China’s Oil Giants Scale Back Expansion as Middle East Conflict Rattles Energy Markets
Energy market disruptions triggered by the ongoing Middle East conflict are prompting China’s state-owned oil and gas majors to rein in expansion plans, as they navigate rising volatility while safeguarding long-term energy security.
China’s three largest producers—PetroChina, Sinopec, and CNOOC—reported weaker earnings over the past year, reflecting the impact of softer crude prices. The downturn comes amid broader structural pressures, including plateauing oil demand, a faster global shift toward cleaner energy, and persistent overcapacity in low-margin petrochemicals.
Although subdued oil prices weighed on 2025 financial results, a prolonged conflict in the Middle East could lift upstream revenues for PetroChina and CNOOC. However, Sinopec, the country’s largest refiner, faces greater exposure to rising crude costs, highlighting a growing performance gap between upstream producers and downstream operators.
CNOOC, a key contributor to China’s production growth, continues to benefit from its low-cost offshore assets and strong sensitivity to oil price movements. Despite achieving record output, the company posted an 11% decline in net income and has adopted a more cautious production growth target for 2026, alongside a slight reduction in capital expenditure. Nevertheless, it reaffirmed its longer-term upstream expansion strategy through 2030.
PetroChina stated it is well-positioned to manage potential supply disruptions linked to the Strait of Hormuz, noting that only part of its supply depends on the region. The company is mitigating risks by boosting domestic production and diversifying imports, including pipeline gas from Russia and Central Asia.
Sinopec remains the most vulnerable to market fluctuations. Its heavy reliance on imported crude and regulated domestic fuel prices limits its ability to pass on higher costs. At the same time, weak margins in its chemicals business continue to weigh on profitability. The company has indicated it may scale back capital spending, particularly within its petrochemicals segment.
