Statement Re Jet Fuel Pricing

8 Aug 2006 07:01

Fortune Oil PLC08 August 2006 8 AUGUST 2006 FORTUNE OIL PLC ("Fortune Oil" or the "Company") Bluesky Jet Fuel Price Compensation The PRC government has issued new regulations that will allow aviationrefuelling companies to be compensated for price differences between importedand domestically refined jet fuel. Since late 2005 Bluesky has been sellingsome jet fuel at domestic jet fuel prices for domestic flights usinghigher-priced imports, which potentially affects the operating margin. Asdetailed in our announcement on 21 June 2006 we believed this affect to betemporary and these new regulations confirm that this pricing disparity risk hasnow been removed. In addition there will be compensation paid for pricingdisparities earlier this year. Under the new regulations, an extra tariff will be charged for jet fuel sales todomestic airlines for domestic flights. This will be calculated based on theactual average price difference between imported and domestically sourced jetfuel for the preceding quarter, weighted by the amount actually sold fordomestic flights. The extra tariff to be paid in the 3rd quarter in 2006 is RMB290 per tonne (US$ 36 per tonne) based on the average price difference for the2nd quarter in 2006. The domestic airlines will fund this additional tariff bycharging higher fares to customers, for example through a fuel price surcharge.The volume of jet fuel sales by Bluesky in the 2nd quarter of 2006 that wouldhave attracted the rebate, had it been in place in that period, was 293,000tonnes. The Company welcomes these new regulations. They confirm that aviationrefuelling companies such as Bluesky should not be taking direct fuel price riskand they enable future changes in international jet fuel prices to be passedthrough to end-users without affecting Bluesky's operating margin. We believethat the consequent rise in fares will not significantly impact the growingdemand for air travel in China. Some compensation sharing mechanisms andhistorical compensation formulae have still to be decided by the PRC authoritiesbut the overall impact will be beneficial for Bluesky in 2006. Once the extentof such historical compensation is determined a further announcement will bemade. Enquiries: Fortune Oil PLC John Pexton - Deputy Chief Executive Tel: 00 852 2583 3113 (Hong Kong) Pelham Public Relations Archie Berens Tel: 020 7743 6679 or 07802 442 486 This information is provided by RNS The company news service from the London Stock Exchange