London, UK, Apr. 5--BP said that it is moving to a twin-track strategy and management approach for its petrochemicals segment, and that it intends to sell its Fabrics and Fibers division. BP will now approach aromatics and acetyls differently from olefins and derivatives.
BP outlined key differences in the following areas:
Investment--Organic capital expenditure will reduce from around $1 billion per annum between 2000 and 2003 to about $750 million from 2006. Discretionary spend will be focused on the 'advantaged' PTA, paraxylene and acetyls products with a bias to the Asia markets. The exceptions will be the completion of the SECCO ethylene cracker development in China and the ongoing ethylene capacity extension at Chocolate Bayou, TX.
Portfolio--The company will continue to look at all options for performance improvements in its O&D business, and assets which BP believes have a more natural fit with other industry players will be offered for sale. BP therefore announced today that it intends to sell its Fabrics and Fibers division, as well as its specialty business manufacturing and marketing linear alpha olefins and poly alpha olefins (LAO/PAO).
Performance improvements--The company's priorities will be safe operations and improvements in cash returns across all businesses. It will look for efficiencies from simplification, optimization of its operations, reducing complexity in its product grades and offers, and will look for cost savings through further attention on fixed and variable costs. The pressure on returns is particularly strong in the O&D business.
Speaking at BP's annual strategy meeting for the financial community in London today, Iain Conn, Chief Executive, Petrochemicals, said: "These two management approaches recognise the differing strategic and performance agendas for the two parts of our portfolio."
A twin-track approach reflects growing demand in China and BP's existing strong position in PTA and acetyls, compared to the more fragmented nature and lower growth in the European marketplace where O&D dominates the company's portfolio.
Conn characterized the aromatics and natural gas value chains as 'advantaged', based on the combination of global leadership positions in PX, PTA and Acetyls combined with distinctive technologies in each product.
He pointed out that the remainder of BP's petrochemicals portfolio, Olefins and Derivatives, has enjoyed significant investment in recent years and performs well in its sector, but nonetheless needs to improve its performance relative to the rest of the BP Group.
"2003 was a tough year for us but in the face of a strong Euro, sluggish demand and SARS, we put in one of the stronger performances in our sector. But we cannot wait for the environment to change to help us. I am confident that the actions we have outlined today will both underpin O&D's performance improvement and our growth agenda in our advantaged products.
"We are well positioned to rebalance capital employed associated with our core products to 90% by 2006 and our strategy remains on track," added Conn.
