China's Sinochem to sell two bankrupt refineries to local operators

China’s state-run Sinochem Group will sell another two bankrupt refineries in eastern Shandong province to local refiners for much less than they are valued via auctions that closed on Friday (Aug 22), according to seven trade sources and auction documents.

The acquisitions, which come during a consolidation of the world’s largest refining base, would see the new owners step up crude imports and resume operations at the troubled plants, lifting oil purchases at the world’s top importer.

The refineries, Zhenghe Group, which operates a 100,000-barrels-per-day refinery, and Huaxing Petrochemical, which has a 140,000-bpd plant, were listed for sale on last Monday, according to the Shandong Property Right Exchange Centre.

Shandong Qicheng Petrochemical is expected to acquire Zhenghe while Shandong Qirun Petrochemical will take over Huaxing, the sources with knowledge of the matter said. They are all located in the city of Dongying.

Contacted by Reuters, Sinochem said the company does not comment on market speculation.

Qicheng and Qirun did not respond to requests for comments.

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The sales will mark Sinochem’s exit from Shandong, home to most Chinese independent refiners, also known as teapots, which account for a fifth of China’s crude imports.

Sinochem took over the Shandong-based refineries via a state-orchestrated merger with ChemChina. The plants were declared bankrupt by local courts last year on debts and taxes owed.

The minimum transfer price for Zhenghe was at 2.62 billion yuan (S$469.7 million), versus its valuation at 6.3 billion yuan, documents on the Shandong Property Right Exchange Centre’s website showed.

For Huaxing, the minimum transfer price came in at 3.24 billion yuan, versus its valuation at 8.7 billion yuan, according to the documents.

The website did not reveal names of bidders and it was not immediately clear if the deals will be concluded at these prices. Shandong Property Right Exchange Centre declined to comment.

In March, Sinochem sold Changyi Petrochemical to Shandong Hongrun Petrochemical.

After the acquisition, Qicheng and Qirun’s refining capacities in Dongying will increase to about 170,000 bpd and 184,000 bpd, respectively, improving their economies of scale.

The two Shandong refiners are also expected to receive a government quota to import crude oil of about 3.56 million metric tons (26 million barrels) for the rest of 2025, after acquiring Sinochem’s plants, three of the sources added.

The Ministry of Commerce, which issues quotas, did not respond to a fax seeking comment.

Changyi recently resumed operations and has bought crude from Brazil and Canada using its 2025 import quota. REUTERS