Collection sells oil and gas business, increases focus on new materials and specialty chemicals.
BASF is accelerating its business restructuring. Recently, BASF announced to sell the exploration and production business of Wintershall Dea, an oil and gas company that has been operating for many years, and said that this move is an important step for it to realize its goal of gradually withdrawing from the oil and gas industry. From this point of view, under the trend of energy transformation, BASF as a representative of the multinational chemical enterprises in general is the idea of transformation to abandon oil for chemical.
Gradual withdrawal from the oil and gas industry.
In 2019, two companies, Wintershall and Dea, merged to form Wintershall Dea. The company has two shareholders, with BASF holding 72.7% and Luxembourg-based investment agency LetterOne holding 27.3%. However, since 2022, BASF has begun to relinquish its stake in Wintershall Dea due to the poor economic environment and the wave of energy transition.
In 2023, BASF announced the signing of an agreement with Harbour Energy for the sale of its business, specifically Wintershall Dea’s production and development assets and exploration rights in Norway, Argentina, Germany, Mexico, Algeria, Libya, Egypt, and Denmark, as well as Wintershall Dea’s carbon capture and storage (CCS) licenses. The transaction was recently completed. Under the agreement, BASF sold its 72.7 percent stake in Wintershall Dea to Harbour Energy, which completed the transaction for a total consideration of $11.2 billion. It also includes approximately $4.9 billion of Wintershall Dea’s outstanding bonds. BASF will receive $1.56 billion in cash and a 39.6 percent stake in Harbour Energy.
With regard to its stake in Harbour Energy, BASF emphasized that the option to liquidate its holdings will set the stage for further exits from the oil and gas industry.
Implementing Cost Reduction Programs.
As an international chemical giant, BASF’s main business is mainly concentrated in the middle and lower reaches of the oil and gas industry. However, oil and gas resources are important petrochemical raw materials, and once prices rise, they are bound to be transmitted along the chain to the middle and lower reaches, and BASF will inevitably be affected by them. Although oil and gas prices have improved greatly since 2024, according to the company’s published results for the first half of 2024, BASF’s half-year sales of 33.664 billion euros, down 360 million euros year-on-year, and the business situation has not improved much. This shows that the series of economic impacts triggered by rising oil and gas prices are still affecting the world economy, and the same is affecting BASF.
Earlier this year, BASF also announced additional cost-cutting measures for the Ludwigshafen site. BASF proposed to launch a number of cost-cutting plans, including optimization, exit, and asset sales, in response to soaring costs and declining market demand. The plan involves nearly 10 billion euros of BASF’s businesses, including Wintershall Dea’s oil and gas exploration and production business, emission catalysts for internal combustion engine vehicles, some plants in the food additives sector, and some businesses in the coatings sector, etc. Between May and July 2024, BASF sold part of its Ludwigshafen integration site, its bioenergy enzymes business, and its mining flocculants business, respectively. In addition, BASF canceled the Chilean business. In addition, BASF also canceled the Chilean lithium mine investment plan and Indonesia nearly 2.6 billion U.S. dollars of investment plans. 2025 years ago, BASF will continue to stop part of the plant production line.
New materials or the main direction.
According to the international chemical giants released the first half of the financial results, LyondellBasell, INEOS, Nordic Chemical, Arkema and other companies have different degrees of profits rose, but BASF such as “all-around” chemical enterprise performance is declining. Therefore, it became an inevitable choice for BASF to give up high-cost assets and lock in high-growth areas. In the face of market and environmental changes, BASF chose to sell Wintershall Dea, Ludwigshafen part of the business and other assets, to focus on new energy-related materials and specialty chemicals market.
In recent years, with the rapid development of energy transformation, the demand for new energy-related materials is growing, such as carbon fiber, photovoltaic film, proton exchange membrane, positive and negative materials for lithium-ion batteries, etc., which are regarded as the “king of new materials” in the 21st century. At the same time, with the growing demand for smartphones and other electronic products, the demand for specialty chemicals such as silicon is also on the rise. The production of these materials is BASF’s strength.
At the end of 2023, BASF had separated its three business units of agricultural products, coatings, and battery materials from the company’s structure. In response to the business split, BASF said it hoped to improve its market competitiveness by realigning its businesses, so that these divisions, which were separated out, could gain more space for their activities. At the same time, BASF also plans to invest more than 4 billion euros in the next few years in the battery materials business for electric vehicles, especially for the Chinese market, in order to establish its leading position in the global market.