To help achieve its energy transition goals, BP has agreed to sell its global petrochemicals business to INEOS for $5 billion. BP said the sale, expected to be complete by year end, will further strengthen its balance sheet and help fulfill its target for agreed divestments a year earlier than originally scheduled.
The sale comes less than a month after BP said it would cut 10,000 jobs—or approximately 14% of its workforce—in response to the COVID-19 pandemic, and as part of the company’s plan to shift to renewable energy, which includes its commitment to reducing its carbon footprint to net zero by 2050 or sooner.
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.
BP said the sale also helps it meet its $15 billion target for agreed divestments a year ahead of schedule.
The company expects to report its Q2 results on 4 August, and to hold a capital markets day to set out details of its new strategic direction in mid-September.
BP’s petrochemicals business, which produced 9.7 million tonnes of petrochemicals in 2019, is focused on the aromatics and acetyls sectors, which comprise 15 sites across the world (five in the Americas, two in Europe, eight in Asia) as well as 10 joint ventures.
“I recognize this decision will come as a surprise and we will do our best to minimize uncertainty,” said BP CEO Bernard Looney. “We have other opportunities that are more aligned with our future direction.” He added that the overlap of the petrochemicals business with the rest of BP is limited and it would take considerable capital for the company to that segment.
INEOS, a global chemicals company with a network spanning over 180 sites in 26 countries, has acquired a number of businesses from BP over the past 20 years, most notably the 2005 $9-billion purchase of BP’s Innovene subsidiary, which made up the majority of BP’s chemicals assets at the time and two refineries.