by TIAN Heqi

China's refining industry is reshaping its output mix as carbon targets and the rapid adoption of new energy vehicles curb demand for traditional fuels.

The CNPC Economics & Technology Research Institute, the research unit of state-owned oil giant CNPC, said in its latest oil and gas industry report that refiners are increasingly shifting capacity away from fuels towards chemicals and specialty products.

Output of refined oil products fell to 414 million tonnes in 2025 from 433 million tonnes in 2021, while their share of total output dropped from 63% to 56%. Over the same period, chemical light oil output rose sharply to 184 million tonnes from 126 million tonnes, lifting its yield to 25% as refiners expanded higher-value production.

The institute said the sector has phased out or replaced 35.7 million tonnes per year of outdated capacity, while deeper processing capacity continued to expand. The ratio of secondary to primary processing capacity rose to 127% in 2025. Refineries with annual capacity of at least 10 million tonnes accounted for 58.4% of total capacity.

China's refining capacity continued to grow during the 14th Five-Year Plan period (2021–2025), even as fuel demand weakened. Total capacity reached about 940 million tonnes per year, making China the world's largest refining market.

Industry concentration has increased, with Sinopec, PetroChina and private refiners together accounting for the bulk of capacity. Average refinery size rose to 7.17 million tonnes per year in 2025, close to the US average.

Globally, oil markets remained oversupplied in 2025, and the institute expects demand growth to stay weak in 2026. Brent crude is forecast to average between US$60 and US$65 per barrel.

LU Ruquan, president of the institute, said China seeks to support stability in global oil and gas markets amid global uncertainty.

Looking ahead to the 15th Five-Year Plan period (2026–2030), the institute said China's refining industry is likely to shift its focus from capacity expansion to improving returns. Total capacity is expected to remain broadly stable as new integrated projects come on stream and smaller or ageing facilities exit the market.

By 2030, China's refining capacity is projected to stand at about 920 million tonnes per year, around 20 million tonnes lower than at the end of 2025, according to the report.