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Sinopec has said that it has
received US$1.7 billion in government subsidies to
compensate for losses incurred through government price controls.
The funds comprise 4.9 billion yuan to be counted in 2007 income and
7.4 billion yuan in the first quarter of this year. "This will be
good for the company's 2007 annual profit as well as
the profit in this year's first quarter," said a source within the
company.
Although government subsidy will compensate for the company's losses
to some extent, it cannot tackle the problem at the root, said market
analysts.
Chinese oil refiners have suffered losses as they have been unable
to pass on surging international crude oil prices to customers because
of the government's control on domestic oil prices for fuel and
other refined oil products.
Sinopec suffered "extremely heavy losses", said Zhou Yuan, vice
chairman of Sinopec. The company lost 2,000 yuan for every ton of fuel sold when international crude prices stood at US$100 per
barrel.
The financial situation worsened in the second half last year due to the onset of severe winter weather and other factors.
To ease the oil shortage in some parts of the country, Sinopec had
imported 60,000 tons of fuel and 800,000 tons of diesel oil, and
stopped oil exports, said Zhou.
Sinopec and PetroChina, China's largest oil producer applied to the
government for subsidies at the end of 2007, but the latter has not
received official approval yet.
It is the third government subsidy payment for Sinopec. The
government gave it a subsidy of 5 billion yuan last year and 10 billion
yuan in 2005 to compensate it for losses incurred from low domestic
refined oil prices.
Sinopec, which lists in Shanghai, London, New York and Hong Kong
stock exchanges markets, is Asia's biggest refinery by output. It takes
80 percent of China'a imported crude oil and produces 70 percent of the
country's refined oil.
PetrolWorld 210308
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