China Petroleum & Chemical Corporation Terminates Two Major Projects, Adjusting Over 8 Billion Yuan in Fundraising

China Petroleum & Chemical Corporation (600028.SH, hereinafter referred to as "Sinopec") recently announced plans to modify and postpone the investment projects involving 8.019 billion yuan in raised funds, accounting for 66.82% of the net proceeds from its 2024 private placement. The company will terminate two projects: Phase I of the Tianjin LNG Phase III project and the Zhongke Refining 2nd EVA project, reallocating the funds to the Southwest Natural Gas Development project and the Maoming Branch Refining Transformation and Upgrade project. Additionally, the commissioning date for the Maoming project has been postponed to the end of 2028.

I. Current Status of Fund Utilization: Nearly 30% Invested, Over 60% Reallocated

In March 2024, Sinopec completed a private placement, raising a total of 12 billion yuan, with net proceeds of 11.987 billion yuan. As of February 28, 2026, the overall utilization rate of the raised funds was only 32.48%, with low fund utilization efficiency being a key factor driving this adjustment.

In this adjustment, the company has decided to terminate two ongoing fundraising projects and reallocate the existing raised funds:

· Tianjin LNG Phase III Project, Stage I: Originally planned with a total investment of 5.562 billion yuan, with 4.5 billion yuan from raised funds. Only 393 million yuan has been invested so far. The remaining 4.107 billion yuan of raised funds will be reallocated, with 4 billion yuan transferred to the Southwest Natural Gas Development project and 107 million yuan supplementing the Maoming Refining Upgrade project.

· Zhongke (Guangdong) Refining 2nd EVA Project: Originally planned with a total investment of 2.158 billion yuan, with 1.6 billion yuan from raised funds. So far, 845 million yuan has been invested. The remaining 755 million yuan of raised funds will be entirely transferred to the Maoming Branch Refining Transformation and Upgrade project.

Additionally, the Maoming Branch Refining Transformation and Upgrade project has been adjusted: the originally allocated 3.157 billion yuan for high-value-added materials will now be used for the overall project construction. The project's scheduled operational date has been postponed from 2027 to December 2028.

To date, the Yanshan Branch Hydrogen Purification Facility Improvement project and the Maoming Branch 50,000-ton/year Polyolefin Elastomer (POE) Industrial Pilot Plant project have successfully reached their scheduled operational status.

II. New Fund Allocation: Focusing on Domestic Gas Sources and Refining Quality Improvement

The total of 8.019 billion yuan in reallocated funds will be entirely invested into two core projects:

· Southwest Natural Gas Development Project: Receiving 4 billion yuan in investment for natural gas production capacity construction in the Sichuan-Chongqing-Guizhou region. The project aims to achieve an annual production capacity of over 3 billion cubic meters, with a total investment of 11.1 billion yuan. It is expected to be fully operational by December 2028.

· Maoming Branch Refining Transformation and Upgrade and Ethylene Quality Improvement Project: Receiving approximately 4.019 billion yuan in remaining funds (including 755 million yuan transferred from the EVA project and 3.157 billion yuan from internal adjustments). The total investment for this project reaches 33.057 billion yuan. The postponement will allow for better alignment with market dynamics during construction.

III. Adjustment Logic: Adapting to Market Changes and Optimizing Strategic Layout

The announcement indicates that the core of this adjustment is to align with changes in the market environment and the company's overall strategic layout:

· Termination of Tianjin LNG Phase III stems from the company's need to optimize its gas source structure, shifting focus toward increasing domestic natural gas production to enhance resource self-sufficiency.

· Termination of the Zhongke 2nd EVA Project is primarily due to delays in the delivery of key equipment, making it difficult to proceed with the project as planned.

From an industry perspective, Sinopec's fund reallocation is a proactive adaptation to the energy and chemical markets:

1. Natural Gas Offers Better Cost-Effectiveness: Natural gas is a core category in the energy transition. Domestic shale gas and conventional natural gas development have short payback periods and fast cash flow returns. Combined with the company's mature exploration and development technologies, this enables rapid investment recovery.

2. Refining Upgrades Focus on Precise Implementation: The one-year postponement of the 33.057 billion yuan Maoming large-scale refining project reflects a cautious approach by industry leaders to avoid concentrated capacity release leading to oversupply. The goal is to achieve "efficient operation upon completion."

As a leader in the energy and chemical industry, Sinopec's reallocation of nearly 10 billion yuan in funds serves as an industry bellwether. In the future, the industry may witness adjustments in investment strategies, with more companies directing resources toward projects that ensure supply chain autonomy, improve short-term cash flow, and upgrade existing assets. High-uncertainty projects may be approached with phased and investment strategies. Balancing short-term operational efficiency with long-term technological布局, as well as  incremental value from existing assets, will become core development challenges for the entire chemical industry.