Sinopec’s refining business suffers loss in H1

China Petroleum and Chemical Co. Ltd. (Sinopec), the listed arm of China Petrochemical Corp. (Sinopec Group), announced that its first-half profit fell 77% from a year earlier to 8.26 billion yuan (US$1.21 billion). The disappointing result was due to a deficit in the company’s refining business, which recorded a net loss of 46.02 billion yuan (US$6.72 billion) for the period. In comparison, the company’s refining business attained net profit of 5.73 billion yuan (US$836.5 million) in the same period in 2007. In addition to its refining loss, the company paid 15.65 billion yuan (US$2.28 billion) in windfall tax, a tax levied by the government on excessive profits from the oil companies’ upstream businesses. The tax was more than four times greater than the 3.07 billion yuan (US$448.18 million) paid by the company last year. Despite the large refining loss and greater windfall tax, the company’s net profit in the first half was still positive, due to government subsidies and import tax rebates amounting to 33.4 billion yuan (US$4.88 billion). For the third quarter, a Sinopec official said that the company’s refining business could see profits again only if international crude oil prices drop below US$88 per barrel. However, if international crude prices are less than US$100 per barrel, the company’s refineries can at least avoid operating losses, he said. (August 25/27, 2008)