Sinopec to focus on chemicals; expects slower growth
Against the backdrop of fuel disruptions, China’s oil/gas firm China Petroleum & Chemical (Sinopec) reported a 19% rise in net profit for the first half of 2026. But it also reported a 34% drop in net income for 2025. The slump reflected a decline in consumption of transport fuels due to continuing electrification of the vehicle fleet, as well as a wave of new petrochemical plants leading to structural oversupply.
It sold around 3.6 million barrels per day of gasoline and diesel last year according to company data, mostly in the domestic market, a scale that has become a liability as demand for transport fuels declines with widening vehicle electrification.
Meanwhile, Sinopec plans to allocate about 20% of its capital spending, or more than US$4.46 billion a year, on new energy and new materials over 2026 to 2030, the company said in its annual reporting.
It expects to complete more than 30 projects by 2030, including growing reserves, producing shale oil, developing sustainable aviation fuel and cutting refining costs, said the firm’s Chairman Hou Qijun, who was appointed to the role just last year.
As the world’s largest refiner, facing dwindling fuel demand, overcapacity in petrochemicals and the world’s worst oil crisis, Hou has launched an overhaul to give greater authority to business units that he revamped into four profit centres: oil, gas and new energy, refining and chemicals, finance and strategic new business, and a segment combining global trading with Sinopec’s vast marketing teams for fuel, natural gas and chemicals.
However, the company’s shift to higher-value petrochemicals faces fierce competition from rivals such as local government-backed Wanhua Chemical and privately-led Satellite Chemical as well as overcapacity in ethylene, a key building block in plastics and fibre.
Ethylene production reached 6.394 million tonnes in the first half of the year, while total chemical products sales in the first half of the year amounted to 37.86 million tonnes, with export volume increasing by 70% year-on-year, reaching a historic high.
In exploration, the company actively acquired high-quality mining rights and stepped up natural gas exploration, making significant breakthroughs in shale oil in the Bohai Bay Basin, tight gas in the Sichuan Basin, and offshore natural gas exploration, while effectively proving shale gas in Ziyang and coalbed methane in Yulin-Ordos.
In development, it accelerated the construction of crude oil production capacity in Jiyang and Tahe, as well as natural gas production capacity in offshore areas and the Western Sichuan marine facies.
In the second half of 2026, China’s economy is expected to maintain stable growth. Domestic demand for natural gas is projected to rise, while demand for chemical products will remain weak, and that for refined oil products will still be affected by alternative energy. Given the impacts of geopolitics and changes in the global supply, demand and inventory, there will be greater uncertainties in international crude oil prices, says Sinopec.
With above backdrop, the company says it will focus on the following aspects: increasing reserve and production of oil and gas through intensified efforts in exploration and development; adhere to the principle of developing “basic + highend” and “chemicals + materials”, strive to cut costs, expand markets, minimise losses and increase profits.
