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Cheap US gas drives Formosa Plastics expansion

11.22.2013  | 

The company asked federal and state environmental regulators to approve plans for an ethane cracker unit and downstream derivatives, Formosa Plastics Vice Chairman Susan Wang said in an interview. She is visiting the US as part of a business delegation led by former Taiwan Vice President Vincent Siew.

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By BRIAN WINGFIELD & YU-HUAY SUN

WASHINGTON (Bloomberg) -- Formosa Plastics is seeking United States' permits for a $2 billion expansion of its Texas operations as cheaper natural gas prices make US production more competitive.

The company asked federal and state environmental regulators to approve plans for an ethane cracker unit and downstream derivatives, Formosa Plastics Vice Chairman Susan Wang said in an interview. She is visiting the United States as part of a business delegation led by former Taiwan Vice President Vincent Siew.

“Because of shale gas, the cost of making petrochemical and plastic-related products is becoming very competitive here in the United States,” Wang said. “It’s probably as cost effective as in the Middle East.”

The investment is bigger than was previously planned by Formosa Plastics as of February 2012, when it said it would spend $1.7 billion to build two factories and a polyethylene plastics plant in Texas.

Trans-Pacific partnership

One of the business delegation’s key aims is shoring up United States support for Taiwan’s participation in the proposed Trans-Pacific Partnership, a regional trade deal the will cover the United States and 11 other nations, an area with about $28 trillion in combined annual economic output. Taiwan is seeking to join the talks, which don’t include China.

Environmental permits

Formosa Plastics’s Wang said the Taipei-based company expects to receive the environmental permits for an expansion at its Point Comfort facility, about 200 km southwest of Houston, sometime within the next year. Construction can begin immediately thereafter, she said.

Environmental regulations in the United States are “quite reasonable,” Wang said. The hurdles in Texas are a shortage of skilled labor, due to the number of competing facilities that need workers, and the relatively high cost of shipping products by rail in the United States, she said.

In the US, the group owns petrochemical plants, plastic processing facilities and natural gas wells. Last year, it applied to boost capacity in two Texas chemical plants.

Wang said Formosa Plastics is “at a crossroads” in determining whether to build or invest in an ethylene plant in China. Taiwan last month lifted the ban on investing in Chinese ethylene plants, also known as “naphtha crackers” for the use of the petroleum distillate naphtha. China has yet to ease its rules on ethylene investments across the Taiwan Strait.



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