BP to sell global petchems business to Ineos for $5bn

BP has agreed to sell almost all of its global petrochemicals assets to privately-owned integrated firm Ineos for $5bn, describing the deal as the next strategic step in reinventing itself and a way of becoming more focused and more integrated.

"I recognise this decision will come as a surprise," chief executive Bernard Looney said. But "strategically, the overlap with the rest of BP is limited and it would take considerable capital for us to grow these businesses. As we work to build a more focused, more integrated BP, we have other opportunities that are more aligned with our future direction."

The deal, which is subject to approvals, is expected to close by the end of this year. It includes all of the company's petrochemicals assets except for those at Gelsenkirchen and Mulheim in Germany, which are highly integrated with the firm's 265,000 b/d Gelsenkirchen refinery.

BP has long been an outlier among the majors when it comes to petrochemicals, concentrating investment on aromatics and acetyls, as opposed to olefins, such as ethylene. It has aromatics and acetyls businesses in the US, Trinidad and Tobago, the UK, Belgium, China, Indonesia, Malaysia, South Korea and Taiwan.

The other majors think petrochemicals are consistent with the energy transition. ExxonMobil has argued in the past that demand for petrochemicals is more resilient to tightening climate change regulations than demand for products such as gasoline and diesel. This is because packaging made from chemicals extends the life of food, reducing the amount of energy required for shipping. Plastics made from chemicals are also used to make cars more fuel efficient, and insulation made from chemicals cuts the amount of energy needed to heat and cool homes.

BP's aromatics and acetyls businesses have interests in 14 manufacturing plants and produced 9.7mn t of petrochemicals last year.

"The agreed sale, the next strategic step in reinventing BP, will further strengthen BP's balance sheet and delivers its target for agreed divestments [of $15bn since the start of 2019] a year earlier than originally scheduled," the company said.

Ineos will pay BP a deposit of $400mn and a further $3.6bn on completion. The remaining $1bn will be paid in instalments in March-June 2021.

Reshaping under Looney

Since Looney took over as chief executive in February, BP has been reshaping itself to be more aligned with the transition to a lower-carbon energy system. The firm has already moved to reflect rising energy transition pressures in its financial statements, flagging up a major hit to valuations for some of its upstream assets and resources after it slashed its long-term oil and gas price assumptions. It said earlier this month that it will book a total of $13bn-17.5bn of post-tax impairment charges and exploration write-offs in the second quarter.

"Today's agreement is another deliberate step in building a BP that can compete and succeed through the energy transition," Looney said today.

Ineos has bought several businesses from BP over the past two decades, including the $9bn purchase of subsidiary Innovene in 2005, which "comprised the majority of BP's then chemicals assets and two refineries".

By Konstantin Rozhnov