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Profit at China’s Sinopec Slumps 21.6% in First Half

A Sinopec gas station stands in front of a Sinopec oil refinA Sinopec gas station stands in front of a Sinopec oil refin
State-owned companies like oil refiner Sinopec have had miserable returns in recent years.Kevin Lee/Bloomberg—Getty Images

China Petroleum and Chemical Corporation, or Sinopec Corp, said on Sunday its net profit fell 21.6% in the first half of 2016, hurt by a steep decline in international oil prices.

The state-controlled energy firm, Asia’s largest refiner, said in a separate statement that Dai Houliang had replaced Li Chunguang as company president and become vice chairman of the board. It said Chunguang had resigned due to his age.

During the first six months of the year, Sinopec posted a net profit of 19.9 billion yuan ($2.98 billion), down from 25.4 billion yuan a year earlier.

Sinopec’s peers PetroChina and CNOOC Ltd , both heavy on upstream oil and gas production, were hit badly by falls in crude oil and natural gas prices.

Sinopec’s operating income in the first half was 35.1 billion yuan, according to IFRS accounting standard, 13.3% lower than a year ago.

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The refiner said its oil and gas output fell 6% in the first six months on-year, with crude oil production down 11.4%, as it was forced to cut output at loss-making fields.

While fuel demand growth in China, the world’s second-largest consumer, moderated along with the broader economy, domestic competition heated up after more than a dozen independent refineries were allowed to import crude oil for the first time since late 2015.

As these independents boosted refinery throughput, state majors came under pressure to reduce operations.

Sinopec said its first-half refinery operations fell 2.51% on-year. The firm, however, boosted total domestic refined fuel sales by 3.1%.

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“China’s economic growth is expected to be steady in the second half of 2016, which will drive the growth of domestic demand for refined oil products and petrochemical products,” the company said in a statement,

It added, however, that over-supply in the international oil market is likely to persist and international oil prices will remain low.

“The consumption mix of oil products shall continue to change, and demand for chemical products shall be gradually going for more high-end products,” the company said.

It said it plans to produce 147 million barrels of crude oil, of which domestic production will account for 125 million, in the second half of 2016.