Sinopec, Asia's top refiner, has called for a more market-oriented oil pricing mechanism in 2007 after struggling last year to refine more oil at higher cost for local consumption.

"A more market-based fuel pricing system will certainly benefit our business by smoothing our operation," Huang Wensheng, spokesperson for Beijing-based Sinopec, told China Daily yesterday.

Related readings:  Oil price to stay high in 2007  Domestic jet fuel surcharge to be cut  Oil companies at the dawn of competition  PetroChina output up 5.2 percent  Oil price cut, but not taxi fares

"I do not believe timing is the priority in making the decision, but the determination of the authority is," he said. Because pricing is government-controlled rather than market-driven, Sinopec witnessed a huge refining deficit in 2006 due to a soaring crude import cost and the low price of refined oil sold domestically.

As a result, the refiner recently received State compensation of 5 billion yuan as it continues shouldering responsibility for processing crude oil to meet robust local demand.

In a public statement yesterday, Sinopec announced it processed 146.32 million tons of crude in 2006, up 4.56 percent over the previous year. Oil products Sinopec delivered to the market reached 111.68 million tons last year, growing 6.81 percent over 2005.

"The output volume unveiled is in line with our original plan. Despite the heavy loss, we still manage to refine more oil and to source from third party suppliers for rising local consumption," Huang said.

Sinopec's output is higher than many analysts expected given the huge deficit triggered by surging global oil prices last year, Liu Gu, a senior energy analyst with Shenzhen-based Guotai Jun'an Securities (Hong Kong) Ltd, told China Daily. He expects a positive market reaction to the listed refining giant's output announcement.

1

2

(For more biz stories, please visit Industry Updates)