State-Approved Sinopec-CNAF Restructuring Fuels China's SAF Commercial Push

The State Council has approved a major strategic reorganization between two central enterprises: China Petrochemical Corporation (Sinopec) and China National Aviation Fuel Group (CNAF). This significant move, announced by the State-owned Assets Supervision and Administration Commission (SASAC) on January 8, 2026, aims to create a fully integrated jet fuel industrial chain. The primary goal is to drive China Sustainable Aviation Fuel (SAF) towards large-scale commercial use and support the nation’s ambitious aviation sector emission reduction targets.

Strategic Integration and SAF Development

This restructuring merges the strengths of China's largest aviation fuel producer, Sinopec, with Asia's largest aviation transport service provider, CNAF. Sinopec is a world-class refining and chemical giant and the largest upstream supplier of refined oil products domestically. CNAF manages the procurement, transportation, storage, and refueling services for aviation fuel.

The integration is expected to reduce intermediate links and lower supply costs, enhancing energy security for China's aviation sector. For Sinopec, the reorganization provides direct access to aviation fuel sales channels, creating a closed-loop system from crude oil refining to aircraft refueling. For CNAF, it secures a more stable and reliable upstream supply.

Advancing Sustainable Aviation Fuel

The core of the strategic reorganization is to deepen cooperation in the field of Sustainable Aviation Fuel. The combined entity will integrate advantages in scientific research, industrialization capabilities, storage, transportation, and international trade for SAF. This is intended to promote the research, utilization, and continuous iteration of SAF technologies.

SDIC Securities (also reported as Guotou Securities) noted that this solidifies China's transition of SAF from demonstration flights to large-scale commercial use. Analysts recommend focusing on companies with leading progress in SAF production capacity and those with mature UCO raw material collection systems. SAF is primarily produced in China using the hydroprocessed esters and fatty acids (HEFA) pathway, which relies heavily on feedstocks like used cooking oil (UCO).

China's SAF Market and Policy Landscape

China's government has set clear, albeit non-mandatory, goals for SAF adoption. The 14th Five-Year Plan for Green Civil Aviation Development (2021-2025) set a target for a cumulative SAF consumption of 50,000 tonnes by 2025. This target is a significant milestone for the domestic aviation sector.

• Current Capacity: China has approximately 400,000 tonnes per year of SAF production capacity in operation, though over 90% is currently exported.
• Future Demand: China's aviation fuel consumption is projected to grow from 39.28 million tonnes in 2024 to 75 million tonnes by 2040. SAF demand is forecast to reach 3 million tonnes per year by 2030, based on a 5.2% adoption rate.

Despite the positive outlook, the high price of SAF—estimated to be three to five times higher than traditional jet kerosene—remains the biggest challenge for airlines. Furthermore, while the country is a major exporter of UCO, the domestic availability and prioritization of these feedstocks pose a limitation to scaling up China's SAF production capacity.

This strategic reorganization under the State-owned Assets Supervision and Administration Commission is a key step in addressing the supply-side constraints. It aligns with broader state-owned enterprise reform policies focused on enhancing core competitiveness and optimizing the layout of state capital. By integrating production and distribution, the new entity is better positioned to meet future SAF demand and accelerate the aviation decarbonization goals.

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