Top Asian oil refiner China Petroleum & Chemical Corp (Sinopec) said on Monday it will diversify production as it tries to mitigate the impact of rising prices.

The refiner said price increases will continue to strain its refining business and it expects global crude oil to hover at US$85 to US$95 a barrel this year.

Sinopec posted a 10.4 billion yuan loss in EBIT (earnings before interest and tax) for its refining business last year. That dragged down net profit growth 5.5 percent to 56.53 billion yuan.

Given refined oil's break-even point of US$76 a barrel, Sinopec Chairman Su Shulin told reporters in Hong Kong yesterday its refining business is under huge pressure, with the global price peaking at US$110 per barrel last year.

Wang Tianpu, the company's president, expects the oil price to stay high, at US$85 to US$95 a barrel, which is likely to hit the refiner hard.

Su said it's unclear whether the government will issue more price controls or subsidies to help its loss-making refining business. Sinopec received 7.4 billion yuan in government subsidies in the first quarter.

The refiner wants to boost production of high value-added oil and products under more lenient price controls such as diesel oil.

"We haven't heard about any new government subsidies," Su said. "But we'll make that information public as soon as we get it."

He said the company hasn't received any information about a rumored crude oil tax rebate.

But he noted inflationary pressure will make it difficult for the government to push forward refined oil pricing reform.

Su said the refiner is looking into possibilities abroad, but doesn't plan to buy overseas assets from its parent Sinopec Group.

He said the refining business loss won't affect dividends, with a payout ratio of no less than 40 percent.

Sinopec has natural gas reserves of 273 billion cu m, he said.

(China Daily April 8, 2008)