CompanyGraph
China Petroleum & Chemical Corporation
600028 · SSE · China
Refines government-allocated crude oil into fuel and chemicals sold through 30,000-plus stations across China.
Sinopec takes crude oil allocated by China's National Development and Reform Commission, refines it through coastal facilities like Zhenhai and Maoming that are physically built around medium-sour crude blends, and pushes the resulting fuel and petrochemicals out to more than 30,000 branded stations and industrial customers across China. Because the NDRC sets the total crude import quota once a year in fixed tranches, every barrel that eventually reaches a forecourt or chemical plant is determined by that upstream administrative decision — building more refinery capacity or opening more stations does not unlock a single extra barrel. The one way Sinopec can process crude above that ceiling is through a direct coordination role with the Ministry of Commerce during national stockpiling directives, which authorises procurement volumes outside the commercial quota and is available to no private or foreign refiner because it was created by the state for state purposes. If Beijing ever reroutes those reserve-fill mandates through a different entity, that ceiling-piercing mechanism disappears entirely, and Sinopec's throughput falls back to whatever the NDRC chooses to release.
How does this company make money?
Sinopec earns a margin on each barrel it refines — the difference between what the crude costs and what the processed fuel or chemical sells for. At retail stations, it collects markups on gasoline and diesel, though the NDRC sets the price bands within which those markups must stay. It also sells petrochemicals like benzene and ethylene at prices tied to contracts on the Shanghai Futures Exchange.
What makes this company hard to replace?
Employees of state-owned enterprises often receive government fleet fuel cards that are tied specifically to Sinopec stations, making it impractical for those drivers to refuel elsewhere. Chemical manufacturers in industrial parks are locked into long-term ethylene supply contracts with storage and logistics infrastructure physically located at Sinopec-linked sites, so switching suppliers would mean rebuilding that infrastructure. Refineries that unload crude at state-controlled port berths dedicated to Sinopec's operations cannot simply redirect those supply chains without major physical changes.
What limits this company?
The NDRC sets the crude import quota once a year in fixed tranches. Sinopec cannot process a single barrel beyond what that quota allows, even if its refineries are sitting idle with spare capacity. Spending more money on refinery upgrades does not earn more quota. The ceiling is administrative, not physical, and capital investment cannot move it.
What does this company depend on?
Sinopec cannot run without five things: the annual crude import quota allocations from the NDRC, oil production volumes from the Daqing oilfield, access to the East-West natural gas pipeline system, NDRC approval of retail fuel prices, and renminbi foreign exchange to pay for dollar-denominated crude purchases.
Who depends on this company?
China Eastern Airlines and other domestic carriers rely on Sinopec for jet fuel at Beijing Capital and Shanghai Pudong airports — a disruption would ground flights. Chemical manufacturers in Zhejiang and Jiangsu depend on ethylene and propylene from Sinopec's crackers as raw material for their own production. Farming regions across China rely on urea fertilizer that Sinopec produces from its coal gasification plants.
How does this company scale?
Adding retail stations across Chinese cities is relatively straightforward — Sinopec uses standardized fuel distribution and payment systems that replicate efficiently in new urban markets. But the crude import quota stays fixed no matter how many stations are added or how much refinery capacity is built. The retail end can expand; the feedstock ceiling cannot.
What external forces can significantly affect this company?
U.S. sanctions on Iran and Venezuela have cut off two of Sinopec's traditional suppliers of heavy crude, forcing it to find replacement sources. When the renminbi weakens against the dollar, every barrel of imported crude costs more in local currency terms, squeezing margins. Sinopec also has to develop overseas energy assets in politically unstable regions as part of China's Belt and Road Initiative commitments, adding exposure to countries where operations can be disrupted.
Where is this company structurally vulnerable?
If Beijing decides to route its strategic petroleum reserve fill orders through a different state entity — or sets up a separate central trading arm to handle reserve procurement — Sinopec's Ministry of Commerce coordination role disappears. That role is the only mechanism Sinopec has to process crude beyond its NDRC quota ceiling. Losing it would collapse Sinopec's above-quota throughput capacity entirely.