Sinochem Group is considering keeping three bankrupt oil refineries in eastern China after auctions to sell them attracted little interest, reports said Reutersciting sources.
The situation highlights the challenges facing China’s refining sector as the world’s largest oil importer struggles with falling fuel demand and increasing regulatory scrutiny. Sinochem’s refineries, also known as teapots, are particularly affected.
The refineries, Changyi Petrochemical, Huaxing Petrochemical Group and Zhenghe Group, have a combined crude oil processing capacity of 380,000 barrels per day (bpd), equivalent to 3% of China’s national production.
They were auctioned through the Shandong Property Right Exchange Center in October but failed to attract buyers. The lack of import quotas for crude oil has further deterred potential buyers.
According to the report, sources familiar with Sinochem’s strategy indicate that the company could keep the refineries by writing down debt and renegotiating taxes.
By mid-2024, refineries had accumulated unpaid consumption taxes of about 13.2 billion yuan ($1.82 billion).
Sinochem inherited these refineries in a merger with state-owned ChemChina in 2021. The auctions followed court orders declaring the companies bankrupt after restructuring efforts failed.
The inability of refineries to import crude oil leads to a dependence on more expensive imported fuel oil, which impacts competitiveness.
The report also states that the factories have not used competitively priced crude oil from Russia, Iran and Venezuela due to Western sanctions.
Dismantling the factories could lead to significant job losses, a concern for local authorities focused on social stability. Sinochem shut down operations in Zhenghe and Changyi in mid-2024, and Huaxing Petrochemical recently closed its doors.
In late 2021, the Shandong government ordered refiners to correct irregular fuel tax practices as part of a nationwide crackdown on independent refiners. Sinochem’s decision to keep the refineries underlines the broader challenges China’s refining sector faces under economic pressure.
“Sinochem May Keep Three Bankrupt Refineries in China Due to Low Auction Interest” was originally created and published by Offshore Technology, a brand owned by GlobalData.
The information on this site has been included in good faith for general information purposes only. It is not intended to amount to advice on which reliance should be placed and we make no representation, warranty or guarantee, express or implied, as to its accuracy or completeness. You must obtain professional or specialist advice before taking or refraining from any action on the basis of the content on our site.
