Communicator

SINGAPORE, March 19 (Reuters) - - In a significant development in China's refining sector, state-run Sinochem Group has agreed to sell one of its bankrupt oil refineries to Hongrun Petrochemical, an independent refiner based in Eastern China. This sale marks a notable shift in the landscape of China's petrochemical industry and highlights the ongoing consolidation in the country's refining sector.

Hongrun Petrochemical, a private refiner located in Weifang city, Shandong province, has emerged as the successful bidder for the Changyi Petrochemical facility. The auction, which concluded on March 14, 2025, saw a winning bid of approximately 2.98 billion yuan ($411.82 million) for the refinery.

The Changyi Petrochemical plant, situated in Shandong's key refining area, boasts a processing capacity of about 160,000 barrels per day. However, the facility has been inactive since 2024, making it one of three Sinochem plants in Shandong declared bankrupt by local courts last year due to outstanding debts and taxes.

Sinochem acquired the struggling Shandong refineries, including Changyi Petrochemical, in a state-coordinated merger with ChemChina in 2021. However, the refineries have faced financial difficulties, leading to their bankruptcy declarations in 2024. Hongrun secured the refinery at a significantly discounted price, reflecting current market conditions.

The acquisition of Changyi Petrochemical by Hongrun Petrochemical has several key implications for the company. Hongrun is expected to inherit Changyi's crude oil import quota, enhancing its ability to secure feedstock. The deal may also include forgiveness of Changyi's outstanding tax obligations, reducing financial liabilities. Most notably, the acquisition will substantially boost Hongrun's crude processing capacity to nearly 20 million tons per year, or approximately 400,000 barrels per day, positioning the company for growth in China's competitive refining sector.

Sources reveal that Sinochem is currently in negotiations with two other private refiners in Shandong regarding the potential sale of its remaining two bankrupt facilities: Huaxing Petrochemical and Zhenghe Petrochemical.

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