BEIJING (Reuters) - China Petroleum and Chemical Corp, or Sinopec Corp (SS:600028) (HK:0386), reported a 24.7 percent drop in earnings in the first half of 2019 on Sunday, dampened by rapid growth of domestic refining capacity and waning demand for refined products.
Sinopec, Asia's largest refiner, posted a net profit of 31.34 billion yuan ($4.42 billion) in the first six months of the year under Chinese accounting standards.
That put the profit in the April-June period at 16.58 billion yuan, up from 14.76 billion yuan in the first quarter but down 27% year-on-year, according to Reuters calculations based on company statements filed with the Shanghai Stocks Exchange.
Revenue in the first six months rose 15.3% from a year ago to 1.5 trillion yuan, the company said.
"Domestic demand of refined oil products continued to grow in the first half of this year (but) competition in the market was extremely fierce with ample supplies," Sinopec said in a statement.
Refining margins at Chinese refiners were cut after the start-up of two mega-sized plants, Hengli Petrochemicals (SS:600346) and Zhejiang Petrochemical, with combined capacity of nearly 800,000 barrels per day.
However, demand for refined oil products, especially gasoline and diesel, were tepid amid stagnating car sales and an economic slowdown.
Some fuel producers were forced to make extended curbs to their output as profit margins fell into the red.
Average profit margins of oil refining at Sinopec were reported to be 383 yuan a tonne in the first half of 2019, down 161 yuan a tonne, or 29.6% year-on-year.
Oil throughput at Sinopec was at 123.92 million tonnes in the reported period, or about 5 million bpd, up from 4.87 million bpd in the first half of last year.
The company said it produced 141.68 million barrels of crude oil, down 1.4% on year, and 509.5 billion cubic feet of natural gas, up 7% from the same period last year.
Sinopec plans to further boost its oil and gas exploration and development in the second half of this year by building oil production capacity in the Shunbei block in the northwestern region of Xinjiang and an offshore block in the Shengli oilfield. It also plans to speed up gas production capacity in Sichuan and Inner Mongolia.
Sinopec expects to produce 142 million barrels of crude oil, with 17 barrels from overseas fields, and 507 billion cubic feet of natural gas in the second half of 2019.
It also plans to process 124 million tonnes of crude oil in the July-December period.
"We will accelerate construction of advanced capacity ... and improve production plans of low-sulphur bunker fuel to lower our output cost," it said.
Sinopec said last year it would start supplying low-sulphur fuel in 2019 and all of its supplies would meet a 0.5 percent sulphur content cap in shipping fuel set by the International Maritime Organisation before it comes into effect on Jan. 1, 2020.