Sinopec Photo: VCG

Two large Chinese oil companies, China Petrochemical Corporation (Sinopec Group) and China National Aviation Fuel Petroleum Co (CNAFLP Corp), will be merged, as their restructuring plan is approved by the State Council, according to a statement seen on the website of the State-owned Assets Supervision and Administration Commission of the State Council on Thursday.

Sinopec Group is the world's largest refining company and China's largest producer of aviation fuel, while China National Aviation Fuel Group is Asia's largest aviation transport service provider, integrating aviation fuel procurement, transportation, storage, testing, sales, and refueling. Its core businesses cover major segments including aviation fuel, petroleum, logistics and general aviation, the Xinhua News Agency reported.

The combination of the two oil majors will strengthen the resilience of the aviation kerosene industry chain and better safeguard energy security for the aviation sector, an industry analyst said.

China's aviation fuel consumption is expected to rise from 39.28 million tons in 2024 to reach 75 million tons by 2040, the People's Daily reported, citing forecasts by S&P Global. 

Following the planned merge, the two companies will be able to leverage a range of corporate strengths — including integrated refining and chemical operations and a more robust aviation fuel supply assurance system — to reduce intermediate links, lower supply costs, and provide strong support for China's aviation sector's energy security, the People's Daily report said.

This reform is a strategic restructuring step implemented among central state-owned enterprises (SOEs), as well as a proactive move to respond to international competition and the green transition, Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University, told the Global Times on Thursday.

The merge is expected to help lower aviation fuel costs, enhance the competitiveness of China's aviation industry, and promote the green and low carbon transformation of the industry, said Lin.

In recent years, strategic and specialized corporate restructuring and consolidation among central SOEs has gained pace, the Xinhua News Agency reported. During the 14th Five Year Plan period (2021-25), six rounds involving 10 enterprises completed strategic restructuring, nine new central SOEs have been established, effectively improving resource allocation and operational efficiency, said the report.