Third Petrochemicals Division

A.History

The Third Petrochemicals Division was established in 1988 to operate a 250,000 tons/year PTA plant in Longte, Ilan. As part of the investments planned under No. 6 Cracking Project, we started the construction of two 420,000 tons/year PTA plants in Mailiao, Yunlin in 1994. The two plants were completed in September 1998 and August 1999 respectively, and began production at 120% of the designed capacity. Through continuous debottleneck efforts in the past few years, the annual capacity of each plant has been increased to 480,000 tons. Our improvement work continues and we expect to boost the capacity of each plant to 550,000 tons a year in 2006.

In light of the increasing demands for PTA in the domestic and foreign markets as polyester producers carried on expansion, we decided, in December 1998, to close down the 250,000 tons/year PTA production line in Longte, Ilan and replace it with more advanced PTA process that would output 500,000 tons a year. When the new process was in operation in March 2002, the quality of its output already met the international standards. Currently the new plant produces 550,000 tons of PTA a year.Subsequent debottleneck work will push its capacity up further to 700,000 tons a year in 2006.

As the No. 6 Cracking Project entered a new phase, the original expansion units under the project underwent reorganization after July 1, 1999. The 1st and 2nd Petrochemical Sections were dissolved.Plants under their charge were assigned to the respective business division. As a result, our division took over the operation of DMF plant from the 2nd Petrochemical Section in addition to the PTA plants in Longte and Mailiao. The DMF plant had been plagued by shortage of CO supply and environmental problems since it was in operation. So in April 2000 we decided to invest another NT$100 million to improve its process and pollution control facilities. The improvement work was completed in July 2001,and the DMF plant, the only such plant in operation in Taiwan now produces up to 40,000 tons a year with adequate supply of CO from the refinery of Formosa Petrochemical.

In the 18 years of operation, the Division has been adhering to the longstanding philosophy of FPG that stresses“diligence”,“simplicity”and“pragmatism.”We persistently carry on optimization and endeavor towards cost reduction, boosting competitiveness and quality assurance. In total support of government policy, we have invested heavily in pollution control with the input of tremendous manpower, efforts and money to seek the ultimate goal of zero hazard and zero pollution.

B. Major Businesses

Our major businesses are manufacture and sales of PTA and DMF. Our first PTA plant located in Ilan was not able to meet the demands of the Fiber Department of Nan Ya Plastics without annual capacity of 250,000 tons.

But as the two PTA plants in Mailiao and the rebuilt PTA plant in Ilan were in operation in September 1998, August 1999 and March 2002, at present their combined annual capacity of 1,800,000 tons is sufficient to meet the demands within the Group and supply outside PE operators. Thus a sales unit was set up to develop the domestic and export markets. Currently we ship about 75,000 tons of PTA a month to domestic customers other than Nan Ya, and about 50% of the monthly output through Mailiao Harbor and Suao Harbor to PE operators predominantly in Mainland China.

Our 40,000 tons/year DMF plant in Mailiao was shut down in June 2000 to undertake process and pollution control upgrade. The plant started running again in July 2001 and now supplies Formosa Plastics, Nan Ya Plastics, as well as outside producers of PU, resin, and electronic board, and in small amount, foreign operators in Japan or Korea.