China’s newest oil refiners are thriving by aligning themselves with President Xi Jinping’s vision, expanding even as their older rivals and several other private businesses have been reined in by Beijing.
These newcomers have gained the moniker Teapot 2.0 in China, and are benefiting because they are fitting into Xi’s push for cleaner industries and greater energy efficiency.
In June, Shenghong installed China’s biggest refining tower, and dedicated the $10.5 billion facility to the Communist Party’s centenary anniversary. Once a producer of synthetic fibers, Shenghong’s stock has rallied more than fourfold since the project began two years ago. Hengli’s stock has more than tripled since its first refinery in late 2018.
Xi’s administration has cracked down on private businesses deemed as having grown too powerful or less aligned with its vision, imposing strict controls on tutoring firms and investigating ride-hailing service Didi Global Inc. over its data practices. In the energy sector, the government is now supporting firms most closely in line with its objectives, while curtailing the more polluting first generation private refiners — called Teapot 1.0 — that have been around for decades.
“The Teapots 2.0 have a very different business and operating model which, in theory, is better suited to China’s visions for its energy sector – integrated and efficient,” said Michal Meidan, director of the China Energy Research Program at the U.K.-based Oxford Institute for Energy Studies.