Subsidy for Sinopec to boost 2007 profits

Sinopec will receive a government subsidy worth between US$2.75 billion and US$4.12 billion to offset losses sustained from low government-fixed fuel prices in China, the Wall Street Journal reported. An official from the state-owned energy giant acknowledged that its application for a subsidy was approved, but said the amount has not been finalized. Sinopec has receieved a subsidy in each of the last two years, but this year’s payment surprised analysts, who believed Beijing’s 10% hike in gasoline, diesel oil and aviation kerosene prices would be enough to keep its refineries profitable. Sinopec’s refineries posted an operating loss of US$729 million in the third quarter of 2007, but the company was kept in the black by its earnings from its chemical and marketing segments.