BP hikes cost-cutting target again after striking deal to sell German refinery

BP has agreed to sell one of its oil refineries in Germany as part of ongoing efforts to trim down parts of the business and ramp up cost cutting.

The energy giant struck a deal for the Gelsenkirchen refinery with independent European refiner Klesch Group, which it said would help boost the resilience of its remaining refining portfolio, allow it to focus on core businesses and increase cost savings.

BP said the sale marks another “significant milestone” in its strategy, which involves selling off parts of the group and stripping out costs to bolster its balance sheet.

It did not disclose the value of the sale, but said it was now aiming to cut costs by between 6.5 billion US dollars (£4.9 billion) and 7.5 billion dollars (£5.7 billion) by 2027, up from a target of up to 6.5 billion dollars previously.

This marks the second time that BP has hiked its cost savings target since the start of the year.

The group said the new 2027 cost reduction target equates to around 30% of its cost baseline in 2023.

Shares in BP lifted over 2% in Thursday morning trading, though this was also likely boosted by another spike in Brent crude prices as the Iran war escalated.

Carol Howle, interim chief executive at BP, said: “With this transaction, we are strengthening our balance sheet, increasing our structural cost reduction target, and increasing the resilience of our focused refining portfolio.

“We will continue to take decisive action to reduce portfolio complexity – with a continued focus on growing cash flow and returns and delivering value for our shareholders.”

The deal is expected to complete in the second half of 2026.

The Gelsenkirchen refinery makes fuels for vehicles and aircraft, processing around 12 million tonnes of crude oil a year.

It also supplies feedstocks to the petrochemical industry in Germany and across Europe.

Gelsenkirchen has two sites in Horst and Scholven in Germany, comprising an integrated refining and petrochemical hub, as well as the Bottrop tank farm.

It employs around 1,800 workers, who are expected to join Klesch when the deal completes.

Klesch is an independent refiner and has more than 1,000 staff across the UK, Switzerland, Denmark and Germany, with offices in London and Geneva.

Patrick Wendeler, BP’s head of country for Germany, said: “We have a long history of operating successful assets and brands in Germany, and we are deeply grateful for the refinery’s decades of contribution to our business.

“We are confident that Klesch Group’s experience in refining makes them the right owner for Gelsenkirchen’s next chapter.”