BAKU, Azerbaijan, June 30
By Leman Zeynalova – Trend:
BP’s decision to sell its petrochemical business will be a welcome financial boost, said Will Scargill, Managing Oil & Gas Analyst at GlobalData, a leading data and analytics company, Trend reports.
BP has announced that it has agreed to sell its global petrochemicals business to INEOS for a total consideration of $5 billion, subject to customary adjustment.
“While many oil and gas companies have recently looked to petrochemicals integration as a way to drive value, BP’s petrochemicals unit was not particularly well suited to its new energy transition strategy. Its aromatics focus tied it to oil, putting it at odds with the shift to cleaner sectors such as gas and renewables and making it a natural area for divestment as the company looks to streamline,” said the expert.
“Furthermore, meeting its $15 billion divestment target ahead of schedule will be a welcome financial boost given the market turmoil caused by the COVID-19 pandemic.
“Meanwhile, for INEOS, this transaction will be a major step forward in its growth plans. At a stroke, the company will become a major player in aromatics, while at the same time building on geographical and operational synergies.”
Steve Jenkins, vice president of Wood Mackenzie’s petrochemicals team, said that this is a significant move, signalling its switch to focus on new energies.
“This move makes strategic sense. BP held onto these assets in 2005 when they were making strong profits. Now these chemicals businesses are struggling with over-capacity and BP is urgently raising cash. INEOS is, no doubt, relying upon capturing significant operational synergies as it integrates the two businesses. The deal includes a number of collocated assets and represents a good overall portfolio fit with very limited overlap.”
Under the terms of the agreement, INEOS will pay bp a deposit of $400 million and will pay a further $3.6 billion on completion. An additional $1 billion will be deferred and paid in three separate instalments of $100 million in March, April and May 2021 with the remaining $700 million payable by the end of June 2021. Subject to regulatory and other approvals, the transaction is expected to complete by the end of 2020.
BP’s petrochemicals business is focused on two main businesses – aromatics and acetyls – each of which has leading technology and advantaged manufacturing plants, including a strong presence in growth markets in Asia. 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.
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