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Sinopec profit nearly doubles in biggest gain

CHINA Petroleum and Chemical Corp's earnings almost doubled in the fourth quarter last year, the biggest gain since 2007, as plunging crude oil prices boosted Asia's top refiner, and it expects net profit to continue to grow more than 50 percent this quarter.

The firm, also known as Sinopec, is confident its earnings would grow after the Chinese government implemented a new fuel pricing system that guarantees profit margins for refiners. Sinopec's net profit for October to December rose to 13.3 billion yuan (US$2 billion) from 6.71 billion yuan a year earlier, according to its 2008 results. New York crude futures plunged 65 percent from US$147 a barrel in July, a record high.

China in late December introduced a new pricing mechanism to link fuel prices to international levels more closely and to ensure a "reasonable" refining margin. The government has made two cuts and an increase since then.

The firm's full-year earnings fell 47.3 percent to 29.8 billion yuan, beating analyst forecast of 23.53 billion yuan in a Thomson Reuters poll. Still, the annual drop was its first in seven years.

Unlike PetroChina Co, which is keeping its capital budget this year basically flat with last year's, Sinopec said its capital spending will rise 4.2 percent to 111.8 billion yuan.

Sinopec's operating loss in the refining segment widened to 61.5 billion yuan last year, from 10.5 billion yuan in 2007. It received 50.3 billion yuan in government subsidies last year for its refining loss.

Operating profit in oil and gas exploration and production rose 36.5 percent to 66.6 billion yuan. But the chemical division made an operating loss of 13.1 billion yuan, versus a profit of 13.3 billion yuan in 2007.

"Sinopec's refining business could turn to profit in 2009, but the chemical segment would find it hard to make money," Haitong Securities analyst Deng Yong said.


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