Major adjustment! Sinopec originally planned to use the 4 billion yuan intended for the Tianjin LNG import terminal to invest in the Sichuan Basin

01 A shift of 4 billion yuan in investment, from purchasing gas to extracting it. To understand this adjustment, it’s first necessary to clarify the figures. In 2024, Sinopec completed a private placement worth approximately 12 billion yuan. At that time, two main areas of investment were planned: the first was Phase 1 of Stage 3 of the Tianjin LNG project, for which 4.107 billion yuan was allocated to expand the capacity for importing liquefied natural gas ； The second is Sinochem Refining & Chemicals’ Project 2 EVA, which requires an investment of over 3.1 billion yuan to develop the production of high-end chemical materials. Today, both sums of money have disappeared. The largest amount was 4 billion yuan, which was directed precisely to the Sichuan Basin. Sinopec Southwest Oil and Gas Branch has launched the Southwest Natural Gas Development Project, with a total investment of 11.1 billion yuan. This project covers more than a dozen areas in Sichuan, Chongqing, and Guizhou, and is intended for drilling, fracturing operations, as well as the construction of gathering stations and transmission pipelines. The goal of this investment is to achieve an annual production capacity of over 3 billion cubic meters, with commissioning planned for December 2028. The terminated Tianjin LNG Phase III project was originally intended to build an imported liquefied natural gas receiving station. One is to extract gas from underground, and the other is to purchase gas from the sea. A single character difference can lead to a huge difference in strategic logic. Sinopec explained in its announcement that it aims to increase the volume of natural gas produced internally in order to optimize the structure of its gas supply sources. Behind this statement lies an energy geopolitical storm that shook the world in early 2026. In mid-March, the situation in the Middle East escalated when Qatar, one of the world’s largest LNG exporters, saw its key production facilities attacked, resulting in a permanent disruption to LNG supply from a temporary shutdown. On March 19, Qatar’s Energy Minister announced that force majeure would be declared for certain long-term contracts, resulting in a suspension of supply, including those related to countries such as China and South Korea. On March 20, Sinopec issued a announcement regarding the change in the use of the funds raised. Two things, less than 48 hours apart. The temporal coincidence of these two events precisely highlights the strategic value of domestic gas sources in addressing sudden geopolitical risks. And when the uncertainty surrounding overseas gas supplies soars, no matter how many import receiving stations are built, natural gas cannot enter and thus cannot be used for energy supply. In contrast, self-produced gas fields increase domestic production capacity and enable control over domestic resources. The key difference between the two is not the level of return, but rather the different safety levels. The Southwest Natural Gas Project is located in the Sichuan Basin and possesses confirmed proven reserves, ensuring a steady supply of gas once production begins. When global pathways are full of uncertainties, enhancing domestic supply capacity is the greatest source of certainty. And this certainty is, in itself, the highest level of security.

02 Betting on natural gas: For Sinopec, this adjustment is not either a last-minute decision. Let’s look at a key figure first. In 2025, Sinopec’s net profit attributable to the parent company was 31.809 billion yuan, a significant decrease on a year-on-year basis. Why is this the case? By 2025, international crude oil prices continued to fall, with the average price of Brent crude dropping to $69 per barrel. The chemical products market is highly competitive, with the gross margins of common materials continuing to decline. The penetration rate of new energy vehicles is rising rapidly, while demand for refined oil is shrinking quickly. The decline in oil prices, intense competition in the chemical industry, and the contraction of the refined oil market – these three pressures combined constitute the real situation facing China’s petrochemical industry in 2025. It is precisely this situation that has shaped the core theme of Sinopec’s 2026 work conference: advancing high-quality development through a second round of entrepreneurship. “The phrase “second venture” carries great weight. It means the company needs to find new sources of growth. At the same time, the work meeting provided a precise strategic outline for the core oil and gas business: rapid growth for natural gas, and stable production for crude oil. Behind these words lies a calm industrial assessment. Natural gas is the key driver of growth in the future. Crude oil: maintain production levels. China’s urban gas, industrial gas, and gas used for power generation peak shaving are still in a period of rapid growth. Natural gas has a significantly lower carbon emission intensity than coal and oil, serving as a key bridge between fossil fuels and renewable energy sources. This is not the judgment of a single company, but a consensus of the entire Chinese energy industry for this era. At the same time, the Southwest Petroleum Bureau made plans to increase reserves and production in the Sichuan Basin during its work meeting, proposing the strategy of \"stabilizing western Sichuan, focusing on southern Sichuan, and exploring northern Sichuan\" by 2026. Maintain the stock in western Sichuan, increase growth in southern Sichuan, and tap potential in northern Sichuan. The goal is to create three atmospheric zones with a capacity of 5 billion cubic meters each, thereby establishing a major natural gas production base in Sichuan with an annual output of 15 billion cubic meters. Looking at the adjustments in fundraising strategies at the Sinopec Group level, 4 billion yuan has been allocated specifically to southern Sichuan; import LNG projects have been discontinued, while projects for producing gas domestically have been launched. The work plan of the Southwest Petroleum Bureau forms a logical consistency with the adjustments at the Sinopec Group level. 03

04 The ceiling for natural gas has not yet been reached; to understand Sinopec’s latest adjustments, a broader framework is needed. China’s oil and gas industry is undergoing an irreversible structural transformation. Crude oil production remained stable within the range of 215 million to 216 million tons, while natural gas production increased by over 10 billion cubic meters each year for 9 consecutive years. Stabilizing oil production and increasing gas output is no longer just a corporate strategy; it is the core focus of the entire **oil and gas industry. **The planning at this level clearly confirms this judgment. The \"Work Plan for Advancing the Development of a Natural Gas Production Base with a Capacity of 100 billion cubic meters in Sichuan and Chongqing\" specifies that by 2030, the natural gas production in the Sichuan Basin will reach 100 billion cubic meters, accounting for about one-third of the country’s total production. By 2025, natural gas production in the Sichuan Basin had exceeded 80 billion cubic meters, with a remaining gap of 20 billion cubic meters to reach the 100-billion-cubic-meter target. Sinopec’s investment of 4 billion yuan in gas field projects at this time is precisely what provides the crucial impetus for achieving this target of 100 billion. There is another figure worth reflecting on. Natural gas accounts for about 9% of China’s primary energy consumption, over 20% in the EU, and over 30% in the United States. Among the world’s major economies, China has one of the lowest proportions of natural gas consumption. This gap means that China’s natural gas market is far from reaching its ceiling. Huge opportunities for growth are right ahead; whoever can extract domestic gas efficiently will be able to secure the strongest market position. This is the industrial logic behind Sinopec’s increased investment in the lowest layers of the Sichuan Basin. In terms of industry impact, Sinopec’s adjustments will generate strong spillover effects. Building on the fact that China National Petroleum Corporation’s Southwest Oil and Gas Field produced over 44.7 billion cubic meters of gas in 2024, these two state-owned enterprises, working together in the Sichuan Basin, will continue to boost China’s natural gas self-sufficiency rate. In the future, China will have more confidence in negotiating long-term import contracts, and will be better equipped to ensure supply during winter despite extreme weather conditions. Therefore, the 4 billion yuan invested by Sinopec is not only directed at the Sichuan Basin, but also represents a new benchmark for China’s energy security.

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