China oil majors' refining losses draw media skepticism


Nov 29 (Reuters) - Mounting refining losses at China's top oil companies have drawn skepticism from Chinese media about their efficiency and the merits of the country's fuel-pricing system, and encouraged lesser known private rivals to call for more equal treatment.

The National Development and Reform Commission (NDRC), a powerful ministry in charge of economic and social affairs planning and pricing, said last week that the refining sector lost 1.17 billion yuan ($183.27 million) in the first three quarters, down 102.4 percent from a year earlier.

China Petroleum & Chemical Corp (Sinopec) and PetroChina Co Ltd , the country's dominant fuel producers, said they lost a combined 64.6 billion yuan ($10.12 billion) on oil refining in the first nine months.

Of the total, Sinopec lost 23.09 billion yuan on refinery throughput of 4.37 million barrels per day from January to September and PetroChina lost 41.54 billion yuan on crude runs of 2.66 million bpd.

PetroChina said its refining losses could reach 50 billion yuan if fuel prices remained at their current levels for the rest of 2011.

Crude oil processed by Sinopec and PetroChina in the first three quarters accounted for 78.1 percent of China's total, and their gasoline, diesel and kerosene output made up 80.5 percent, according to data from the companies and the National Bureau of Statistics.

It was not immediately clear whether the companies and the government used a same set of definitions and standards to derive the losses. Calls to the NDRC and Sinopec were not answered.

"It's incredible that the profits of private refiners with a market share of less than 20 percent could offset most of the losses at state refiners," the Guangzhou Daily said, citing an analyst.

Qi Fang, an executive president of the China Chamber of Commerce for the Petroleum Industry, a lobby group for the private oil sector, was quoted as saying that refining costs at independent refineries were 1,300 yuan per tonne higher than using crude oil.

China's independent refiners mainly use fuel oil as a feedstock as they are not permitted to use crude oil. Some have sold stakes to state refiners in exchange for crude supplies.

"We can break even and even make a profit processing fuel oil; we could surely reap a bumper profit if we had crude oil," a refiner in eastern China's Shandong province said.

Some independent refiners said they could have helped increase domestic fuel supplies if they had access to crude oil.

Analysts said China's current oil pricing system allowed oil majors to make a profit on crude oil production and on refined fuel sales even though refineries were often squeezed by high crude oil costs and low ex-refinery fuel prices.

PetroChina's oil and gas exploration and production unit posted a profit of 160.79 billion yuan for the first three quarters and its fuel selling unit pocketed 18.02 billion yuan for the same period.

The upstream unit of Sinopec recorded a 55.27 billion yuan profit for January to September and its sales unit made a profit of 31.96 billion yuan.

The NDRC data included oil refining and fuel sales businesses, Zhu fang, an official with China Petroleum and Chemical Federation, was quoted as saying by the Beijing Times.

However, the two companies would still post a loss of 14.6 billion yuan by the expanded measure.

"Given that oil refining is a money-losing business, why do oil majors shut crude supplies to independent refiners and why are they unwilling to let the private sector bear the brunt?" said a commentary in the China Youth Daily, a mouthpiece of the China Communist Youth League.

"Many social injustices and distortions of truth are buried in different statistical measures ... if you divide the business chains of state oil companies by segment, it's no surprise some are losing money"


2005-2011 All Rights Reserved 京ICP备05069564号-1