BP seeking buyers for Far East coal interests

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The Independent Online
BRITISH PETROLEUM, the cash-strapped oil and chemicals giant, is seeking buyers for its remaining coal interests in the Far East as part of a dollars 2bn disposal programme this year.

The group, which is struggling to stem a massive cash outflow, is conducting a discreet international marketing effort to find buyers for the business.

The plans concern the huge Sangatta coal mining venture in East Kalimantan, Indonesia. BP has a 50 per cent stake in the business, with the remainder owned by CRA, the Australian mining company in which RTZ Corporation, the minerals group, has a substantial stake.

It is believed that BP is holding discussions with several financial advisers to mastermind a possible worldwide auction of the assets. Some experts believe that the sale could raise about dollars 50m for BP. However, BP declined to comment yesterday.

BP sold the bulk of its minerals business to RTZ in 1989 for pounds 2.4bn. However, it held on to its coal mining assets in Indonesia and South Africa as well as a 49 per cent stake in Olympic Dam, a vast copper, gold and uranium mining project in Australia.

Olympic Dam has long been regarded by analysts as a prime candidate for disposal, but little has been heard about the Indonesian venture in the past few years.

Although peripheral to BP's core businesses, Sangatta is a significant coal producer in the region. Industry estimates suggest it has total proven and probable deposits of more than 150 million tonnes of high quality coal.

Commercial production from the site began last autumn and it is expected to reach about 7 million tonnes this year. The business is also understood to have long-term supply contracts with customers in several countries, including Japan and Taiwan.

Its sale could generate considerable interest from potential buyers throughout the world. Less than a month ago Shell, the world's biggest oil company, sold its coal mining subsidiary to Ziegler Coal Holdings for an undisclosed sum.

BP is aiming to raise between dollars 1.5bn and dollars 2bn this year in an attempt to cut borrowings and stem a heavy drain on cash. Analysts believe it is facing a pounds 1bn-plus cash outflow this year.

There are fears that BP will be forced to cut its dividend by up to half this year. Last month a boardroom row led to the sudden departure of Robert Horton as its chairman and chief executive due to a personality clash with fellow directors.

BP shares rose 3p to 210.5p yesterday.

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