Oil duo's profits plunge
By Wan Zhihong (China Daily)
Updated: 2008-04-29 09:30

Motorcyclists line up at a PetroChina gas station in Shanghai. PetroChina said its first-quarter profit fell 31.5 percent as refining losses and windfall taxes cut its earnings from record crude prices. [Agencies]

PetroChina, the nation's largest oil producer, said its first-quarter profit fell 31.5 percent as refining losses and windfall taxes cut its earnings from record crude prices.

Net income dropped to 28.9 billion yuan ($4.12 billion) from 42.1 billion yuan a year earlier, Beijing-based PetroChina said in a statement yesterday. The company's revenue for the first quarter was 259 billion yuan, an increase of 41.9 percent.

Because of the gap between high crude prices abroad and government-controlled low refined oil prices at home, the company's refining business "saw big losses in the first quarter", said the company statement.

China has kept down the domestic prices of refined oil products despite the surge in international crude price to nearly $120 per barrel in the first quarter, which has resulted in big losses for domestic refiners.

The country's largest refiner, Sinopec, said its first-quarter net profit decreased by 65.78 percent to 6.7 billion yuan, on rising costs and governmental control of fuel prices.

This was after the company got 12.3 billion yuan of government subsidies in March, among which 7.4 billion yuan was counted as first-quarter income.

Sinopec's refining business saw 20.64 billion yuan in losses in the first quarter, compared with a profit of 4.38 billion yuan a year earlier, said a company statement.

"As fuel prices are controlled by the government, Sinopec cannot pass the rising crude costs to end users," said Liu Bo, an analyst with Sinolink Securities in Shanghai.

Sinopec's revenue for the first three months was 332 billion yuan, an increase of 19.8 percent, said the statement.

The company processed 41.89 million tons of crude in the first quarter, an increase of 9.57 percent, it said.

Since April 1, Sinopec and PetroChina, the country's two largest oil companies, are being subsidized for their losses in oil processing.

The government will give "appropriate monthly subsidies", Sinopec and PetroChina had said earlier. However, the two companies didn't say how much they would get as subsidies every month.

Earlier in April, the Ministry of Finance said the government would refund value-added taxes on 3.5 million tons of gasoline and diesel imported by Sinopec and PetroChina in the second quarter. Analysts said the 17 percent tax rebate would mitigate to some extent the refining losses.