An employee walks past oil tanks at a Sinopec refinery in Wuhan, Hubei province. Image Credit: Reuters

FRANKFURT/HONG KONG: British oil major BP is seeking buyers for its 50 per cent stake in Chinese petrochemicals joint venture SECCO, its largest investment in China, in a deal sources said could fetch $2-$3 billion.

State-owned China Petroleum & Chemical Corp (Sinopec), 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 has made no decision.

BP is working with Morgan Stanley to sell its shareholding in the SECCO venture as part of a drive to cash out of businesses where it lacks control, three sources familiar with the matter said. A successful deal would mark BP’s first significant exit from a business in China.

Situated in Caojing near Shanghai, SECCO is China’s largest petrochemicals refinery and was built at a cost of $2.7 billion, according to BP’s website.

BP shares were up 1.1 per cent in morning trade, outpacing a 0.3 per cent 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 1 per cent, 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 are distracted by anticorruption probes.

BP’s stake has 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 their presence in petrochemicals.

“Even in this low oil price environment, this is one auction that will attract a lot of demand. With most SOEs going slow on M&A, Chinese private enterprises will be active,” one Asia-based 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 $50 billion 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 $3 billion and $5 billion worth of assets, of which $1.9 billion has been agreed, it said when releasing second-quarter earnings last month.