China's largest refiner, Sinopec Corp., has reconsidered its plans to invest in new petrochemical projects, shelving proposed investments worth billions of dollars. The main reason for deciding against moving forward with them is growing competition from the U.S. petrochemical sector, in addition to increasing domestic opposition from environmental groups over new projects related to oil and gas development.
The announced move follows a previously stated reduction of budget for 2014, as a reaction to unsatisfactory performance of Sinopec's chemical unit and in response to China's economic slowdown. Previously, the company announced it was dropping plans for a $3.1 billion ethylene plant in Qingdao city.
But the overall scaleback comes after two decades of continual investment and expansion, not just by Sinopec but also by other major players in the Chinese energy market, Reuters noted. The trend appears to be reversing at present, with other companies taking similar steps. PetroChina, another big gun in the sector, has stalled a $13 billion project that it was planning together with Shell in the eastern part of the country, and another one with state-owned Petroleos de Venezuela.
The sector is changing its focus, realizing that it is losing its competitiveness against natural gas-based petrochemical products from North America and put off by strong public opposition to new projects, a Beijing-based industry official with an international energy giant told Reuters.