Sector News

BP to sell petchems business to Ineos for $5 billion

June 30, 2020
Energy & Chemical Value Chain

BP has agreed to sell its petrochemicals business to Ineos for $5 billion, encompassing the whole of BP’s worldwide aromatics, acetyls, and related businesses. Ineos says it will pay $4 billion on completion with the remaining $1 billion deferred until June 2021 “at the latest.”

A deposit of $400 million will initially be paid to BP by Ineos, with a further $3.6 billion on completion, with the transaction expected to be completed by the end of the year subject to regulatory and other approvals, BP says. An additional $1 billion will be deferred and paid in three separate installments of $100 million in March, April, and May 2021, with the remaining $700 million payable by the end of June 2021, it says. Ineos Styrolution, the wholly owned styrenics subsidiary of Ineos, will be the formal acquirer of BP’s businesses. Proceeds from the sale will be used by BP for general corporate purposes.

BP’s petchems segment is focused on two main businesses, aromatics and acetyls, with interests in 14 manufacturing plants in Asia, Europe, and the US. In 2019 the business produced 9.7 million metric tons of petrochemical products, says BP. The company has a “strong presence in growth markets in Asia,” it says. The sale will also include related interests, such as the chemical recycling technology BP Infinia and the company’s interest in acetylated wood developer Tricoya.

The businesses included in the transaction together employ more than 1,700 staff worldwide, with these employees expected to transfer to Ineos on completion, BP says.

The sale is the “next strategic step in reinventing BP,” will strengthen the company’s balance sheet, and delivers on its $15-billion target for agreed divestments a year earlier than originally scheduled, according to BP. “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,” says BP CEO Bernard Looney. “I recognize this decision will come as a surprise and we will do our best to minimize uncertainty. I am confident, however, that the businesses will thrive as part of Ineos, a global leader in petrochemicals.”

Strategically, the petchem division’s overlap with the rest of BP is limited, and it would take “considerable capital” for BP to grow these businesses, Looney adds. “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 says the acquisition will extend the company’s portfolio and geographic reach. “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,” says Ineos chairman Jim Ratcliffe.

Ineos has acquired several businesses from BP over the past two decades, most notably the $9-billion acquisition in 2005 of Innovene, which at that time comprised the majority of BP’s petchem assets including olefins, and two refineries. It also bought BP’s ethyl acetate and vinyl acetate monomer (VAM) business in the UK for an undisclosed sum in 2008, comprising ethyl acetate and VAM plants at Hull, each with capacity for 250,000 metric tons/year.

“BP has had a long relationship with Ineos, and this agreement reflects the mutual respect and trust that exists between us. It is a strategic deal for both parties that recognizes both the high quality of the businesses and that Ineos is in many ways a natural owner for them,” says BP CFO Brian Gilvary, who led the negotiations with the owners of Ineos.

BP’s aromatics business is a world leader in the production of purified terephthalic acid (PTA) and para-xylene (p-xylene), and it licenses its PTA production technology to other producers worldwide. The business’s largest manufacturing plants are in China, the US, and Belgium. The acetyls business produces acetic acid and derivatives such as acetic anhydride, with a diverse base and manufacturing plants in the US, UK, China, South Korea, Taiwan, and Malaysia, according to BP.

Ineos says the aromatics business has six sites supplying the worldwide polyester business and that the acetyls segment has nine sites producing acetic acid and a range of derivatives. The deal “is a good fit with Ineos’s existing asset base, reintegrating the Hull site and expanding the existing Ineos footprint at Geel, Belgium,” it says. Of the 15 sites included in the transaction, five are located in the Americas, two in Europe, and eight in Asia, with BP’s petchems business also including 10 “leading joint ventures,” Ineos says.

With assets to be acquired in China, South Korea, Malaysia, Indonesia, and Taiwan, the acquisition “will transform our presence in Asia,” an Ineos spokesperson tells CW. “We have got a presence in China already, but this increases that quite significantly,” he says. The acquisition also sees Ineos step into the PTA, p-xylene, and acetic acid production sector for the first time, with the spokesperson describing it as a “new step for us” and “an obvious one in terms of how well it fits. If you look at our chemistry set, there were a few bits missing from when we bought Innovene. This brings that back,” he tells CW.

In Europe, the acquisition of BP’s assets at Geel, Belgium, is “another presence” for the company in the area, the spokesperson says. Ineos is currently engineering and building a new steam cracker at Antwerp, a project that remains “on track” despite the impact of the COVID-19 pandemic, he adds.

The transaction, if it proceeds to completion, will mean that BP has agreed on $15 billion of divestments and other disposals through 2019 and 2020 to date, an amount originally expected to be reached by mid-2021, BP says. The gross assets subject to this transaction amounted to $3.5 billion as at 31 December 2019, with a replacement cost profit before interest and tax of $396 million related to them on that date, it says.

Ineos also has an option to acquire from BP a research complex at Naperville, Illinois, for an additional consideration or to enter into a lease or other arrangement for the facility.

BP’s petchem assets at Gelsenkirchen and Mulheim, Germany, integrated with its Gelsenkirchen refinery, are not part of the sale, says BP.

Manufacturing plants, their primary products, and BP’s ownership stake included in their proposed sale to Ineos are as follows:

Americas: Cooper River, South Carolina (PTA; BP 100%); Texas City, Texas (p-xylene, meta-xylene; BP 100%); Eastman BP Texas City Production Agreement (acetic acid); Atlas Methanol, Point Lisas, Trinidad and Tobago (methanol; BP 36.9%).
Europe: Hull, UK (acetic acid, acetic anhydride; BP 100%); Geel, Belgium (PTA, p-xylene; 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; BP 100%); Kertih, Malaysia (acetic acid; BP 70%); Ulsan, South Korea (acetic acid, vinyl acetate monomer; BP 50.9%); Taichung, Taiwan (PTA; BP 61.4%); Mai Liao, Taiwan (acetic acid; BP 50%).

The integration of the BP facilities at Hull, Geel, and Texas City with Ineos’s own assets is “a logical and natural step for us” and one that will see some of the facilities reintegrated with former BP assets taken over by Ineos in 2005, the Ineos spokesperson says. “These are high-performing, top-quartile technologies we are acquiring,” he tells CW.

In January 2019, BP announced plans to invest $175 million via its acetyls production joint venture with Lotte Chemical (Seoul, South Korea) at Ulsan to expand acetic acid and VAM capacity to 650,000 metric tons/year and 400,000 metric tons/year, respectively.

By: Mark Thomas

Source: Chemical Week

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