China's Oil Titans Pivot to Greener Fuels and Chemicals

As of August 2025, China's state-owned oil giants, PetroChina and Sinopec, are scrambling to adapt their businesses to the country's accelerating energy transition. Weighed down by weaker international oil prices and plummeting domestic demand for fossil fuels, the companies are now revamping their downstream operations to focus on alternative fuels and high-end chemicals.

PetroChina's first-half earnings saw a 19% combined decline in its refining and chemicals segments compared to the previous year. Sinopec fared even worse, with a 59% drop in operating profit from its mainstay refining business and deepening losses in its chemicals unit. This reflects the broader challenges facing China's oil processing industry, which has been losing money over the first seven months of 2025.

The rapid electrification of vehicles and the increasing use of natural gas have severely impacted demand for traditional transport fuels like gasoline. PetroChina's CFO warns that Chinese gasoline consumption will "face quite a lot of pressure" in the second half of the year. Chemicals makers, particularly bulk suppliers to industries like plastics, have also struggled with oversupply.

In response, the oil giants are shifting their focus to more specialized, higher-value products. PetroChina plans to invest in compounds like paraffin, lubricants, low-sulfur marine fuel, carbon fibers, and materials for high-voltage cables. Sinopec, meanwhile, will accelerate the elimination of outdated facilities and limit investment in basic chemicals during the upcoming five-year plan starting in 2026. Instead, the company will prioritize high-end chemicals to meet growing demand from emerging sectors like aircraft, drones, robotics, and new energy vehicles.