CHINA Petroleum & Chemical Corp, the nation's biggest refiner, is losing about 3,000 yuan (US$430) on each metric ton of oil products it makes because of near-record crude oil prices.

Government assistance to compensate the refiner for selling fuels at below cost covers less than half of its losses from turning crude oil into gasoline and diesel, Chairman Su Shulin said in Beijing yesterday.

China controls fuel prices to limit their effect on inflation in the world's most-populous nation, reducing refiners' ability to pass on higher oil costs. The state has paid rebates on crude oil and oil-product import duties and gives Sinopec monthly subsidies toward rising raw-material costs., Bloomberg News said

"Government assistance will help to a certain extent, but will not solve the fundamental problem," Su said at the firm's annual general meeting.

Crude oil prices, which have doubled in a year, rose to a record US$135.09 a barrel in New York last Thursday. Sinopec fell for a third day in Hong Kong trading, slumping 1.1 percent HK$7.16 by the market's midday break. The stock has dropped 40 percent this year, the second-worst performance of the 43 companies in the benchmark Hang Seng Index.

It is "hard to say" when the state may allow diesel and gasoline prices to rise, Su said. Inflation that is running near a 12-year high, the Beijing Olympic Games that open on August 8 and the impact of natural disasters are factors that may discourage the government from increasing fuel prices, he said.

Sinopec targets a 2-percent increase in crude oil production in China to 42 million metric tons this year, or about 840,000 barrels a day, Su said, in response to surging energy demand in the world's fastest-growing major economy.

To expand fuel supplies in central China, Sinopec plans to increase capacity at its Changling refinery in Hunan Province to 8 million tons a year, from 5 million tons now, Su said. He didn't say when the expansion may be completed.

Sinopec has no timetable for the potential purchase of overseas assets in the group from parent China Petrochemical Corp, he said.

An 8-magnitude earthquake struck southwestern China on May 12, killing almost 63,000 people, injuring about 360,000 and leaving almost 24,000 missing. The quake disrupted transport links and power supplies, increasing demand for diesel to fuel electricity generators.

China last week rejected as "baseless" talk that it may remove curbs on fuel prices as early as June.