Sinopec: government subsidies to offset refining loss

China Petroleum & Chemical Corporation (Sinopec)<600028><386>, the country’s largest oil refiner, revealed to sources that the government subsidies are supposed to offset the huge losses of its refineries, which was caused by increasing global crude oil prices and tight domestic price controls.

It was a direct response to some reports that Sinopec should not receive financial subsidies while posting a big profit gain.

The company argued that it is an indisputable fact that the refining industry was experiencing hard time last year, adding that the Sinopec's investment in oil refining was about RMB 200 billion over recent years.

"Every ton of crude oil refined has caused a loss of between RMB 600 and RMB 700 since the third quarter of last year when international oil prices started surging," an official with Sinopec's Guangdong office said.

The exact amount of the subsidy has not been finalized yet, but approximately US$1.40 billion was expected on predictions of the exact figure up to US$2.1 billion. The firm received a US$1.40 billion (RMB10 billion) subsidy in 2005 and US$700 million (RMB 5 billion) in 2006, according to sources.