Industry profits in China's petrochemical sector have climbed by a robust 37.3 percent to reach 171.47 billion yuan (US$21.1 billion) in the first half of the year, according to the industry's watchdog.

"The main reason for the petrochemical industry's strong growth in the first six months are the skyrocketing oil prices on the world market," Yang Weicai, vice-chairman of the China Petroleum and Chemical Industry Association (CPCIA), told a petrochemical industry summit yesterday in Beijing.

Crude oil delivery prices in September rose to an all-time high of US$62.30 earlier this week on the New York Mercantile Exchange.

The high crude prices, Yang noted, have greatly boosted the upstream oil and gas exploration sectors, but squeezed the downstream sectors such as the oil refining business.

In an overall outlook, the country's 20,801 petrochemical producers turned over 1,527.3 billion yuan (US$188.3 billion) of petrochemical products from January to June, and sold 1,481.6 billion yuan (US$182.6 billion) for the same period, a 35.4 percent increase from last year.

China's oil and gas exploitation businesses have been the biggest beneficiary of the bearish crude oil prices, gaining a profit of 133.19 billion yuan (US$16.5 billion) in the six-month period, up 73.4 percent year-on-year.

According to the association's statistics, China yielded 89.8 million tons of crude oil in the first half of the year, an increase of 4.8 percent on the same period in 2004, the biggest jump since 2000. Its gas output also saw a year-on-year growth of 19.7 percent, reaching 23.85 billion cubic metres.

Industry analysts in the oil trade said that the surging crude prices, together with the country's increased oil stockpiles and slowed oil-refining business, have cut China's oil imports.

The Ministry of Commerce (MOFCOM) earlier this week predicted the country will need to import 130 million metric tons of crude oil this year, a year-on-year increase of just 6.5 percent from 2004.

In contrast, last year's imports of 122 million tons of crude oil represented a year-on-year rise of 34.68 percent from 2003.

CPCIA's Yang yesterday said China's oil storage by the end of June increased by 1.231 million tons from the beginning of the year, or 10.8 percent. The figure was calculated based on statistics from the country's three oil majors -- China National Petroleum Corp, Sinopec Corp and China National Offshore Oil Corp.

For the downstream sectors such as oil refining and chemical products, rising raw material prices have shrunk their profit margins.

Profits for the country's chemical sector in the first six months increased by 21.3 percent, compared with the 52.8 percent for the same period last year.

Because of the soaring crude prices and the government's restricted domestic refined oil pricing system, Yang said, China's oil refiners in the first half made losses of 6.09 billion yuan (US$750.9 million), compared with last year's 13.66 billion yuan (US$1.68 billion) profit for the same period.

These squeezed profit margins at China's oil refiners, experts said, have slowed growth in China's refined oil production.

CPCIA statistics show that China processed 145 million tons of crude oil into refined oils such as gasoline and diesel in the first six months of this year, up 7.9 percent year-on-year, compared with the 17.9 percent increase for the same period of 2004.

The country's refined oil storage by the end of June was reduced by 208,500 tons from the beginning of the year, a drop of 2.8 percent.

(China Daily August 5, 2005)