China's oil refining industry registered a loss of about 30 billion yuan (3.7 billion US dollars) in 2005, a sharp contrast to the 20.8 billion yuan in profits in 2004, according to sources with China's State Development and Reform Commission.

The development of China's oil refining industry has witnessed tension between oil demand and straining supply as well as a steady increase of output in 2005, impacted by domestic and international factors.

The refining capacity of the whole industry in 2005 reached 328 million tons, an increase of 14 million over the same period of 2004. About 286 million tons of crude oil were processed last year, 17.6 million tons more than that in 2004, according to the commission.

Last year the two leading refineries, China National Petroleum Corporation (CNPC) and China Petroleum and Chemical Corporation (Sinopec) operated with their production overloaded more than 95 percent, the commission said, while less than 60 percent of local refineries have been made full use of.

The commission said that in 2005 China's oil supply met its demand on the whole. The glancing demand of processed oil in the domestic market stands at 168 million tons, while the domestic output of processed oil hit 175 million, with 10 million for exports. A total of 3.6 million tons of processed oil was imported last year.

Combined factors like an incomplete price mechanism of processed oil, scant use of local refineries and the typhoon Maisha and railway accidents, hindering the transportation of oil from the north to the south, led to an "oil crisis" in some cities in southern Guangdong Province in 2005, resulting in a sharp decrease of profits for the oil refinery industry.

The sharp decrease also led to the further expansion of China's oil trade deficit. In 2005, China imported 165 million tons of oil, almost the same as in 2004. Yet due to the soaring oil price, the imports cost more than 60 billion US dollars, an increase of 32 percent year-on-year.

Last year, 25 million tons of oil were exported, bringing in foreign exchange of 10 billion US dollars, up 22 and 68 percent respectively year-on-year. For the first time, the trade deficit reached 50 billion US dollars, an increase of 25 percent from the same period in 2004.

Source: Xinhua