Refinery income helps Sinopec defy oil slump

China Petroleum& Chemical Corp employees inspect natural gas pipelines in Zibo, Shandong province. Sinopec's profit jumped to $1 billion during the first quarter of this year. [Photo/CFP]

Energy giant China Petroleum & Chemical Corp, better known as Sinopec, has defied global low oil and gas prices, as it saw a 206 percent surge in net profit due to its refining margins during the first quarter of the year.

Net profit jumped to almost $1 billion during the first three months, a huge improvement compared with an 84.6 percent drop logged in the same period last year.

Revenue at Asia's biggest oil refiner grew 153.4 percent to 13.1 billion yuan, compared with a 79.2 percent fall in the first three months of 2015.

The company said the rising profit from its oil-refining activities had offset losses from its upstream businesses such as oil exploration and production－conditions also hitting many of its rivals hard after falling oil prices wiped out gains.

China National Petroleum Corp fell into a net loss of 13.8 billion yuan ($2.13 billion) in the quarter, from net profit of 6.15 billion yuan during the same period last year, according to a filing to the stock exchange in Hong Kong.

It was the company's first net loss since listing in the Shanghai bourse in 2007.

China National Offshore Oil Corp, the country's top offshore oil and gas producer, also reported lower revenues for the period, citing the sharp decline in international oil prices.

Lin Boqiang, director of the China Center for Energy Economy Research at Xiamen University, said that CNPC and CNOOC, which are heavily dependent on their struggling upstream businesses, were hit the most by low crude prices.

For petrochemical companies such as Sinopec, however, he said falling oil prices lowered the cost for refining, bringing higher returns.

He now expects prices to rise after two years of falls, as the global oil glut is gradually eased.

"For one thing, producers are pulling back or writing off investment in response to lower prices," he said. "On the other hand, once global demand outpaces supply, it's only a matter of time before prices recover."

With current oil prices just above $40 a barrel, Lin predicted that as long prices continue rising, results of "three barrels of oil three oil majors (trio)" in the second quarter "will certainly be better".

"There are signs of a price rebound as production declines in the United States and producers cut output. I see no reason why the oil prices cannot rise to $50 a barrel by the end of this year," he said.