Center

Sinopec net set to grow on climb in fuel prices

(Shanghai Daily)
Updated: 2006-09-11 08:54

China Petroleum & Chemical Corp, Asia's biggest oil refiner and also known as Sinopec, will sustain profit gains in the second half as state fuel price increases compensate for rising crude costs, Chairman Chen Tonghai said.

"The second half will not be worse than the first half," Chen told reporters at the World Economic Forum's China Business Summit in Beijing yesterday. The price of refined oil has risen 15 percent since the beginning of the year, he said.

Sinopec's first-half profit rose 8.9 percent, the smallest gain in four years, as soaring crude oil costs eroded earnings from making fuels and chemicals. The central government is easing controls on retail fuel prices to help protect refiners' margins and promote energy efficiency, Bloomberg News reported.

Net income rose to 21.4 billion yuan (US$2.7 billion) in the first half, from 19.7 billion yuan a year earlier, the company said on August 28. Sales and other operating revenue rose 34 percent to 493.1 billion yuan.

"There will be impact from rising" crude oil prices in the second half, Chen said. Sinopec, which also sells crude oil, had a 16.6 billion yuan first-half loss from refining, more than 10 times the 1.3 billion yuan it lost a year earlier. Losses are likely to continue for the rest of the year, Chen said.

The Beijing-based refiner supplies 80 percent of the fuels sold in the world's fastest-growing major economy. Sinopec has said it plans to accelerate drilling for natural gas, use cheaper grades of oil and expand output of higher-priced fuels and chemicals to stem refining losses and boost exploration earnings.

Second-quarter profit rose 20 percent, beating analysts' estimates, after the government increased retail fuel prices. China on May 24 increased the price of gasoline by 10.6 percent, diesel prices by 12.3 percent and jet fuel by 10.3 percent, after boosting prices in March.

Crude oil prices have dropped 16 percent from a July 14 record of US$78.40 a barrel in New York, closing at US$66.25 on Friday.

Sinopec said that it expects crude oil price to remain high and demand for oil and chemical products to rise steadily in the second half.