Sinopec Chairman Initiates Overhaul to Combat Declining Fuel Demand

Hou Qijun, appointed chairman of Sinopec a year ago, has launched a significant overhaul of the world's largest refiner to address dwindling fuel demand, petrochemical overcapacity, and internal bureaucracy. The new strategy aims to make the state-owned enterprise more agile and responsive to fundamental shifts in the global energy market.

Confronting 'Big Company Syndrome'

Hou is reorganizing Sinopec into four distinct profit centers: oil, gas and new energy; refining and chemicals; finance and strategic new business; and a combined global trading and marketing division. In a July article for a publication by China's State-owned Assets Supervision and Administration Commission (SASAC), Hou stated that the primary hurdles to this transformation are "system and institutional inertia" and the "big company syndrome," which hinders the company's ability to react to market changes.

The urgency for reform is underscored by the company's performance. According to the SASAC report, Sinopec's fuel sales have fallen to 2017 levels. At a recent earnings briefing, Hou questioned the long-term viability of its core products, asking, "Gasoline was made for cars, yet half of new cars no longer need fuel... how can producing more gasoline and diesel continue to generate revenue?"

A Strategic Pivot to New Energy

To counter these trends, Sinopec is planning a major capital shift. The company intends to allocate approximately 20% of its capital spending, or more than 30 billion yuan ($4.46 billion) annually, towards new energy and new materials between 2026 and 2030. The investment will fund more than 30 key projects by 2030, including:

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• Developing shale oil reserves at its flagship Shengli oilfield.
• Producing sustainable aviation fuel (SAF).
• Implementing aggressive cost-cutting measures in refining.

This strategic pivot aims to transition Sinopec from a traditional oil and gas company to a producer of higher-value chemical materials and a key player in the energy transition. Despite market challenges, Sinopec reported a 19% rise in net profit for the first half of 2026.

Leadership and Market Headwinds

Hou, a 60-year-old geologist with executive experience at China National Petroleum Corp (CNPC) and PipeChina, is described by an institutional investor as being on a mission to "salvage Sinopec." However, the path forward faces significant obstacles. The company's move into higher-value petrochemicals will meet fierce competition from rivals like Wanhua Chemical and Satellite Chemical amid existing overcapacity in key products like ethylene.

Michal Maiden, director of the China program at the Oxford Institute for Energy Studies, noted that while Hou has a strong grasp of the energy value chain, the key question is "how will Sinopec (and its peers) compete with the non-state actors in the new energy space."