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PetroChina asks for change in oil product prices, import taxes
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22:07, March 20, 2008

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PetroChina, the country's largest oil producer, said it hoped that the government would adjust refined oil product prices to reflect high world crude prices.

Jiang Jiemin, the chairman of PetroChina, told the Shanghai Securities Journal that the company had applied to the government for adjustments in refined product prices and lower import taxes on these fuels.

Jiang said such changes would be in line with the global trend and the country's effort to launch a market-based oil pricing mechanism.

World oil prices hit 111 U.S. dollars (777 yuan) per barrel on March 17 but domestic prices are only about 68-70 U.S. dollars per barrel. Domestic oil refiners have lost money because they can't pass on high world prices to consumers, since the government controls domestic prices for gasoline and other refined products.

PetroChina said it could break even when world prices are about66-67 U.S. dollars per barrel. The company has an annual loss of 3.24 billion yuan for every dollar that the price rises, said Jiang.

PetroChina's request follows Sinopec's move to raise some prices on its oil products over the weekend to offset record international crude prices.

Sinopec and PetroChina applied for government for subsidies at the end of 2007. Sinopec said it had received 12.3 billion yuan as of Thursday, but PetroChina hasn't received official approval yet.

Earlier this month, China's chief economic planning agency -- the National Development and Reform Commission (NDRC) -- urged oil refiners to stabilize prices to help curb inflationary pressure.

China has adjusted refined oil prices nine times since 2005. The latest move was in October, when the prices of gasoline, diesel oil and jet fuel each rose 500 yuan per ton.

Zhang Baoguo, vice-minister in charge of the NDRC, said that the country was awaiting the right opportunity to adjust its energy prices. "When and how to integrate domestic and international prices is a really complex issue. It is difficult to set a timetable," said Zhang.

Zhang Liqu, a researcher from the development research center of the State Council, echoed that view, saying that the government should make careful plans for energy price integration or serious problems would arise.

"If oil in the domestic market continues to be priced at a low level, oil resources will certainly flow to overseas markets and shortages in some parts of the country will worsen," he said.

Recent reports tell of new oil shortages in some southern areas such as Guangdong, Guangxi, Yunnan and Hainan.

Despite its losses in the refined oil business, PetroChina's net profit hit 145.6 billion yuan in 2007, up 2.4 percent year-on-year, with earnings per share of 0.81 yuan.

Total output of crude oil and natural gas was 1.11 billion barrels of oil equivalent, up 4.8 percent year-on-year.


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