The global petrochemicals business of British Petroleum (BP) will be sold to billionaire Jim Ratcliffe’s Ineos for $5 billion, the company said. With this deal the energy major will be completely exiting a sector that is widely viewed to be one of the key drivers for growth in oil demand in the coming decades.
The announcement by the company has however surprised the market.
The deal also marked a total asset sale of $15 billion which was a target that was set by the company to be achieved a year later. This also hastens he shift of the company from carbon intensive energy industry to low-carbon energy as set by the company’s CEO Bernard Looney.
Following the announcement of the deal there was 2.5 per cent rise in the company’s London-listed shares.
The sale of the business unit of BP, which currently employs 1,700 people and produced 9.7 million tonnes of petrochemicals last year, “will come as a surprise”, acknowledged Looney.
“Strategically, the overlap with the rest of BP is limited and it would take considerable capital for us to grow these (petrochemical) businesses,” 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,” Looney added.
Manufacturing plants in the United States, Trinidad and Tobago, Britain, Belgium, China, Malaysia and Indonesia are included as a part of the deal. The sale however does not include the petrochemical plant attached to BP’s oil refineries in Gelsenkirchen and Mulheim in Germany.
The International Energy Agency (IEA) said in a 2018 report that global oil demand to 2050 will be driven by plastics and other petrochemical products which will offset fall in demand for oil as fuel by the motor vehicle sector.
The majority of the petrochemicals business of BP, which comprised of a huge network of of more than 180 sites in 26 countries and about 22,000 employees, was sold out to Ineos by the company in 2005.
BP sold the bulk of its petrochemicals business in 2005 to Ineos, which has a network of more than 180 sites in 26 countries and about 22,000 employees.
A comprehensive plan to reinvent BP by shifting its focus from oil and gas to low-carbon energy and renewable was quickly set out for the company as well as its investors by Looney soon after he took office in February. Since then, he has also announced plans for a dramatic reduction of the total carbon emissions of the company by 2050 as well as a plan for a major restructuring of the company that is 112 years old.
Since the emergence of the novel coronavirus pandemic and the related collapse in energy consumption across the world, a 25 per cent cut in announced plans to its 2020 spending was announced by BP while also announcing 10,000 job cuts. The pandemic has also accelerated by the transition plans of the company.
“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,” Ineos Chairman Ratcliffe said in a statement
(Adapted from FinaniclaPost.com)