China may not subsidize oil refiners this year to compensate them for selling fuels at state-controlled prices, as it did in 2005 and 2006, a government official said.

 

Refiners benefited from oil prices in the first nine months of 2007 that were lower than a year earlier, National Development and Reform Commission Vice-Chairman Zhang Xiaoqiang said in Beijing yesterday. Zhang said he was expressing his personal views.

 

Bloomberg News reported China paid China Petroleum & Chemical Corp (Sinopec), 15 billion yuan (US$2 billion) in the past two years as compensation for losses caused by selling oil products at below-cost prices. The government increased fuel prices last month to encourage oil processors to bolster diesel and gasoline supplies.

 

"On a full-year basis, refiners' losses in the fourth quarter can be absorbed allowing them to break even," Zhang said. The commission is China's main economic planning body.

 

Shares in Sinopec, Asia's biggest refiner, fell 5.5 percent to HK$11.44 (US$1.47) in Hong Kong, the largest decline in a month. The shares in Shanghai dropped 4.1 percent to 22.07 yuan.

 

Sinopec said it lost 5.3 billion yuan from processing oil in the third quarter.

 

(Shanghai Daily December 14, 2007)