China's oil and energy giants pivot to specialised chemicals and clean energy

China’s chemical industry, particularly bulk suppliers serving sectors like plastics, has faced challenges this year due to overproduction relative to demand.

According to the Bloomberg observations, the broader downstream sector is now bracing for significant restructuring as the government intensifies efforts to address the involutionary pressures weighing on the economy.

Sinopec plans to accelerate the retirement of outdated facilities and limit chemical investments during the next five-year plan starting in 2026, President Zhao Dong said during an earnings briefing in Hong Kong last week. High-end chemicals will be a key focus, according to Chairman Hou Qijun, aimed at meeting growing demand from sectors including aircraft, drones, robotics, batteries, and new energy vehicles.

PetroChina is also pivoting toward specialized chemical compounds, ranging from paraffin and lubricants to low-sulfur marine fuels, carbon fibers, and high-voltage cable insulating materials, as outlined in its earnings report.

Both companies are increasingly embracing cleaner-burning gas and electric vehicles to reduce reliance on oil revenues. PetroChina reported that liquefied natural gas (LNG) refuelling volumes rose 59% in the first half, while electric vehicle charging volumes surged 213%, with further expansion planned for the second half. PetroChina’s proposed $5.6 billion acquisition of its parent company’s gas storage businesses would strengthen its market position.

Sinopec has focused on becoming an integrated energy provider, developing its EV battery networks and securing the top spot in China’s retail LNG market, CFO Shou Donghua noted at the Hong Kong briefing.

Despite the downstream recalibration, both Sinopec and PetroChina remain committed to upstream growth, in line with Beijing’s energy security objectives. Offshore driller Cnooc Ltd., China’s third major oil company, has traditionally led these efforts, maintaining oil output while boosting gas production.

Other industrial moves include Indonesian sovereign wealth fund Danantara signing a $1.42 billion heads of agreement with China’s GEM Co. to invest in a battery-grade nickel plant. Meanwhile, Baoshan Iron & Steel Co. noted that China’s crackdown on overcapacity is beginning to yield results.

Industrial profits in China fell at a slower rate in July, suggesting that measures to curb overcapacity are gradually easing competitive pressures across the sector.

By Tamilla Hasanova