Sinopec Establishes Investment Entity for Overseas Refineries, Aiming for Global Expansion Amidst Declining Chinese Demand

China's Sinopec is embarking on a strategic endeavor to establish a new entity focused on investing in refinery and petrochemical assets on the global stage. This initiative aims to capitalize on Sinopec's extensive expertise and substantial resources, positioning the company for international expansion at a time when domestic Chinese oil demand is approaching a plateau.

Having quietly launched Sinopec Overseas Investment Holding in late June as its exclusive platform for investments, construction, and operation of refineries overseas, Sinopec is now in the process of assembling the necessary team and determining the budget for this newly established entity.

Sinopec's pursuit of a global footprint aligns with current circumstances in the Chinese market. China has imposed restrictions on the approval of new refineries domestically due to slowing demand growth, excessive capacity, and a shifting industry landscape that increasingly emphasizes higher-end products and the transition to cleaner energy sources.

Zhao Dong, President of Sinopec's parent company, China Petrochemical Corp, articulated the company's global ambitions in late June when announcing the creation of the new entity. He emphasized Sinopec's intent to "expand overseas refining and chemical business by taking full advantage of the group’s core strength."

While Sinopec has refrained from divulging specific details about its target regions or assets, a senior company official, speaking on condition of anonymity as he lacks authorization to engage with the media, disclosed that Sinopec will give precedence to regions characterized by growing demand and accessible feedstock.

One such investment opportunity can materialize in Sri Lanka, where Sinopec is among the shortlisted bidders for an export-oriented refinery in Hambantota. The potential value of this endeavor is estimated to be in the billions of dollars.

Sinopec is also among the companies evaluating Shell's refinery and petrochemical assets in Singapore. However, the president of Sinopec recently refuted such claims.

Furthermore, Sinopec is actively considering the expansion of the Yasref refinery in Yanbu, Saudi Arabia, in collaboration with Saudi Aramco. This exploration follows a preliminary agreement reached in December of the previous year.

In summary, Sinopec is venturing into the global arena, establishing an entity dedicated to overseas investments in refinery and petrochemical assets. This strategic move positions the company to harness its strengths and seize opportunities in regions characterized by growing demand and favorable access to feedstock. As the Chinese market undergoes significant changes and challenges, Sinopec's international expansion serves as a proactive response to shifting dynamics in the industry.