State-owned China National Chemicals Import and Export (Sinochem) saw earnings fall about 11 per cent last year due to volatile oil prices. The oil refiner and trader reported a fall in revenues to US$16 billion last year against US$18.03 billion in 2000. Gross profit shrank by about 29 per cent to about US$170 million, while net profit dipped about 24 per cent to about US$70 million. Song Yuqing, vice-chairman of Sinochem Hong Kong (Holdings) - Sinochem's Hong Kong investment vehicle - blamed the global economic slowdown and volatility in oil prices for last year's fall in earnings. Oil prices fell from more than US$30 a barrel in 2000 to between US$16 and US$20 last year. The oversupply of refined oil products and China's commitment to liberalise oil trading fully by 2005, following accession to the World Trade Organisation, pose further challenges for Sinochem. Mr Song said Sinochem had diversified in the past few years into logistics, financial services, property and technology investments, to reduce its reliance on oil trading. Sinochem, which stalled its plan to list in Hong Kong in 1997 after the Asia financial crisis, was considering relaunching the scheme, he said. However, this was unlikely to occur this year. Mr Song said the firm was close to finalising a plan to co-operate with China Petroleum and Chemical's (Sinopec) parent Sinopec Group on the upstream oil sector. Exposure to this relatively more lucrative area is seen by analysts as beneficial to Sinochem's planned listing. Mr Song would not divulge location details of the project or the anticipated oil and gas reserve, but said the initial investment was not expected to be huge. Sinochem, directly administered by China's central Government, is one of the mainland's four designated state crude-oil traders. The other three are Sinopec, PetroChina and China National Offshore Oil Corp. A European brokerage analyst believed exposure to the upstream sector would help Sinochem attract investors. 'The upstream sector is the least vulnerable to competition after China's World Trade Organisation entry,' he said. Oil trading Sinochem, unlike its manufacturing peers, is operating on razor-thin net profit margins, which stood at 0.4 per cent last year and 0.5 per cent in 2000. Mr Song played down worries Sinochem's profitability would be affected after Beijing last month announced it would allow non-state companies to import 10 per cent of China's oil requirements. He said the company's more than 50 years of operating history and established distribution networks would help buffer the impact from growing competition. Sinochem has about 60 per cent of the crude-oil import market. In 2000, it imported about 30 per cent of China's crude oil and refined oil products.