--Sinopec recorded CNY41.17 billion first-half net profit, up 12% on year

--Operating profit from upstream division rose 26% on higher oil prices

--Refining business turned an operating loss as a result of government control of fuel-product prices

--Sinopec sees international crude oil prices to fluctuate within a wider range in 2H

(Updates with Sinopec chairman's comment on second-half outlook in second and third paragraphs; adds first-half profit breakdown and output data in the sixth to 11th paragraphs)

HONG KONG (MarketWatch) -- China Petroleum & Chemical Corp. /quotes/zigman/269314/quotes/nls/snp SNP +1.06% , or Sinopec, said Sunday that its first-half net profit rose 12% due to stronger contribution from its oil-production business, although its refining business posted an operating loss on rising fuel costs.

The Beijing company said it expects China government will take multiple measures to curb inflation, and the country's GDP growth should remain strong but may slow down slightly in the second half.

"We expect that international crude oil prices will fluctuate within a wider range and the domestic demand for refined oil and chemicals products will keep increasing," Chairman Fu Chengyu said in the statement.

The company, Asia's largest refiner in terms of capacity, said its net profit for the six months ended June 30 was CNY41.17 billion (US$6.44 billion), up from CNY36.80 billion a year earlier, according to international accounting standards The result was above the average CNY31.0 billion forecast of six analysts polled by Dow Jones Newswires.

First-half revenue rose 32% to CNY1,233.3 billion from CNY937.7 billion because of higher contributions from the upstream exploration and production segment.

Its oil- and gas-producing operation posted an operating profit of CNY34.65 billion, up 26% from CNY27.53 billion a year earlier, due to higher oil prices. Sinopec said the average selling price of its crude oil rose 34% to CNY4,600 a ton from a year earlier.

However, Sinopec couldn't match the profit gains posted by other global oil giants including Exxon Mobil Corp. (XOM), Chevron Corp. (CVX) 00and Royal Dutch Shell PLC (RDSA), where refining operations fed the bottom line as the companies passed along higher oil prices.

Sinopec's refining business posted an operating loss of CNY12.17 billion, reversing an operating profit of CNY5.74 billion because of government control of fuel-product prices.

With Brent crude prices averaging $117 a barrel in the second quarter--and no price increases permitted by Beijing for refined products--Chinese refiners' margins have been hurt. Beijing last raised domestic gasoline and diesel prices by 5% in April.

PetroChina Co. (PTR) said Thursday that its first half net profit rose 1% to CNY66.01 billion. Its refining business posted an operating loss of CNY23.36 billion.

Fu said Sinopec for now would keep its full-year target of refining 222.5 million metric tons of crude oil, of which it will refine 114 million tons in the second half. Sinopec refined 108.53 million tons of crude oil in the first half, up 5% from a year earlier.

It sold 75.10 million tons of fuel in the domestic market during the first half, up 10% from a year earlier due to increased demand from energy amid China's rebounding economy.

Analysts expect Sinopec's refining margins to improve in the July-December period due to a recent easing in crude-oil prices, although the government price controls will still weigh on them.

Sinopec proposed a first-half dividend of CNY0.10, up from CNY0.08 a year earlier.