By Yvonne Lee
HONG KONG--China Petroleum & Chemical Corp. (0386.HK,
600028.SH, SNP), or Sinopec, Sunday reported a 24% increase in
first-half net profit on improved refining margins and narrower
losses at its chemical business after China reformed fuel pricing
in March.
Beijing-based Sinopec outperformed larger rival PetroChina Co.
(0587.HK), which posted a 5.6% increase in net profit for the same
period. The stronger performance from Sinopec was widely expected
because it has bigger downstream refining and petrochemicals
operations than PetroChina, China's largest listed oil company by
capacity.
Operating performance at China's refiners has improved since the
second quarter after Beijing reformed fuel pricing in late March so
refined-product prices are linked more closely to international
prices. Previously, domestic adjustments lagged behind movements in
overseas prices, causing periodic losses for refiners when crude
prices rose sharply.
"In the second half of the year, we expect balanced supply and
demand fundamentals in the global oil market and a steady growth in
domestic demand for refined oil products and chemicals," Chairman
Fu Chengyu said in a statement.
The company, Asia's largest refiner by capacity, said Sunday its
net profit for the six months ended June 30 rose to 30.28 billion
yuan ($4.95 billion) from CNY24.50 billion a year earlier.
First-half revenue rose 5.2% to CNY1.42 trillion from CNY1.35
trillion.
Sinopec's refining business recorded an operating profit of
CNY213 million in the first half, compared with an operating loss
of CNY18.5 billion a year earlier.
Mr. Fu said Sinopec plans to refine 120 million metric tons in
the second half, up from 115 million tons in the first half.
Analysts said they expect Sinopec to report a stronger result in
the second half, partly due to a higher contribution from overseas
operations after it agreed in March to buy $1.5 billion of oil and
gas assets from its state-owned parent, Sinopec Group.
The acquisitions, in countries including Kazakhstan, Colombia
and Russia, are aimed at putting Sinopec on par with integrated
global energy majors such as Exxon Mobil Corp. (XOM), Chevron Corp.
(CVX) and Royal Dutch Shell PLC (RDSA.LN).
Mr. Fu is on a mission to transform Sinopec into the group's
primary international arm. He said last year that Sinopec, which
has few overseas oil and gas assets, planned to acquire its
parent's overseas upstream assets, partly to limit the damage that
China's fuel-price controls have on the company's bottom line.
After the transaction, Sinopec's overseas proven reserves will
rise more than fourfold to 330.2 million barrels of oil equivalent.
Its overseas production will more than double to 58.7 million
barrels of oil equivalent. Sinopec's only current overseas asset is
a stake in an oil field off Angola's shore.
On Tuesday, the smallest of China's three state-controlled oil
majors, Cnooc Ltd. (0883.HK), reported a 7.9% rise in first-half
net profit, thanks to stronger oil and gas output overseas
following the acquisition of Canada's Nexen Inc.
Write to Yvonne Lee at yvonne.lee@wsj.com
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