BP Divests Petrochemicals

BP has agreed to sell its petrochemicals business to the UK firm Ineos for $5bn, enabling it to reach its $15bn divestment target a year early, the oil and gas major said on June 29.

Under the deal's terms, Inoes will pay a deposit of $400mn and make a further payment of $3.6bn on the deal's completion. A further $1bn will be paid in three $100mn tranches in March, April and May 2021 and a final $700mn by the end of June that year. Pending regulatory and other approvals, the transaction is expected to be closed by the end of 2020.

BP is scrambling to stem losses, warning earlier this month it would cut close to 10,000 jobs, or around 15% of its total workforce. It is also preparing to book $17.5bn in impairments and write-offs in the second quarter, after lowering its long-term price assumptions for oil.

The sale to Ineos will bring BP's total divestments since the start of 2019 to $15bn. Earlier the company did not expect to reach this goal until mid-2021.

BP's petrochemicals business is focused on aromatics and acetyls with a strong presence in growth markets in Asia. It has a total of 14 manufacturing plants in Asia, Europe and the US that last year produced 9.7mn metric tons of petrochemicals.

"Strategically, the overlap with the rest of BP is limited and it would take considerable capital for us to grow these businesses," CEO Bernard Looney said. "As we work to build a more focused, more integrated BP, we have other opportunities that are more aligned with our future direction. Today’s agreement is another deliberate step in building a BP that can compete and succeed through the energy transition."

Ineos is one of the world's largest chemicals companies, with 180 sites in 26 countries. In 2005, it bought BP subsidiary Innovene, which at the time comprised most of the major's chemical assets. It has bought BP oil assets in the UK as well, including the Forties pipeline system.

"We are delighted to acquire these top-class businesses from BP, extending the Ineos position in global petrochemicals and providing great scope for expansion and integration with our existing business," Ineos founder and chairman Jim Ratcliffe said.