Acquisition

BP PLC
16 July 2001





July 16, 2001                                                         36/01


                      BP SELLS RUHRGAS STAKE IN DEAL THAT WOULD

                        MAKE IT MARKET LEADER IN GERMAN FUELS



In a move that could propel it to first place in the German fuels market and
fundamentally transform its downstream position in central Europe, BP
announced today that it is to take a majority stake in Veba Oil which owns
Aral, Germany's biggest fuels retailer.



Subject to regulatory approvals, the deal - in the form of a joint venture
between BP and Veba Oil's owner E.ON - involves BP taking 51 per cent and
operational control of Veba Oil and offers the prospect of full ownership as
early as the second quarter of next year.



In return, E.ON will receive 51 per cent of Gelsenberg - which holds BP's 25.5
per cent stake in Ruhrgas, Germany's leading gas distributor - plus a
balancing cash payment of $1.63 billion, subject to adjustments, and an
assumption by BP of $950 million of debt. Terms have also been agreed which
could result in BP transferring its remaining Ruhrgas stake and paying a
further $340 million for the remainder of Veba Oil.



The cash cost to BP of acquiring all of Veba Oil could be significantly offset
by proceeds from a re-sale of Veba Oil's upstream business which produces
160,000 barrels of oil and gas equivalent a day. These proceeds would be
shared with E.ON but with the bulk accruing to BP.



BP chief executive Lord Browne said the transaction would be immediately
accretive to earnings and returns and, if BP acquired all of Veba Oil, should
deliver annual synergies and savings of at least $200 million and greatly
enhance future downstream growth in Europe.



Browne said: 'E.ON's wish to deepen its gas interests and exit downstream oil
has presented BP with a unique opportunity to realise two strategic aims -
achieve market leadership at the heart of Europe and realise excellent value
for our stake in Ruhrgas.



'We've been very successful in the past three years at building big, efficient
downstream positions in key world markets, but our buyout of Mobil gave us no
significant assets in Germany. This transaction has the potential to transform
that position at a stroke, giving us the leading, most efficient fuels
business in the world's third largest economy.



'It also allows us to exit Ruhrgas - a passive equity investment we have been
seeking to monetise for a decade - to a buyer happy to pay an excellent
premium for an asset that fits very neatly with their growth strategy,' Browne
said.



Aral's highly-efficient domestic network of 2,560 retail sites has daily fuel
sales of 170,000 barrels and 1.7 million customers a day in Germany. Adding
BP's existing German retail business would boost fuel sales to 230,000 barrels
a day and shop revenues to over $2 billion a year, creating a market
leadership position in fuels. Aral also operates 450 high-quality retail sites
in adjacent countries - chiefly Austria and Poland where BP also has key
positions.



As well as its retail assets, Veba Oil owns the Lingen refinery and has
interests in four other refineries in Germany with a total net capacity of
over 300,000 barrels a day. BP said the addition of these plants would
significantly enhance its supply logistics and boost its clean fuels capacity
in central Europe. Veba Oil's petrochemicals business, with an ethylene
capacity of 1.3 million tonnes a year, would help meet BP's future chemical
feedstock needs in the region.



Veba Oil's upstream subsidiary has interests in 13 countries, including
Venezuela, offshore UK, the Netherlands and Norway, with daily oil-equivalent
production of 160,000 barrels. BP said it would review these assets, most of
which are likely to be non-core to its own upstream business and may be
re-sold. The proceeds, likely to be significant, would be shared between BP
and E.ON on a sliding scale based on the total price, with the bulk going to
BP.



Under the terms of today's deal, which is subject to the approval of the
European Commission and other authorities, BP and E.ON, will form two joint
ventures. The first gives BP 51 per cent and operating control of Veba Oil
with the balance held by E.ON. In return, the second gives E.ON a 51 per cent
stake in Gelsenberg which holds BP's 25.5 per cent of Ruhrgas.



The agreement incorporates 'put' options giving the minority shareholder in
each joint venture the right to be bought out by the majority owner. Both
options are exercisable after the first quarter of next year.



BP said that, were it to take full control of Veba Oil, it would consolidate
Aral's operations with its own marketing business and retain Aral as BP's sole
retail fuels brand in Germany. Business operations, including petrochemicals
and refining, would be run from the North-Rhine Westphalia region, where Veba
Oil and Aral are currently based. Corporate functions from BP's existing head
office in Hamburg would also move, with new locations still being considered.



BP said that in the event of such consolidation, it would expect be able to
reduce the costs of the combined business by some 15 per cent and that this
would entail some reduction in the workforce.



BP is being advised by Deutsche Bank AG London.



NOTES TO EDITORS:



  * There will be simultaneous press conferences at the BP warehouse
    facility, 6-7 Wenlock Road, London N1 at 1045 BST and at E.ON AG,
    Bennigsenplatz 1, 40474 Dusseldorf at 1145 CET today (July 16, 2001).



  * There will be a slidecast for analysts, hosted by Lord Browne, at 1400
    BST today (July 16, 2001).  The slidecast can be viewed via the internet
    at: http://www.bp.com/.





Background information on Veba Oil



  * Veba Oil employs around 8,750 staff and is headquartered at
    Gelsenkirchen; Aral's head office is in Bochum. In the 12 months to
    December 31, 2000 Veba Oil reported profits before tax of Euro733 million
    and had net assets at that date of Euro1.077 billion.



  * Aral, a wholly-owned subsidiary of Veba Oil, is the leading retail fuels
    marketer in Germany with around 2,560 service stations and approximately
    18 per cent market share by volume. Aral also has around 450 service
    stations in Austria, Poland, Czech Republic, Slovakia, Hungary and
    Luxembourg.



  * Veba Oil has interests in five German refineries - Gelsenkirchen (50 per
    cent), Lingen (100 per cent), Miro (12 per cent), Bayern Oil (12.5 per
    cent) and Schwedt (18.75 per cent). With the exception of Lingen, these
    interests are held through Ruhr Oil - 50/50 joint venture with Petroleos
    de Venezeula SA (PdVSA). Total net refining capacity amounts to some
    300,000 barrels a day.



  * Veba Oil has major petrochemicals facilities at Gelsenkirchen and
    Munchmunster. Total ethylene capacity is some 1.3 million tonnes a year.



  * Through a wholly-owned subsidiary, Veba Oil has oil and gas operations
    in 13 countries, including the UK, Netherlands, Norway, Venezuela,
    Trinidad, Kazahkstan, Syria, Egypt and Libya.



Background information on BP in Germany



  * Headquartered in Hamburg, BP in Germany employs around 4,200 staff. It
    has some 950 filling stations with a market share of approximately seven
    per cent by volume.



  * BP has a 55 per cent interest in the Bayernoil refinery and has a net
    German refining capacity of some 145,000 barrels a day.



  * Ruhrgas had net assets of Euro2,533 million at December 31, 2000 and
    pre-tax profit for the year of Euro694 million. BP's post-tax operating
    dividend from Ruhrgas in 2000 was $63 million.





Statements made in this press release, particularly those regarding earnings,
returns, synergies, savings, value, sales and revenues are or may be
forward-looking statements and actual results may differ materially from those
expressed or implied in such statements.  Infomation concerning factors that
could cause actual results to differ materially from those in the
forward-looking statements are contained in BP's latest published annual
report and accounts and in BP's latest published report on Form 20F filed with
the US Securities and Exchange Commission.





                                 -    ENDS -



ADDITIONAL FINANCIAL AND TECHNICAL DATA

Veba Oil Group

Total Number of Employees                           8,754


Retail Marketing - Aral AG



  * Germany's leading automotive fuel retailer

            Aral branded service station network


                                                      Number of
                                                      stations

                        Germany                       2,562
                        Luxembourg                       47
                        Austria                         167
                        Poland                          102
                        Czech Republic                   63
                        Slovakia                         10
                        Hungary                          58
                        Total count                   3,009



Veba Oil Refining and Petrochemicals (VORP)



Refineries                      Refining        Refining            
                                Capacity        Capacity (Veba Oel share)

Gelsenkirchen*                 248,000 b/d       124,000 b/d
Lingen                          81,000 b/d        81,000 b/d
Bayern-oil*   (12.5% Ruhr Oel)  66,000 b/d        33,000 b/d
Miro*           (24% Ruhr Oel)  71,200 b/d        36,000 b/d
Schwedt*      (37.5% Ruhr Oel)  80,000 b/d        40,000 b/d
Total                          546,000 b/d       314,000 b/d



*Joint venture refinery



Margin Advantage of Veba Refineries versus ARA standard




                                                     Average '99 - '00

ARA industry Margin  $/BBL                                       2.60
Veba Oil Average $/BBL                                           4.45
Veba Advantage $/BBL                                             1.75



BP estimate of mid-cycle ARA Industry Gross Margin is $2.00/Bbl

advantage derived from inland premium, clean fuels/upgrading investment.



Petrochemical locations         Ethylene        Propylene
                                Capacity        Capacity

Gelsenkirchen                980,000 Te/yr        615,000
Munchmunster                 300,000 Te/yr        255,000
Bayernoil                                          85,000
MIRO                                               86,000
Schwedt                                            68,000



Source: CMAI World Light Olefins Analysis 2001CMAI: Chemical Market Associates
Inc.



Veba Oil Downstream & Petrochemicals



EBITDA                                     1998                1999        2000

$million                                    703                 480         786



1998 BP Estimates, 1999 BP estimate using E.on data, 2000 Audited data from
E.on.



Upstream: Veba Oil & Gas (VOG)



Veba Oil & Gas is involved in the worldwide exploration and production of oil
and gas. Its core regions are the North Sea, North Africa, the Caspian region
and northern Latin America. Veba Oil & Gas has operations in a total of 13
countries.



International upstream operations in four core areas:

  * North-West Europe
    Denmark, Faroes, the Netherlands, Norway and the United Kingdom
  * North Africa / Near East
    Egypt, Libya, Syria
  * North  & Latin America
    Canada, Trinidad, Venezuela
  * Caspian / Middle East
    Iran, Kazahkstan

Key Figures



Production                                    160 mboed
Proven Reserves                               604 mmboe
Probable Resources                            155 mmboe
Possible Resources                            366 mmboe



Source: DeGolyer & MacNaughton analysis.

                                              1995   1996   1997   1998   1999
Crude oil production          Million bbl     55.0   52.7   48.5   50.7   52.4
Gas production                Million m3     1,627  1,876  1,713  1,353  1,215
Proved oil and gas reserves   mboe           467.2  471.1  477.9  472.8  654.4
*Annual Report data





Veba Oil Upstream Earnings ( VOG)

EBITDA                 1998    1999    2000

$million                  -       -    418(1)



(1) after exceptional items of $ 45 m



Ruhrgas



Ruhrgas AG is Germany's leading gas merchant company. As a private-sector
enterprise, it provides secure, economic gas supplies from foreign and
domestic sources based on long-term purchase contracts.. For its supply and
transmission business, Ruhrgas operates its own pipeline system along with
large underground storage facilities



BP interest (25.5%) through Gelsenberg

  * Ruhrgas is the leading gas distributor in Germany with an approximate
    market share of 60%.
  * Gas purchases from indigenous sources, the Netherlands, Russia, Norway
    as well as Denmark and the UK
  * Exports deliveries to Belgium, Czech Republic, Switzerland, Hungary,
    Austria, Liechtenstein, Poland, Sweden, and the United Kingdom.



Total gas sales                                         582 billion kWh
Length of pipeline system                               10,748km
Underground storage facilities                          12
Compressor stations                                     785MW
Number of employees                                     2,600





BP 25.5% Ruhrgas Dividend Stream         1998         1999       2000

$million post-tax                          80           73         63



Ruhrgas shareholders