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Sinopec set to expand its refining capacity


China Petroleum & Chemical (Sinopec) plans to expand its oil refining capacity by 7.5 million to eight million tonnes a year over the next three years.

The region's largest oil refiner will also step up efforts to acquire fuel stations to bolster its market position ahead of the opening of the retail market to foreign competition in December and the wholesale market in December 2006.

Speaking via teleconference to analysts and reporters, chief financial officer Zhang Jiaren said yesterday that all new refining capacity would be able to process crude oil with high sulphur content.

This would allow Sinopec to lessen the impact of soaring crude oil prices on its profit margin, because the price of lower-grade, high-sulphur crude has not risen as much as the price of low-sulphur crude.

Sinopec's refining margin has been under pressure because the central government has not allowed prices of refined products to rise as fast as the price of crude.

This took a toll on Sinopec's third-quarter refining margin, which fell to about US$3.45 a barrel from $4.07 a barrel in the first half.

Sinopec plans to refine 27 million tonnes of high-sulphur crude this year and 33 million to 34 million tonnes next year. Its refining facilities were 91.57 per cent utilised, with some coastal plants operating at full capacity, in the third quarter.

Sinopec yesterday reported a 54.88 per cent surge in net profit for the first nine months, to 26.65 billion yuan under international accounting standards.

In the third quarter, the chemicals division's operating profit of 5.09 billion yuan was higher than those of the refining division (1.48 billion yuan) and distribution division (4.24 billion yuan) for the first time since the company's listing.

It lagged, however, the exploration and production division's operating profit of 6.91 billion yuan.