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Note: The information contained in this report is the best available as of April 2003 and can change.
Oil is by far the dominant fuel in Taiwan's energy mix, accounting for 51% of total primary energy consumption. Coal also plays an important role (32% of total energy consumption), followed by nuclear power (8%), natural gas (6%), and hydroelectric power (2%). Taiwan has very limited domestic energy resources and relies on imports for most of its energy requirements. The country's industrial sector accounts for more than half of total energy demand, but this share is expected to decline slightly, since Taiwan's economy is moving toward newer, less energy-intensive industries. The transportation sector accounts for one-quarter of total energy demand.
Taiwan was admitted to membership in the World Trade Organization (WTO) in November 2001, concurrently with China's admission. Unlike China, Taiwan has been admitted to the WTO as a "developed country," which imposes more stringent requirements for reducing barriers to foreign competition. Taiwan recently has lifted some restrictions on direct trade with and investment in mainland China, which is expected to increase cross-strait commercial ties.
Prior to the construction of the FPC Mailiao refinery, Taiwan imported a significant quantity of refined petroleum products. Now the country's refining capacity exceeds its domestic consumption of petroleum products, making it an exporter. The global and Asian economic slowdowns, however, have reduced demand, which has had a negative impact on Taiwanese refiners, which have been operating at somewhat below full capacity. FPC signed an export agreement with China's state-owned oil trader Sinochem in December 2002, which has opened up mainland China to petroleum products from Taiwan.
Taiwan's current crude oil production is under 1,000 bbl/d. Most of Taiwan's crude oil imports come from the Persian Gulf, though West African countries also are important suppliers for Taiwan. To ensure against a supply disruption, Taiwan's refiners are under a regulatory requirement to maintain stocks of no less than 60 days of consumption. Refiner-held strategic petroleum stocks are the norm in Asia, and Taiwan's policy is similar to those of Japan and South Korea.
Taiwan's government has announced plans to further liberalize the petroleum sector. Taiwan's legislature passed the Petroleum Administration Act in September 2001, which removed CPC's quasi-governmental policy implementation functions, and which will permit the eventual sale of a majority stake in the firm. In January 2003, the Taiwanese government announced that it would accelerate the timetable for the sale, offering equity in the firm to private investors in 2003, with the process to be completed in 2004. Foreign firms will be allowed to acquire stakes in CPC on an equal basis with domestic investors.
Despite the lack of formal ties between Taipei and Beijing, Taiwan and mainland China have developed a cooperative relationship in the field of energy. CPC and Beijing's state-owned China National Offshore Oil Corporation (CNOOC) signed a deal in 1996 to jointly explore a 5,939-square-mile area in the Tainan Basin of the Taiwan Strait. Taipei officially ratified the deal in March 1998, and the first round of seismic surveys by the two companies was completed in October 1999. A joint venture agreement was signed between the two companies in May 2002, but drilling has yet to commence.
CPC operates Taiwan's only LNG receiving terminal -- at Yungan, Kaohsiung. CPC anticipates an increase in natural gas demand due to the construction of additional power plants. The government plans to triple LNG consumption by 2010 for environmental reasons, as natural gas is the cleanest burning fossil fuel.
Meanwhile, Taiwan's energy sector market liberalization program has made possible the construction of competing LNG import terminals. Several private Taiwanese and Japanese firms have formed a consortium, Tung Ting Gas, to pursue an LNG regasification project in Tao-Yuan county. Construction of the terminal was started in mid-2001 by Japan's Chiyoda and Taiwan's CTCI, and it is scheduled for completion in 2006. A preliminary agreement has been signed with Qatar's RasGas for LNG supplies. Most of the natural gas from the terminal is slated to be used for electric power generation. CPC also is reportedly discussing the construction of its second LNG import terminal, which could be needed around the end of the current decade if natural gas demand in Taiwan rises as projected in the current forecast.
Independent power producers are required to sign power purchase agreements with Taipower, which distributes the power to consumers. However, regulations issued by the government in July 1998 allow foreign investors to play a greater role in Taiwan's electric transmission and distribution sector. The rules raised the level permitted of foreign investment in these sectors to 50%, from 30% previously.
Taiwan's first major IPP, the coal-fired Mailiao plant owned by Formosa Plastics, began operation in 1999. It currently has a capacity of 2,400 megawatts (MW) in four 600-MW generating units, and sells about three-quarters of its output to Taipower. A second, coal-fired IPP plant, Ho-Ping Power, is to begin commercial operation of its first 660-MW unit in March 2002, with a second unit beginning operation in July 2002. Ho-Ping is a joint venture including Taiwan Cement Corporation and Hong Kong's China Power and Light Corporation. Several other IPP projects have been approved.
At the end of 2001, Taipower operated 70 power plants with a total installed capacity of 30,136 MW, of which 68% was thermal and 17% nuclear, according to Taipower's published figures. Taipower retains exclusive control over nuclear and hydropower plants. The government will continue to own these assets after Taipower is privatized. Taipower currently has 5,144 MW of nuclear generating capacity at 3 plants (Kuosheng and Chinshan stations in the north and Maanshan station in the south).
Taipower also has plans for a 4,000-MW LNG-fired complex, the Tatan Power Plant. The facility was scheduled to begin operation in late 2003, but this date will slip to 2006 due to lack of available LNG supplies pending the completion of a second import terminal.
One major controversy which has affected Taiwan's electric power over the past two years concerns the future role of nuclear power. Taiwan's Democratic Progressive Party government came into office in early 2000 promising to approve only LNG-fired power projects in the future, and to increase LNG's share of Taiwan's power generation to roughly one-third by 2010. This raised the question of what to do about the 2,700-MW Kungliao nuclear power plant, which is currently under construction. The DPP government attempted to terminate the project in October 2000, but action by the legislature and courts forced a resumption of construction in February 2001. The plant currently is scheduled to begin operation in July 2006. After that, the current government does not plan to support additional nuclear generating capacity. Some officials have reportedly started to question the designation of LNG as the "fuel of choice" for electricity generation, due to costs, which might mean the approval of additional coal-fired capacity for incremental demand after the completion of the Kungliao and Tatan projects in 2006.
A new electricity law has been under consideration in Taiwan's parliament, the major feature of which is expected to be the privatization of Taipower. Progress, though, has been slow, and the legislation is being reworked by the new Democratic Progressive Party government which came into office in May 2000. Under the basic framework envisioned, Taipower would retain a monopoly on transmission and distribution networks, but Taipower's generation assets would be split into several firms. The planned privatization is to an extent the result of rapidly rising power demand in Taiwan, and Taipower's inability to build sufficient capacity to keep pace with demand, which led to a power crisis during the summer peak-demand months in 1999. The expected date for completion of Taipower's privatization was originally 2001, but several issues, most notably the controversy over nuclear power, have pushed the expected date back to 2006.
Per capita energy use in Taiwan is on par with several of its neighboring countries in Asia. However, energy intensity levels in Taiwan compared to other developed countries tend to be relatively high. This is due primarily to the country's heavy concentration of energy-intensive manufacturing industries.
Taiwan's per capita carbon emissions have more than doubled since 1980, and in 2001 represented more than five times the amount of per capita carbon emissions in China (0.65 metric tons). Compared to Taiwan's neighbors, carbon intensity (the amount of carbon consumed per dollar of GDP) in Taiwan has experienced very little growth since 1980.
Air pollution in Taiwan is most obvious in Taipei -- the country's capital and largest city. The primary cause of urban air pollution in Taipei is the large number of motorbikes and scooters which are the main source of transportation for millions of the city's residents. Nuclear power plays an important role in Taiwan's energy sector, making up 17% of Taipower's electric generation.
Sources for this report include: Asian Wall Street Journal; CIA World Factbook 2002; Dow Jones News Wire service; Economist Intelligence Unit ViewsWire; GlobalInsight Asia Economic Outlook; Oil & Gas Journal; Petroleum Intelligence Weekly; Platt's Oilgram News; Reuters News Wire; U.S. Energy Information Administration; U.S. Department of State.
* The total energy consumption statistic includes petroleum, dry natural gas, coal, net hydro, nuclear, geothermal, solar and wind electric power. The renewable energy consumption statistic is based on International Energy Agency (IEA) data and includes hydropower, solar, wind, tide, geothermal, solid biomass and animal products, biomass gas and liquids, industrial and municipal wastes. Sectoral shares of energy consumption and carbon emissions are also based on IEA data.
**GDP based on EIA International Energy Annual 2001
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World Factbook - Taiwan
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Republic of China -- Government
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File last modified: April 30, 2003
Contact: Lowell Feld