Reaction: Grangemouth owner Ineos strikes major £4bn deal for chunk of BP
The deal means that a transforming BP has met its promise to sell off $15bn of assets a year earlier than initially promised. It also announced plans recently to cut 10,000 jobs globally amid a slump in demand for oil.
The planned sale is another step in a revamp led by the FTSE 100 listed oil giant’s new chief executive Bernard Looney.
He said: “This is another significant step as we steadily work 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 competitive returns 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 and their commitment to BP.
“I recognise this decision will come as a surprise and we will do our best to 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 us to grow these businesses.
“As we work to build a more focused, more integrated BP, we have other opportunities that are more aligned with our future direction. Today’s agreement is another deliberate step in building a bp that can compete and succeed through the energy transition.”
Ineos said the acquisition would extend its portfolio as well as the geographic reach of the business.
Ratcliffe, founder and chairman of Ineos, said: “We are delighted to acquire these top-class businesses from BP, extending the Ineos position in global petrochemicals and providing great scope for expansion and integration with our existing business.
“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.”
Aromatics provide the building blocks for the global polyester industry – key to fibres, films and packaging. Acetyls support a wide range of industries in food flavouring and preservation, pharmaceuticals, paints, adhesives and packaging.
Steve Jenkins, vice president of Wood Mackenzie’s petrochemicals team, noted: “This move makes strategic sense. BP held onto these assets in 2005 when they were making strong profits. Now these chemicals businesses are struggling with over-capacity and BP is urgently raising cash.
“Ineos is, no doubt, relying upon capturing significant operational synergies as it integrates the two businesses. The deal includes a number of collocated assets and represents a good overall portfolio fit with very limited overlap.”
David Elmes, who leads the global energy research network at Warwick Business School, said: “This is another step in Bernard Looney’s shaping of a new BP.
“Oil market commentators have suggested the decreasing demand for oil as electric vehicle numbers rise would be replaced by increasing oil use for plastics and petrochemicals. Today’s sale by BP means the company is spinning off what they have left of their downstream market.
“Completing this deal also marks a milestone for departing CFO Brian Gilvary as it completes the firms $15bn divestment goal a year early. BP has caught the attention with recent announcements on reaching net zero emissions, reducing its headcount and writing off the value of some future oil and gas development.
"These are steps away from its focus on oil and gas but major news on what will take its place is now even more eagerly anticipated.”
BP expects to report its second-quarter 2020 results on 4 August and hold a capital markets day in mid-September.
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