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bp agrees to sell its petrochemical business to INEOS

Release date:
30 August 2018
  • $5 billion deal for bp’s global aromatics, acetyls and related businesses
  • Next strategic step in focusing portfolio as part of reinventing bp
  • Further strengthens bp’s finances, delivers $15 billion divestment target a year early

bp today announced that it has agreed to sell its global petrochemicals business to INEOS for atotal consideration of $5 billion, subject to customary adjustments. The agreed sale, the nextstrategic step in reinventing bp, will further strengthen bp’s balance sheet and delivers its targetfor agreed divestments a year earlier than originally scheduled. 

 

Under the terms of the agreement, INEOS will pay bp a deposit of $400 million and will pay afurther $3.6 billion on completion. An additional $1 billion will be deferred and paid in threeseparate instalments of $100 million in March, April and May 2021 with the remaining $700 millionpayable by the end of June 2021. Subject to regulatory and other approvals, the transaction isexpected to complete by the end of 2020. 

 

bp’s petrochemicals business is focused on two main businesses – aromatics and acetyls – eachof which has leading technology and advantaged manufacturing plants, including a strongpresence in growth markets in Asia. In total, the businesses have interests in 14 manufacturingplants in Asia, Europe and the US and in 2019 produced 9.7 million tonnes of petrochemicals.

 

Bernard Looney, bp chief executive officer said: “This is another significant step as we steadilywork to reinvent bp. These businesses are leaders in their sectors, with world-class technologies,plants and people. In recent years they have improved performance to produce highly competitivereturns and now have the potential for growth and expansion into the circular economy. 

 

“I am very grateful to our petrochemicals team for what they have achieved over the years andtheir commitment to bp. I recognise this decision will come as a surprise and we will do our bestto minimise uncertainty. I am confident however that the businesses will thrive as part of INEOS,a global leader in petrochemicals.

 

“Strategically, the overlap with the rest of bp is limited and it would take considerable capital for usto grow these businesses. As we work to build a more focused, more integrated bp, we haveother opportunities that are more aligned with our future direction. Today’s agreement is anotherdeliberate step in building a bp that can compete and succeed through the energy transition.”

 

INEOS is a leading global chemicals company with a network spanning over 180 sites in 26countries, employing some 22,000 staff worldwide. Over the past two decades, INEOS hasacquired a number of businesses from bp, most notably the 2005 $9 billion purchase of Innovene,the bp subsidiary that comprised the majority of bp’s then chemicals assets and two refineries. 

 

Brian Gilvary, bp’s chief financial officer, said: “With today’s announcement we have met our $15billion target for agreed divestments a full year ahead of schedule, demonstrating the range andquality of options available to us.”

 

Gilvary, who led the negotiation with the owners of INEOS, added: “bp has had a long relationshipwith INEOS and this agreement reflects the mutual respect and trust that exists between us. It is astrategic deal for both parties that recognises both the high quality of the businesses and thatINEOS is in many ways a natural owner for them.”

 

bp’s aromatics business is a global leader in the production of purified terephthalic acid (PTA), akey feedstock for the manufacture of polyester plastics, and its precursor paraxylene (PX). Thebusiness’s largest manufacturing plants are in China, the US and Belgium and it licenses itsleading PTA production technology to producers around the world. 

 

The acetyls business produces acetic acid and derivatives such as acetic anhydride, which haveuses in a wide range of sectors. It has a diverse base with manufacturing plants in the US, theUK, China, Korea, Taiwan and Malaysia. The sale will also include related interests such as thechemical recycling technology bp Infinia and bp’s interest in acetylated wood developer Tricoya.

 

In total, the businesses included in the transaction currently employ over 1,700 staff worldwide.These staff are expected to transfer to INEOS on completion of the sale.

 

This agreement means that bp has now agreed $15 billion of divestments and other disposalsthrough 2019 and 2020 to date, an amount originally expected to be reached by mid-2021. 

 

bp expects to report its second quarter 2020 results on 4 August and to hold a capital marketsday to set out details of its new strategic direction in mid-September.

Notes:

  • The sale agreement includes the whole of bp’s aromatic and acetyls businesses, includingassets, technology and licences, as well as related assets.
  • Manufacturing plants, and their primary products, included in the sale:
    • Americas: Cooper River, South Carolina (PTA - bp 100%); Texas City, Texas (PXand metaxylene - bp 100%); Eastman bp Texas City Production Agreement (aceticacid); Atlas Methanol, Point Lisas, Trinidad & Tobago (methanol – bp 36.9%).
    • Europe: Hull, UK (acetic acid, acetic anhydride - bp 100%); Geel, Belgium (PTA, PX -bp 100%).
    • Asia: Zhuhai, China (PTA – bp 91.9%), Chongqing, China (acetic acid, acetate esters– bp 51%); Nanjing, China (acetic acid – bp 50%); Merak, Indonesia, (PTA – bp100%); Kertih, Malaysia (acetic acid – bp 70%); Ulsan, South Korea (acetic acid andvinyl acetate monomer – bp ~50.9%); Taichung, Taiwan (PTA – bp 61.4%); Mai Liao,Taiwan (acetic acid – bp 50%).
  • bp’s petrochemicals assets at Gelsenkirchen and Mulheim in Germany are highly integratedwith bp’s Gelsenkirchen refinery and are not included in the sale.
  • In connection with this transaction, INEOS has an option to acquire from bp the researchcomplex located at Naperville, Illinois, for an additional consideration or to enter into a leaseor other arrangement for the same
  • This transaction constitutes a Class 2 transaction for bp under the UK Listing Rules
  • The gross assets that are the subject of this transaction amounted to $3,496 million as at 31December 2019. For the year ended 31 December 2019, a replacement cost profit beforeinterest and tax of $396 million arose in relation to these assets (see page 57 of bp’s AnnualReport and Form 20-F 2019). 
  • Proceeds from the sale will be used by bp for general corporate purposes.

 

Further information:

bp press office London, bppress@bp.com, +44 (0)7831 095541, +44 (0)7554 114451

 

Cautionary statement: 

In order to utilize the ‘safe harbor’ provisions of the United States Private Securities LitigationReform Act of 1995 (the ‘PSLRA’), bp is providing the following cautionary statement. This pressrelease contains certain forward-looking statements – that is, statements related to future, notpast events and circumstances – which may relate to one or more of the financial conditions,results of operations and businesses of bp and certain of the plans and objectives of bp withrespect to these items. These statements are generally, but not always, identified by the use ofwords such as ‘will’, ‘expects’, ‘is expected to’, ‘aims’, ‘should’, ‘may’, ‘objective’, ‘is likely to’,‘intends’, ‘believes’, ‘anticipates’, ‘plans’, ‘we see’ or similar expressions. In particular, amongother statements, expectations regarding the completion of the sale of bp’s global petrochemicalsbusiness to Ineos and the amount and timing of receipt of sale proceeds; expectations regardingthe transfer of staff; expectations regarding the completion of previously announced divestmentsand other disposals; expectations regarding the date on which bp’s second-quarter 2020 resultswill be released; expectations and plans to hold a capital markets day in mid-September; andexpectations regarding bp's use of the proceeds of sale. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend oncircumstances that will or may occur in the future and are outside the control of bp. Actual resultsmay differ from those expressed in such statements, depending on a variety of factors includingthe extent and duration of the impact of the current market conditions including the significantdrop in the oil price, overall global economic and business conditions impacting our business anddemand for our products, as well as the risk factors set forth in our most recent Annual Reportand Form 20-F under “Risk factors” and in any of our more recent public reports.

 

Our most recent Annual Report and Form 20-F and other period filings are available on ourwebsite at www.bp.com or can be obtained from the SEC by calling 1-800-SEC-0330 or on itswebsite at www.sec.gov.