The spokesman of board of directors of China Petroleum and Chemical Corp (Sinopec) said on December 26 that refining enterprises suffered heavy losses because the domestic finished oil price was always much lower than the international price. The government offered lump-sum financial subsidy of RMB5 bln to the refining enterprises of Sinopec which suffered policy-related losses in 2006.

The spokesman said that since 2003 the international crude oil kept climbing. Although the price has dropped since September, 2006, it was still at a high level. Proceeding from the whole situation of stablizing economy and society, China regulated and controled the finished oil price which was much lower than the international price so that the domestic refining enterprises suffered heavy loss.

The data provided by Sinopec indicated that the international crude oil price rose from an average of USD28.4/barrel in 2003 to an average of UDS66/barrel during January - September, 2006 with an increase of 132%. After 13 price adustments, the price for domestic gasoline increased by 72% and diesel oil up 67%. there are 13 whose ratio of assets to liabilities is close to or over 100% among 33 refining enterprises of Sinopec.

The spokesman explained that Sinopec’s imported crude oil accounted for 80% of the total and processing volume accounted for 70%. Losses due to increase in international oil price are mostly shouldered by Sinopec. The impact that China’s regulation and control of finished oil had is also mainly reflected in Sinopec. Out of consideration of these, the country decided to offer subsidy to Sinopec.