BP Sells Petrochemicals Business in $5 Billion Deal
BP is selling its petrochemicals business to Ineos Ltd., one of the world’s largest petrochemical companies, for $5 billion. This sale reflects the largest deal in the oil industry since the COVID-caused economic downturn.
Petrochemicals appear in everyday products, such as plastics, fertilizers, and fabrics. The International Energy Agency anticipates that petrochemicals will become the largest driver of oil demand, consisting of over a third of oil demand growth in 2030.
Since the coronavirus outbreak, companies have cut costs and scale back investments. The oil industry simultaneously faced increased production from Saudi Arabia and declining demand. Oil prices have fallen by one third since January.
BP and Ineos first proposed the sale years ago, and revisited the proposition in recent months. In 2005, Ineos bought most of BP’s petrochemicals business for $9 billion.
The deal may help BP with its sizable debt load. In early June, BP said it was cutting 14% of its global workforce and would accept a write-down of $17.5 billion on its asset values, pushing forward its plans to reestablish itself after COVID’s impact. Shares were up 3.4% in London on Monday. Selling petrochemicals allowed BP to reach $15 billion of asset sales a year before the company’s target.
Exiting this business distinguishes the company from rivals, such as Royal Dutch Shell PLC and Exxon Mobil Corp., who have been expanding petrochemical endeavors. BP says that the division would have taken large investments to grow, though this energy company will keep some petrochemicals facilities for its German refining business.
“This is another significant step as we steadily work to reinvent BP,” said Bernard Looney, the chief executive of BP. The company’s reorganization plan is due to launch in September.