Sinopec expects much smaller government subsidy
Updated: 2007-12-15 08:20
Sinopec, the country's largest oil refiner, said it believed it would not receive a large subsidy this year from the government, reported Friday's Shanghai Securities News, a newspaper run by Xinhua News Agency.
Sinopec received government subsidies of 10 billion yuan (US$1.36 billion) and five billion yuan respectively in 2005 and 2006 to cover losses incurred in running its refineries. The losses are caused in the most part by the yawning gap between domestic oil product price and the rising international crude price.
Official figures showed that about 70 percent of the crude oil consumed by the company was imported, and its refinery capabilities accounted for more than 52 percent of the country's total in 2006.
PetroChina, the country's biggest oil producer and second largest refiner, whose refining capabilities accounted for 37 percent of the nation's total in 2006, received no such subsidies in the past two years as its businesses were composed of oil and gas exploration, development and production, pipeline construction, crude oil and oil products trading besides refining.
There was a report in Thursday's China Securities Journal that Sinopec and PetroChina were considering lobbying the government to grant them subsidies because of losses from their oil products importation and refining operations.
Sources from Sinopec told Shanghai Securities News that the government would base its approval of subsidies not on the performance of one sector of the company's businesses but would take the company's overall operation into consideration and even if the government would grant a subsidy, the amount would not exceed the five billion yuan of 2006.
"Sinopec's whole year loss from its refining business might stand around eight billion yuan, less than the 10 billion yuan loss of last year," predicted Qiu Xiaofeng, an analyst with China Merchants Securities.
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