The acquisition integrates refining, logistics and airport refuelling into a single aviation energy value chain, strengthening China’s SAF supply chains while enhancing long-term energy security and international competitiveness.
On July 11, China Petroleum & Chemical Corporation (Sinopec) completed the restructuring of China National Aviation Fuel Group (CNAF), making the country’s dominant aviation fuel supplier its wholly owned second-tier subsidiary.
The move marks one of China’s most significant state-owned enterprise reorganizations in recent years, bringing together the country’s largest refiner with its nationwide aviation fuel distribution network as China seeks to strengthen energy security, accelerate the commercialization of sustainable aviation fuel (SAF), and enhance its position in the emerging low-carbon aviation economy.
The restructuring follows strategic plans approved by the State Council in 2025. In January, the State-owned Assets Supervision and Administration Commission (SASAC) formally launched the integration process, describing it as a key step in advancing strategic consolidation among centrally administered state-owned enterprises.
Beyond corporate restructuring, the transaction reflects a broader industrial policy aimed at creating a fully integrated aviation energy value chain capable of supporting China’s expanding civil aviation market while responding to increasingly stringent global decarbonization requirements.
More fundamentally, the integration reunifies aviation fuel production, transportation, storage, blending and airport refuelling within a single enterprise. For years, China’s aviation fuel industry operated with a structural divide: Sinopec had expanding SAF production capability but limited direct access to airport refuelling infrastructure, while CNAF controlled the country’s aviation fuel logistics and airport network but relied on external suppliers for fuel production. The integration removes this disconnect, creating a more seamless pathway for new fuels to move from refinery to aircraft.
A growing market demands greater integration
China’s aviation fuel market is expected to become one of the fastest-growing segments of the country’s refined petroleum industry over the next two decades. According to S&P Global forecasts, China’s domestic jet fuel consumption is projected to increase from 39.28 million tonnes in 2024 to approximately 75 million tonnes by 2040, nearly doubling over the period.
Such growth places increasing emphasis on supply resilience, logistics efficiency and fuel standardization. Unlike petrol or diesel, aviation fuel requires tightly controlled quality management throughout procurement, storage, transportation, blending and airport refuelling. Any disruption along this chain has immediate implications for airline operations and national transportation infrastructure.
By combining Sinopec’s refining capacity with CNAF’s nationwide distribution and airport servicing network, the new entity creates a vertically integrated platform spanning production, procurement, storage, transportation, blending and aircraft refuelling. The integration is expected to improve coordination between upstream and downstream operations while strengthening supply chain resilience during periods of market volatility or geopolitical uncertainty.
Building an end-to-end SAF value chain
The restructuring carries particular significance for sustainable aviation fuel, widely regarded as one of the aviation industry’s most practical pathways for reducing lifecycle carbon emissions before the large-scale deployment of hydrogen or electric aircraft.
Sinopec already operates a 100,000-tonne-per-year biojet fuel facility at its Zhenhai Refining & Chemical complex and is developing an additional 230,000-tonne-per-year SAF production line in partnership with TotalEnergies. CNAF, meanwhile, controls much of China’s aviation fuel procurement, storage, transportation, blending infrastructure and airport refuelling network.
In the near term, commercial expansion is expected to rely primarily on the hydroprocessed esters and fatty acids (HEFA) pathway, which converts waste oils and fats into aviation fuel. Sinopec plans to expand its SAF production capacity to approximately 500,000 tonnes per year by 2027 through projects including Zhenhai Refining & Chemical and Maoming Petrochemical, positioning the company among Asia’s largest SAF producers.
Together, the two companies create an integrated platform capable of preserving SAF’s chain of custody from production to aircraft fuel tanks. This traceability is becoming increasingly important as international regulators require verifiable documentation demonstrating the origin, sustainability and carbon-reduction performance of aviation fuels.
Rather than simply expanding production capacity, the restructuring addresses a critical institutional challenge: ensuring that environmental attributes remain attached to the fuel throughout the supply chain. Such traceability underpins emissions accounting and carbon certification for airlines operating international routes.
Green hydrogen lays the foundation for SAF
The restructuring also aligns with Sinopec’s broader investments in renewable hydrogen production, which is expected to become a critical feedstock for next-generation power-to-liquid (PtL) sustainable aviation fuels.
On July 8, Sinopec announced that all 52 alkaline electrolyzers at its Kucha green hydrogen demonstration project in Xinjiang had achieved continuous operation at 100% of design capacity. Powered by a 300 MW photovoltaic installation, the project is currently the world’s largest solar-powered hydrogen production facility.
According to Sinopec, optimization of electrode materials and flow-field design has reduced average electrolyzer electricity consumption to approximately 4.2 kWh per normal cubic metre of hydrogen, outperforming the original design target of 4.5 kWh/Nm³. Overall system energy consumption, including gas separation and purification, remains below 4.8 kWh/Nm³.
Combined with local photovoltaic generation costs of around CNY0.15/kWh, Sinopec estimates that green hydrogen production costs have fallen to approximately CNY 18 per kilogram, approaching cost competitiveness with conventional fossil-fuel-derived hydrogen.
While the Kucha project currently supports refining and industrial applications, declining renewable hydrogen costs could substantially improve the economics of synthetic aviation fuels over the coming decade.
Beyond 2028, Sinopec is expected to expand from HEFA towards power-to-liquid (PtL) aviation fuels, which combine renewable hydrogen with captured carbon dioxide to produce synthetic hydrocarbons. If successfully commercialized, the company would control every major stage of the emerging value chain, from renewable electricity and green hydrogen production to SAF manufacturing, logistics and airport refuelling.
The integrated platform also creates a significant future source of hydrogen demand alongside green ammonia and green methanol, reducing commercial risks as synthetic aviation fuels move towards large-scale deployment.
Regulatory pressures reshape competition
Global SAF deployment is increasingly being driven by regulation rather than voluntary corporate commitments, making certified production capacity a strategic competitive advantage.
Under the EU’s ReFuelEU Aviation regulation, fuel suppliers must achieve a minimum SAF blending ratio of 2% from 2025, rising to 6% by 2030 and reaching 70% by 2050. Airlines serving European destinations will therefore require certified SAF supplies supported by internationally recognized sustainability documentation.
For Chinese carriers operating long-haul international services, access to certified SAF is becoming both a compliance requirement and a commercial necessity. Without sufficient domestic production and certification capability, airlines could become increasingly dependent on imported SAF, potentially exposing them to higher costs and reduced supply flexibility.
Against this backdrop, Sinopec’s acquisition of CNAF represents more than a domestic industrial consolidation. It establishes a national platform capable of supplying certified SAF across the full value chain while supporting China’s participation in emerging international low-carbon aviation markets.
From production scale to standards leadership
The strategic implications extend well beyond production capacity.
Current international certification for SAF carbon accounting and sustainability largely follows standards established by the European Union and the International Civil Aviation Organization (ICAO). As global SAF markets mature, the ability to influence technical standards, certification systems and mutual recognition frameworks is expected to become an increasingly important source of industrial competitiveness.
An integrated operator controlling production, logistics, blending and airport delivery possesses stronger capabilities to collect operational data, validate emissions reductions and demonstrate compliance with evolving international certification requirements. Such capabilities could support China’s efforts to develop domestic standards that achieve broader international recognition while reducing reliance on foreign certification systems.
From a value chain perspective, the restructuring also reduces transaction complexity between refiners, logistics providers and airport fuel operators. Vertical integration can improve inventory management, optimize blending operations and accelerate the commercialization of new SAF products as production capacity expands.
Strategic implications beyond aviation fuel
The restructuring reflects China’s broader industrial strategy of moving beyond expanding production capacity towards controlling critical value chains. In aviation energy, competitive advantage will increasingly depend not only on refining capability but also on integrated logistics, certification and downstream fuel distribution.
For Sinopec, the acquisition transforms its aviation fuel business into a fully integrated energy platform spanning refining, logistics, airport refuelling and, ultimately, synthetic aviation fuels supported by its expanding renewable hydrogen portfolio.
More broadly, the deal underscores China’s ambition to develop national champions capable of competing across increasingly integrated global energy markets. As sustainable aviation fuel becomes a strategic component of international aviation policy, Sinopec’s combination of industrial scale, vertically integrated supply chains and growing low-carbon fuel capability positions it to play a central role in the next phase of aviation energy development.