Sinopec profit down 40 pct on higher crude costs

Sinopec profit down 40 percent on higher crude costs, China's tight fuel price controls

Associated Press

HONG KONG (AP) -- Sinopec Corp., one of China's three major state-owned oil companies, says first-half profit fell 40 percent as crude oil prices rose but government price controls prevented costs from being passed to customers.

The company, also known as China Petroleum & Chemical Corp., said late Sunday that profit fell to 24.5 billion yuan ($3.8 billion) or 0.27 yuan per share (4.3 US cents). Revenue rose 9.3 percent to 1.3 trillion yuan.

Profit at Asia's biggest refiner by volume fell because global crude prices rose by about 2 percent in the period to an average price per barrel of $113.34. But the Chinese government tightly controls fuel prices to cushion the inflationary impact of high global crude costs, forcing Sinopec and other refiners to absorb losses.

The company's refining division's loss widened by about half to 18.5 billion yuan, reflecting the larger gap between rising international oil prices and domestic fuel prices.

Sinopec's crude oil output rose 4.3 percent to 163.1 million barrels. Natural gas output rose 14 percent to 8.2 billion cubic meters.

Profit was also dragged down by the chemicals division, which swung to a loss of 1.2 billion yuan because of intense competition in the sector that resulted in a "drastic drop" in product prices.

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