Sinopec Zhenhai Refining & Chemical Co (中國石化鎮海煉油化工), which runs China's largest refinery, processed 4.4 percent more oil in the first half of the year to meet demand. Soaring oil prices are cutting profit from making fuels and chemicals, the company said.
Sinopec Zhenhai turned 8.47 million metric tonnes of oil into fuels such as gasoline and diesel from January through June, the company said in a statement yesterday. The price of oil in New York rose 30 percent during the same period, compared with a 21 percent gain in China's fuel prices.
"The company will face tremendous pressure on its production operation, given that international crude oil prices may continue to rise in volatility. The cost of crude oil processing will be pushed up," the refiner said.
Rising oil prices are reducing Sinopec Zhenhai's refining margin, the profit the company makes on each barrel of oil it processes. Oil reached a record US$67.10 a barrel on Aug. 12, the highest intraday price for the contract nearest expiry since the futures began trading on the New York Mercantile Exchange in 1983. Oil prices have surged 50 percent this year.
First-half profit fell 1.2 percent to 1.26 billion yuan (US$155 million) from a year earlier at the unit of China Petroleum & Chemical Corp (
Sinopec Zhenhai's shares were unchanged at HK$8.50 by the Hong Kong market's 4pm close.
The company limited the gain in oil costs in the first half of the year by increasing the use of cheaper oil with a higher sulfur content by 16 percent, the statement said.
The refiner processed 6.41 million tonnes of oil with a higher sulfur content, accounting for 77 percent of the first-half total.
"We need to try to use more higher-sulfur crude to mitigate the rising costs," Sun said.
The use of crude oil with a higher sulfur content may account for more than 77 percent of total processing in the second half the year, chairman Sun Weijun (孫偉君) said yesterday.
Sinopec Zhenhai plans to process 8.7 million tonnes of oil into fuels in the second half of the year, the company said.