Chinese oil giant Sinopec says its first-half profit will fall more than 50 percent from the same period last year due to government controls that limit its ability to pass on record-high crude costs to consumers.
A Sinopec statement, dated Thursday, gave no estimate of first-half earnings. But the company, Asia's biggest refiner by volume, reported profits of 36.2 billion yuan in the year-earlier period. Sinopec is due to release results in late August but has set no date.
Sinopec, formally known as China Petroleum & Chemical Corp., and China National Petroleum Corp., the country's biggest oil producer by revenue, say they are suffering heavy losses due to price controls. Sinopec's losses are bigger because it refines much more oil than it produces. CNPC has a bigger production unit.
"The net profit for the first half of 2008 will decrease by more than 50 percent compared to the same period of last year," Beijing-based Sinopec said. It blamed China's "strict control over refined oil prices."
Despite the controls, Sinopec has taken steps to ensure adequate supplies, "which resulted in great losses in the oil-refinery business and massive decline in overall performance," the statement said.
CNPC has made no comment on how price controls might affect its earnings.
Beijing has kept state-set gasoline and diesel prices low to shield China's poor from surging global crude costs. It raised prices for some customers in June to curb rising demand but refiners say they still are losing money.
Sinopec loses about 430 yuan ($65) per barrel of production in its refining business due to the gap between high crude costs and low retail prices, the government's Xinhua News Agency said, citing a Sinopec official, Chen Ge.
Sinopec shares are traded on exchanges in New York, London, Hong Kong and Shanghai.
The Chinese government has paid subsidies to Sinopec and CNPC to help compensate, but industry analysts say that covers only part of their losses.
Oil refiners have tried to cut their losses due to price controls by reducing output. That led to gasoline and diesel shortages last year. The government responded by ordering Sinopec and CNPC to import refined gasoline and diesel to fill the gap.
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On the Net:
Sinopec: http://english.sinopec.com/
Sinopec (in Chinese): http://www.sinopec.com.cn
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