SHANGHAI: China Petroleum & Chemical Corporation (known as Sinopec) says net profits in 2005 rose by 23 per cent on the year before, according to domestic accounting standards.

However, there was a huge increase in costs, and money passed on to shareholders was lower than that given out by other industry giants.

A newly discovered gasfield in Southwest China's Sichuan Province is not expected to have a big impact on the firm's financial dealings in the short-term, analysts said.

The firm, Asia's biggest oil refiner, said yesterday that net income last year rose to 39.6 billion yuan (US$5.0 billion).

Analysts said 70 per cent of that came from oil and gas explorations. The company's oil refining business is believed by experts to have incurred losses due to surging international crude oil prices.

Sinopec processed 139.9 million tonnes of oil in 2005, an increase of 5.26 per cent on 2004. Close to 1 million tons were imported.

The company reported a massive surge in purchasing costs, up by 47.2 per cent, because of rising prices of oil and other petrochemical raw materials.

Purchasing expenses accounted for 85.3 per cent of total operating expenses which stood at 765.7 billion yuan (US$94.53 billion), a rise of 37.5 per cent over the previous year.

Sinopec's profit distributable to shareholders based on international accounting standards rose to 40.9 billion yuan (US$5.1 billion), up 13.6 per cent. That was the lowest rise of China's three petrochemical giants, the other two being PetroChina and China National Offshore Oil Corporation (CNOOC).

The increases in distributable profits at PetroChina and CNOOC were 28.4 per cent and 56.9 per cent respectively, rising to 13.4 billion yuan (US$1.7 billion) and 25.3 billion yuan (US$3.2 billion).

Sinopec plans to pay a dividend of 0.09 yuan (US one cent) per share.

"PetroChina and CNOOC performed better because the two are less affected by surging international prices of crude oil. PetroChina produces more oil than it refines while CNOOC has no downstream operations in the petrochemical industry," said Shenyin Wanguo analyst Huang Meilong.

International oil prices surged and remained at high levels in 2005 for the third consecutive year. In the second half of the year, in particular, oil prices climbed to historical highs.

On August 30, 2005, WTI (West Texas Intermediate) crude oil prices on the New York Merchantile Exchange exceeded US$70, setting the record price of US$70.85 per barrel.

China's domestic prices of processed oil have therefore been adjusted a number of times, yet analysts say they are still way below international prices.

Commercial production is ready to start in the new field in Sichuan, with annual output projected to reach 4 billion cubic metres by 2008 and 8 billion by 2010.

However, the gas field "will have little effect on the company's financial performance in the short term," Shenyin Wanguo's Huang said.

In comparison, an ongoing offer by Sinopec to its four A-share subsidiaries will help improve the company's financial position.

In February Sinopec announced its tender offer to acquire all tradable shares of Sinopec Qilu Petrochemical Co Ltd, Sinopec Yangzi Petrochemical Co Ltd, Sinopec Zhongyuan Oil & Gas High-tech Co Ltd and Sinopec Shengli Oilfield Dynamic (Group) Co Ltd, and all non-tradable shares of Shengli held by investors other than Sinopec.

The tender offer is expected to be completed on Thursday.

(China Daily 04/04/2006 page9)