joint venture will amount to NT$120 billion (US$3.52 billion at US$1:NT$34). CPC said it would vie for a 50% stake in the joint venture.

To that end, CPC President Chen Pao-lang has instructed Tsao Ming, executive officer of the company's petrochemical business division, to carry out the joint-venture project with the assistance of planning department.

Chen noted CPC is a state-run enterprise and remains prohibited from investing in mainland China. Accordingly, the Middle East will be the company's optimal choice for overseas investment. Possible cooperative partners in the Middle East include SABIC and Qatar government.

CPC said it has close relations with Saudi Arabia and Qater governments. As Saudi Arabia and Qater have abundant LNG (liquefied natural gas), CPC believes investing in naphtha cracking facilities there will enjoy quick investment return.

In 1999, CPC cooperated with Qatar government, Lee Chang Yung Chemical Corp. and IOL Co. of Canada to form a joint venture named Qatar Fuel Additives Co. (QAFAC) in Qatar for the production of methyl alcohol. The joint venture has set up a plant with an annual production capacity of 800,000 metric tons of methyl alcohol.

Thanks to a surge in the price of methyl alcohol, QAFAC targets to score US$60 million in after-tax earnings this year.

A CPC executive said the establishment of the joint-venture naphtha cracking plant with SABIC will help speed up the establishment of the company's logistics center. The basic petrochemical materials will be initially shipped back to Taiwan and stored at CPC's Chiencheng, Kaohsiung oil storage tank.

In addition to the joint-venture plant with SABIC, CPC also plans to set up a joint-venture naphtha cracking plant in Qater in cooperation with the Qater government.