A mining truck carries a load at Syncrude Canada Ltd's oil sands North Mine in Fort McMurray, Alberta, Canada earlier this year. The Syncrude Project is a joint venture between Canadian Oil Sands Ltd, Imperial Oil Ltd, Mocal Energy Ltd, Murphy Oil Company Ltd, Nexen Inc, Sinopec and Suncor Energy Inc. Jimmy Jeong / Bloomberg News

China Petroleum & Chemical Corp (Sinopec) reported increased profits for the first half of the year along with plans to expand operations in Latin America and Africa.

Sinopec said on Sunday a 6.7 percent increase in net profits for the first half of 2010 to 35.46 billion yuan thanks to higher oil prices and stronger fuel demand.

However, the increase in crude costs in the first quarter outpaced the hike in the country's oil product prices, crimping the company's refining margins. Net profit of Sinopec's refining business slumped 71 percent to 5.69 billion yuan in the first half from a year earlier as gross margin from refining a ton of crude fell 45 percent to 237 yuan.

Sinopec, Asia's largest crude refiner by capacity, said during a media briefing to announce its results Monday that it is studying acquisition opportunities to diversify its business portfolio and enhance the oil exploration and production operation to counter risks faced by its refining business.

The refiner is currently in talks with companies in Brazil to collaborate on onshore and offshore projects, Chairman Su Shulin said without elaborating.

"There are many acquisition opportunities out there but good ones are quite few," Su said.

The company is also talking with Hong Kong-listed China National Offshore Oil Corporation for possible cooperation in Brazil but there had been no substantial progress in this effort.

Sinopec is cautious when evaluating takeover opportunities, Su said, adding that many potential acquisitions are too expensive.

In March, Sinopec agreed to acquire a stake in an Angolan oil field from its parent China Petrochemical Corp for $2.5 billion.

Earlier reports citing Uganda's ambassador to China said Sinopec plans to start negotiations with local governors in September to establish an oil refinery in the African country.

Su also said that the National Development and Reform Commission (NDRC) is reviewing the mainland's oil-product pricing mechanism, which has led to as many as 10 adjustments in the price of oil since last year.

The top executive said he knows of no concrete timetable for any revisions to the current mechanism but is optimistic that any modification will be "conducive to the development of the oil refining sector".

Currently, price adjustments on domestic oil products are triggered when the 22-day moving average of changes in the international crude price rises above 4 percent.

The NDRC lifted oil product prices in April and profits from the company's refining business appeared to be recovering in the second quarter and in the past two months.

"Sinopec's refining margins in July and August stand at the second-quarter level of around $5 a barrel," president Wang Tianpu told reporters at the same media briefing, adding that the company is also planning commercial crude oil storage tanks in the country's central, northern and southern regions as part of a plan to build 30 million cubic meters of commercial storage.

Sinopec aims to produce 42.55 million metric tons of crude oil this year, said its chief financial officer Wang Xinhua.

Wang said the company also plans to produce 12 billion cubic meters of natural gas in 2010, a 42 percent increase over last year.

China Daily

(HK Edition 08/24/2010 page3)