BP (BP.L) has announced plans to sell its petrochemical business to chemical giant INEOS for $5bn (£4bn).
BP said in a statement on Monday it had agreed the deal to sell part of its business that makes chemicals as a byproduct of oil refining.
The sale is part of new chief executive Bernard Looney’s radical plan to remake BP for the clean energy era and part of broader plans to sell $15bn-worth of assets.
INEOS will take control of 14 manufacturing plants that produce 9.7 million tonnes of petrochemicals a year as part of the deal. The chemicals produced are used in everything from polyester manufacturing to food flavouring and paints.
The deal is expected to complete by the end of 2020. INEOS will pay $4bn this year, with additional phased payments for the assets until June 2021.
“This is another significant step as we steadily work to reinvent BP,” chief executive Bernard Looney said.
Looney, who took charge at BP in February, has sought to reposition the oil giant as a clean energy player. The recent collapse in oil prices, which forced BP to write-down assets by $17.5b, has increased the urgency of this push.
"Strategically, the overlap with the rest of BP is limited and it would take considerable capital for us to grow these businesses,” Looney said. “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."
Some 1,700 staff will be transferred to INEOS on the deal’s completion and Looney thanked them for their work at BP.
“I recognise this decision will come as a surprise and we will do our best to minimise uncertainty,” Looney said. “I am confident however that the businesses will thrive as part of INEOS, a global leader in petrochemicals.”
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INEOS’ billionaire founder Sir Jim Ratcliffe said in a statement: “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.”