China's second largest oil producer China Petroleum & Chemical Corporation (Sinopec) reported better-than-expected third quarter earnings on Friday, thanks to booming demand of chemicals and soaring oil prices on the mainland.

Sinopec booked 10.5 billion yuan (US$1.3 billion) in net profits in the July-to-September period, up 62 per cent over the same period of last year. This beat market estimates of 9.73 billion yuan (US$1.2 billion).

The company's output of crude oil rose 0.89 per cent in the first nine months of this year, while natural gas production grew 10.01 per cent.

Sinopec said in a statement that domestic demand for refined oil and chemical products is expected to remain robust in the fourth quarter.

The operating profits from the company's exploration and production jumped nearly 33 per cent to 6.9 billion yuan (US$831.3 million) in the third quarter.

The operating profit generated from its chemical division stood at 5.1 billion yuan (US$614.5 million) in the third quarter, a nearly seven-fold jump from a year ago.

Zhang Jiaren, senior vice-president and chief financial officer of Sinopec, said the chemical division is a cyclical industry and was also a company star performer.

He expected earnings from that division would maintain a 30 per cent increase in the next few years.

In addition, the price the company got for its oil leapt 44 per cent year-on-year to an average of US$36.6 per barrel, mainly as a result of the global crude oil shortage and price hikes.

On the central bank's interest rate hike, Zhang said that there would be no major impact on Sinopec since the development of the oil industry has been encouraged by the government.

Zhang said the company would continue to increase its capital expenditure.

(China Daily October 30, 2004)