Chinese Online Class - Sinopec calls for new oil pricing mechanism

BIZCHINA / Center

Sinopec calls for new oil pricing mechanism

(China Daily)
Updated: 2007-01-19 08:38

Sinopec, Asia's top refiner, has called for a more market-oriented oil
pricing mechanism in 2007 after struggling last year to refine more oil
at higher cost for local consumption.

"A more market-based fuel pricing system will certainly benefit our
business by smoothing our operation," Huang Wensheng, spokesperson for
Beijing-based Sinopec, told China Daily yesterday.

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"I do not believe timing is the priority in making the decision, but the
determination of the authority is," he said. Because pricing is
government-controlled rather than market-driven, Sinopec witnessed a huge
refining deficit in 2006 due to a soaring crude import cost and the low
price of refined oil sold domestically.

As a result, the refiner recently received State compensation of 5
billion yuan as it continues shouldering responsibility for processing
crude oil to meet robust local demand.

In a public statement yesterday, Sinopec announced it processed 146.32
million tons of crude in 2006, up 4.56 percent over the previous year.
Oil products Sinopec delivered to the market reached 111.68 million tons
last year, growing 6.81 percent over 2005.

"The output volume unveiled is in line with our original plan. Despite
the heavy loss, we still manage to refine more oil and to source from
third party suppliers for rising local consumption," Huang said.

Sinopec's output is higher than many analysts expected given the huge
deficit triggered by surging global oil prices last year, Liu Gu, a
senior energy analyst with Shenzhen-based Guotai Jun'an Securities (Hong
Kong) Ltd, told China Daily. He expects a positive market reaction to the
listed refining giant's output announcement.

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