CPC's deal with Chad to go ahead

Aug 07, 2006 02:00 AM

by Amber Chung

State-run Chinese Petroleum Corp's (CPC) oil exploration projects in Chad remain intact after Taiwan severed diplomatic ties with the African country, the company said.
"Oil exploration is a commercial activity and will not be affected by this political incident," Chen Bao-lang, president of the nation's largest oil refiner, said. CPC will be able to handle the situation as it has abundant experience doing oil exploration in countries with which Taiwan has no diplomatic relations, Chen said.

The outlook for the Chad investment appears positive, as an adjacent oil field explored by a Canadian rival has reserves equivalent to up to 200 mm barrels of crude oil and liquid natural gas, according to the executive.
Taiwan announced it had cut diplomatic ties with Chad, after the African nation recognized China. The nation's diplomatic setback sparked concerns over the possible impact on CPC's investments in Chad. The company signed a $ 17 mm four-year contract for the exclusive rights to explore three oil fields covering 26,000 sq km, or two-thirds the area of Taiwan, in the country in January.

The entire project in Chad could cost up to $ 30 mm. CPC has earmarked $ 4.95 mm for the project this year, the oil refiner said.
CPC has engaged in foreign oil exploration in recent years. The company said in May that it planned to pour NT$ 8.3 bn ($ 252.5 mm) into overseas oil exploration over the next five years to boost supplies in the face of soaring crude prices. The refiner is also exploring fields in Ecuador, Indonesia, Venezuela and the US, Chen said. Oil fields in Australia will start mass production within the next two years, he added.

The company estimates that the results of its overseas oil exploration efforts could contribute around NT$ 30 bn in profits in the future. Skyrocketing crude oil prices have dragged CPC into the red. The company reported a deficit of NT$ 22.4 bn for the first seven months of this year. Chen, however, remained tight-lipped about any possible mark-ups in gasoline prices to address the losses.
Gas prices have been raised three times this year. CPC has proposed adopting a floating pricing mechanism to reflect fluctuating crude oil costs but has not received a positive response from the ministry. The company may continue to promote the system to incoming minister of economic affairs Steve Chen, in the hope of curbing losses, he said.

Source: The Taipei Times
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