British Petroleum has agreed to sell its petrochemicals business to INEOS for $5 billion. BP's petrochemicals unit focuses on aromatics and acetyls, with interests in 14 manufacturing plants across Asia, Europe, and the US. BP CEO Bernard Looney called the deal "another significant step" in his plan to "reinvent" the British oil major.
“Strategically, the overlap with the rest of bp is limited and it would take considerable capital for us to grow these businesses," 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.”
The transaction is expected to complete by the end of 2020, with payments scheduled until the end of June 2021. In 2019, the company produced 9.7 million tonnes of petrochemicals, and Looney admitted that the decision would "come as a surprise" to the petrochemicals team.
“I am very grateful to our petrochemicals team for what they have achieved over the years and their commitment to bp. I recognise this decision will come as a surprise and we will do our best to minimise uncertainty. I am confident however that the businesses will thrive as part of INEOS, a global leader in petrochemicals," he said.
INEOS is a global chemicals company with a network spanning over 180 sites in 26 countries, employing some 22,000 staff worldwide. Over the past two decades, INEOS has acquired a number of businesses from bp, most notably the 2005 $9 billion purchase of Innovene, the BP subsidiary that comprised the majority of BP’s then chemicals assets and two refineries.
Brian Gilvary, bp’s chief financial officer, said: “With today’s announcement we have met our $15 billion target for agreed divestments a full year ahead of schedule, demonstrating the range and quality of options available to us.”
Gilvary, who led the negotiation with the owners of INEOS, added: “BP has had a long relationship with INEOS and this agreement reflects the mutual respect and trust that exists between us. It is a strategic deal for both parties that recognises both the high quality of the businesses and that INEOS is in many ways a natural owner for them.”
BP’s aromatics business is a global leader in the production of purified terephthalic acid (PTA), a key feedstock for the manufacture of polyester plastics, and its precursor paraxylene (PX). The business’s largest manufacturing plants are in China, the US and Belgium and it licenses its leading PTA production technology to producers around the world.
The acetyls business produces acetic acid and derivatives such as acetic anhydride, which have uses in a wide range of sectors. It has a diverse base with manufacturing plants in the US, the UK, China, Korea, Taiwan and Malaysia. The sale will also include related interests such as the chemical recycling technology BP Infinia and BP’s interest in acetylated wood developer Tricoya.
In total, the businesses included in the transaction currently employ over 1,700 staff worldwide. These staff are expected to transfer to INEOS on completion of the sale.