BP sold its petrochemicals business in a move designed to help it become a low-carbon company.
The $ 5 billion (4.1 billion pounds) deal with Ineos will allow BP to exit a sector that is expected to contribute to oil demand in the coming decades.
BP chief Bernard Looney said the sale of the business, which employs 1,700 people, “will be a surprise.”
Campaign group Greenpeace UK said the proceeds from the sale “should be invested in the transition to renewable energy”.
BP is in the process of mapping a major change in direction announced in February, when it said it plans to drastically reduce carbon emissions by 2050.
More details are expected on how it plans to get there in mid-September.
BP is also analyzing its assets to decide which ones to sell in light of this strategy and a decline in demand amid the coronavirus pandemic.
“Strategically, [petrochemistry] overlaps the rest of BP is limited and considerable capital would be needed to grow these businesses,” said Looney in a statement.
“As we work to create a more focused and more integrated BP, we have other opportunities more aligned with our future direction,” he added.
The deal includes stakes in factories in the UK, USA, Trinidad and Tobago, Belgium, China, Malaysia and Indonesia.
The petrochemical plants linked to BP’s oil refineries in Gelsenkirchen and Mulheim in Germany will not be sold.
The International Energy Agency said in 2018 that it expected plastics and other petrochemicals to help increase global oil demand by 2050, offsetting slower engine fuel consumption.
However, in June, BP expects lower oil prices in the coming decades, as governments accelerate plans to reduce carbon emissions after the coronavirus crisis.
Earlier this month, it announced plans to cut 10,000 jobs after a drop in oil demand due to Covid-19.
Sale of assets
BP’s petrochemicals business was smaller compared to rivals like the American oil giant Exxon Mobil or Royal Dutch Shell after it sold its Innovene division in 2005 to Ineos.
The company, majority owned by billionaire Sir Jim Ratcliffe, has a network of more than 180 sites in 26 countries and around 22,000 employees.
This left BP’s petrochemicals business focused on aromatics, which are used in polymers for plastic bottles and packaging, and acetyls, which are used in paints, solvents and pharmaceuticals.
However, consumers’ growing concern about marine pollution has made these sectors a less likely long-term bet for BP as it focuses on improving its green credentials.
The sale also meant that BP reached a goal of $ 15 billion in asset sales a year ahead of schedule.
Progress toward the target has slowed after BP had to renegotiate the terms of its sale of two oil and gas portfolios in Alaska and the North Sea in recent months.
Santander analyst Jason Kenney said the deal is positive for BP due to limited overlap with its other operations.
It also reinforced expectations that BP will not cut dividend payments to its shareholders, he said.
Call for renewable sources
Environmental campaign group Greenpeace said it was vital for BP to invest in renewable energy.
Mel Evans, senior oil researcher at Greenpeace UK, said: “BP sold its petrochemicals business to free up some money, but it remains to be seen how BP will spend the money.
“BP chief Bernard Looney admits that we may be at the peak of oil demand and our climate can no longer support burning oil or gas. So if BP cares about the future of our planet – or even yours. future itself – this money must be invested in a transition to renewable energy “.