Petronas buys BP’s Malaysian ethylene and polyethylene interests

BP has agreed to sell its interests in ethylene and polyethylene production in Malaysia to Petronas. The agreement concerns BP’s 15% interest in Ethylene Malaysia Sdn Bhd (EMSB) and 60% interest in Polyethylene Malaysia Sdn Bhd (PEMSB), both of which are operated by Petronas, and are located in Kertih, on the east coast of Malaysia. This announcement does not affect BP’s other businesses in Malaysia.

Under the terms of the agreement, Petronas will, at closing, pay $363 million in cash to BP, inclusive of a balance sheet adjustment of $13 million and the repayment of a shareholder loan of $53 million. Subject to certain conditions, both parties anticipate completing the transaction by the end of 2010. Additionally, BP will also receive an EMSB pre-closing dividend payment amounting to $48 million, subject to EMSB board approval.

“Whilst these are attractive businesses with strong domestic and regional markets, BP recognizes that Petronas is their natural owner, with various integration opportunities uniquely available to them at the Kertih site,” said Sue Rataj, president of BP’s global petrochemicals business. “BP will continue to focus on the development and expansion of our olefins and derivatives business in China, and other large rapidly growing markets, and pursue opportunities in China and India to extend our leading world positions in aromatics and acetyls.”

EMSB’s olefins cracker, commissioned in 1995, has production capacity of approximately 440,000 tpy of ethylene, a basic petrochemical feedstock. PEMSB, whose polyethylene plant also began operation in 1995, has a production capacity of some 318,000 tpy of polyethylene, used primarily for packaging and film manufacture. Ethylene feedstock for the plant is supplied by EMSB.

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