BP, Amoco main overlap is PP in Europe - BP

13 August 1998 16:32  [Source: ICIS news]

LONDON (CNI)--Polyisobutene and European polypropylene (PP) production are the two main areas of overlap between BP's and Amoco's chemicals businesses, according to BP Chemicals chief executive Bryan Sanderson.

The two businesses are to be combined under the $110bn merger announced by the two oil-to-chemicals groups Tuesday, to form BP Amoco.

Sanderson said Thursday the "only significant overlap" between the chemicals businesses was polypropylene (PP) production in Europe. But he added that there was also a "big product overlap" in polyisobutene (PIB).

BP's PP joint venture with Elf Atochem, Appryl, is clearly "a misfit with Amoco's activity", and will have to be resolved, Sanderson told journalists. Appryl produces PP at Lavera and Gonfreville-l'Orcher in France, and is building a plant at Grangemouth, Scotland, due onstream late in 1999. Earlier this year Appryl said the three sites would have a total capacity of over 700 000 tonne/year of PP in 2000. Amoco produces 490 000 tonne/year of PP at Geel in Belgium.

BP Amoco will have 39% by volume of the world PIB capacity, according to BP data.

Sanderson said the two chemicals business are complementary, and described the link-up as "two jigsaw pieces fitting together". However, there are more synergies in exploration and oil than in chemicals, said Nick Elmslie, BP planning and strategy manager.

According to John Robinson, BP Chemicals director, the main areas of synergy are BP's acetic acid for Amoco's PTA production, BP's light olefins for Amoco's polypropylene production and Amoco's alpha olefins as co-monomers for BP's linear low density polyethylene (lldPE). BP is currently expanding lldPE capacity at its Grangemouth site, due onstream in Q2-2000.

BP also expects to combine PP and PE technology licensing activities, as well as technological development in these two product lines, Robinson said.

The merged company will have "considerably more clout and access to opportunities in Asia," said Sanderson. Together, BP and Amoco have 13 joint ventures in six countries in Asia, with nine different products. BP has an acetic acid plant in South Korea and is opening one in China in October, while Amoco has "PTA plants scattered around the place".

Sanderson does not expect any plant closures, and said UK operations "won't be affected at all" because Amoco has no chemicals activities in the UK. Job losses in the chemicals division will be small, and will mainly be in R&D and corporate functions.

The merger does not affect BP's interest in increasing its stake in ICI's ethylene cracker at Wilton, northeast England, Sanderson insisted. BP said earlier this year it was putting together a consortium to take over the 865 000 tonne/year cracker and wanted to raise its own stake from 20% stake to around 50%.

Around 15% of BP Amoco's income will come from chemicals, according to calculations based on last year's figures. This compares with 12% for BP and 21% for Amoco last year.

BP Amoco's chemicals business will be headquartered in Chicago, Illinois once the merger is complete, with Sanderson as chairman. Sanderson said it has not yet been decided whether he will relocate to the US since he has responsibilities in BP other than within chemicals. The two companies hope to complete the deal by the end of the year.

By: Anna Williams
+44 208 652 3214

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