By Ebi Kesiena
China’s state-owned oil and gas majors are scaling back expansion plans as volatility triggered by the Middle East conflict forces a recalibration of growth strategies against long-term energy security priorities.
The country’s three largest producers, PetroChina, Sinopec, and CNOOC, reported weaker profits last year, as softer crude prices weighed on earnings. The downturn comes amid broader structural pressures, including plateauing oil demand, an accelerating global energy transition, and persistent overcapacity in low-margin petrochemicals.
While subdued oil prices have dragged on 2025 earnings, analysts note that a prolonged conflict involving Iran could bolster upstream revenues for firms with strong exploration and production portfolios, particularly CNOOC and PetroChina. In contrast, Sinopec, China’s largest refiner, remains more exposed to rising crude costs, highlighting a growing divergence between upstream and downstream performance.
CNOOC, a key driver of China’s production growth, continues to benefit from its low-cost offshore assets and high sensitivity to oil price movements. Despite achieving record output, the company posted an 11 percent decline in net income and has outlined a more cautious production growth target for 2026, alongside a modest reduction in capital expenditure. However, it reaffirmed its long-term upstream expansion strategy through 2030.
Meanwhile, PetroChina stated that it is well-positioned to manage potential supply disruptions linked to the Strait of Hormuz, noting that only a fraction of its imports pass through the corridor. The firm is mitigating risks through increased domestic production and diversified supply channels, including pipeline gas imports from Russia and Central Asia.
Sinopec appears the most vulnerable to ongoing market instability. Its heavy dependence on imported crude and regulated domestic fuel pricing limits its ability to pass on rising costs to consumers. At the same time, weaker margins in its chemicals segment continue to erode profitability, prompting the company to signal potential cuts in capital spending, particularly within its petro-chemicals operations.
