China Gives Sinopec $1.2 Billion To Cover Rising Oil Costs

Asia's largest oil refiner, Sinopec Corp, said Dec. 28 it will receive a one-off 9.42 billion yuan (US$1.2 billion) government subsidy to compensate for losses caused by tight caps on domestic oil product prices. The government subsidy will be split among the listed arm of Sinopec, China Petroleum Chemical Corp (Sinopec), and three other Sinopec subsidiaries. The company said the subsidy was a one-off payment to deflect the impact of sharply higher crude oil prices.

The move, which sent Sinopec group stocks higher in Hong Kong and mainland China, was widely seen as a sign that Beijing wants to ensure steady supplies of gasoline and other refined products. Sinopec said the subsidy, which will come directly from the finance ministry, will help offset costs but not eliminate its additional financial burden.

Analysts said the decision was also aimed at ensuring sufficient supplies of gasoline after shortages emerged earlier this year.

Some analysts said that the shortages -- as gas stations in some parts of the country ran out of petrol -- were the result of refiners deliberately holding back their products from the market because of low prices. "I think it is a precautionary measure to avoid petrol shortages from recurring next year," said Wen Jiebin, an analyst with Sanyi Securities in Beijing.

Copyright Agence France-Presse, 2005

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