CRUDE oil producers in China may feel a pinch this year after experiencing a fast growing 2006, though industry fundamentals still prevail and the refining sector is set to recover on changes to the fuel pricing mechanism.　

Last year, the country's oil and petrochemicals industry rose 17.9 percent to 434.5 billion yuan (US$55.7 billion), although refineries still posted a loss as the government caps prices for refined oil products including gasoline and diesel.

Chinese oil producers had better earnings last year compared to 2005. He also said this year would likely not be as good as 2006 due to lower international oil prices and a windfall tax.

The impact has already been noted in the 2006 earnings figure reported by China National Petroleum Corp, parent of overseas listed PetroChina Co. China's largest oil producer had a pretax profit of 185.6 billion yuan last year, up 4.9 percent year on year. This growth rate is compared with a 40 percent increase in the first half and a 37 percent expansion in 2005.

Crude rates have fallen from a record high of US$78 per barrel recorded in July to a bit below US$60. Crude traded around US$51 early last month, the lowest since June 2005. Brokerage CLSA Ltd has estimated crude prices to average US$60 a barrel this year, fluctuating between US$55 and US$65.

CNPC paid a total of 28.98 billion yuan in windfall tax on crude oil sales in 2006 as it pumped a record amount of oil. The levy was introduced last March as the government tried to set up a subsidy system that could fund the poor - farmers, fishermen and those in the transport sector - who are hit the hardest by rising fuel prices.

Oil produced and sold in China is subject to a tax of 20 to 40 percent on the portion of the price above US$40 a barrel.

Source:未知