Taipower battle over project

Reports indicate that two state-run enterprises are poised to battle over a government construction project to build a natural gas terminal servicing northern Taiwan.

Taipower (台電) previously lashed out against CPC Co. (中油) for supplying natural gas at high prices, according to reports published yesterday. Taipower claimed that if it awarded the northern Taiwan natural gas terminal, its operating costs would be reduced by NT$7.896 billion annually and households across the nation would enjoy lower energy prices, saving NT$240 per year, or NT$0.4 per kilowatt hour. CPC Co. denied that its natural gas prices exceed industry norms, and added that it strives to provide the resource at a reasonable price using sound procurement management.

Following the halt on the construction of Taiwan’s fourth nuclear power plant, the nation’s reliance on natural gas-based energy production is likely to continue to rise. Despite its status as Taiwan’s largest consumer of natural gas, Taipower remains reliant on CPC Co. for the resource. As a result, Taipower is seeking to build its own natural gas terminal, to the dismay of CPC Co.

Both companies have submitted their proposals to the Ministry of Economic Affairs for review, which will ultimately task one of the rivaling pair to complete the project independently.

Currently, Taiwan’s two natural gas terminals are both operated by CPC Co., with 80 percent of natural gas proceeds contributed by Taipower to satisfy the nation’s energy consumption. Reports indicate that Taipower is growing weary of letting CPC Co. take a distributor’s cut in sourcing natural gas.

According to Taipower, the company would be better equipped to control the costs of generating energy if it was allowed to build and operate its own natural gas terminal.

Meanwhile, over the first half of this year, natural gas spot prices in international markets have tumbled from NT$22.776 to NT$14.568 per cubic meter, while futures prices for the resource have declined from NT$19.968 to NT$19.452 per cubic meter. CPC Co. however, has been offering natural gas at around NT$20 steadily.

CPC Co. stated that the domestic price of natural gas is not so simply gauged by short-term movements in international markets, adding that different time periods have different appropriate prices. Recent declines in international natural gas prices are due to increased shale gas extraction in the U.S., and this does not reflect the resources’ long-term pricing trends.

Both companies stated that Taiwan’s third natural gas terminal will be completed with a budget of NT$60 billion, with Taipower claiming that costs may be recovered in 8 year’s time, while CPC Co. declined to specify a time frame. Taipower stated that the company is capable of seeking cheaper sources of natural gas, while CPC Co. cited the company’s excellent 24-year track record in providing seamless access to natural gas throughout Taiwan.