BP said it is planning to consolidate the olefins and derivatives (O&D) division of its petrochemicals business into a stand-alone entity separate from the group. The new O&D business will incorporate more than half of the $13 billion of operating capital employed in BP’s petrochemicals portfolio, giving it the scale to be a major independent player in the global petrochemicals sector.
It will be headed by Ralph Alexander, who has been named as chief executive of BP’s petrochemicals business with effect from July 1, 2004.
BP said it plans to sell the division in due course, possibly through an initial public offering, depending on market circumstances and necessary approvals, in the second half of 2005.
In a statement, BP said: “The group intends to retain the balance of its petrochemicals portfolio, comprising the aromatics and acetyls businesses. BP views these as “advantaged products” where BP has leading proprietary technology and strong positions in growing Asian markets.”
Last month, CEO Lord Browne spelt out BP’s determination to tackle the continuing poor returns of its petrochemicals segment overall at a strategy presentation to investors in London and New York.
He said future investment would focus more on paraxylene, PTA 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 Ð perhaps by means of an IPO, subject to market conditions and any necessary consents Ð 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,” Lord Browne said.
The current chief executive of BP Petrochemicals, Iain Conn, said: “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.”
At a strategy presentation on March 29, Lord Browne said future investment would focus more on so-called “advantaged products”, including paraxylene, PTA and acetyls which were strong in growing Asian markets and where BP has a proprietary technological lead, and less on olefins and derivatives which dominated the company’s portfolio in the more fragmented and lower-growth European markets.
BP’s olefins and derivatives business employs approximately 7,500 people in 24 locations worldwide, mostly the US and Europe.