LONDON (Reuters) – BP (BP.L) agreed to sell its global petrochemicals business to billionaire Jim Ratcliffe’s Ineos for $ 5 billion, leaving a sector widely seen as a key driver of growth in oil demand in the coming decades.
FILE PHOTO: A BP logo at a service station in London, Great Britain, January 15, 2015. REUTERS / Luke MacGregor / File Photo
The surprise move means BP has reached its asset sales target of $ 15 billion a year ahead of schedule, as CEO Bernard Looney prepares the company for a shift to low-carbon energy.
Progress toward the sales target had slowed after BP had to renegotiate the terms of its sale of two oil and gas portfolios in Alaska and the North Sea in recent months in light of the unprecedented drop in demand. triggered by the COVID-19 pandemic.
Shares of the company listed in London rose on Monday news, rising 3% at 1320 GMT.
Looney acknowledged that the sale of the business, which employs 1,700 people and produced 9.7 million tons of petrochemicals last year, “will be a surprise.”
“Strategically, the overlap with the rest of BP is limited and it would take considerable capital to grow these (petrochemicals) businesses,” Looney said in a statement.
“Today’s agreement is another deliberate step to build a BP that can compete and succeed through the energy transition.”
The business includes interests in manufacturing plants in the United States, Trinidad and Tobago, Great Britain, Belgium, China, Malaysia and Indonesia. The petrochemical plant attached to BP’s oil refineries in Gelsenkirchen and Mulheim in Germany is not included.
Plastics and other petrochemicals will drive global demand for oil until 2050, offsetting slower consumption of motor fuel, the International Energy Agency (IEA) said in a 2018 report.
BP’s petrochemical business was lower relative to rivals like Exon Mobil (XOM.N) and Royal Dutch Shell (RDSa.L) after it sold a large part of its operations in 2005 to Ineos, which today has a network of more than 180 sites in 26 countries and some 22,000 employees.
‘POSITIVE CHANGE’
That left BP’s petrochemical business focused on aromatics, which are used in polymers for plastic bottles and packaging, and acetyls, which are used in paints, solvents, and pharmaceuticals.
However, growing consumer concern about marine pollution from chemicals has made those sectors a less likely long-term bet for BP as it focuses on improving its green credentials.
Santander analyst Jason Kenney said the decision to download them now is a “positive change” for BP due to limited overlap with its other operations. It also strengthens expectations that BP will not cut its dividends, he added.
Looney took office in February and quickly established a plan to reinvent BP by shifting its focus from oil and gas to low-carbon and renewable energy. Since then, he has announced plans for a sharp reduction in the company’s carbon emissions by 2050 and a major 112-year restructuring of the company.
BP also announced plans to cut 2020 spending by 25% and cut 10,000 jobs as the coronavirus crisis accelerates the company’s transition plans.
Ineos will pay a deposit of $ 400 million and another $ 3.6 billion at the end of the agreement, which is expected by the end of the year. The remaining $ 1 billion will be paid in installments in 2021.
“This acquisition is a logical development of our existing petrochemical business, expanding our interest in acetyl and adding a world leading aromatics business that supports the global polyester industry,” Ineos President Ratcliffe said in a statement.
Additional information from Yadarisa Shabong in Bangalore; Arun Koyyur and David Goodman Edition
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