China Petroleum and Chemical Corporation (Sinopec), the country's largest oil refiner, said Thursday it has received 12.3 billion yuan ($1.7 billion) in government subsidies to compensate for losses incurred through government price controls.

The funds comprise 4.9 billion yuan to be counted in 2007 income and 7.4 billion yuan in the first quarter of this year.

"This will be good for the company's 2007 annual profit as well as the profit in this year's first quarter," said a source within the company. Sinopec's annual report is to come out in next few days.

Although government subsidy will compensate for the company's losses to some extent, it cannot tackle the problem at the root, said market analysts.

Chinese oil refiners have suffered losses as they have been unable to pass on surging international crude oil prices to customers because of the government's control on domestic oil prices for gasoline and other refined oil products.

Sinopec suffered "extremely heavy losses", said Zhou Yuan, vice chairman of Sinopec. The company lost 2,000 yuan for every ton of gasoline sold when international crude prices stood at $100 per barrel.

The financial situation worsened in the second half last year due to the onset of severe winter weather and other factors.

To ease the oil shortage in some parts of the country, Sinopec had imported 60,000 tons of gasoline and 800,000 tons of diesel oil, and stopped oil exports, said Zhou.

Sinopec and PetroChina, China's largest oil producer applied to the government for subsidies at the end of 2007, but the latter has not received official approval yet.

It is the third government subsidy payment for Sinopec. The government gave it a subsidy of 5 billion yuan last year and 10 billion yuan in 2005 to compensate it for losses incurred from low domestic refined oil prices.

Sinopec, which lists in Shanghai, London, New York and Hong Kong stock exchanges markets, is Asia's biggest refinery by output. It takes 80 percent of China'a imported crude oil and produces 70 percent of the country's refined oil.

Its stock climbed 2.61 percent or 0.35 yuan to close at 13.75 yuan in last trading day on Shanghai Stock exchange.

Sinopec Shanghai Petrochemical Co Ltd (SPC) at the same time received 341.2 million yuan in subsidies for losses caused by soaring oil prices and rising refining costs.

Of the total, 93.9 million yuan will be taken in its 2007 accounts and the remainder will be booked in the first quarter of this year.