MADRID, Nov 5 (Reuters) - Spanish oil company Cepsa is exploring a sale of its chemicals business under a strategic review as it seeks to raise funds to accelerate its transition to clean energy, two sources with knowledge of the matter told Reuters. Cepsa is working with Citi (C.N) to identify possible buyers for the division which is valued at up to 3 billion euros ($3.5 billion), the sources said, cautioning that discussions were at a preliminary stage and no deal was certain. Other strategic options may be pursued as an alternative to an outright sale, a third source said. A Cepsa spokesperson declined to comment on any sale process. "In order to respond quickly to the challenges of the green transition and provide the agility and flexibility to capture opportunities, we have initiated a process to provide our core businesses with greater autonomy," the person said. The spokesperson said Cepsa, owned by Abu Dhabi state fund Mubadala and private equity firm Carlyle, was developing green products that would make it a "benchmark in sustainable development" and help customers in the energy transition. Cepsa hired former Shell (RDSa.L) executive Maarten Wetselaar as chief executive in January with a mandate to accelerate the implementation of its energy transition and offer "more differentiated and sustainable energy solutions". If successful, a sale would unlock funds to finance Cepsa"s push into renewables while part of the proceeds would be returned to shareholders, one of the sources said. Cepsa said on Thursday that its chemicals business had core earnings of 355 million euros in the nine months to September, a 39% rise from last year. The unit makes chemicals for the IT, cosmetics and automotive industries, among others, and has plants in Brazil, Canada, China and Germany. Cepsa is expected to sound out interest from private equity funds and European chemicals firms, including Germany"s Evonik (EVKn.DE) and INEOS, the sources said. Bain Capital and Cinven have clinched the largest chemicals deal of 2021 so far with the $4.7 billion purchase of Lonza"s specialty ingredients business in February. In 2019, the overall value of chemicals deals came to roughly $115 billion, according to a PwC study, but M&A activity slowed down last year because of the pandemic. "The recovery of the global economy from COVID-19 will drive increased activities in chemicals M&A for the remainder of 2021," said Craig Kocak, a deals partner at PwC in the United States. ($1 = 0.8654 euros) Reporting by Andres Gonzalez; Editing by Pamela Barbaglia, Susan Fenton and David Clarke