Sinopec May Post Loss on Tax Refund, Goldman Says
China Petroleum & Chemical Corp. may post a loss in the third quarter of this year if the country scraps a 75 percent refund on oil import taxes paid to the company and PetroChina Co., Goldman Sachs Group Inc. said.
The management at Sinopec, as Asia’s largest refiner is known, has indicated the state hasn’t made a final decision on the compensation, Goldman analysts wrote in a report today.
Analyst and media reports suggest China may end oil-import subsidies to state refiners beginning July after last month’s fuel price increase. China has paid subsidies to Sinopec and PetroChina for crude imports on a monthly basis since April to pare losses from selling gasoline and diesel below cost as crude-oil costs climb to records.
“After checking with Sinopec’s management, we understand that Sinopec is still negotiating with the government on the crude oil imports VAT refund,”Goldman said.
Huang Wensheng, Sinopec’s Beijing-based spokesman, wasn’t immediately available to comment. PetroChina hasn’t received any notice on a cut in the refund, Beijing-based spokesman Mao Zefeng said today, declining to comment further.
Sinopec fell 2.8 percent to close at HK$6.84, the lowest in more than two months. PetroChina declined 3.2 percent to close at HK$9.55 in Hong Kong.
Crude oil, which has more than doubled in the past year, reached a record $145.09 a barrel in New York today.
Price Increases
In place of the tax assistance, China may increase fuel prices further and continue cash subsidy payments first made to Sinopec in 2005, the Goldman analysts said.
China increased gasoline and diesel prices by as much as 18 percent on June 20 to help refiners and encourage energy efficiency. The government controls fuel costs to limit their impact on inflation in the world’s most-populous nation, curbing refiners’ ability to pass on higher raw-material expenses.
China paid Sinopec about 7 billion yuan ($1 billion), or between 600 and 700 yuan for each ton of crude oil imported in April as compensation for selling fuels below cost in the domestic market, a company official said in May.
Sinopec loses about 3,000 yuan on each ton of oil products it makes because of record crude prices, spokesman Chen Ge said May 26.
Tags: crude-oil, Fuel, PetroChina, Petroleum, Sinopec