Pressure on its refining business caused first-quarter profit at China Petroleum & Chemical Corp to fall 3.6 percent although revenue from the upstream sector climbed.

 

The top Asian refiner, better known as Sinopec, said profit for the first three months fell to 9.29 billion yuan (US$1.16 billion) from 9.64 billion yuan a year earlier. Sales rose to 222.7 billion yuan from 169 billion yuan.

 

"The (firm's) performance is a bit better than our expectations because of more gains in the upstream business due to higher realized crude oil prices," said Huang Meilong, a Shenyin & Wanguo Securities Co analyst. "We also see better results in its chemicals unit."

 

The realized price for Sinopec's crude jumped 46 percent in annualized terms to 3,112.8 yuan a ton while that for natural gas rose 14 percent to 745.1 yuan per thousand cubic meters.

 

The company expanded oil output 2.8 percent to 9.8 million tons and gas production 23.4 percent to 1.8 billion cubic meters in the first quarter.

 

However, Sinopec posted an operating loss of 7.88 billion yuan at its refining division in the first quarter from 1.67 billion yuan a year earlier as the surging costs of crude oil erode refining margins.

 

The company processed 35.2 million tons of crude oil in the first quarter, an increase of 2.45 percent year on year.

 

"If government measures to adjust refined oil prices cannot be fully implemented and oil prices stand above US$70 per barrel, the refining loss will be even higher in the second quarter," Chief Financial Officer Zhang Jiaren said on a conference call.

 

China raised gas and diesel prices in late March for the first time in eight months to help domestic refiners.

 

But Huang said the move may have a limited impact on Sinopec in the future because the firm has to import nearly 80 percent of the crude it uses from the international market.

 

Oil prices flowed past the record of US$75 a barrel last week in New York, and they have gained nearly 10 percent during the first quarter.

 

(Shanghai Daily April 29, 2006)