Sinopec Reports 20 Percent Increase in Net Income for Q3

Michael Teague  |

Sinopec Shanghai Petrochemical Co. Ltd. ($SHI), otherwise known as Sinopec, is publicly traded on the New York Stock Exchange as the 13th-largest oil and gas refining and marketing company, with a valuedof $2.75 billion.

It also happens to be one of China’s largest oil companies, and it watched shares climb higher in Wednesday trading after opening up its income statement for the recently ended third quarter showed a huge jump in net income and seemingly validated recent changes in government policy towards State-owned energy companies.

Sinopec, often referred to as China Petroleum, saw net income up 20 percent to $3.6 billion dollars in the third quarter. Furthermore, the company said that for the first nine months of the year, it had turned around all of the prior year’s losses resulting from a refinery expansion project that was finished and operable by the end of 2012, and that has increased Sinopec’s processing capacity.

The news is perhaps more significant because Q3 profits for the company were boosted by higher fuel prices, a move that resulted from newly implemented regulations for Chinese businesses. Rules implemented in March have allowed the company the possibility of “taking advantage of the newly promulgated pricing mechanism for refined products,” according to a statement, part of the government’s efforts to get its own fuel prices more aligned with international prices.

Furthermore, Premier Li Keqiang is expected to further reduce the Statism under which Chinese businesses have had to operate up until now that would allow a larger role for private investment from foreign oil companies. For the time being, China still relies on coal for well over half of its power and energy supply, and even though the country sits on the world’s largest reserves of shale gas, its oil companies do not have the technical know-how required in order to bring it up from underground. It is hoped that Chinese oil companies will benefit from the involvement of foreign concerns by gaining access to their experience and technology.

Shares for Sinopec were up 1.75 percent to $38.90 per share in afternoon trading.

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