The Chinese Super League side pulled out hours before the February 19 match, blaming "serious physical discomfort" of players and saying they were unable to form a team.
The Asian Football Confederation's (AFC) Disciplinary and Ethics Commission said Shandong would not be able to play in the AFC's club competitions up to and including the 2026/27 season editions, and fined the club $50,000.
It also ordered Shandong to return a participation fee of $600,000 and a performance bonus of $200,000 to the AFC along with compensation of $40,000 to Ulsan "in respect of damages and losses claimed" by the South Korean club.
Shandong's pull-out came days after the club said it had banned supporters for "inappropriate behaviour" during a home ACL match against South Korean team Gwangju after fans in the crowd displayed images of South Korea's last military dictator Chun Doo-hwan.
Hundreds of people are estimated to have died or gone missing when the South Korean government violently put down the Gwangju uprising by pro-democracy protesters in May 1980, when Chun was the de facto leader of the country after leading a military coup.