PetroChina faces the prospect of losing about $18bn on its refining business if the price of crude oil remains at its present level, its chairman suggested on Wednesday. Chinese refiners have been unable to pass soaring oil prices on to consumers because the government imposes price controls on petrol and other refined products. Sinopec, China's second-biggest listed oil company, announced on Wednesday a $1.7bn hand-out from the government to compensate for its losses on refining, following smaller payments in 2005 and 2006. PetroChina receives no such subsidy because the increased revenue from its oil production as the price rises is deemed to be sufficient compensation. Sinopec has a much smaller up-stream business. However, the scale of the potential losses facing PetroChina is huge. Jiang Jiemin, the company's chairman, said the break-even point of the refining business was at about $66-$67 a barrel of crude. Every dollar higher than that, the business loses Rmb3.24bn ($458m) over a full year. So if oil were to stay at about $105 a barrel all year, the loss would be Rmb123bn, or about $18bn. A loss that size would have wiped out most of PetroChina's 2007 net profit of Rmb146bn. Last year, PetroChina's refining losses were much smaller, at just Rmb20.7bn, against Rmb29.2bn in 2006. Sinopec is facing similar pressures. Zhou Yuan, a vice-president, said when crude oil prices were at $100 a barrel, Sinopec lost about Rmb2,000 for each ton of petrol it produced. With production of 24.7m tonnes last year, its losses would run at a rate of Rmb49bn a year on its petrol output alone. Beijing was forced to raise petrol and diesel prices by almost 10 per cent last November, the first increase since May 2006, after the country was hit by mass fuel shortages. The government has been reluctant to relax price controls any further because of worries about rapidly rising inflation. At the time, many small independent refiners had opted to shut production rather than incur losses. PetroChina and Sinopec have both been buying up many of those refiners to sustain fuel production. Mr Jiang said: "We, together with the other Chinese oil companies, have expressed our proposals and opinions to the authorities about making adjustments to refined product prices.' However, he made it clear that if PetroChina was forced to make losses on its refining, it would do so. "We...have to shoulder some social responsibility, such as ensuring the supply of refined oil products in China. So when there is some conflict, some sacrifice will be required.' Price controls for refined products have helped keep China's demand for oil growing, while high prices have deterred consumers in developed countries. China is the second-largest oil consumer after the US. The International Energy Agency, the rich countries' energy watchdog, has forecast that China's demand for oil products will grow by 5.6 per cent this year to 7.96m barrels per day. Copyright The Financial Times Limited 2008