March 19 (Reuters) - BP said on Thursday it would sell its Gelsenkirchen refinery to Klesch Group as it raised its cost reduction target by around $1 billion to $6.5 to $7.5 billion by 2027. (
BP offloads German refinery to Klesch, boosts cost savings target
BP's Strategic Divestment and Cost Reduction Initiatives
Sale of Gelsenkirchen Refinery to Klesch Group
March 19 (Reuters) - BP said on Thursday it would sell its German oil refinery site in Gelsenkirchen to investment firm Klesch Group for an undisclosed sum and raised its cost reduction target, in the latest move to simplify its portfolio and shore up its balance sheet.
The transaction forms part of the British oil major’s $20 billion divestment plan aimed at cutting debt and boosting returns and is expected to save BP around $1 billion of underlying operating expenditure associated with Gelsenkirchen.
Financial Impact and Analyst Estimates
BP declined to provide a value of the deal, or the liabilities the sale would remove from its books. Barclays analyst Lydia Rainforth estimated the latter to be in the range of $1.3 billion to $1.7 billion.
Operational Details and Cost Reduction Targets
The sale of the refinery, which processes about 12 million metric tons of crude oil annually, allowed BP to raise its structural cost reduction target to between $6.5 billion and $7.5 billion by 2027.
Shedding Costs and Improving Financial Health
2027 Cost Reduction Goals
SHEDDING COSTS
The 2027 cost reduction target equates to around 30% of BP's 2023 cost baseline, the company said.
Previous Cost Savings and Additional Divestments
BP in February had lifted its cost savings target to $5.5 billion to $6.5 billion after the sale of its Castrol business.
Impact on Free Cash Flow and Refining Portfolio
The deal will add to the group's free cash flow based on historical performance and will help lower BP's cash breakeven for its remaining refining portfolio, the company said.
Employee Transition and Leadership Changes
About 1,800 employees at the integrated refinery complex are expected to join Klesch upon completion of the deal in the second half of 2026.
BP's divestment programme has now reached over $11 billion of its targeted $20 billion by 2027, as the company continues to shed assets and reduce complexity under the leadership of interim CEO Carol Howle.
BP's new chief executive, Meg O'Neill, will take over in April.
Reporting and Editorial Credits
(Reporting by Yadarisa Shabong in Bengaluru and Shadia Nasralla in London; Editing by Sonia Cheema, Mrigank Dhaniwala, Tomasz Janowski and Louise Heavens)
