Bp sells petro­chem­i­cal unit to Ineos as it shifts to low-car­bon en­ergy

The Globe and Mail (Ontario Edition) - - BIRTH AND DEATH NOTICES - RON BOUSSO

BP PLC has agreed to sell its global petro­chem­i­cals busi­ness to bil­lion­aire Jim Rat­cliffe’s Ineos for US$5-bil­lion, pulling out of a sec­tor widely seen as a key driver of oil de­mand growth in the com­ing decades.

The sur­prise move means BP has hit its US$15-bil­lion as­set sales tar­get a year ahead of sched­ule as chief ex­ec­u­tive Bernard Looney pre­pares the com­pany for a shift to low-car­bon en­ergy.

Progress to­ward the sales tar­get had taken a dent af­ter BP had to rene­go­ti­ate terms of its sale of two oil and gas port­fo­lios in Alaska and the North Sea in re­cent months in light of the un­prece­dented de­mand slump trig­gered by the COVID-19 pan­demic.

The com­pany’s Lon­don-listed shares gained 3.3 per cent on Mon­day’s news.

Mr. Looney ac­knowl­edged that the sale of the busi­ness, which em­ploys 1,700 peo­ple, and pro­duced 9.7 mil­lion tonnes of petro­chem­i­cals last year, “will come as a sur­prise.”

“Strate­gi­cally, the over­lap with the rest of BP is lim­ited and it would take con­sid­er­able cap­i­tal for us to grow th­ese [petro­chem­i­cal] busi­nesses,” Mr. Looney said in a state­ment.

“To­day’s agree­ment is an­other de­lib­er­ate step in build­ing a BP that can com­pete and suc­ceed through the en­ergy tran­si­tion.”

The busi­ness in­cludes stakes in man­u­fac­tur­ing plants in the United States, Trinidad and Tobago, Bri­tain, Bel­gium, China, Malaysia and In­done­sia. The petro­chem­i­cal plant at­tached to BP’s oil re­finer­ies in Gelsenkirc­hen and Mul­heim in Ger­many are not in­cluded.

BP’s petro­chem­i­cals busi­ness was smaller rel­a­tive to ri­vals such as Exxon Mo­bil Corp. and Royal Dutch Shell PLC 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 about 22,000 em­ploy­ees.

That left BP’s petro­chem­i­cals busi­ness fo­cused on aro­mat­ics, which are used in poly­mers for plas­tic bot­tles and pack­ag­ing, and acetyles, which are used in paints, sol­vents and phar­ma­ceu­ti­cals.

How­ever, grow­ing con­sumer con­cern over 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 off­load those now is a “pos­i­tive change” for BP be­cause of the lim­ited over­lap with its other oper­a­tions. It also strength­ens ex­pec­ta­tions that BP will not cut its div­i­dend, he added.

Mr. Looney took of­fice in Fe­bru­ary and quickly set out a plan to rein­vent BP by shifting its fo­cus from oil and gas to low-car­bon en­ergy and re­new­ables. He has since an­nounced plans for a sharp re­duc­tion in the com­pany’s car­bon emis­sions by 2050 and a ma­jor re­struc­tur­ing of the 112-year-old com­pany.

BP also an­nounced plans to cut 2020 spend­ing by 25 per cent and axe 10,000 jobs as the novel coro­n­avirus cri­sis ac­cel­er­ates the com­pany’s tran­si­tion plans.

Ineos will pay a de­posit of US$400-mil­lion and a fur­ther US$3.6-bil­lion on com­ple­tion of the deal, which is ex­pected by the end of the year.

The re­main­ing US$1-bil­lion will be paid in in­stal­ments in 2021.

“This ac­qui­si­tion is a log­i­cal de­vel­op­ment of our ex­ist­ing petro­chem­i­cals busi­ness, ex­tend­ing our in­ter­est in acetyls and adding a world lead­ing aro­mat­ics busi­ness sup­port­ing the global polyester in­dus­try,” Mr. Rat­cliffe said in a state­ment.

BP also an­nounced plans to cut 2020 spend­ing by 25 per cent and axe 10,000 jobs as the novel coro­n­avirus cri­sis ac­cel­er­ates the com­pany’s tran­si­tion plans.

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