China Petroleum & Chemical (Sinopec) - China's No 2 oil company - is forecast to book a 24.7 per cent year-on-year rise in net profit to 9.37 billion yuan (about HK$8.78 billion) in the first half of this year. The rise would be driven primarily by the company's strong profit growth in upstream oil exploration and production operations on the back of buoyant oil prices. This has offset the negative impact of the regional slump on its downstream refining and chemical business. Sinopec is one of Asia's largest crude oil refiners and producers of petrochemical and chemical products. A poll by Business Post last Friday on five international brokerage analysts has put their consensus net profit forecast for the first half at 9.37 billion yuan, compared with 7.51 billion yuan in the previous corresponding period. For the whole year, they expect a profit of 17.48 billion yuan, compared with the 18.57 billion yuan consensus of 27 brokerages polled by Multex Global Estimates. H share Sinopec is scheduled to release its results on Friday, while its four H-share subsidiaries are expected to do so on Sunday. For the purpose of its A-share offering last month, the company forecast in its listing prospectus 11.5 per cent growth in net profit to 18.02 billion yuan for this year. The forecast was based on mainland accounting standards, under which the company's net profit was 16.16 billion yuan for last year, compared with 19 billion yuan under international accounting standards. The difference was due to discrepancies in depreciation accounting policies between mainland and international standards, analysts said. Some analysts said they doubted Sinopec's ability to achieve its forecast, as it was based on refining margins and chemical prices of last year's second half, as well as refining throughput planned at the beginning of this year. A day after Sinopec's A-share listing, the company's senior management said it had scaled down its planned crude oil refining throughput for the year by 4.5 per cent to 105 million tonnes, citing weak demand for its refined products. Prices of chemicals and other refined products such as plastics and ethylene have fallen between 10 per cent and 30 per cent in the first half of this year, making Sinopec's original assumptions questionable. While growth in China's demand for refined oil products remains strong due to continued steady economic growth in the first half, analysts said the global economic slowdown had caused regional refining margins to fall sharply. Prices of Sinopec's refined products are tied to Singapore's prices with a one-month lag, making it vulnerable to the regional slump. Subsidiaries polyester-maker Sinopec Yizheng Chemical Fibre and diversified petrochemical product-maker Sinopec Shanghai Petrochemical both warned of significant interim profit drops last month. Analysts expected refining and chemical operations to account for less than 10 per cent of Sinopec's profit this year, with about 70 per cent and 20 per cent coming from crude oil production and the marketing of refined products, respectively. HSBC Securities analyst Gordon Kwan said both Sinopec and rival PetroChina had sped up the expansion of their oil products marketing operations, as oil prices were expected to fall mildly this year and next year, which would eat into profits. Both have been buying up petrol stations quicker than anticipated in a bid to gain market share.