BP Planning Olefins Spin-off

BP is planning to separate its olefins and derivatives (O&D) business into a separate company that may be spun off in an initial public offering (IPO) next year.

The unit consists of BP's olefins, polyethylene, polypropylene, acrylonitrile, and polystyrene businesses. It employs 7,500 people and represents roughly half of BP Petrochemicals, which had overall sales of $16 billion in 2003.

Major O&D plants are located in the U.K., France, Germany, Ohio, and Texas. The $2.7 billion ethylene cracker that BP is building in Shanghai with China Petroleum & Chemical Corp. (Sinopec) also falls under O&D.

According to Byron E. Grote, BP's chief financial officer, O&D products have been struggling compared with the company's higher profit chemicals like purified terephthalic acid, p-xylene, and acetyls. O&D has "a good track record on cost reduction and volume growth, leading technology positions, and significant growth opportunities--notably in China," he said. "However, in the BP context, its returns have been much less acceptable."

In March, BP disclosed that it would focus on the more profitable products and sell its -olefins and fabrics and fibers businesses. The -olefins unit may now be included in the O&D spin-off. BP earlier agreed to sell its performance chemicals business--including isophthalic acid, trimellitic anhydride, and maleic anhydride--to Koch Industries.

BP says it is targeting an IPO for the second half of next year. Ralph Alexander, who will become CEO of BP Petrochemicals on July 1, will head the new company.

The BP plan follows a program by French oil giant Total to form a new company out of 13 of its chemical businesses. However, Total is keeping its polyolefins and petrochemicals.