Sinopec, the world’s largest oil refiner, is accelerating a strategic overhaul under new Chairman Hou Qijun, who is redirecting capital and operations toward new energy and materials as traditional fuel demand declines.
Hou, appointed a year ago after moving from PipeChina, has restructured the company into four profit centers: oil, gas and new energy; refining and chemicals; finance and strategic new business; and a combined global trading and marketing unit. The changes aim to address what Hou describes as systemic inertia and a ‘big company syndrome’ that has hindered Sinopec’s agility in a shifting market.
The refiner reported a 19% rise in net profit for the first half of 2026, but faces mounting pressures from falling transport fuel demand, government price controls, and overcapacity in petrochemicals. Gasoline and diesel sales have retreated to 2017 levels, with Sinopec selling around 3.6 million barrels per day last year. Hou highlighted the structural shift in demand, noting that half of new cars no longer require fossil fuels, challenging the long-term viability of refining margins.
To adapt, Sinopec plans to allocate roughly 20% of its annual capital spending—more than 30 billion yuan ($4.46 billion)—to new energy and materials between 2026 and 2030. The company is also advancing upstream projects, including the commercial development of the Jiyang trough in the Shengli oilfield, where conventional reserves are depleting. Over 30 projects are targeted for completion by 2030, spanning reserves expansion, shale oil, sustainable aviation fuel, and refining cost reductions.
Industry analysts question whether Sinopec can compete with non-state actors in the new energy space. Michal Meidan, Director of the China program at the Oxford Institute for Energy Studies, noted the challenge of transitioning from a state-dominated, high-carbon model to a low- or zero-carbon future. Hou has acknowledged the hurdles, emphasizing the need for early preparation despite being close to the typical retirement age of 63 for Chinese state enterprise executives.
The company’s shift reflects broader trends in China’s energy sector, where state-owned enterprises are under pressure to diversify amid volatile oil markets, geopolitical disruptions, and the accelerating adoption of electric vehicles.
