Sinopec projects continued growth in production and capacity

13-Apr-07

China Petroleum and Chemical Corporation (Sinopec), is one of the largest petroleum and petrochemical companies in Asia, the second largest crude oil and natural gas producer in China, and the largest refiner and marketer of refined petroleum products. The company is also the largest manufacturer and distributor of petrochemicals. Sinopec operates in four business segments: exploration and production, refining, marketing and distribution and chemicals. Sinopec (SNP) reported strong operational results for 2006 mainly due to an environment that supports its continued upstream production growth and downstream capacity expansion, along with projected benefits from possible price reform for refined products in China. Sinopec's downstream operations are primarily located in China's prosperous and fast-growing coastal provinces, which it has further strengthened by lowering costs, increasing refining capacity, and converting coastal refineries to handle imported sources of crude varieties. This has positioned the company to benefit from the continued growth in Chinese refined-product consumption levels. Sinopec remains well positioned to benefit from China's strong economic growth and has the most balanced petrochemical business in China. The company's reported stable growth in 2006. However certain factors could affect the growth of the company ¢ Rising competition from overall integrated petroleum and petrochemical companies in China's market. ¢ Sensitivity of sales to the availability and prices of feedstock and general economic conditions since a major chunk of income is attributable to crude oil prices refined petroleum products and petrochemical products. ¢ Government regulations that will influence the company's activities by determining retail prices of refined products, import and export quotas, right to explore and produce crude oil and natural gas. ¢ The special oil income duty when crude oil price will exceed to US$40 per barrel, is bound to adversely affect the company.