Oil and gas giant BP has signed a $5 billion worth deal to sell its global petrochemicals business to INEOS Styrolution, a subsidiary of chemicals company INEOS, in a move to strengthen its balance sheet.

The transaction is also said to help BP deliver its $15 billion divestment target a year earlier than the original schedule.

BP’s petrochemicals business that is being divested is focused on two primary areas – aromatics and acetyls. The company boasts of technology and advantaged manufacturing plants for both the commodities, with a strong footprint in growth markets in Asia.

Overall, BP petrochemical business has interests across 14 manufacturing plants in Asia, Europe, and the US. Last year, the BP business produced 9.7 million tonnes of petrochemicals.

BP’s aromatics business is engaged in the production of purified terephthalic acid (PTA) at manufacturing plants across China, the US, and Belgium. The business also licenses its PTA production technology to producers across the world.

The acetyls business, on the other hand, produces acetic acid and derivatives like acetic anhydride at manufacturing plants across the US, the UK, China, Taiwan, South Korea, and Malaysia.

BP said that the sale will also include related interests like the chemical recycling technology BP Infinia and the company’s stake in Tricoya, an acetylated wood developer.

Bernard Looney – BP CEO 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.”

As per the terms of the agreement, INEOS will pay a deposit of $400 million to BP followed by a further payment of $3.6 billion on closing. An additional $1 billion will be paid through three separate installments.

Jim Ratcliffe – founder and chairman of INEOS said: “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.”

Based on receiving regulatory and other approvals, the deal is expected to be wrapped up by the year end.

  acetyls, aromatics, BP, INEOS, Jim Ratcliffe, United Kingdom