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BP exits petrochemicals

UK BP has announced it will exit petrochemicals, end of this year. This will be followed up by three
clinching a $5bn deal to sell its assets to UK $100mn payment tranches in March, April and
BP is taking a different chemicals giant Ineos. May of 2021, and then a fourth $700mn transfer
path to some of its The sale will help the embattled oil and gas by the end of June that year.
peers. major deliver on its divestment goals and output BP is under considerable financial strain as a
cut deal. It will also help BP reshape its busi- result of the oil price collapse, with its net debt
ness for the global transition to lower-carbon swelling by $6bn in the first quarter as it swung to
energy. By divesting its petrochemicals, BP is a $4.4bn loss on weaker sales and impairments.
also separating itself from its peers such as Royal The company recently said it would make almost
Dutch Shell and ExxonMobil, both of which are 10,000 workers redundant, or around 15% of its
expanding their petrochemicals businesses. total staff. It will also take an impairment hit of
BP’s petrochemicals division is focused on up to $17.5bn in the second quarter, after lower-
aromatics and acetyls, with a strong presence in ing its long-term price assumptions.
Asian markets, which have been a driving force BP launched a divestment plan last year
behind growth in demand for petrochemicals in aimed at shedding $15bn of assets by mid-2021.
recent years. The business consists of 14 manu- The deal with Ineos, once concluded, will bring
facturing plants in Asia, Europe and the US that BP to that goal ahead of schedule.
produced a combined 9.7mn tonnes of petro- “The sale will help alleviate fears over BP’s
chemicals last year. balance sheet, reducing gearing around 2 per-
“Strategically, the overlap with the rest of BP centage points by mid-2021,” Peter Low, energy
is limited and it would take considerable capital analyst at Redburn, commented. “This is another
for us to grow these businesses,” CEO Bernard reminder that the oil majors are currently trading
Looney said announcing the sale. “As we work at a large discount to fundamental valuations.”
to build a more focused, more integrated BP, we Ineos founder and chairman Jim Ratcliffe said
have other opportunities that are more aligned the group was “delighted to acquire these top-
with our future direction.” class businesses from BP, extending the Ineos
He added that the deal was “another deliber- position in global petrochemicals and providing
ate step in building a BP that can compete and great scope for expansion and integration with
succeed through the energy transition.” our existing business.”
Ineos, a major global petrochemicals pro- Ineos acquired BP subsidiary Innovene in
ducer with 180 sites in 26 countries, has agreed 2005, which at the time comprised the bulk of the
to pay a $400mn deposit to BP under the deal. It major’s chemical assets. It later snapped up BP’s
will transfer a further $3.6bn on the deal’s com- oil and gas assets in the UK North Sea, including
pletion, which BP says is anticipated before the the Forties pipeline system. ™

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