Sinochem closes third refinery in China due to low margins

The closure of Sinochem's third refinery in Shandong underscores the economic difficulties associated with rising crude costs and weak demand for refined fuel.

Share:

Gain full professional access to energynews.pro from 4.90$/month.
Designed for decision-makers, with no long-term commitment.

Over 30,000 articles published since 2021.
150 new market analyses every week to decode global energy trends.

Monthly Digital PRO PASS

Immediate Access
4.90$/month*

No commitment – cancel anytime, activation in 2 minutes.

*Special launch offer: 1st month at the indicated price, then 14.90 $/month, no long-term commitment.

Annual Digital PRO Pass

Full Annual Access
99$/year*

To access all of energynews.pro without any limits

*Introductory annual price for year one, automatically renewed at 149.00 $/year from the second year.

A Chinese court has declared the bankruptcy of Shandong Changyi Petrochemical, one of the refineries owned by the Sinochem group.
This decision comes after months of uncertainty surrounding the future of several refineries located in Shandong province, China’s main refining center.
Two other refineries belonging to the group, Shandong Huaxing Petrochemical Group and Zhenghe Group Co Ltd, have also been declared bankrupt in recent days.
The combined capacity of the three sites is 380,000 barrels per day, representing around 3% of national refinery output.
However, weak demand and steadily rising crude oil prices have made operations at these sites unprofitable, prompting Sinochem to temporarily shut down some of these units before their final closure.
The Group has not yet specified the fate of the assets of the three refineries.

A petrochemical sector in difficulty

China’s refining market is bearing the full brunt of rising crude costs.
Refinery margins have been severely squeezed, particularly in Shandong province, where independent refineries operated at just 56.4% of capacity in August 2024.
This 10-point year-on-year drop reflects the economic challenges facing the sector.
Falling demand for fuel, coupled with rising costs, is putting pressure on local players, forcing them to adjust production.
These closures are part of a wider drive to rationalize refining capacity in China.
For several months, the authorities have been seeking to concentrate production around the largest units, which are more efficient and better integrated into global supply chains.
Small independent refineries, often located in Shandong, are the first victims of this restructuring, especially as they are largely dependent on crude oil imports for their operations.

Impact on the supply of petroleum products

The closure of these refineries directly affects the supply of refined petroleum products to the Chinese market.
Although Sinochem’s three refineries account for only a small share of national capacity, their strategic location in Shandong makes them important players in regional fuel supply.
The impact of their closure could therefore be felt on the local market, where fuel prices could rise in the short term.
However, it is unlikely that these closures will have a significant effect on a national scale.
China has excess refining capacity, and the large production units located on the country’s east coast can quickly make up for lost production.
In addition, falling demand for fuel, particularly in the industrial and transport sectors, has enabled the largest refineries to maintain high inventory levels.

Sinochem’s future strategy

The series of bankruptcies suffered by Sinochem could signal a review of its strategy in the petrochemical sector.
As the group strives to reduce its losses in a market with squeezed margins, it could turn to more profitable sectors of the energy chain, such as fine chemicals or energy distribution.
In addition, current market conditions are forcing many players in the sector to consider collaborations or mergers to consolidate their positions.
Sinochem could, for example, forge closer ties with strategic partners to reduce operating costs and secure access to crude oil resources, a key factor in maintaining its petrochemical activities.
The next few weeks will be crucial in assessing the Group’s ability to bounce back from these successive closures.
Analysts agree that Sinochem will have to review its priorities and consider a broader restructuring of its activities to adapt to an increasingly volatile market.

A drone attack on a Bachneft oil facility in Ufa sparked a fire with no casualties, temporarily disrupting activity at one of Russia’s largest refineries.
The divide between the United States and the European Union over regulations on Russian oil exports to India is causing a drop in scheduled deliveries, as negotiation margins tighten between buyers and sellers.
Against market expectations, US commercial crude reserves surged due to a sharp drop in exports, only slightly affecting international prices.
Russia plans to ship 2.1 million barrels per day from its western ports in September, revising exports upward amid lower domestic demand following drone attacks on key refineries.
QatarEnergy obtained a 35% stake in the Nzombo block, located in deep waters off Congo, under a production sharing contract signed with the Congolese government.
Phillips 66 acquires Cenovus Energy’s remaining 50% in WRB Refining, strengthening its US market position with two major sites totalling 495,000 barrels per day.
Nigeria’s two main oil unions have halted loadings at the Dangote refinery, contesting the rollout of a private logistics fleet that could reshape the sector’s balance.
Reconnaissance Energy Africa Ltd. enters Gabonese offshore with a strategic contract on the Ngulu block, expanding its portfolio with immediate production potential and long-term development opportunities.
BW Energy has finalised a $365mn financing for the conversion of the Maromba FPSO offshore Brazil and signed a short-term lease for a drilling rig with Minsheng Financial Leasing.
Vantage Drilling has finalised a major commercial agreement for the deployment of the Platinum Explorer, with a 260-day offshore mission starting in Q1 2026.
Permex Petroleum has signed a non-binding memorandum of understanding with Chisos Ltd. for potential funding of up to $25mn to develop its oil assets in the Permian Basin.
OPEC+ begins a new phase of gradual production increases, starting to lift 1.65 million barrels/day of voluntary cuts after the early conclusion of a 2.2 million barrels/day phaseout.
Imperial Petroleum expanded its fleet to 19 vessels in the second quarter of 2025, while reporting a decline in revenue due to lower rates in the maritime oil market.
Eight OPEC+ members will meet to adjust their quotas as forecasts point to a global surplus of 3 million barrels per day by year-end.
Greek shipping companies are gradually withdrawing from transporting Russian crude as the European Union tightens compliance conditions on price caps.
A key station on the Stalnoy Kon pipeline, essential for transporting petroleum products between Belarus and Russia, was targeted in a drone strike carried out by Ukrainian forces in Bryansk Oblast.
SOMO is negotiating with ExxonMobil to secure storage and refining access in Singapore, aiming to strengthen Iraq’s position in expanding Asian markets.
The European Union’s new import standard forces the United Kingdom to make major adjustments to its oil and gas exports, impacting competitiveness and trade flows between the two markets.
The United Kingdom is set to replace the Energy Profits Levy with a new fiscal mechanism, caught between fairness and simplicity, as the British Continental Shelf continues to decline.
The Italian government is demanding assurances on fuel supply security before approving the sale of Italiana Petroli to Azerbaijan's state-owned energy group SOCAR, as negotiations continue.

Log in to read this article

You'll also have access to a selection of our best content.