China Petroleum and Chemical Corporation (Sinopec), Asia's largest refiner, said its net profit for the first quarter would fall by 50 percent from a year earlier.
"Sinopec has seen big losses in its refining business this year, which has led to sharp decrease in net profit," the company said in a statement yesterday.
Last year, the company's net profit for the first three months was 19.42 billion yuan.
The gap between high crude oil prices on the international market and government-controlled refined oil product prices domestically has caused big losses for Chinese refiners.
Sinopec is expected to see 16 billion yuan in losses in its refining business in the first quarter, Liu Gu, an energy analyst with Guotai Jun'an Securities in Shenzhen, told China Daily.
Since April 1, the country's two largest oil companies, Sinopec and PetroChina, are being subsidized for their losses in oil processing, according to the two companies.
The government will give "appropriate monthly subsidies" to the two oil companies, statements from PetroChina and Sinopec said yesterday, without elaborating. Both declined to make any further comment.
The Ministry of Finance last week said the government would refund value-added taxes on gasoline and diesel imported by Sinopec and PetroChina in the second quarter.
Value-added taxes on 500,000 tons of gasoline and 1 million tons of diesel imported by PetroChina between April 1 and June 30 this year will be refunded. The government will also return to Sinopec taxes collected on imports of 500,000 tons of gasoline and 1.5 million tons of diesel in the same period, said a statement of the Ministry of Finance.
Analysts said the 17 percent tax rebate would mitigate to some extent the refining losses of the two companies.
Earlier media reports had said the country is working to grant a hefty tax rebate on crude imports to help domestic oil firms limit their refining losses.
Source: China Daily