Refining Business of Sinopec Suffered Loss for H1     

According to an executive from Sinopec Corp. (SH: 600028) on July 30th, due to the surging price of crude oil in the international market and the lower domestic oil product price set by the government, the refining business of Sinopec Corp. suffered a loss of over RMB60 billion in the first half of 2008.
   The price of crude oil imported by Sinopec was US$110-120 per barrel in the first half of 2008 whereas the selling price of oil products by the company was only US$70 per barrel in the first 5 months and a half 2008. After the Chinese government raised  the oil product price this June, the selling price of oil products by the company reached US$80 per barrel, one-third lower than the international price of oil products.
   As the refining business suffered a loss for the government policy, Sinopec Corp. got a government subsidy of RMB12.3 billion in the first half of 2008, of which RMB7.4 billion included in the performance for the first quarter of 2008 and the balance included in the performance for 2007. Along with the government subsidy, Sinopec accomplished a net profit of RMB6.7 billion in the first quarter of 2008.
   The Ministry of Finance has announced this year that the government will provide a subsidy for the loss caused by processing crude oil imported, effective April 1st, 2008. 75% of the value-added tax on crude oil imported will be refunded to refineries. All of the 17% value-added tax will be refunded to enterprises importing oil products. The tax refund Sinopec Corp. got in the second quarter of 2008 was RMB23.5 billion.
   Compared with the loss in the refining business, the subsidy is not enough "No policy information for subsidy in the third quarter is yet disclosed."
   Sinopec Corp. expects the net profit in the first half of 2008 to fall more than 50% year-on-year. The performance of Sinopec Corp. in the first quarter was sharply down 65.78% year-on-year.
   There is news saying that because of raising the oil product price, the refunding 75% of the value-added tax on crude oil imported would likely be eliminated in the third quarter of 2008, which would be extremely unfavorable to the performance of Sinopec Corp. for the second half of 2008. The company is still trying its best to apply for a subsidy.