BP plans to sell most of its petrochemicals business through possible IPO

April 27, 2004
BP PLC said Tuesday it plans to consolidate the olefins and derivatives (O&D) division of its petrochemicals business into a stand-alone operation that it will sell "in due course, possibly through an initial public offering," in the second half of next year.

By OGJ editors

HOUSTON, Apr.27 -- BP PLC said Tuesday it plans to consolidate the olefins and derivatives (O&D) division of its petrochemicals business into a stand-alone operation that it will sell "in due course, possibly through an initial public offering," in the second half of next year.

The new O&D business will be funded by more than half of the $13 billion operating capital in BP's petrochemicals portfolio, "giving it the scale to be a major independent player in the global petrochemicals sector," company officials said. It will be headed by Ralph Alexander, who was named Tuesday as chief executive of BP's petrochemicals business effective July 1.

BP will retain the balance of its petrochemicals portfolio, comprising the aromatics and acetyls businesses, which are viewed as "advantaged products" where BP has leading proprietary technology and strong positions in growing Asian markets.

BP's decision to spin off its O&D operation stems from continuing poor returns of its petrochemicals segment overall. At strategy presentations to investors in London and New York last month, BP CEO John Browne said future investment would focus more on paraxylene, purified terephthalic acid, and acetic acid, and less on olefins and derivatives, which form the bulk of BP's petrochemical operations in Europe.

"We have now concluded that divesting O&D�perhaps by means of an IPO, subject to market conditions and any necessary consents�is likely to deliver the best returns to our shareholders and to be in the best long-term interests of the O&D business itself," Browne said Tuesday.

"Our O&D sub-segment is one of the highest-quality portfolios of its kind in the petrochemicals industry. It has a global network of manufacturing sites, good technology, a fine range of products, and strong market positions. As a free-standing entity, it will be a significant competitor in its sector," said Iain Conn, current chief executive of BP Petrochemicals.

BP's O&D operations employ 7,500 people in 24 locations worldwide, chiefly in the US and Europe. Major petrochemicals sites include Grangemouth, Scotland; Lavera, France; Köln and Gelsenkirchen, Germany; and Shanghai Secco Petrochemical Co. Ltd., a 50-50 joint venture of BP and China Petrochemical Corp. US facilities include a plant at Lima, Ohio; the Chocolate Bayou facility at Alvin, Tex., and the Green Lake plant at Port Lavaca, Tex.

BP recently announced the intended sale of its linear and poly alpha olefins businesses and will consider whether to include those operations in the planned IPO of O&D.

O&D products include olefins (ethylene and propylene) and their derivatives such as acrylonitrile, polyethylene, polypropylene and solvents. Current worldwide production capacity of BP's O&D plants is some 20 million tones/year of a BP Petrochemicals total of 34.5 million tonnes.