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Sinopec: Refined oil prices too low

By Zhao Tingting (chinadaily.com.cn)
Updated: 2008-04-14 16:57

Low prices on refined oil is the biggest problem facing China Petroleum & Chemical Corporation (Sinopec) and the company will focus on natural gas development in the next few years, said Sinopec Board Secretary Chen Ge over the weekend.

Asked whether the government plans to lift the cutoff point on its special oil gains levy, Sinopec Securities Affairs Representative Huang Wensheng said they haven't yet received any government notice advising them on the issue.

Special oil gains levy is paid for all crude oil taken from China and the sea area under its jurisdiction by all oil exploiting companies in China, whether State-owned, joint-venture, or private.

The government has tightened price control over commodities that weigh much on national economy and people's livelihood, such as refined oil, water, electricity and natural gas to stabilize prices and to boost economic growth.

Under the circumstances, Sinopec has had to reduce production costs by lowering crude oil purchasing costs, optimizing operations and improving effectiveness to ease pressure from the surging international crude oil prices, according to Chen. Sinopec's practical crude oil refining cost is much lower than average prices for Brent crude oil.

"In the long run, adjusting prices of resource-related products is a growing trend, but the near future remains uncertain as the inflation grew 7.1 percent and 8.7 percent respectively in January and February in China," Chen said. He noted that in the meanwhile oil refiners' losses won't last long.

Sinopec doesn't plan to inject its overseas oil and gas assets into the domestic company, but will depend on Puguang gas field in Sichuan province and Ordos gas field in the Inner Mongolia Autonomous Region. The company will mainly exploit natural gas from Puguang gas field, with an estimated recoverable reserve of 99.3 billion cu m, this year.

Chen didn't give a definite answer as to whether Sinopec will post losses in its first quarterly report for 2008. He pointed out that yuan appreciation has little impact in terms of counteracting crude oil purchasing price hikes, although 81 percent of Sinopec's crude oil was imported.