Oil titan BP announced on Monday that it will be selling its petrochemicals business to UK chemical company Ineos for $5 billion (€4.61 billion) in a bid to “reinvent” themselves.
Photo: BP
Shares for the company were up 1.5% to 309.02 pence each in London, however, overall stocks are down 36% compared to the same time last year due to weak oil prices owing to the Covid-19 pandemic.
With this agreement, Ineos will lay down a deposit of roughly $400 million, and will then front $3.6 of the agreed-upon amount once the deal has been completed. A further $1 billion will be deferred and paid in three separate instalments of $100 million in March, April and May 2021, with the final $700 million being paid by June of the same year.
The sale is slated to strengthen BP’s balance sheet and delivers its $15 billion divestment target a year earlier than originally planned, the stated. Proceeds will be used by the company for general corporate purposes.
BP's Chief Executive Bernard Looney said: "This is another significant step as we steadily work to reinvent BP. I recognise this decision will come as a surprise and we will do our best to minimise uncertainty.
"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. Today's agreement is another deliberate step in building a BP that can compete and succeed through the energy transition."
BP is perhaps best known for the Deepwater Horizon oil spill, which flooded the Gulf of Mexico with the largest ever marine oil spill in history, following an explosion on April 20, 2010.
It caused a humanitarian disaster, as the slick covered more than 57,000 square miles (147,600 square km) - an area around the size of Bangladesh. To clean it, 1.8 million gallons (8.2 million litres) of dispersants were deployed to emulsify the oil.
More than a third of federal waters in the gulf were closed out of fear of contamination, with further oil slicks being detected for several years after.
BP’s petrochemicals business is focused on two main businesses, aromatics and acetyls. IN total, the businesses have interests in 14 manufacturing plants in Asia, Europe and the US and in 2019 produced 9.7 million tonnes of petrochemicals.
The aromatics business produces purified terephthalic acid, a key feedstock for the manufacture of polyester plastics and its precursor paraxylene.
The acetyls business makes acetic acid and derivatives such as acetic anhydride, which have uses in a wide range of sectors.
The gross assets being sold amounted to roughly $3.5 billion as of December 31, 2019. The business recorded a replacement cost profit before interest and tax of $396 million in 2019.
Ineos previously has acquired several businesses from BP, most notable the purchase of Innovene in 2005, at a staggering $9 billion. The asset comprised of the majority of BP’s then chemical assets and included two refineries.
Back to Homepage
Back to Chemicals & Biochemicals