PetroChina's refining operation has swung to a record operating profit in the first half from a record loss a year earlier as the plunge in crude oil prices allowed Beijing to relax its grip on domestic fuel prices and let refiners earn a decent margin after years of deficits. The listed unit of the nation's largest oil and gas producer, China National Petroleum Corp (CNPC), had the highest first-half earnings since its stock market flotation in 1999. 'Affected by the international financial crisis and depressed demand ... refineries were forced to operate on low utilisation rates, but [our refining operations] achieved excellent results,' CNPC said on its website yesterday, adding that cost reduction efforts had also helped. Analysts said the record refining profit was unexpected, given the industry has suffered four years of losses owing to price controls. Mirae Asset Securities regional head of energy research Gordon Kwan estimated PetroChina's first-half refining operating profit would reach eight billion yuan (HK$9.08 billion), compared with a loss of 59 billion yuan a year earlier. This despite expected lower processing volume amid depressed demand, with first-quarter throughput falling 14.6 per cent year on year. Second-quarter volume has picked up since, but the exact figures have not been released. Last year's record refining loss stemmed from the spectacular surge in oil prices from a low of US$87 a barrel in January to a high of US$147 in July. To protect vulnerable consumers, Beijing only raised domestic fuel retail prices once by about 17.5 per cent. In contrast, crude prices have varied between US$34 and US$73 a barrel since the start of the year. In addition, Beijing introduced a new fuel pricing system in December to ensure stable profit margins for refiners when crude prices are below US$80. The margins will only be squeezed with crude prices of between US$80 and US$130. Anything above that and negative margins take effect. Mr Kwan estimated rival China Petroleum & Chemical Corp (Sinopec), Asia's largest oil refiner, would have recorded a refining profit of 13.8 billion yuan in the first half, compared with a loss of 73.88 billion yuan a year earlier. Despite a marked turnaround in the mainland's refining sector, analysts said operations in the downstream petrochemical industry would remain challenging in the remainder of the year. Sinopec posted a first-quarter chemical operating profit of 2.71 billion yuan, a major turnaround from a loss of 13.1 billion yuan last year. Owing to lower crude oil prices, analysts expect PetroChina to post a 19 per cent fall in net profit to 92.71 billion yuan this year, while Sinopec may see its profit jump 65.8 per cent to 49.37 billion yuan, according to the mean estimate of 27 brokerage analysts polled by Thomson First Call. PetroChina sources most of its profit from crude oil production, while Sinopec is much more exposed to refining and chemicals.