China Petroleum and Chemical Corp., or Sinopec Corp., will reduce its 2015 capital expenditure (capex) by 12% to CNY 135.9 billion (USD 22.1 billion), after the company reported an operating profit of CNY 65.5 billion (USD 10.6 billion) in 2014, down 32%, from the previous year.

In 2014, the global economic recovery remained weak while China’s economic growth was 7.4%. International crude oil prices fluctuated at a high level in the first half of the year before plunging in the second half, with a precipitous drop in the fourth quarter.

The effect of lower oil prices was felt across Sinopec’s business segments, with full year net profit falling 29.7% to CNY 46.5 billion (USD 7.5 billion). Sinopec posted an operating loss of CNY 2 billion (USD 0.33 billion) in refining last year, compared to a CNY 8.6 billion (USD 1.4 billion) profit in 2013, as gross refining margin dropped 18.4% to CNY 213 (USD34.70) per metric tonne in 2014.

In 2015, China’s economy will enter a “new normal” phase of slower growth, the company said. China’s domestic oil products market will see steady growth as the company continues to upgrade the quality of its oil products. Demand for major chemical products will grow steadily.

In light of this “new normal,” Sinopec will look at improving its investment and project portfolios based on market conditions, while focusing on improving efficiency, deepening reforms and implementing rigorous management programs.

More than half of its capital expenditure budget in 2015 will be allocated to exploration and production projects, mainly for the construction of the Fuling shale gas project, exploration and development projects in the Shengli oilfield, Sichuan Basin, Tahe oilfield, Junggar Basin and Ordos Basin as well as Guangxi and Tianjin LNG projects, construction of gas pipelines and overseas projects.

About 17% of the total capex has been allocated for the refining segment, mainly for revamping the Qilu and Jiujiang refineries, as well as product quality upgrade projects such as gasoline adsorbent desulfurization and diesel hydrogenation.

Sinopec plans to raise refinery throughput by 3.2% this year to 243 million metric tonnes.

About 16% has been allocated for marketing and distribution, mainly for revamping service stations, constructing product pipeline networks, optimising the distribution of tank farms, improving facilities in service stations and promoting non-fuel businesses.

About 11% will be spent on chemical projects, mainly for the Jinling propylene oxide and LPG utilisation projects and the Hainan PX phase II project.