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Written by: Staff
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SINGAPORE, Mar 27 (Reuters) China has imposed a windfall profit tax on domestic crude oil sales with immediate effect, the government's economic planning body said, but it did not say how big the tax would be or how it would be applied.

Talk has circulated for months of a windfall tax on producers -- whose profits have soared as oil prices rise -- to help alleviate the losses that refiners face in selling products on the regulated domestic market. The statement, seen on Monday, was the first confirmation from Beijing that it would go ahead.

''According to the rule by the state council, China will start collecting from oil producers a windfall profit tax for sales of domestic crude oil with effect from the same date as the price increase,'' the National Development and Reform Commission (NDRC) said in a statement on its Web site (www.ndrc.gov.cn) on Sunday.

The NDRC raised domestic retail prices by 3-5 per cent on Sunday, the first increase in eight months, but analysts said it was too small to stem losses in the refining sector, squeezed between soaring global import costs and fixed retail rates.

It said further details of the tax would be announced separately by the Ministry of Finance.

China produces about 3.6 million barrels per day (bpd) of crude and consumes almost all of that domestically.

Shares in China's top oil producer PetroChina were flat in Hong Kong on Monday, while top refiner Sinopec Corp. -- which imports about 80 per cent of its crude -- fell 1 per cent after the meagre pump price rise.

Offshore producer CNOOC Ltd., which accounts for about 12 per cent of all oil output in the world's number six producer, was down 3.15 per cent after reporting that second-half earnings rose 48 per cent, lagging forecasts for faster growth.

Revenues from an upstream tax would help Beijing finance plans to subsidise poorer fuel consumers against the cost of rising prices as it gradually raises pump rates to catch up with crude prices that have doubled in two years.

The NDRC announced the subsidies on Sunday, but said the Finance Ministry would provide more details.

PetroChina made 133.4 billion yuan ($16.6 billion) last year, despite a $2.5 billion loss in the refining and refined product sales division. Beijing granted Sinopec, which imports most of its crude from overseas, a $1.2 billion subsidy last year to cover part of the losses from selling on the domestic market.

China's refining sector lost about 24 billion yuan ($3 billion) in the first 11 months of last year, while oil producers made 69 million yuan ($8.5 billion), government data showed.

($1=8.020 Yuan) REUTERS SD VC1455

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