Sinopec Asks Government for Oil Imports Tax Holiday

By Wang Ying and Winnie Zhu

Oct. 30 (Bloomberg) -- China Petroleum & Chemical Corp., Asia's biggest oil refiner, said it asked the government to suspend taxes levied on the imports of crude oil and fuel to help boost profits.

If the exemptions were approved by the government, the changes will be reflected in the next-quarter report, Chief Financial Officer Dai Houliang said in a conference call today.

The Beijing-based oil company was paid state subsidies of 45.1 billion yuan ($6.59 billion) for selling fuel at below crude-oil costs for the first nine months. Its net income fell 67 percent for the period because government caps on fuel prices prevented it from passing on higher oil costs to consumers, Sinopec, as China Petroleum is known, said yesterday.

The refiner's crude costs were about $113 a barrel in the three months ended Sept. 30, Dai said today. Benchmark oil prices in New York were 57 percent higher in the third quarter from a year earlier and touched a record $147.27 a barrel on July 11.

Sinopec shares rose 17 percent in Hong Kong to HK$5.15, the biggest gain in more than two weeks. The stock has fallen 56 percent this year, compared with a 48 percent decline in the benchmark Hang Seng Index.

The Chinese government paid Sinopec and its bigger rival PetroChina Co. rebates of 75 percent on the 17 percent value- added tax levied on crude imports in the second quarter. The amount of subsidy Sinopec received in the third quarter for crude imports is less than that for the previous three months, Dai said in August.

Capex Reduced

Sinopec will cut its 2008 capital expenditure by 8.2 billion yuan due to ``severe operating pressure'' and ``cash flow constraints,'' Chairman Su Shulin said on Aug. 26.

The company will stick to its plan to cut spending and won't change its fourth-quarter expenditure budget, Dai said today.

Dai said the company's refining business ``has already reversed from losses based on current crude oil and domestic fuel prices'' and he didn't say if Sinopec will continue to receive state subsidies in the last three months of this year.

China's 2009 petrochemical demand growth will be lower than the previous years as the economy slows, Dai said.

China raised the prices of gasoline, diesel and jet fuel by at least 17 percent in June. Sinopec hasn't received notice of further price changes from the government, according to Dai.

To contact the reporters on this story: Wang Ying in Beijing at ywang30@bloomberg.net; Winnie Zhu in Shanghai at wzhu4@bloomberg.net