China’s oil majors curb spending as market volatility tests upstream growth

(Bloomberg) — China’s state-run oil and gas giants are moderating expansion plans as they balance market volatility against long-term energy security goals.

The country’s three largest producers—PetroChina, Sinopec and CNOOC—reported lower profits last year as softer oil prices weighed on earnings. The results come as the sector faces flattening oil demand, an accelerating energy transition and persistent overcapacity in lower-margin petrochemicals.

While weaker crude prices pressured 2025 results, a prolonged Middle East conflict could boost upstream earnings for CNOOC and PetroChina. In contrast, Sinopec—China’s largest refiner—remains more exposed to higher crude costs, underscoring a widening divergence between upstream and downstream performance.

CNOOC, a key driver of China’s production growth, continues to benefit from a low-cost offshore portfolio and strong leverage to oil prices. Despite record output, the company reported an 11% drop in net income and has set a more measured production growth target for 2026, alongside slightly reduced capital spending. Still, it reaffirmed longer-term upstream expansion plans through 2030.

PetroChina said it can manage potential supply disruptions tied to the Strait of Hormuz, noting that only a portion of its demand is linked to the region. The company is increasingly offsetting risk through domestic production and diversified imports, including pipeline gas from Russia and Central Asia.

Sinopec remains the most vulnerable to market swings. Heavy reliance on imported crude and regulated fuel pricing limits its ability to pass through higher costs, while weaker chemicals margins continue to pressure earnings. The company has signaled potential capital spending cuts, particularly in its chemicals segment.

Image: PetroChina