China Petroleum & Chemical Corp said today it received 12.3 billion yuan (US$1.7 billion) in government subsidies to cover its refining losses due to surging global crude oil prices.

The Beijing-based refiner, also known as Sinopec, will book 4.9 billion yuan of the total in its 2007 accounts and 7.4 billion yuan in the first quarter of 2008, it said in a statement to the Hong Kong stock exchange today.

Light, sweet crude for April delivery fell US$4.94 to settle at US$104.48 a barrel on the New York Mercantile Exchange yesterday. The oil price surged to US$111.42 a barrel in after-hours trading in New York on Monday, the highest since trading of the contract began in 1983, as a sliding US dollar and credit market losses in the United States prompted investors to buy commodities.

Chinese oil refiners cannot raise product prices to pass the rising cost of crude oil onto customers unless they have government approval.

Sinopec and its parent Sinopec Group received subsidies from the government in 2005 and 2006.

Sinopec, the nation's largest oil refiner, said that it and its subsidiaries had to purchase refined oil products from local producers at higher prices and increase refined oil output to ensure domestic supplies. Those measures resulted in "serious losses to the company,'' it said without giving a number.

Sinopec Shanghai Petrochemical Co, China's largest maker of ethylene, also said it received a subsidy of 341.2 million yuan to offset its refining losses. Of that, 93.9 million yuan will be taken in its 2007 account and the remaining amount will be booked in the first quarter of this year.

Sinopec plunged 5.16 percent to 13.04 yuan at 10:25am today in Shanghai.

The stock has dropped seven-straight sessions since March 10.

(Shanghai Daily March 20, 2008)