According to Oil and Gas Journal (OGJ), Taiwan had 2.38 million barrels of estimated proved oil reserves as of January 2008. Taiwan’s estimated total oil production has remained flat in recent years, averaging 10.6 thousand barrels per day (bbl/d) in 2007. Oil production in Taiwan comes from four fields: the Chingtsohu, Chinshui & Yunghoshan, Chuhuangkeng, and Tiechengshan fields, which have a total of 71 producing oil wells, according to OGJ. However, the majority of Taiwan’s oil production is due to refinery gain (approximately 10,000 bbl/d), resulting from the country’s large petroleum refining sector. Only 800 bbl/d of crude oil was produced in Taiwan in 2007.

Industry reports indicate that government stocks of crude oil have been built up in recent years and are estimated at around 10 million barrels. In accordance with the Petroleum Administration Law, the downstream sector is required to maintain a strategic petroleum stockpile of no less than sixty days of supply (based on the average of domestic sales and private consumption over the last year).

Taiwan consumed around 950 thousand bbl/d of oil in 2006, down from 970 thousand bbl/d in 2005, but slightly higher than the 2004 consumption level. The EIA estimates 2007 consumption at about 930 thousand bbl/d and 910 thousand bbl/d in both 2008 and 2009. However, over the long-term, oil demand is expected to rise. According to the International Energy Agency (IEA), Taiwan will account for 5.3 percent of Asian demand by 2030, up from other industry reports of 2.9 percent in 2006. Nearly all oil consumption in Taiwan is from imports and roughly 80 percent of oil imports in Taiwan come from the Middle East.

CPC Corporation Taiwan (formerly the Chinese Petroleum Corporation), Taiwan’s national oil company, is the dominant player in all sectors of the country’s petroleum industry. Significant competition to CPC began in July 2000 with the opening of a refinery at Mailiao by the privately-owned Formosa Petrochemical Company (FPCC). This was made possible when Taiwan’s legislature passed the Petroleum Administration Law in October 2001, which removed CPC’s quasi-governmental policy implementation functions. The government has set forth plans to sell up to a 48 percent stake in CPC. In 2005, the United Arab Emirates (UAE) state-owned International Petroleum Investment Company (IPIC) reportedly offered $5 billion for a 20 percent share in CPC, however, legislative disagreements in Taiwan caused IPIC to put the plan on hold. Many analysts expect privatization efforts to proceed in the future when greater political cohesion can be reached.

As in other Asian countries, in 2008 Taiwan took steps to deregulate its energy prices in light of the increasing international cost of oil. The government has removed some end-user subsidies as the rapid increases in the global price of oil, in combination with the government controlled pricing scheme, has resulted in substantial losses for CPC. CPC has been absorbing much of the high cost of oil imports. On May 28, 2008, the Taiwanese government allowed CPC to raise petrol and diesel prices by 13 and 16 percent respectively. Although the government had originally planned to allow CPC to raise these prices to the global market level, the government ultimately decided to absorb 20 percent of the difference between global and domestic prices of petrol and diesel while requiring CPC to absorb an additional 20 percent. The remaining 60 percent has been passed on to consumers. The price increase was also put in place earlier than originally announced in order to prevent hoarding. Deregulation had been started by the previous government, but due to inflationary concerns and political considerations, domestic oil prices were again frozen at the end of 2007. The effect that the May 2008 price increases will have on demand growth in the short and medium-term remains to be seen, although the International Energy Agency (IEA) predicts a temporary slow down in demand growth. Privately-owned FPCC was able to lift its prices earlier in 2008, but the result was excess demand for CPC’s products and gasoline exports by CPC were temporarily deferred.

CPC has conducted exploration activities in Taiwan for more than 50 years; however, the country has never had significant domestic oil assets. Despite the lack of formal ties between Taipei and Beijing, Taiwan and China have developed a cooperative relationship in the energy field. CPC and Beijing’s state-owned China National Offshore Oil Corporation (CNOOC) signed a deal in 1996 to jointly explore a 6,000 mile area in the Tainan Basin of the Taiwan Strait. A 50-50 joint venture project was formalized in 2002. CPC and CNOOC are expected to prolong their cooperation to 2010, having already extended the 2002 deal from 2006-08. Some estimates put recoverable oil reserves in the basin at 300 million barrels, although production has not yet taken place. Slow progress has resulted in the drilling of only one of three planned exploratory wells, although the expected extension of the deal would involve the drilling of the remaining two wells. In addition, CPC and CNOOC also signed a draft agreement to form a joint venture exploration project in the Nanjih Islands Basin. Warming economic ties between the two countries may help rejuvenate joint cooperation in this area. CPC has also expressed interest in collaborating with mainland China’s Sinopec on overseas projects.

Although some cross-strait cooperation has taken place between Taiwan and China, numerous territorial disputes in the resource-rich South China Sea persist. Various countries in the Asia-Pacific region lay claim to some portion of the South China Sea, which has limited exploration and production activities in the region (please see the South China Sea report for more information).

CPC is also active in overseas oil exploration and production projects through its overseas arm, the Overseas Petroleum Investment Corporation (OPIC). OPIC currently holds equity stakes in twelve overseas oil fields in seven countries: Blocks 16 and 17 in Ecuador, the Sanga Sanga field in Indonesia, the Gulf of Paria East and West in Venezuela, the AC/P21 block in Australia, the Jaguar, Caviar, Channelview, and West Avondale blocks in the United States, the BCOIII/BCSII/BLT blocks in Chad, and CPC's most recent acquisition, the Murzuq 162 block in Libya. CPC is also considering purchasing some of CNOOC’s blocks in Kenya. The projects in Ecuador and Indonesia are OPIC’s largest, bringing in a combined 6.76 million barrels of crude in 2007 according to CPC figures. CPC reports that it is actively negotiating to maintain exploration and production rights in Ecuador and Venezuela in light of efforts aimed at resource nationalization in these countries.

After the January 2006 joint exploration contract was awarded to OPIC by Chad, the Chadian government suspended diplomatic recognition of Taipei. CPC officials declared however that the move will not affect OPIC’s contract and the company has retained its 70 percent interest.

Prior to the construction of the Formosa Petrochemical Company’s Mailiao refinery, Taiwan imported a significant quantity of refined petroleum products. Today the country’s refining capacity is greater than its domestic consumption of petroleum products and Taiwan has been a net exporter of products since 2002, although it continues to import products as well. Some analysts forecast that Taiwan may return to being a net product importer in the near future. In terms of petroleum products, the country primarily exports gasoline and diesel and imports naphtha. Taiwan must import nearly all the crude oil it refines.

According to Oil and Gas Journal’s (OGJ) January 2008 figures, Taiwan has 1.29 million bbl/d of crude refining capacity at four facilities: CPC’s Kaohsiung (270,000 bbl/d) Ta-Lin (300,000 bbl/d) and Tao-Yuan (200,000 bbl/d) plants as well as FPCC’s Mailiao refinery (520,000 bbl/d). Both CPC and FPCC are considering building additional new refineries or expanding capacity at existing plants, especially as the Kaohsiung refinery is expected to be closed in 2015 amid concerns from local area residents about pollution. A final decision on closing the refinery has not yet been made, however. FPCC announced preliminary plans in March 2008 to expand crude refinery capacity at Mailiao by an additional 150,000 bbl/d.

Taiwan has a robust petrochemical sector, which is the result of the country’s strong base in petroleum refining. Taiwan must import significant levels of naphtha to meet its petrochemical production demand. CPC’s petrochemical production is based at its Kaohsiung Refinery and the Linyuan Petrochemical Plant. The Linyuan site is independently operated by CPC’s Petrochemical Business Division (PBD), which was established in 2000 in response to enhanced competition in the downstream sector. CPC is currently renovating and expanding its No. 3 naphtha cracker at Linyuan to increase the efficiency and safety of the system. When completed in 2013, the upgrade will give the naphtha cracker a capacity of 600,000 tons per year (t/y) of ethylene, 360,000 t/y of propylene, 100,000 t/y of butadiene, and 90,000 t/y of benzene.

CPC is currently planning a petrochemical technology park to be constructed in the Yunlin Offshore Industrial Zone. The project includes a 300,000 bbl/d refinery, a 1.2 million t/y naphtha cracking complex, 23 petrochemical units, and related transmission and storage units. CPC and several private companies, including Oriental Union Chemical and the Chang Chun Group, established the Kuokuang Petrochemical Technology Company Ltd. in January 2006 to undertake the project. CPC holds a 43 percent stake, the largest share in the joint venture project. The completion date for the complex has been pushed back by several years to 2017 due to delays in the required environmental impact assessment studies. This may also delay the scheduled second phase of the project, which was intended to commence in 2015 and would include an additional 150,000 bbl/d of crude oil refining capacity and a 1.5 million mt/y aromatic plant. The delays could even cause the project site to be moved entirely and the expected cost of the project has risen substantially. The complex at Kuokuang would help to make up for lost capacity if Kaohsiung were to close. If both facilities were online simultaneously, Taiwan would significantly increase its exports of petroleum products.

The FPCC Mailiao refining complex has a substantial petrochemical production capacity. The company’s No. 6 naphtha cracker project at Mailiao contains a variety of petrochemical facilities, including 60 downstream plants and an industrial harbor. There are currently three naphtha crackers with a combined ethylene output of 2.9 Mmt/y at Mailiao. Additional investment to increase capacity further is reportedly planned.