China's Sinopec lifts margins

Shares of Sinopec are trading higher in Hong Kong on Monday Story Tools

BEIJING, China (Reuters) -- Chinese oil giant Sinopec Corp says its refining margins have improved compared to the first half of 2002, and expects its chemical division to return to profit this year on rising prices.

Refining margins averaged $3.80 to $3.90 a barrel in the first two months of the year, President Wang Jiming told Reuters in an interview Monday.

That is little changed from the second half of 2002 but above the average level of $3.48 in first-half 2002.

State-owned Sinopec Corp is Asia's largest refiner by capacity.

But Wang said the outlook for refining margins this year was not promising because international oil prices were likely to fall sharply after the end of a possible war in Iraq.

"Refining margins look good in the first half of this year but are expected to shrink in the second half because oil prices are likely to be weaker," said Wang, who was attending the annual session of the National People's Congress, or parliament.

"Oil prices, I think, should fall back after the war," he added.

Shares higher

On a day the Hong Kong market moved lower, shares in Sinopec Corp were up 2.88 percent at HK$1.43 in Monday afternoon trade. The stock had gained 11 percent in the past three months through Friday.

Wang said the utilization rate of its refineries is expected to increase to 84 percent in 2003 from 80 percent in 2002.

Sinopec is on track to achieve its target of cutting refining capacity by 11 million tonnes between 2001 and 2005, he said. It will have eliminated six million tonnes of capacity by the end of 2002.

The company plans to cut production costs by three billion yuan ($362.4 million) in 2003 compared to 2.5 billion yuan it cut last year, he said.

Wang also said he expects the company's chemical division to report a profit for 2003 on increasing product prices after a loss in 2002.

Sinopec, which has yet to report 2002 annual results, has said its chemical division had an operating loss of 476 million yuan in first-half 2002 due to a global cyclical downturn for the industry and increased imports by China since its entry to the World Trade Organization.

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