BEIJING -- China Petrochemical Corp (Sinopec), Asia's largest oil refiner, started production at its new Qingdao refinery on Monday, despite expecting to lose money from the plant.
The refinery is designed with a processing capacity of 10 million tonnes per year, the largest of its kind in the country, Tuesday's Shanghai Securities Journal reported.
The 12.5-billion-yuan ($1.8 billion) plant is expected to produce 7.08 million tonnes of refined oil each year with annual sales exceeding 40 billion yuan.
This would help ease the domestic fuel shortage and ensure supplies for the summer grain harvest, quake relief and Olympic Games, said market analysts.
However, the refinery was expected to lose money once it started operation because of the widening gap between the government-set prices of oil products and rocketing crude oil prices on the global market, according to the newspaper.
Sinopec was losing about 3,000 yuan for every tonne of oil refined with the international crude price hovering above $130 per barrel, said Chen Ge, secretary of Sinopec's board of directors.
The company took 7.4 billion yuan in subsidies in the first quarter to compensate for refining losses, but the firm claims this will cover only half its losses.
According to Sinopec first-quarter report, its refining business saw 20.64 billion yuan in losses in the first three months, compared with a profit of 4.38 billion yuan a year earlier.