Will CNPC and Sinopec’s further applications for **subsidies succeed? The answer will become clear in the near future

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Given the expected continued losses in the refining sector this year, as well as imports of refined oil that result in losses amounting to hundreds of thousands of tons, officials from Sinopec (600028) and CNPC (601857) said that the companies are reporting the actual situation of these policy-related losses to **. “The next one or two weeks will be a critical period to determine whether the government will provide subsidies,” said a Sinopec official. The central government introduced subsidy policies twice, in the year before last and last year; Sinopec received one-time subsidies of 10 billion yuan and 5 billion yuan respectively. There are disagreements regarding subsidies; industry experts hold different views on whether Sinopec will continue to receive financial subsidies. Industry experts point out that since the policy-related losses this year occur not only in the refining sector but also in the import of refined oil products, in addition to the possibility of continuing to receive financial subsidies, oil companies might also get subsidies in the form of kickbacks or exemptions from tariffs on imported refined oil products. Those who hold a negative view argue that the degree of policy-induced losses in Sinopec’s refining sector is much lower than in the previous two years; a small amount of subsidy holds little significance, and **the prices of refined oil products were already raised significantly in November. A Sinopec official said that the profitability of the refining segment remained roughly unchanged in the first three quarters of this year, and given current oil prices, the losses in refining will be less than those in last year. Although CNPC is the second-largest refining company in China and a petroleum company with a relatively balanced upstream and downstream structure, it did not receive similar subsidies in the previous two years. Company officials explained that this depends on **how CNPC is positioned as a company; if it is seen as an enterprise focused on upstream activities, then the likelihood of receiving substantial refining subsidies is low. The same person also said that no notice has been received **regarding the issuance of oil refining subsidies at present. Industry experts point out that **raising the prices of refined oil products on November 1 did help address the losses in the refining sector; however, at the same time, international crude oil prices continued to rise fluctuantly, so this price adjustment was still not sufficient. Sinopec, which relies primarily on imported crude oil, has now locked in its annual crude oil import costs, and losses in the final quarter are almost certain. Import tariffs may be reduced. With refinery utilization rates already approaching their limits, Sinopec and CNPC incurred losses of hundreds of thousands of tons in refined oil imports during the final quarter of this year. By the end of November, China National Petroleum Sales Corporation had imported 410,000 tons of refined oil products. On December 8th and 9th, two more tankers carrying imported diesel fuel from China arrived in Zhuhai and Ningbo respectively, and the fuel they carried was put on the market. It is reported that another 9 oil tankers carrying over 300,000 tons of imported diesel will arrive in the country in the middle and late part of December. Since September, Sinopec has imported a total of 388,000 tons of refined oil products, including 90,000 tons of gasoline and 298,000 tons of diesel; 423,000 tons of diesel are scheduled to be imported in December. Industry experts estimate that as importations increase, the shortage of domestic oil products is expected to improve significantly by mid-December, but oil companies will have to bear losses of several hundred yuan per ton. Sources from China National Petroleum Corporation say that the losses associated with the import of refined oil are not as high as the market estimates of 1,000–1,500 yuan per ton; however, a price inversion does indeed occur, and in this regard, subsidies from ** are also sought. A Sinopec official said that the company has also submitted details regarding the import losses. Industry experts say it is not ruled out that **tariffs on oil imports could be reduced as a form of subsidy for oil companies, but this would also be a temporary measure. Currently, the import tariff on crude oil in the country is 0, while the import tariffs on gasoline and diesel are 5%-6%. (Reporters: Zhang Nan, Jiamu) Source: China Securities Journal