Oil major BP, which produces the Castrol range of lubricant products, has formalised an agreement to sell its petrochemicals business to UK-based chemicals company INEOS in a deal worth $5bn (approximately £4bn).

The sale will bolster BP’s finances in the wake of the coronavirus pandemic and enable it to spend the proceeds on what the company calls “general corporate purposes”.

The petrochemical arm of BP focuses mainly on producing and selling acetyls and aromatics. For the former, it is a leading producer of the key feedstock purified terephthalic acid, which is used for making polyester plastics. The acetyls business, meanwhile, produces acids for food flavourings, including salt and vinegar flavour crisps.

The chief executive officer of BP, Bernard Looney, praised the petrochemicals team for developing an industry-leading, high-performing business and sought to reassure employees by saying the company would reduce uncertainty as much as possible. He expressed that the business’s potential growth may be better realised outside of BP, saying:

“Strategically, the overlap with the rest of BP is limited and it would take considerable capital for us to grow these businesses. As we work to build a more focused, more integrated BP, we have other opportunities that are more aligned with our future direction.”

He added that the sale represented another step in BP’s preparation to prosper during the energy transition and beyond.

Under the deal, INEOS will pay $400m in deposit, with another $3.6m to be paid on completion and a further $1bn to be paid in instalments over 2021.