BP puts its 50% stake in China unit up for sale

BRITISH oil major BP is seeking buyers for its 50percent stake in Chinese petrochemicals joint venture SECCO, its largest investment in China, in a deal sources said could fetch $2 billion-$3billion (R41bn).

State-owned China Petroleum and Chemical Corporation, which owns the other half of the venture and has a right of first refusal, said it was discussing the conditions put forward by BP, but had not made a decision.

BP was working with Morgan Stanley to sell its shareholding in the SECCO venture as part of a drive to cash out of businesses where it lacked control, three sources familiar with the matter said.

A successful deal would mark BP’s first significant exit from a business in China.

SECCO is China’s largest petrochemicals refinery and was built at a cost of $2.7bn, according to BP’s website.

BP shares were up 1.1percent in morning trade, outpacing a 0.3percent rise in the FTSE index, as investors digested news that would bolster its cash position and underpin dividends.

Sinopec’s Shanghai-listed shares were up 1percent, slightly outperforming the broader China market.

A London-based BP spokesman declined to comment. Morgan Stanley was not available for immediate comment.

SECCO, a venture formed in 2001, produces ethylene and propylene, which are used to make resins, plastics and synthetic rubbers.

Bankers said Chinese state enterprises were unlikely to step in to buy the stake as executives at many of them were distracted by anti-corruption probes.

BP’s stake had been marketed to existing refinery operators in China, including companies from Japan, South Korea, Taiwan and Europe, the sources added.

Bankers said the stake would also attract interest from Chinese private firms stepping up these company’s presence in petrochemicals.

Bankers said the stake would also attract interest from China-based private companies.

“Even in this low oil price environment, this is one auction that will attract a lot of demand. With most SOEs (stateowned enterprises) going slow on M&A (mergers and acquisitions), Chinese private enterprises will be active,” one Asiabased oil and gas banker said. The refining and chemicals businesses have been a bright spot for M&A in the oil sector since the sharp drop in oil prices more than two years ago. Lower oil prices have boosted refining profits and demand for oil products around the world. BP, like other global oil and gas companies, has been sharpening its focus on costs and core businesses as it reels from lower oil prices.

US rival Chevron and Britain’s BG Group have also recently sold stakes in Asian ventures as they return their focus to their core home markets.

BP has sold more than $50bn of assets since the deadly 2010 Gulf of Mexico oil spill in order to pay for clean-up costs and legal bills.

This year, it plans to offload between $3bn and $5bn worth of assets, of which $1.9bn has been agreed, the British company said when releasing second-quarter earnings last month.