Sinochem Group's Two Refineries Go Bankrupt, Daily Production Capacity of 220,000 Barrels Drops to Zero, Industry Winter Worsens

Chinese judicial authorities have ruled that two refineries owned by state-owned petrochemical company Sinochem have been declared bankrupt after creditors failed to reach a consensus on a restructuring plan, according to court documents. Two verdicts issued by the Dongying Court in Shandong province on September 14 said that the bankruptcy proceedings of Shandong Huaxing Petrochemical Group and He He Group Co LTD had been completed.

There was no immediate response from Sinochem. Both refineries are located in China's Shandong province, which is home to a concentration of small, independent refineries, and have a combined crude oil processing capacity of 220,000 barrels a day.

Reuters reported in July that Sinochem had decided to close two of its three refineries in Shandong province - Zhenghe Refinery and Changyi Refinery - for long-term maintenance due to high crude oil prices and weak demand in China's refined oil market.

Bloomberg reported on Tuesday that Changyi plans to hold talks with creditors later this month. The three plants have a combined crude refining capacity of 380,000 barrels per day, or about 3% of the country's total refining capacity. According to local consultancy Sublime China Information, factories in Shandong operated at an average operating rate of 56.4% in August, up 2.2 percentage points from July, but still 10 percentage points lower than a year earlier, mainly because of low processing margins and weak fuel demand.