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Sinopec Corporation: Two Billion Yuan Question∗ - page 3 / 5

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Refining

Purchases

Volume (mill tons)

Segment

External

Price (RMB/ton)

1113

1825

1663

1574

Purchases

Volume (mill tons)

61.00

77.40

69.77

75.17

Sinopec, 1999-2002

27.41

27.19

31.27

28.98

1444

1664

1256

1189

4.50

4.90

4.74

6.55

3.9

24.7

23.2

14.8

58.9

49.0

53.8

16.5

14.1

15.0

5.2

6.7

6.4

0.2

0.0

0.0

80.8

69.8

75.2

Inter-

Exploration

segment

and

Sales

Production

External

Segment

Sales

6.1

1.4

2.1

5.9

69%

74%

69%

72%

31.8

28.4

24.4

27.1

1104

1745

1538

1517

Operating Profit (RMB bill)

2002 1360

Price (RMB/ton)

Volume (mill tons) Price (RMB/ton) Volume (mill tons)

Operating Profit (RMB bill)

1999

2000

2001

901

1640

1385

Inter- segment

Price (RMB/ton)

Percent of input from external suppliers

External suppliers

Imports PetroChina CNOOC Others Sub-total

Sinopec, Annual Reports, various years; PetroChina, Annual Reports, various years.

see E&P segment sales

PetroChina

Sources:

External sales

Unit sales (mill. Tons)

Price (RMB/ton)

In January 2000, the company revised its transfer pricing policy for crude oil such that “sales of similar grades of crude oil are to be made at substantially the same prices as those for external sales of the same products” (Sinopec, 2000 Annual Report, page 29). Accordingly, the exploration and production segment’s price for inter-segment sales leapt from RMB 901 per ton in 1999 to RMB 1640 per ton in 2000. Meanwhile, it received an average price of RMB 1664 from selling 4.90 million tons to external customers.

Curiously, however, in the same year, Sinopec’s refining segment was purchasing crude from external sources at an average price of RMB 1825 per ton. That is, the refining segment was paying almost 10% more to buy crude oil from

© December 2003, I.P.L. Png

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