Taipower's decision to slash its fuel oil requirements from 2.5 million tonnes to 1.5 million tonnes was brought about by its decision to purchase power from four independent power producers that make use of gas powered plants to generate electricity.

Its choice of CPC's rival, Formosa (Petrochemicals), to supply fuel oil for its Linkou plant has also broken CPC's supply monopoly. And since Taipower was CPC's main oil customer, the company has been forced to look elsewhere for customers.

"We had to look for other outlets, since Taipower is buying less from us, and also Taipower may award more domestic fuel oil tenders to Formosa. CPC may no longer feel obliged to put Taipower as its first priority for our fuel oil supply, since Taipower is buying from Formosa," said an unnamed CPC official.

Despite restrictions on direct trade with China, CPC is looking to export high sulphur fuel to the mainland. It intends to bypass these laws by exporting its product via Hong Kong-based partners and, by doing so, increase its export volume to China from the mere 38,000 tonnes it exported there last year. Another market that CPC is looking into is in exporting low sulphur fuel oil to Thailand.

In related news, Taipower is expected to issue a fuel oil supply tender next month for its 2,400 MW Talin power plant. The company is expected to seek a two-year term supply worth 500,000-800,000 kilolitres of oil. However, it is hoping to attract more sellers other than CPC and Formosa. It also plans to upgrade its Talin harbour in order to accommodate bigger barges.