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Downstream Operations

Downstream Operations





CPC aims to ensure stability in supply by both purchasing crude oil under long-term contracts and by utilizing vendors dispersed around the world. In 2016 its crude oil imports amounted to 132.65 million barrels, among which imports from the Middle East accounted for 50.47%, Africa 25.75%, Southeast Asia 3.56% and the remaining 20.22% from other locations. In recent years, increasingly stringent domestic environmental standards have mandated that lowsulfur crude makes up a certain percentage of total imports.


To facilitate its vitally-important handling of oil imports, the company has set up large tanker offloading pontoons just offshore its refineries – at Shalun near Taoyuan in the north and Dalinpu near Kaohsiung in the south. In addition, purpose-built oil tanker wharves have been constructed at Kaohsiung, Taichung and Shen’ao ports.



CPC’s refineries at Taoyuan and Dalin currently have a combined daily refining capacity of 500,000 barrels. In order to comply with a commitment made to the government to relocate the Kaohsiung complex – which had a daily refining capacity of 200,000 barrels, and an annual capacity of 50,000 tons for refining, chemicals, and storage – it was shut down at the end of 2015. In order to stabilize the supply of domestic energy, Its operations are being gradually transferred to the Dalin Refinery – which is undergoing capacity expansion to meet rising internal demand for refined products – so that stability of supply is not compromised. The job of filling the petrochemical raw material supply gap consequent to the Kaohsiung refinery closure has been transferred to a naptha cracker in CPC’s Linyuan complex.


The Dalin Refinery was originally established as a part of the Kaohsiung plant but in 1996 was hived off as an independent operation. Its daily capacity is 300,000 barrels, with both incoming crude and outgoing refined products handled by four offshore mooring and unloading buoys and dedicated port facilities.


The Taoyuan Refinery started up in 1976. Following renovations and the addition of a second distillation plant, it now has a daily refining capacity of 200,000 barrels. In 2016 CPC’s total output of refined petroleum products amounted to (in million kiloliters): gasoline 10.624; aviation fuel 1.851; diesel 5.819; fuel oil 3.664. In metric tons, liquefied petroleum gas (LPG) totaled 347,000.



In response to Taiwan’s ever more demanding environmental and quality of life standards, coupled with the government’s increasingly strict enforcement of the environmental protection regulations enacted to improve air quality and reduce haze, CPC has in recent years moved to both improve the quality of its products and raise their production value. Refining and production facilities have undergone design and process upgrades to enable the supply of higher-grade products – such as desulfurized gasoline and diesel – to Taiwan’s internal market. At the same time, those upgrades have raised the level of production efficiency across the whole range of refining processes.


Additionally, CPC facilities are in compliance with the Environmental Protection Administration’s (EPA) 2011 directive setting parameters for the sulfur and aromatics content of gasoline and diesel fuel. The EPA measure required that diesel fuel’s sulfur content be reduced to 10ppmw or less, its aromatic hydrocarbon content to 35vol% or less and that the olefin content in gasoline be 18vol% or less. The aforementioned facilities consist of a 30,000-barrel-per-day cracked gasoline hydrodesulfurization plant at the Taoyuan Refinery, completed in 2008; a 20,000-barrelper- day cracked gasoline hydro-desulfurization plant at the Dalin Refinery, completed in 2009; and a similar 40,000-barrel-per-day plant for diesel at the Dalin Refinery, completed in 2010. The 18,000-barrel-per-day cracked gasoline quality improvement plant at the Kaohsiung Refinery was moved to the Dalin site in 2011.


In 2006 CPC began construction of an 80,000-barrel-per-day residue fluid catalytic cracking (RFCC) facility at the Dalin refinery to upgrade its refining infrastructure and heavy oil recovery rate. That plant began mass production in 2013. At the same location, construction of a 14,000-barrel-per-day alkylation plant – designed to boost gasoline quality and to take advantage of the plentiful supply of crude butane feedstock from the refinery’s heavy fuel oil conversion facility – began in 2008 and was completed in 2013 with the onset of mass production. With the aim of eliminating acidic process fumes and reducing harmful emissions, CPC has built a plant that began producing a daily output of 250 tons of highgrade sulfur in mid-2014.


In March of this year, CPC put into effect and funded its plan for revamping the No. 3 residue hydro-desulfurization (RDS) plant at the Dalin Refinery. The aim is to boost its capacity for refining high-sulfur crude oil, reduce purchasing costs and reinforce the stability and quality of the feedstock for its residual oil conversion facility. The planned investment’s overall scope is to update and restart the old residual oil hydrogenation and desulfurizing site within the Taoyuan refinery, and a 70,000-barrel-per-day desulfurization plant is being constructed as a part of that. But CPC’s immediate goal is to get both buy-in from local residents and approval by the competent authorities.


Due to the aforementioned closure of the Kaohsiung Refinery, CPC is installing an additional processing plant at its Dalin site to ensure an uninterrupted supply of raw materials to Taiwan’s petrochemical industry. Current plans call for the construction of an ambient-pressure petroleum distillation facility with a daily refining capacity of 150,000 barrels, a 50,000-barrel light crude distillation facility and hydro-desulfurization plants for both diesel (40,000 barrels) and kerosene (30,000 barrels) – all of which are scheduled for completion by November. 2017. After that, the Dalin complex’s No. 9 plant – which has been in operation for 40 years and has a daily refining capacity of 100,000 barrels – will be shut down. Dalin’s crude oil refining capacity will eventually be raised to 400,000 barrels daily, bringing CPC’s overall capacity to 600,000.


CPC is involved in a joint venture to build and operate an 180,000-ton-peryear isononanol (INA) plant as well as a 144,000-ton-per-year methyl tertbutyl ether (MTBE) facility. Construction is scheduled to begin in September 2017 and production to start up in 2021. The project’s rationale is to boost the value of the mixed C4 hydrocarbons produced by the heavy fuel oil conversion plant that turns out high-value petrochemical products.



External sales of key refined products in 2016 amounted to approximately 3.178 million kiloliters. They were sold mainly to Japan, South Korea, Malaysia, India, the Philippines, Vietnam, Singapore, the United Arab Emirates, Papua New Guinea, Australia and China and other destinations. CPC will continue developing these and other export markets in the future as a means of helping to optimize the company’s overall manufacturing efficiency and return on investment.



CPC’s principal petrochemicals production sites are its Linyuan Petrochemicals Complex run by the Petrochemicals Business Division as well as the Taoyuan and Dalin refineries operating under its Refining Business Division.


The heavy fuel oil conversion plants at Taoyuan and Dalin produce propylene; the naphtha cracker and butadiene extraction plants at the Linyuan site produce ethylene, propylene, and butadiene products, while its aromatics extraction facility produces benzene and xylene. CPC’s current annual production capacity for petrochemical raw materials includes 1.07 million tons of ethylene, 1.194 million tons of propylene, 158,000 tons of butadiene, 274,000 tons of benzene, 321,000 tons of toluene and 507,000 tons of xylene.



CPC’s long-term investment in upstream petrochemicals manufacturing has both helped stimulate the industry’s development and sustain Taiwan’s economic miracle. In recent years, the company has put greater effort into updating equipment and expanding production capacity so as to eliminate any shortfall in the supply of raw materials to downstream users. Starting in 2005, a total of NT$40 billion was invested in upgrading the Linyuan site’s Third Naphtha Cracker and production of qualified ethylene began in 2013. That renovated and expanded Third Naphtha Cracker now produces annually 720,000 tons of ethylene, 370,000 tons of propylene and 100,000 tons of butadiene. As well as supplying downstream manufacturers in the adjacent industrial park, the Linyuan plant provides petrochemical materials to companies in the Renda Industrial Park that were previously supplied by the Fifth Naphtha Cracker. The Linyuan plant generates about NT$60 billion in annual revenue and its evident success encourages downstream companies to invest and raise profitability in the industry to a new level. Looking ahead, CPC plans to employ new processes, low-energy consumption technologies and economies of scale to provide the downstream part of the petrochemical industry with adequate supplies of such raw materials as ethylene and propylene.


In the face of the challenges posed by global warming and depletion of natural resources, CPC lends practical support to the government’s ‘Circular Economy’ policy by turning petrochemical by-products used as fuel or previously regarded as industrial waste into value-added products. Going further, the company aims to create a win-win situation between economic development and environmental protection by employing sustainable principles in overcoming the challenges of industrial transformation.



CPC’s domestic marketing is primarily focused on gasoline, aviation fuel, diesel and fuel oil. In 2016
sales of these products in Taiwan totalled 20,546,000 kiloliters and generating sales revenue of approximately NT$330.5 billion – the latter a significant decrease compared with 2015, due to lower prices at the pump. Automotive gasoline accounted for the largest share at approximately 52.7%, followed by diesel at about 23.3%, fuel oil at about 16.7% and aviation fuel at around 7.2%.


Taiwan’s market for petroleum products is divided chiefly between CPC and the Formosa Plastics Group and competition between the two has grown increasingly intense. CPC has worked hard at leveraging the advantage of its marketing network, and protect its market share, by consolidating its filling-station network: of the 2,495 filling stations operating in Taiwan at the end of 2016, 612 were directly operated by CPC, six were jointly operated by CPC and other parties, and 1,352 were privately-owned CPC franchises. These 1,970 sites give CPC an overall market share of more than 70%, with sales broken down as gasoline 81.2%, aviation fuel 56.8%, diesel 81.5% and fuel oil 94.5%.



CPC operates aviation fueling stations at all of Taiwan’s airports – Songshan, Taoyuan, Taichung, Hualien, Taitung, Kaohsiung, Kinmen, Matsu and Magong. Around the coast, it has international marine bunkering stations at Keelung, Suao, Taichung, Kaohsiung, and Hualien harbors as well as 35 fishing-boat filling stations.


As of end-2016, CPC operated 14 petroleum product distribution centers, located at Keelung, Shimen, Hsinchu, Taichung, Taichung Harbor, Wangtian, Minxiong, Tainan, Fengde, Qiaotou, Suao, Hualien, Magong, Kinmen, and Matsu (part of the oil supply center). These facilities supplied filling stations in their surrounding areas with a total of 23,665,000 kiloliters of product over the course of the year. Three chemical analysis centers in Keelung, Taichung, and Kaohsiung, plus seven testing laboratories, are charged with testing products for quality control and altogether handled 31,733 samples during the year.



Maintaining market leadership requires maximizing customer satisfaction, so CPC has set as the keynote of its filling station operations a standard of service that differentiates them from their competitors. All CPC directly-operated filling stations throughout Taiwan provide all-round, high-level service – always keeping washroom facilities clean, employing a customerexperience management approach, actively promoting the VIP card system and applying proven customer relations management principles. Faced with the need to reduce operating costs and resolve manpower shortage issues, CPC has taken the lead in introducing self-service fueling using credit cards and also requires all filling stations under its flag to increase revenue from non-core areas by providing a diversity of services and strengthening horizontal alliances.

The variety of services provided at CPC gas stations includes car washing, quick maintenance, convenience stores and the sale of quality automotive products. In 2016, sales of CPC-brand intake valve cleaning fluid for motorcycles, cars, and diesel trucks reached 980,000 bottles, while sales of See Clean, an environmentally-friendly laundry detergent, reached 950,000 units. Further, sales of CPC-branded mooncake gift boxes reached a record high of 134,000 units. The revenue generated by car washing and quick maintenance also reached a record high in 2016. Overall gross profit from multi-service gas stations exceeded NT$1.13 billion and the consistent growth seen in their use demonstrates that they are now a highly-valued retail channel in the eyes of the consumer.
In the area of customer service, the 0800-036-188 customer service hotline – and the more recently added “1912” CPC service line – have expanded the scope of CPC’s services and enabled a quicker response to customers’ problems across the spectrum.
Within the global trend towards environmental protection there is now an emphasis on constructing buildings in a way that serves the cause. Variously termed ‘ecology buildings’ in Japan, ‘eco buildings’ or ‘sustainable buildings’ in Europe and ‘green buildings’ in the USA and Taiwan, the aim is to build so as to protect ecological systems, encourage a mutually beneficial relationship between the structures and the environment, conserve energy and reduce both pollution and the overall environmental impact. These sustainable design and eco-protection principles match CPC’s dedication to sustainability in its operations and accordingly a program to green its gas stations began in 2013. As of February 2017, 24 sites have received green building certification.
CPC’s promotion of natural gas as the fuel of the future, in keeping with Taiwan’s policy aim of energy diversification, is based on its inherent advantages in terms of high thermal efficiency, low pollution profile and convenience for safe handling. A new era of clean energy for Taiwan was ushered in with the completion of the country’s first LNG receiving terminal in Kaohsiung’s Yongan District in 1990. To cope with growing demand, its capacity was later boosted to 4.5 million tons annually; and a second-phase expansion project was completed in December 1996.
A third-phase expansion project to satisfy demand for natural gas from independent power producers as well as urban end-users in northern Taiwan commenced in July 1996. In addition to terminal-area expansion, this involved laying a 36-inch diameter, 238 km-long undersea pipeline from the Yongan plant to Tongxiao. Its completion in December 2002 expanded CPC’s then annual LNG handling capacity to 7.44 million tons.
Taiwan’s second LNG terminal, sited close to Taichung Harbor and with an annual capacity of 3.0 million tons, became fully operational in 2009. It was designed to supply natural gas to Taiwan Power Company’s (Taipower) Datan Power Station as well as industrial firms and household users in northern and central Taiwan. This project entailed building three 160,000-kiloliter LNG storage tanks, gasification and gas supply facilities and a 135-kilometer, 36-inch sea/land long-distance transportation pipeline from Taichung Harbor through the Tongxiao distribution center to the Datan power plant. The current Taichung LNG Terminal Phase II Investment Project calls for the construction of three additional 160,000-kiloliter above-ground storage tanks and a gasification facility at the terminal itself, a 26-inch, 21.8 km terrestrial gas pipeline between the terminal and the Wuxi Separation Station and a further switching station linked with the existing 26-inch pipeline at the Wuxi site. Once completed – which is expected to be before 2018 – the project will boost the annual capacity of the Taichung terminal to 5.0 million tons and ensure a stable, dependable supply of gas during the winter monsoon period as well as greater storage capacity in terms of the number of days’ supply on hand.
CPC has constructed a natural gas transmission and distribution system in western Taiwan comprised of approximately 1,734 kilometers of terrestrial trunk pipeline, extending from Pingtung in the south to Keelung in the north, which includes eight supply centers and 48 distribution stations. Current plans are centered on the goal of constructing interlocking ringshaped networks to produce a figure-8 configuration; this will involve laying down a 238-kilometer undersea pipeline from Yongan to Tongxiao and a 500-kilometer terrestrial pipeline onwards from Yongan to Taoyuan, creating a circular network in central and southern Taiwan. In addition, after the 36-inch undersea gas pipeline from the Taichung LNG plant to Datan has come on stream, it will be linked with terrestrial pipelines in central and northern Taiwan to form another circular formation – thus completing the island-wide,
integrated ‘figure-8’ natural gas transmission network.
In the context of Taiwan’s new energy policy that calls for gradually phasing out nuclear power and building a low-carbon environment partly run on green energy, Taipower is planning the addition of 4 natural gasfired generators to its Datan Power Plant. In a parallel development, CPC is now planning construction of a third LNG receiving terminal, located in the Guantang Industrial Area in northern Taiwan, to supply both the expanded fuel uptake of the Datan plant and growing demand from residential, industrial, and other energy users in the region. Apart from the LNG plant itself, the project will involve construction of an industrial port with 10 piers, reclaiming 77 hectares of land and building facilities for the import of 3.0 million tons of LNG each year. The new works will include four 160,000-kiloliter LNG storage tanks as well as vaporization and distribution plants that will be connected to the existing natural gas distribution system. The total investment will amount to some NT$60.08 billion.
The third LNG receiving terminal project formally commenced in 2016, with full operation scheduled by 2023. Its capacity may later be expanded up to 6 million tons of LNG annually to meet higher demand. With its three LNG receiving terminals located in the north, center and south of the island, CPC stands to reap economies of scale that will lower both the costs and risks of importing natural gas in the future. The existing figure-8 undersea and terrestrial pipeline system will enable mutual support by its components in transporting natural gas around Taiwan and raise the level of operational safety and stability.
CPC has put a great deal of effort into diversifying its natural gas sources to ensure that Taiwan has a stable supply. As a result, CPC’s buys its LNG (including spot / short-term cargo) from sources around the globe – including the Middle East, Southeast Asia, Northeast Asia, Australia, Africa and Europe as well as other areas.
In addition to its existing long-term LNG purchase contracts with Indonesia, Malaysia, Papua New Guinea and Qatar, CPC has acquired yet more sources through medium/long-term contracts with, for example, Russia. Matching all of the foregoing with medium/short-term (spot) contracts with sources in varied locations meets the company’s goal of stability and diversity of supply.
CPC’s monopoly in the LPG market was broken when the government opened it up to competition in 1999. Formosa Petrochemical Corp. came in as a producer and independent traders began importing supplies. As both a state-owned enterprise and one of the market’s main suppliers, CPC is charged with maximizing its operating performance while at the same time ensuring sufficiency of supply to the domestic market. With household gas, CPC’s LPG Business Division has been able to consolidate its market share by making full use of its quality advantages and also fully utilizing its north-south transport and storage systems and comprehensive marketing network. In selling industrial gas, the company aims at lifting the quality of its customer service so as to both retain existing customers and win new ones. CPC has to balance compliance with the government’s LPG safety reserve policy against optimizing the rate of turnover in its storage tanks, which is crucial to profitability; and at the same time it must endeavor to reinforce both occupational safety and environmental protection protocols. And along with those preoccupations the company must be a good corporate citizen and fulfill its CSR commitments.
CPC holds a dominant market share position in Taiwan’s solvents and chemicals sector: 75%-85% in solvents, 25%- 35% in toluene, 35%-45% in xylene, 55%-65% in methanol, around 60% in asphalt and around 47% in sulfur.
CPC’s Solvents & Chemicals Business Division aims to achieve its operating objectives by providing innovative products and services. This involves taking a vigorous approach to efficient customer service, systematically expanding exports to promising markets such as Vietnam and China, enhancing product quality and image, continually improving processes and cutting costs. In addition, the division is intensively engaged in marketing the internationally- competitive biotech products developed by its R&D team using their patented technology and spanning such areas as raw materials, functional healthcare and beauty and green lifestyle. The aim is to use innovation and integration to launch a range of reasonably priced, high-quality products.
CPC is the leader in the domestic lubricants market with its dual brands ‘CPC’ and ‘Mirage’, a position supported by strong, well-defined and diversified sales channels. These include more than 30 contracted distributors, the 600-plus CPC directly-operated gas stations and many well-known hypermarkets. CPC systematically integrates production, logistics, marketing, technical capacity and other resources to construct a uniquely competitive profile; and is committed to providing quality products, premium services and full technical support to meet the needs of its community and corporate customers.
CPC has established a precision automated blending system in Chiayi that took more than three years to construct – at a cost of NT$400 million – and which is unique in Taiwan. This plant has sharply lifted the level of efficiency and accuracy in lubricants production, which runs at an annual output of up to 90,000 kiloliters. After the installation of lubricating grease production machinery with an annual output of more than 3,300 tons as part of the renovation project, CPC’s lubricant production equipment and technology is second to none, not only in Taiwan but also in the Asia-Pacific region. All production is carried out in strict accordance with CPC-researched formulas and rigorous and reliable inspection, backed by a strong sales team – evidencing CPC’s dedication to creating a gold-standard brand.
In addition, CPC has set up a highly efficient logistics network, based on four warehouses for finished products in northern, central, and southern Taiwan, to work as a competitive advantage in sales. In future developments, CPC will invest in the two-phase establishment of storage facilities for base oils and additives at Taichung Port to strengthen its supply capacity and enable international trading in lubricant materials.
In addition to cultivating its domestic market, CPC is also actively expanding in the Asia-Pacific region. Distribution bases are currently operated in China, the Philippines, Indonesia, Vietnam, Myanmar, Cambodia, India and other locations. CPC’s future focus with regard to expansion into overseas territories will be on developing diversified international trade in lubricant materials and on OEM manufacturing.