reporte anual de energía de BP (British Petroleum)

8/21/2019 reporte anual de energa de BP (British Petroleum)

1/303

Building a stronger,

safer BP

Annual Report andForm 20-F 2012bp.com/annualreport


2/303

BP Annual Report and Form 20-F 2012

Front cover imageryThe Petroleum Geo-Services (PGS)Ramform Sterling seismic vessel,which conducts seismic surveysfor BP.

Left image: the vessel working inthe Ceduna Basin, Australia.

Centre image: the vessel tows 12streamers (pictured) behind it, each8km long and equipped withhydrophones to pick up echoesfrom the rocks below the seabed.

Right image: seismic data is pickedup by vessels onboard computersystem.

Building a stronger,

safer BP

Annual Report andForm 20-F 2012bp.com/annualreport


3/303

Introduction and contentsBP Annual Report and Form 20-F 2012

3 Business review: Group overview

4 BP at a glance8 Chairmans letter10 Group chief executives letter12 Energy outlook15 Our business model

20 Our strategy22 Our performance28 Our key performance indicators30 Our management of risk32 Cautionary statement

33 Business review: BP in more depth

34 Financial review38 Risk factors46 Safety51 Environmental and social responsibility55 Employees57 Technology59 Gulf of Mexico oil spill

63 Upstream72 Downstream80 TNK-BP82 Other businesses and corporate84 Oil and gas disclosures for the group90 Liquidity and capital resources94 Regulation of the groups business98 Certain definitions

101 Corporate governance

102 Governance overview104 Board of directors109 Executive team112 How the board works114 Board effectiveness116 Shareholder engagement117 Risk in BP120 Audit committee

122 Safety, ethics and environmentassurance committee124 Gulf of Mexico committee125 Nomination committee126 Chairmans committee126 UK Corporate Governance Code

compliance127 Directors remuneration report147 Regulatory information

153 Shareholder information

154 Called-up share capital154 Share prices and listings155 Dividends155 UK foreign exchange controls on dividends

155 Shareholder taxation information157 Major shareholders158 Purchases of equity securities by the

issuer and affiliated purchasers

158 Fees and charges payable by ADSs holders159 Fees and payments made by the

Depositary to the issuer159 Documents on display

159 Administration159 Annual general meeting

161 Additional disclosures

162 Legal proceedings171 Critical accounting policies174 Relationships with suppliers

and contractors

174 Material contracts175 Related-party transactions175 Exhibits

177 Financial statements

178 Statement of directors responsibilities179 Consolidated financial statements of

the BP group186 Notes on financial statements

263 Supplementary information on oil andnatural gas (unaudited)

PC1 Parent company financial statementsof BP p.l.c.

BP in 2012The group made good progressthis year. We workedto enhance safety and riskmanagement. We continued tomeet our commitments in the

Gulf of Mexico. We sold assetsand reduced complexity. Andwe focused investment on areaswhere we see higher margins.Over the following pages, wereport on the actions taken tobuild a stronger, safer BP.

20FCross reference to Form 20-F

2 Information about this report


4/303

Information about this report

This document constitutes the Annual Report and Accounts in accordance with UK requirementsand the Annual Report on Form 20-F in accordance with the US Securities Exchange Act of 1934,for BP p.l.c. for the year ended 31 December 2012. A cross reference to Form 20-F requirementsis on page 20F.

This document contains the Directors Report, including the Business Review and ManagementReport, on pages 3-126 and 147-175, and 178. The Directors Remuneration Report is on pages127-145. The consolidated financial statements of the group are on pages 177-286 and thecorresponding reports of the auditor are on pages 179-181. The parent company financialstatements of BP p.l.c. and corresponding auditors report are on pages PC2-PC11 and page PC1respectively.

The statement of directors responsibilities, the independent auditors report on the annual reportand accounts to the members of BP p.l.c. and the parent company financial statements of BP p.l.c.and corresponding auditors report do not form part of BPs Annual Report on Form 20-F as filedwith the SEC.

BP Annual Report and Form 20-F 2012and BP Summary Review 2012may be downloaded frombp.com/annualreport. No material on the BP website, other than the items identified as BP AnnualReport and Form 20-F 2012or BP Summary Review 2012, forms any part of those documents.

BP p.l.c. is the parent company of the BP group of companies. The company was incorporated in1909 in England and Wales and changed its name to BP p.l.c. in 2001. Where we refer to the

company, we mean BP p.l.c. Unless otherwise stated, the text does not distinguish between theactivities and operations of the parent company and those of its subsidiaries, and information in thisdocument reflects 100% of the assets and operations of the company and its subsidiaries that wereconsolidated at the date or for the periods indicated, including minority interests. BPs primary sharelisting is the London Stock Exchange. Ordinary shares are also traded on the Frankfurt StockExchange in Germany and, in the US, the companys securities are traded on the New York StockExchange in the form of ADSs (see page 154 for more details).

The term shareholder in this report means, unless the context otherwise requires, investors in theequity capital of BP p.l.c., both direct and indirect. As BP shares, in the form of ADSs, are listed onthe New York Stock Exchange (NYSE), an Annual Report on Form 20-F is filed with the USSecurities and Exchange Commission (SEC). Ordinary shares are ordinary fully paid shares in BPp.l.c. of 25 cents each. Preference shares are cumulative first preference shares and cumulativesecond preference shares in BP p.l.c. of 1 each.

Frequent abbreviations

ADRAmerican depositary receipt.

ADS

American depositary share.Barrel (bbl)159 litres, 42 US gallons.

b/dBarrels per day.

boeBarrels of oil equivalent.

GAAPGenerally accepted accounting practice.

GasNatural gas.

HydrocarbonsCrude oil and natural gas.

IFRSInternational Financial Reporting Standards.

LiquidsCrude oil, condensate and natural gas liquids.

LNGLiquefied natural gas.

LPGLiquefied petroleum gas.

mb/dThousand barrels per day.

mboe/dThousand barrels of oil equivalent per day.

mmboeMillion barrels of oil equivalent.

mmBtuMillion British thermal units.

MWMegawatt.

NGLsNatural gas liquids.

PSAProduction-sharing agreement.

RCReplacement cost.

SECThe United States Securities andExchange Commission.

Tonne2,204.6 pounds. Registered office and our worldwide

headquarters:

BP p.l.c.1 St Jamess SquareLondon SW1Y 4PDUKTel +44 (0)20 7496 4000

Registered in England and Wales No. 102498.Stock exchange symbol BP.

Our agent in the US:

BP America Inc.501 Westlake Park BoulevardHouston, Texas 77079USTel +1 281 366 2000

Key performance indicatorsDefinitions for our group KPIs areprovided on pages 28-29.

Certain definitionsFor definitions of certain financial andcontractual terms see pages 98-99.

Trade marks of the BP group appear throughout this Annual Report and Form 20 -F in italics.They include:ampmAralARCOBPBP UltimateCastrolCastrol CRBCastrol EDGECastrol MagnatecDesigner WaterField of the FutureLoSalProject20KPushing Reservoir LimitsVeba Combi-Cracking (VCC)

EcoBoost is a trade mark of Ford Motor Company.

SkyMine is a trade mark of Skyonic Corporation.Permasense is a trade mark of Permasense Limited.

Cautionary statementThis document should be read inconjunction with the cautionarystatement on page 32.

Business review: Group overviewBP Annual Report and Form 20-F 2012

2


5/303

Business review

Group overviewAn overview of the key actions,events and results in 2012,together with commentaryon BPs performance in the

year and our priorities as wemove forward.

4 BP at a glance

8 Chairmans letter

Carl-Henric Svanberg sets out the boards prioritiesin 2012 and BPs prospects moving forward.

10 Group chief executives letter

Bob Dudley reviews the companys progress as we work

to build a stronger, safer BP.

12 Energy outlook

Our views on the factors likely to shape energy demand and supply, frompopulation and the energy mix, to policy, prices and access.

15 Our business model

An overview of how we are organized, the ways in whichwe create value, and our distinctive strengths.

20 Our strategy

Our priorities as we work to create a distinctive

platform for growth.

22 Our performance

From progress in Russia to new exploration access; areview of important actions and events during the year.

28 Our key performance indicators

How we performed as measured by our key financialand non-financial indicators.

30 Our management of risk

A summary of the risks we face in our business.

32 Cautionary statement



6/303

BP at a glanceBP Annual Report and Form 20-F 2012

Our business modelWho we areWe aim to create value forshareholders by helping tomeet growing demand for

energy in a responsible way.Our activities also generate jobs, investment,infrastructure and revenues for governmentsand local communities. We operate in over80 countries.

Our priorities are to enhance safety andrisk management, earn back trust and growvalue. We strive to be a safety leader in ourindustry, a world-class operator, a responsiblecorporate citizen and a good employer.

We are working to build a stronger, saferBP that plays to its distinctive strengths andcapabilities: exploration, operations in deepwater, the managing of giant fields and gasvalue chains, and our downstream business.Innovative technology and strong relationshipswith governments, partners and communitiesaround the world underpin our activities.

Findingoil and gas

Developing and extractingoil and gas

First, we acquire exploration rights,

then we search for hydrocarbonsbeneath the earths surface.

Once we have found hydrocarbons,

we work to bring them to the surface.

UpstreamOur Upstream segment manages its exploration, development and production activitiesthrough global functions with specialist areas of expertise.

BP at a glance

See Upstream pages 63-71.

1. Subsidiaries 4,477 2. Equity-accounted entities 1,033 Total 5,510

Total 6,175

3. Subsidiaries 5,736 4. Equity-accounted entities 439

Liquidsc

Natural gas

14

23

Proved reservesb

$22.5bnreplacement cost profitbefore interest and tax

67,900km2new exploration access

5major project start-ups

28countries of operation

b Million barrels of oil equivalent. Natural gas is converted to oil equivalent at5.8 billion cubic feet (bcf) = 1 million barrels.

c Liquids comprise crude oil, condensate, natural gas liquids and bitumen.

See KPIs pages 28-29.

1

2

32. Upstream 24,0001. Downstream* 51,300

3. Other businesses 10,400 and corporate

and Gulf Coast Restoration Organization

Total 85,700

*Including service stationstaff.

Employees by business segment

18.7%gearing

(net debt ratio)a

$20.4bnoperating cash flow

$11.6bnprofit attributable toBP shareholders

19%reduction in loss of

primary containmenta Net debt is not a recognized GAAP measure,see Financial statements Note 35.

GroupBP p.l.c. is the parent company of theBP group of companies. Our worldwideheadquarters is in London.

Business modelFor more information on our businessmodel see pages 15-19.

The key performance indicators (KPIs) forBP are shown on pages 28-29. Some of thefinancial KPIs are not recognized GAAPmeasures, but are provided for investorsbecause they are closely tracked bymanagement to evaluate BPs operatingperformance and to make financial, strategicand operating decisions.

4


7/303

BP at a glanceBP Annual Report and Form 20-F 2012

Transporting and tradingoil and gas

Marketingfuels and products

Manufacturingfuels and products

We move hydrocarbons using

pipelines, ships, trucks and trainsand capture value across the supplychain.

We refine, process and blend

hydrocarbons to make fuels,lubricants and petrochemicals.

We supply our customers with fuel for

transportation, energy for heat and light, lubricantsto keep engines moving and the petrochemicalsrequired to make a variety of everyday items.

7.2million tonnesbiofuels total sugar cane crush

capacity per annum

1,558MWenet wind generation capacity

DownstreamOur Downstream segment operates hydrocarbon value chains covering three mainbusinesses fuels, lubricants and petrochemicals.

We develop and invest in biofuels and wind.BPs lower-carbon businesses and investmentsin future options are operated through ourAlternative Energy business.

See Downstream pages 72-79.

Lubricants

Fuels

Petrochemicals

Biofuels

International oil andgas markets

See Alternative Energy pages 82-83.

Investingin renewable energy

13

2

Operating capital employedd

1. Fuels $42.7bn 2. Lubricants $1.9bn 3. Petrochemicals $5.3bn

$2.8bnreplacement cost profitbefore interest and tax

2.4million barrelsof oil refined per day

14.7million tonnesof petrochemicals produced inthe year

39%of our lubricants sales were

premium grades

All data provided on pages 4 and 5 is as at, or forthe year ended, 31 December 2012.

d Operating capital employed is total assets (excluding goodwill) less total liabilities,excluding finance debt and current and deferred taxation.

e Excludes 32MW of capacity in the Netherlands, which ismanaged by our Downstream segment.


8/303

The shaded areas indicate countrieswhere we have operations.

BP at a glance continued

TNK-BP see pages 80-81.

Upstream seepages 63-71.

16

2

3

45

7 1. Europe 31,600

2. US and Canada 23,800 3. Asia 16,400 4. South and Central

5. Middle East,North Africa 5,500

6. Sub-SaharanAfrica 2,300

7. Russia 300

America 5,800

BP group headcount by region(including 14,700 service station staff)

Alaska

We opened our Alaska office in 1959 andacquired our first federal licences that year.We now operate 13 oilfields and four pipelines.

We also own a significant interest in six otherproducing fields.

Gulf of Mexico

We are one of the largest lease holders andproducers of oil and gas in the regions deepwater. In 2011 we resumed drilling in the region.We now produce oil and gas from four operatedhubs and three non-operated hubs.

Downstream see pages 72-79.

Alternative Energy see pages 82-83.

Downstream

BP refinery.

Petrochemicals site(s).

Asset held for sale.

Where we operateBP is active in over 80 countries.This map shows our key

operating sites across the world.

Upstreama

Primarily (>75%) liquids.

Primarily (>75%) natural gas.

Liquids and natural gas.

Exploration site.

TNK-BP

TNK-BP upstream assets (wholly orpartly owned by TNK-BP).

TNK-BP refineries (wholly or partlyowned by TNK-BP).

BPs investment in TNK-BP is classified as anasset held for sale in the group balance sheetat 31 December 2012.

Alternative Energy

Operational assets.

Technology assets.

We have interests in 16 wind farms in the US,

and operate four ethanol production facilities three in Brazil and one in the UK.

Fuels

The fuels business is made up of sevenregionally based fuels value chains (FVCs), anumber of regionally focused fuels marketing

businesses, a global aviation fuels marketingbusiness that markets products in more than45 countries and the global oil supply andtrading activities. These businesses sell refinedpetroleum products including gasoline, diesel,aviation fuel and LPG.

Fuels value chainsUS:North West, South West, East of Rockies.

Europe:Rhine, Iberia.

Rest of world:Australia and New Zealand,Southern Africa.

a Locations are categorized as liquids or natural gas based on2012 production. Where production is yet to commencematerially, categorization is based on proved reserves.Exploration sites have no significant proved reserves orproduction as at 31 December 2012.

Trinidad & Tobago

BP has been exploring in Trinidad since 1939.Today we hold exploration and productionlicences covering more than 1,800,000 acres.We operate 13 offshore platforms and anonshore processing facility.


6


9/303

Lubricants

Our lubricants business manufactures andmarkets lubricants and related products andservices. It is a global business marketing

products in more than 70 countries leveragingbrand, technology and relationships. We focusour resources on core and growth marketssuch as Brazil, Russia, India and China.

North Sea region

BP was the first company to findhydrocarbons in the North Sea region, in1965. We now have one of the largest asset

bases in the region, operating around 30 oiland gas fields, two major terminals and anextensive network of pipelines.

Petrochemicals

Our petrochemicals business producespetrochemicals products at manufacturingunits around the world that, for the mostpart, use proprietary BP technology. At theend of the year the business comprised15 manufacturing sites with approximately40% of our capacity in Asia, and 30% in eachof Europe and the US. We sell our productsto customers in more than 40 countries.

Angola

We have been involved in Angola since the1970s. We now hold a position in nine majordeepwater licences, along with equity in theAngola LNG project. We achieved two majorproject start-ups in 2012.

Azerbaijan

Our major projects include the Azeri-Chirag-Gunashli oil field; the Shah Deniz gas field;three major terminals; and a number of long-

distance pipelines, including the 1,768kmBaku-Tbilisi-Ceyhan pipeline, which carries oilacross Azerbaijan, Georgia and Turkey.



10/303

Dear fellow shareholder

In 2012 the board had three priorities. First, to address uncertainty from ongoing litigation inthe US and our partnership in Russia. Second, to reinforce the strategic direction of thegroup. Third, to accelerate the companys momentum and build confidence. All of these

were pursued in the context of the boards active monitoring of safety and risk management.Substantial progress has been made in meeting these priorities. This progress gave theboard confidence to raise the quarterly dividend by 14% in February 2012 and by 12.5% inOctober. The increased dividend represents an important milestone on the road toimproved shareholder value. We are maintaining a progressive dividend policy, increasingreturns to you, in line with financial performance and outlook.

The pursuit of energy will always involve risk, so it is essential that safety remains front ofmind. From safe and reliable operations comes trust, and we need that trust if BP is tocreate value for you and to help meet the worlds energy needs.

Looking ahead, your board sees strong prospects for BP in a world that requires a growingsupply of energy. We are aware that we still have some way to go. We continue to face anumber of uncertainties in the US, for example. The board thanks you for your continuedpatience and support as we work to address these issues.

In working to resolve uncertainty, two matters demanded the close attention ofyour board.

In the US, the company has faced legal proceedings related to the Deepwater Horizonaccident. Our settlements with the US government, the Securities and ExchangeCommission and others were each important steps forward in reducing uncertainty.

In Russia, the agreed sale of our 50% shareholding in TNK-BP to Rosneft, and thesettlement with our partners, have brought clarity. The disposal agreement will provide uswith an increased stake in Rosneft, such that on completion, BP will have a 19.75% shareof the biggest publicly traded oil company in the world in terms of oil production andreserves. In due course BP expects to have two seats on its nine-person board. BP hasworked with Rosneft for some 15 years. Our joint ambition is that BPs people, processesand technologies will help to significantly enhance Rosnefts value over time, as they did at

TNK-BP.During the year the board supported Bob Dudley, our group chief executive, on theimplementation of the 10-point plan and the further implementation of the functionalorganization. We worked with him to develop the group strategy beyond 2014. Bob, theexecutive team and all our employees have made a huge contribution, working to reachour milestones and secure a promising future for the company during a tough period.Bob has shown steady and determined leadership through this time. I thank him andeveryone at BP for their hard work.

The qualities of BPs employees were once again demonstrated in January 2013, followingthe violent attack at In Amenas in Algeria. This shocking event deeply affected us all, butacross the company people responded with great resilience. We will always rememberthose who lost their lives in this terrible incident.

Chairmans letter

Our plans, priorities and

directions are clear. I seegreat opportunities ahead.

Carl-Henric Svanberg

10-year dividend historyUK (pence per ordinary share)

0

20

10

30

40

03 04 05 06 07 08 09 10 11 12

15.25

19.15

21.10

21.00

29.39

3

6.42

8.68

17.40

20.8515

.66

US (cents per ADS)

1 ADS represents six 25 cent ordinary shares.

0

100

200

300

400

03 04 05 06 07 08 09 10 11 12

166

209

230

254

330

336

84

168

198

153

Board performanceFor information about the board and itscommittees see pages 101-126.


8


11/303

As 2012 progressed the board saw the company start to move forward with greaterconfidence. It is important that this momentum continues.

Our board committees have provided effective oversight of the company and itsoperations, which has enabled the board to focus on its three priorities. Outside theboardroom, our non-executive directors have continued to pay visits to key parts of thebusiness. My own visits this year included Angola, Azerbaijan, the North Sea, Japan andthe US.

The board has seen substantial change. For this reason, we have asked Antony Burgmansto serve for a further three years. I am pleased that we will continue to benefit from his

experience and understanding of the company. Byron Grote is retiring after 33 years withBP, including more than 12 years on the board. I thank him for his dedication and theexceptional contribution he has made to this company. As we move through 2013, theboard is well balanced, with deep experience in our industry and a broad range of skillsacross business and finance.

We will refresh the board as and when required. I believe board diversity including therepresentation of women at the top helps to make boards more effective. We willcontinue to work to identify candidates from a range of backgrounds who can make aunique and powerful contribution to BP.

One of the vital tasks of the board is to ensure strategy is matched to the world we seeahead. Energy remains the engine of progress, and we expect rising populations andincreasing industrialization to generate strong demand to 2030 and beyond. The world willcontinue to be dependent on fossil fuels in the medium term. Along with providing the

hydrocarbons needed, we are also involved in developing the resources, technologies andpolicies required over the long term.

Our industry keeps evolving. In the past international oil companies dominated access toresources. Then national oil companies took control of the greater share. But much of theeasiest-to-reach oil has been developed. So we are now entering a third era, whereco-operation between partners is the key to unlocking the resources found in the mostchallenging locations. For BP, advantage now comes from exceptional capability ratherthan exceptional scale. Our future is about high-margin, high-quality production, notsimply volume.

Oil will continue to be BPs prime focus, and we aim to extend our extraordinary trackrecord in finding and developing new resources. We will keep making selectiveinvestments in natural gas, with an emphasis on assets that generate good margins. Andwe will be selective in the Downstream too, choosing to operate where our refining andmarketing assets are connected to attractive markets.

Over the past three years BP has had to change. Through our reorganization, we area simpler company. Through our asset sales, we are stronger financially. Through ouractions, we have reduced complexity and risk. Our plans, priorities and direction are clear.I see great opportunities ahead, as we continue to build a stronger, safer BP that meetsthe expectations of our shareholders and the wider world.

Carl-Henric Svanberg

Chairman6 March 2013

Carl-Henric Svanberg at the Sangachal terminalcontrol room during his three-day trip toAzerbaijan (top); Professor Dame Ann Dowling onthe Thunder Horse platform in the Gulf of Mexico(middle); Brendan Nelson and Phuthuma Nhlekoat BPs North America Gas operations in eastTexas, US (bottom).

Our strategyFor more on our strategic priorities andlonger-term objectives see pages 20-21.



12/303

Dear fellow shareholder

BP made important progress in 2012. We achieved a series of strategic milestones andremained on course with our plans to 2014 and beyond. We made great strides forwardin Russia and the US. We continued to enhance risk management. We focused on our areas of

greatest strength. And we sold assets to capture value, simplify the business and reduce risk.Before I say more about our activities and plans, I would like to reflect, with great sadness, on theterrible events that took place at the In Amenas joint venture facility in Algeria in January 2013. Ourthoughts are with the families and friends of those who lost their lives in the attack. We are workingwith government agencies and others to determine what can be learned from this shocking incident.

Coming back to our work over the past few years, people may not be fully aware of theenormous scale of the change we have made. By the end of 2012 we had announcedasset sales of $38 billion, essentially reaching our target a year early. Since the divestmentprogramme began, we have sold around half our upstream installations and pipelines, andone-third of our wells while retaining roughly 90% of our proved reserves base andproduction. Meanwhile, we are gaining new exploration access, rolling out high valueprojects and upgrading assets.

Our Downstream segment has had an excellent year with strong operational performance

and record underlying profits.aWe made good progress on the modernization programme ofour Whiting refinery and reached agreement on the divestment of two major refineries in theUS, completing the sale of our Texas City refinery in February 2013.

There is more to do and there will always be new challenges to face, but we are steadilyacting to build a stronger, safer BP.

We are addressing uncertainty in the US

In 2012 we resolved federal criminal charges with the Department of Justice and securitiesclaims with the SEC. We continue to work with the Environmental Protection Agency toresolve suspension and debarment issues.

We have consistently said we are willing to settle all outstanding claims on reasonableterms, but we are also prepared to defend the company and its actions in court. We will dowhat is in the best interests of our shareholders. I recognize that ongoing proceedingsprolong uncertainty, so we will endeavour to update you as events unfold.

Back in 2010 we said that we would help restore the environment and economy of theGulf. We are holding true to that promise. In 2012 we made our final payment into the$20-billion Trust fund, from which $9.5 billion has been distributed to date. We supportedenvironmental research and provided funds for the local tourism industry. Having grown upin the Gulf, I am heartened that the tourists are back, beaches are busy and the fishing isgood. To date, BP has made total payments directly related to the accident and oil spill of$32.8 billion. We will continue to meet our commitments in the region.

We are repositioning BP in Russia

In 2012 we agreed to sell our 50% shareholding in TNK-BP to Rosneft. TNK-BP proved to bean outstanding investment, generating substantial value for BP. From an initial commitmentof around $8 billion, it has returned some $19 billion of dividends to us. But the time hadcome to move on.

Carl-Henric Svanberg and Bob Dudley with IgorSechin, President of Rosneft, on the day the BPboard approved the transaction.

Group chief executives letter

We are building a platform

for growth that shouldserve us well for manyyears to come.

Bob Dudley


10


13/303

The new agreement will provide us with an 18.5% share in Rosneft and $12.3 billion of cash,including a dividend of $0.7 billion received from TNK-BP in December 2012. Combined withour existing 1.25% shareholding, we will own 19.75% of Rosneft. We expect the transactionto be completed in the first half of 2013. Through it, we will maintain a strong position in theworlds largest oil and gas producing country. And we will be a major investor in a companytransforming its asset base, management processes and corporate governance.

We will use our experience in large acquisitions and mergers to support Rosneft as itassimilates TNK-BPs assets. We can also contribute technical skills in areas fromexploration and enhanced oil recovery to integrating downstream businesses and

international developments. We have confidence in the Russian business environmentand we look forward to playing a valued role in the countrys future.

We are enhancing safety and risk management

Our employees have been working systematically to enhance safety and risk management.We have changed how we are organized, bringing greater clarity and consistency across thecompany. In the Gulf of Mexico and elsewhere, we are holding our operations to standardsthat in many cases go beyond regulatory requirements. And we have turned lessonslearned from the 2010 accident into new oil spill response plans and technologies, whichwe are adopting within BP and sharing with others. I take encouragement from our 19%reduction in loss of primary containment this past year, continuing a multi-year trend.

2012 saw the appointment of Carl Sandlin, who will oversee the implementation of therecommendations of the Bly Report, BPs internal accident investigation. In addition,following our agreement with the US government to resolve all federal criminal claims, wehave agreed to take additional actions designed to further enhance the safety of drilling

operations in the Gulf. Two independent monitors will be appointed to review and providerecommendations, one regarding process safety for deepwater drilling in the Gulf and theother BPs code of conduct. An independent auditor will review and report on BPsimplementation of key terms of the agreement.

We are building a distinctive platform for growth

In shaping our portfolio, we are prioritizing shareholder value. Scale remains important,but we are focused on driving forward our financial performance rather than simplygrowing production volumes. Operating cash flow and replacement cost profit will takeprecedence over barrels of production. We are increasing investment in the areas withthe greatest potential to generate strong and reliable growth in operating cash flow, fromexploration and deepwater operations to giant fields and gas value chains. In theDownstream, we have a portfolio of world-class businesses that are positioned todeliver material and growing free cash flows.b

There is plenty for us to explore. During the year we gained new access in six countries.

Since 2010 we have accessed around 400,000 square kilometres of new acreage. Thatis roughly the size of California and more than double the exploration acreage gainedfrom 2000 to 2009.

We continue to have an important presence in many of the worlds largest economiesand in fast-developing countries too. BPs global footprint and prudent financial approachare important given the potential for turbulence in the world, including further economicand political upheaval. We are well placed to respond to unsettled conditions if and whenthey appear.

Looking ahead

While facing uncertainties and navigating through testing times, BP emerged from 2012a somewhat smaller, but stronger company. As we move forward, you will see us keepworking to focus, standardize and improve what we do and how we do it. We arebuilding a platform for growth that should serve us well for many years to come.

I want to end by paying tribute to everyone here at BP. This has been another trulydemanding year, and our employees have dedicated themselves to their jobs in a waythat I find humbling. I am proud of the talent and the terrific spirit of determination toimprove that is found within BP. Over the next 12 months and beyond, we will continueour work to enhance safety, earn back trust and create value.

Bob Dudley

Group Chief Executive6 March 2013

The new US-based High-PerformanceComputing centre, which is currently

under construction, will enable BP scientists tocomplete an imaging project in one day whereas it would have taken four years nearlya decade ago.

$19billionDividends received by BP from TNK-BPsince 2003.

a Downstream underlying profit is not a recognized GAAPmeasure. See page 27 for the equivalent measure on an IFRSbasis, which is replacement cost profit before interest and tax.See Certain definitions on p age 98 for further information onunderlying profit.

b See footnote e on page 21 for a definition of free cash flow.



14/303

Energy outlook

Looking ahead, we expect demand for energy to growand the challenges facing our industry to be met by a diverse mixof fuels and technologies.

Our market in 2012

World economic growth was weak in 2012 below its historic trend and we expectsubdued global growth to continue in 2013.Emerging economies with stronger productivityand rising populations, led by China and India,are set to drive growth. Developed countriesmay lag as they continue to address internalfiscal imbalances.

Global demand for energy, including oil,continued to expand modestly in 2012, witha weak economy and high oil prices weighingon demand.

As a result, the growth in world oil consumptionremained weak in 2012, with continued growthin China and other non-OECD countriesoffsetting yet another decline in OECDcountries. With oil markets balancing lowerproduction from certain countries against weakconsumption and high OPEC production,average crude oil prices in 2012 were similar tothe previous year, averaging $111.67 per barrel.

Natural gas prices continued to diverge globallyin 2012, with lower prices in the US andincreases in Europe and the Far East.

Crude pricesFor more information on crude oil andnatural gas prices see page 64.

Globally, refining margins improved on averageas refinery closures and operational issuesreduced product supply. Demand continues togrow in non-OECD countries but the weakfinancial environment in OECD countries hasseen demand growth weaken.

Refining marginsFor more information on the BP refiningmarker margin and other measures seepage 73.

Concerns about the volatility of commodityand financial markets, energy security andclimate change have led to continued debateover the appropriate role of markets,government regulation and other policymeasures that affect the supply andconsumption of energy. Given the pressuresin the sector, we expect regulation and taxationof the energy industry and energy users toincrease in many areas in the future.

2010 2011 2012

150

125

100

75

50

25

2008 2009

Source:Platts/BP.*See Downstream on page 73 for further information on RMM.

Dated Brent oil priceAverage refiningmarker margin (RMM)*

Henry Hub gas price(First of Month Index)

Crude oil and gas prices, and refiningmargins ($ per barrel of oil equivalent)


12


15/303

Longer-term outlook

Challenges and opportunitiesThe worlds population is projected to increaseby 1.3 billion from 2011 to 2030, with realincome likely to double over the same period.These factors will lead to increased energydemand and consumption. Energy and climatepolicies, efficiency gains and a long-termstructural shift in fast-growing economies awayfrom industry and towards less energy-intensiveactivities will help to restrain any increase, butthe overall trend is likely to be one of stronggrowth. We expect demand for energy toincrease by as much as 36% between 2011 and2030, with nearly 93% of the growth to occur innon-OECD countries.

We estimate that there are enough energyresources available to meet the increases indemand in the foreseeable future, but there willbe challenges as well as opportunities.

Energy security represents a challenge. Morethan 60% of the worlds natural gas isconcentrated in just four countries. More than80% of global oil reserves are located in ninecountries, most of which are well away from the

hubs of energy consumption.Meeting growing demand for secure andsustainable energy will also present anaffordability challenge as the availability of easilyaccessible fossil fuels slowly diminishes, withmany lower-carbon resources and technologiesremaining costly to produce at scale.

While energy is available to meet growingdemand, action is needed to limit carbon dioxide(CO

2) and other greenhouse gases being

emitted through fossil fuel use. Burning fossilfuels can also raise local and regional air qualityissues.

Meeting the energy challengeWe believe that, increasingly, the global energychallenge can only be met through a diverse mixof fuels and technologies. A broad mix canenhance national and global energy securitywhile supporting the transition to a lower-carboneconomy. This is one reason why BPs portfolioincludes oil sands, shale gas, deepwater oil andnatural gas production, biofuels and wind.

We estimate that todays oil reserves could

meet more than 45 years of demand at currentconsumption rates, while known supplies ofnatural gas could meet demand for nearly 60years and coal could meet demand for up to120 years.a

Our industry has a track record in expanding theavailability of resources through investment andthe application of technology. For example, in1981 the worlds oil reserves stood at anestimated 700 billion barrels. By 2011 this hadrisen to 1,650 billion barrels, even though800 billion barrels had been consumed in theintervening three decades.

Oil and natural gasWe believe oil and natural gas are likely to

represent about 53% of total energyconsumption in 2030. Even under theInternational Energy Agencys (IEA) mostambitious climate policy scenario (the 450scenario), oil and gas would still make up 50%of the energy mix in 2030, with combineddemand projected to exceed current levels inabsolute terms.bThe 450 scenario assumesgovernments adopt commitments to limit thelong-term concentration of greenhouse gases inthe atmosphere to 450 parts-per-million of CO2equivalent.

The facts and figures used in this section arederived from BP Energy Outlook 2030, publishedin January 2013, unless otherwise indicated, andrepresent a base case or most likely projection.

1.6%per annumProjected world primary energyconsumption growth to 2030.

aBP Statistical Review of World Energy June 2012. Thesereserve estimates are compiled from official sources and otherthird-party data, which may not be based on proved reservesas defined by SEC rules.

b From World Energy Outlook 2012, OECD/IEA 2012, page 553.2020 2030

18

16

14

12

10

8

6

4

2

1990 2000 2010*Includes biofuels.Source:BP Energy Outlook 2030.

Hydro CoalRenewables* Nuclear

OilGas

Energy consumption by fuel(billion tonnes of oil equivalent)

Energy consumption by region(billion tonnes of oil equivalent)

2020 2030

18

16

14

12

10

8

6

4

2

1990 2000 2010

Source:BP Energy Outlook 2030.

Non-OECDOECD

In the US, our biofuels business is focusing on thedevelopment of cellulosic ethanol technology atfacilities in San Diego, California (right) andJennings, Louisiana.


For more information seebp.com/energyoutlook


16/303

New sources of hydrocarbons are more difficultto reach, extract and process. This will requireBP and others in our industry to develop newtechnologies to boost recovery from decliningfields and commercialize currently inaccessibleresources. Greater energy intensity could berequired to extract these resources, whichmeans operating costs and greenhouse gasemissions from operations are likely to increase.

Renewables

Renewable energy is the fastest growing fueland is projected to grow by 7.6% per annum to2030. Renewable energies are starting from alow base however, and we project that they areonly likely to meet around 6% of total energydemand by 2030. With a few exceptions,renewables are not yet competitive withconventional power and transportation fuels.Sufficient policy support is required to helpcommercialize effective lower-carbon optionsand technologies, but renewables will ultimatelyneed to become free from subsidy andcommercially self-sustaining.

Energy efficiency and innovationWhile overall energy consumption is set toincrease, economic growth is expected to

become significantly less energy intensive,especially in non-OECD economies. In fact,globally, demand for energy is expected to riseat less than half the rate of gross domesticproduct (GDP). The amount of energy requiredto generate $1 million in China has alreadydropped from 350 tonnes of oil equivalent in1980 to 200 tonnes of oil equivalent or lesstoday.

Innovation can play a key role in improvingtechnology design, process and use ofmaterials, bringing down cost and increasingefficiency. In transport, for example, we believethat efficient combustion engines and powertrain technologies could offer the quickest andmost effective pathway to a secure, lower-carbon future.

Policy, prices and accessIf the worlds growing demand for energy is tobe met in a sustainable way, we believe thatgovernments must set a stable and enduringframework for the private sector to invest andfor consumers to choose wisely. As part of this,governments will need to provide secure accessfor exploration and development of energyresources; define mutual benefits for resourceowners and development partners; andestablish and maintain an appropriate legal and

regulatory environment.We believe open and competitive markets arethe most effective way to encourage companiesto find, produce and distribute diverse forms ofenergy sustainably. The US experience withshale gas shows how an open and competitiveenvironment can drive technological innovationand unlock resources. We also believe thatputting a price on carbon one that treats allcarbon equally, whether it comes out of anindustrial smokestack or a car exhaust willmake energy efficiency and conservation moreattractive to businesses and individuals, andlower-carbon energy sources more costcompetitive.

Beyond 2030We expect that growing population and percapita incomes will continue to drive growingdemand for energy. These dynamics will beshaped by future technology developments,changes in tastes, and future policy choices all of which are inherently uncertain. Concernsabout energy security, affordability andenvironmental impacts are all likely to beimportant considerations. These factors mayaccelerate the trend towards more diversesources of energy supply, a lower averagecarbon footprint, increased efficiency anddemand management.

BP is sensitive to the challenges and

opportunities outlined here. We actively monitordevelopments and continually assess a range ofpotential outcomes and their implications for ourstrategy.

93%Non-OECD countries share of energyconsumption growth to 2030.

+45%Net growth in unconventional global energyproduction from 2020 to 2030.

Science not sentiment

A BP-funded consortium of experts fromleading universities around the world isexamining the complex relationships betweennatural resources and the supply and use ofenergy. The aim of this multidisciplinaryresearch programme the EnergySustainability Challenge (ESC) is to providescientific evidence to underpin effective policymaking and business planning.

The ESC is concentrating on the nexus of land,

water, minerals and energy. It is hoped thiswork will help the world to developsustainable energy pathways founded onscience rather than sentiment. We anticipateit will provide BP with greater clarity on howsustainability should inform our planning,investments and operations.


14

bp.com/energysustainabilitychallenge


17/303

Who we areBP is one of the worlds leading integrated oiland gas companies.aWe aim to create value

for shareholders by helping to meet growingdemand for energy in a responsible way. Westrive to be a safety leader in our industry, aworld-class operator, a responsible corporatecitizen and a good employer.

Through our work we provide customerswith fuel for transportation, energy for heatand light, lubricants to keep engines moving,and the petrochemicals products used to makeeveryday items as diverse as paints, clothes andpackaging. Our projects and operations help togenerate employment, investment and taxrevenues in countries and communities aroundthe world.

At each stage of the hydrocarbon value chain

there are opportunities for us to create value both through the successful execution ofactivities that are core to our industry, and throughthe application of our own distinctive strengthsand capabilities in performing those activities.

How we are organizedWe have two main business segments:Upstream and Downstream. Through these wefind, develop and produce essential sources ofenergy, and turn these sources into productsthat people need.

We also hold a 50% shareholding in the majorRussian oil company TNK-BP, which ownsupstream and downstream assets. In

November, marking what we expect to be anexciting new future for BP in Russia, we signedfinal, binding agreements with Rosneft, Russiasleading oil company, for the sale of our share inTNK-BP for $12.3 billion in cash (which includesa dividend of $0.7 billion received from TNK-BPin December 2012) and an 18.5% stake inRosneft. The transaction is expected tocomplete in the first half of 2013. Combinedwith BPs existing 1.25% shareholding, this willresult in BP owning 19.75% of Rosneft.

In renewable energy, our investments andactivities are focused on biofuels and wind.In addition, our emerging businesses andventures unit invests in a broad range of energyprojects and technologies. Our renewables and

venturing activities are managed through ourAlternative Energy business, which is reportedin Other businesses and corporate on page 82.

Our commitmentsKeeping a relentless focus on safety is the toppriority for everyone at BP.

Rigorous management of risk helps toprotect the people at the front line, the placesin which we operate and the value we create.We understand that operating in politicallycomplex regions and technically demandinggeographies requires particular sensitivity tolocal environments.

Through our business model we aim to create value acrossthe hydrocarbon value chain. This starts with exploration andends with the supply of energy and other products fundamentalto everyday life.

Our business model

BP is the largest foreign investor in Azerbaijanand operates two production-sharingagreements Azeri-Chirag-Gunashli and ShahDeniz and other exploration leases. Above isthe West Azeri platform.

a On the basis of market capitalization, proved reservesand production.



18/303

Our business model continued The relationships we form with shareholders,governments, regulators, non-governmentalorganizations, local communities, customers,franchisees, partners, contractors, suppliers andothers in our industry are crucial to the successof our business. We are committed to buildinglong-lasting relationships, meeting our obligationsand acting responsibly.

We believe that the best way to achievesustainable success as a group is to act in thelong-term interests of our shareholders, ourpartners and society. Through our work weaim to create value for our investors andbenefits for the communities and societiesin which we operate, with the safe andresponsible supply of energy playing a vitalrole in economic development.

Our peopleWe employ nearly 86,000 people, including14,700 service station staff in Europe andAsia. The majority of our employees arelocated in the US and Europe. The qualitiesand abilities of our employees have a powerfuleffect on our ability to compete and meet ourcommitments to investors and the widerworld. We provide a range of professionaldevelopment programmes and training tohelp our employees develop their skills andcapabilities. We are committed to creating aninclusive work environment where everyone istreated fairly, with dignity, respect and withoutdiscrimination.

Our presenceAs a global group, our interests and activitiesare held or operated through subsidiaries,branches, joint ventures or associatesestablished in and subject to the laws andregulations of many different jurisdictions.Our worldwide headquarters is in London.The UK is a centre for trading, legal, financeand other business functions as well as threeof BPs major global research and technology

groups. We have well-established operationsin Europe, the US, Canada, Russia, SouthAmerica, Australasia, Asia and parts of Africa.BP has freehold and leasehold interests in realestate in numerous countries, but no individualproperty is significant to the group as a whole.For more on the significant subsidiaries of thegroup at 31 December 2012 and the grouppercentage of ordinary share capital see Note 45on page 255. For information on significant jointlycontrolled entities and associates of the group,see Notes 24 and 25 on pages 218-220.

Value creationWe seek to add value at each stage of ouroperations, from exploration to marketing.We believe that by operating across the fullhydrocarbon value chain we can create morevalue for shareholders, as benefits and costscan often be shared by our segments.Integration also enables us to develop sharedfunctional excellence in areas such as safetyand operational risk, environmental and socialpractices, procurement, technology andtreasury management more efficiently.

1

2

1. OECD 64% 2. Non-OECD 36%

Location of groups fixed assets

1

2

1. US 39% 2. Non-US 61%

Our employeesFor more on BPs employees in 2012see pages 55-56.

Material improvement

Purified terephthalic acid (PTA) is the primaryraw material for polyester, which is used intextiles and packaging. Our proprietary PTAtechnology has significantly lower capital andoperating costs compared with conventionalPTA plants. Our estimates suggest that itdischarges 75% less water, generates 65%lower greenhouse gas emissions and 95%lower solids waste compared with competingtechnologies.

We have invested significantly in thisproprietary technology and believe thatmaximum value for BP will come from bothinvesting in projects such as our Zhuhai 3project in Guangdong, China and throughlicensing. We announced our first third-party,non-affiliate, PTA licensing deal in July to JBFPetrochemicals. They intend to build a 1.25million tonnes per annum PTA unit in India expected onstream at the end of 2014.

Our work with PTA is part of an ongoingresearch and development programmedesigned to improve the manufacturingefficiency in petrochemicals. Along with PTA,we have industry leading technology,intellectual property and know-how inparaxylene and acetic acid.


16


19/303

We aim to protect value by maintaining arigorous focus on safety, reliability andefficiency across our range of activities. Weoften work with partners to mitigate risk or gainfrom complementary skills.

Finding oil and gasFirst, we acquire the rights to explore for oiland gas. Through new access we are able torenew our portfolio, discover new resourcesand replenish our development options.

Developing and extracting oil and gas

When we are successful in finding hydrocarbonresources, we create value by seeking toprogress them into proved reserves or byselling them on if they do not fit with ourstrategic objectives.

If we believe developing and producing thereserves will be advantageous for BP, we willproduce the oil and gas, then sell it to themarket or distribute it to our downstreamfacilities.

Transporting and trading oil and gasWe move oil and gas through pipelines andby ship, truck and rail. We use our tradingand supply skills and knowledge to find thebest routes to deliver supplies to the most

attractive markets.Manufacturing and marketing fuels

and productsUsing our technology and expertise, wemanufacture fuels and products, creating valueby seeking to operate a high-quality portfolio ofwell-located assets safely, reliably and efficiently.We market our products to consumers and otherend-users and add value through the strength ofour brands.

Our distinctive strengthsand capabilitiesWe consider our areas of distinctive strength toinclude:

Exploration acquiring access and searchingfor hydrocarbons.

Deep water we have a long track recordin finding, developing and producinghydrocarbons in deep water.

Giant fields managing the scale andcomplexity of fields with resources believed to

exceed 500 million boe.a Gas value chains seeking to add value as

gas moves from field to customer. Downstream the pursuit of safe, reliable and

efficient operations, and leading returns, acrossfuels, lubricants and petrochemicals.

These are underpinned by our developmentand application of technology and our abilityto build strong relationships. In addition, wehave a long-established integrated supplyand trading function.

Strong relationshipsWe are seeing an evolution in our industry,with international oil companies such as BPestablishing new kinds of partnerships and

co-operation with governments, national oilcompanies and other resource holders. Thebenefits of our value-creating activity areshared with governments and other partners.

We seek opportunities to develop and deploydistinctive capabilities that complement thoseof our partners. We also partner with universitiesand governments in pursuit of improving thetechnologies available to us, so we can enhanceour operations and develop new products. Weaim to support and improve standards in our

Our business modelFor more information see BP at a glanceon pages 4-5.

a Actual amount of proved reserves of such fields ona basis recognized by the SEC may be less than this.

Salt reduction promiseshealthy returns

Typically, less than 35% of the oil in a fieldis extracted, even when wells are floodedwith water to increase recovery. That meansimportant resources are currently leftuntapped, all over the world.

The LoSalflooding process is set tosignificantly improve recovery rates.Developed at BPs UK research centre, theLoSalflooding process uses water witha low salt content, which releases moremolecules of oil from the sandstone rockin which they are held.

Following a successful trial in the Endicottfield in Alaska, we are applying LoSalwhereappropriate in our portfolio. In 2012 Clair Ridgein the North Sea became the first large-scaleoffshore scheme to deploy the technology.BP estimates that this breakthroughtechnology (part of BPs suite of DesignerWaterenhanced oil recovery technologies) willincrease production by around 42 million

barrels of additional oil, compared withconventional water flooding methods.



20/303

Field of the Future

Applying real-timedata capabilities toenable safe andefficient operations.

Advanced seismic imagingLocating and accessingnew resource throughindustry-leading imaging.

Beyond sand controlMaximizing productionand managing risk fromsand-prone reservoirs.

Pushing Reservoir LimitsGrowing recovery factorsto maximize resourcesfrom existing oil fields.

Heavy oilDeveloping new technologiesto recover heavy oil.

Unconventional gasRecovering gas fromunconventional rocks usinginnovative technologies.

Deepwater facilitiesDelivering fully qualifiedintegrated productiontechnology solutions thatsafely maximise value fromBPs deepwater portfolio.

Well advisorBP deliver safe, reliableand efficient well operationsthrough the integrationof real-time data.

Inherently reliable facilitiesManaging and reducingintegrity risk.

industry by participating in industry bodies,engaging with our peers on important issues,and where appropriate setting voluntarystandards above those required by currentregulation. And we carry out regular reviewsand audit processes with contractors andsuppliers, which help to maintain strong linksacross our operations and activities.

TechnologyWe believe our development and applicationof technology is central to our reputation andcompetitive advantage. For us, technology isthe practical application of scientific knowledgeto manage risks, capture business value and

inform strategy development. This includes theresearch, development, demonstration andacquisition of new technical capabilities andsupport for the deployment of BPs know-how.

Our investments are focused on access toresources, process efficiency, productformulation and lower-carbon opportunities. Wemonitor the potential opportunities and riskspresented by emerging science, interdisciplinaryinnovation and new players; natural resourceissues and climate concerns; and evolvingpolicy, including the current emphasis on energysecurity and efficiency.

BPs technology advisory council, comprisedof eminent business and academic technology

leaders, provides the board and executivemanagement with an independent view of BPscapabilities judged against the highest industrialand scientific standards.

Supply and tradingWe buy and sell at each stage in the valuechain to optimize value for the group, oftenselling our own production and buying fromelsewhere to satisfy demand from our refineriesand customers. We also aim to create valuethrough entrepreneurial trading, where ourpresence across major energy trading hubsgives us a good understanding of regional andinternational markets.

Upstream

Our Upstream segment is responsible for ouractivities in oil and natural gas exploration,field development and production, andmidstream transportation, storage andprocessing. We also market and trade naturalgas, including liquefied natural gas, powerand natural gas liquids. We focus on areasthat play to our strengths, particularlyexploration, deep water, gas value chains andgiant fields.

In 2012 our upstream and midstream activities

took place in 28 countries including Angola,Azerbaijan, Canada, Egypt, Norway, Trinidad &Tobago, the UK, the US and other locations withinAsia, Australasia, South America, North Africaand the Middle East.

Our Upstream segment manages its exploration,development and production activities throughglobal functions with specialist areas of expertise.

We actively manage our portfolio and are placingincreasing emphasis on accessing, developingand producing from fields able to providehigh-margin barrels (those with the potential tomake the greatest contribution to our operatingcash flow). We sell assets when we believe theymay be more valuable to others. This allows us tofocus our leadership, technical resources andorganizational capability on the resources webelieve are likely to add the most value to ourportfolio.

Our upstream technologies support BPsbusiness strategy by focusing on safety andoperational risks, helping to obtain new access,increasing recovery and reserves and improvingproduction efficiency. Our strengths inexploration, deep water, giant fields and gas valuechains are underpinned by dedicated flagshiptechnology programmes.

Upstream

For more on our upstream activities in 2012see pages 63-71.

Technology

For more on the role of technology at BPsee pages 57-59.

Upstream technology flagships

We increased our acreage in Trinidad & Tobago,where our production comprises oil, gas andNGLs, by 889,000 acres in 2012. Below is theRowan drilling platform, offshore Trinidad.


18


21/303

Conversion technologyConversion of unconventionalfeedstocks, including renewables,to fuels and petrochemicals.

Petrochemicals technologyDevelops, deploys and optimizesproprietary technologies toproduce high-value petrochemicalsintermediates. End products:solvents/resins, plastics,

textiles/fibres, paints.

Lubricants technologyDevelops unique lubricantsand high-performance fluidsfor transportation andindustrial applications.End products: lubricants.

Fuels technologyDevelops and implements newhigh-efficiency fuel products.End products: gasoline, diesel,

aviation fuel, marine fuel.

Refining technologyOptimizes crude oil selection, utilizationand refinery processing capability toproduce high-quality petroleum products.End products: fuels, oils, bitumen, coke.

Downstream

Our Downstream segment is the productand service- led arm of BP, focused on fuels,lubricants and petrochemicals. It isresponsible for the refining, manufacturing,marketing, transportation, and supply andtrading of crude oil, petroleum, petrochemicalsproducts and related services to wholesale andretail customers.

The Downstream segment markets products inover 70 countries and has significant operationsin Europe, North America, Australasia and Asia.

We also manufacture and market our productsacross southern Africa and Central and SouthAmerica.

We aim to be excellent in the markets in whichwe choose to participate those that allow BPto serve the major energy markets of the world.Our aim is to operate all of our businesses assafe and reliable value chains, where weparticipate in multiple stages of each supplychain, as we believe that way we can delivergreater returns than would arise from owninga collection of discrete assets. These valuechains, combined with our advantagedmanufacturing operations and expertise intechnology, allow us to pursue competitivereturns and sustainable growth, as we servecustomers and promote BP and our brandsthrough high quality products. As in ourUpstream segment, we will sell assets whenwe believe that to do so would generate morevalue than retaining them in our own portfolio.

Technology makes a critical contribution to ourdownstream activities. Through the research,development and deployment of a wide rangeof technologies, processes and techniques, weaim to enhance safety and risk management,improve our margins, increase efficiency andreliability, and create new market opportunities.For example, in lubricants we launched an oil

co-engineered with Ford during thedevelopment of its newly released EcoBoostengine, which offers a significant improvementin efficiency.

The segment comprises three businesses:fuels, lubricants and petrochemicals, each ofwhich operates as a value chain.

Our fuels business sells refined petroleumproducts including gasoline, diesel and aviationfuel and liquefied petroleum gas. Within thefuels business, fuels value chains integrate theactivities of refining, logistics, marketing, andsupply and trading on a regional basis.This provides the opportunity to optimize ouractivities from crude oil purchases toend-consumer sales all the way throughour refineries, terminals, pipelines and retailstations.

Our lubricants business is involved inmanufacturing and marketing lubricants andrelated services to markets around the world.We add value through the strength of ourbrands and through strategic collaboration withoriginal equipment manufacturing partnerswhere we seek to develop new high-performance lubricants such as Castrol EDGE.

Our global petrochemicals businessmanufactures and markets petrochemicals that

are used in many everyday products, such aspaints, plastic bottles and textiles. Value isderived from our strong customer relationshipsand joint-venture partners, and through theapplication of our world-class, proprietarytechnology.

Downstream technology

Downstream

For more on our downstream activitiesin 2012 see pages 72-79.

The lubricants business is focusing on the growthmarkets of Brazil, India and China. Below, aCastrol laboratory technician in Brazil, whereCastrollubricants have been sold since the 1950s.



22/303

Our strategy

In 2011 we put forward a 10-point plan thatoutlined what could be expected from BP overthe next three years. During 2012 we worked

towards the milestones we had set out for2014. We refined our plans and communicatedfurther information on our longer-termstrategic objectives beyond 2014.

Through this work and the actions taken tostrengthen the group, BP enters 2013 a morefocused oil and gas company with promisingopportunities and a clear plan for the future.BPs strengthened position, distinctivecapabilities, strong financial framework andvision for the future provide the foundationfor our long-term strategy. This strategy isintended to ensure BP is well positioned forthe world we see ahead.

Our financial framework

We expect our organic capital expenditureato be in the range of $24-27 billion per yearthrough to the end of the decade, withinvestment prioritized towards the Upstreamsegment. All investments will continue to besubject to a rigorous capital allocation reviewprocess.

We expect to make around $2-3 billion ofdivestments per year in order to constantlyoptimize our portfolio. We will target gearingbin the 10-20% range while uncertaintiesremain. Our intention is to increaseshareholder distributions in line with BPsimproving circumstances.

Our strategic prioritiesOur aim is to be an oil and gas companythat grows over the long term. We will seek

to continually enhance safety and riskmanagement, earn and keep peoples trust,and create value for shareholders. We willcontinue to simplify our organization and finetune the portfolio. We will focus on efficientexecution in our operations and our use ofcapital. We will build capability through thepursuit of greater standardization andincreased functional expertise.

BP Energy Outlook 2030projects that worlddemand for energy will continue to grow. Inhelping to meet this demand, BP has a largesuite of opportunities the legacy of years ofsuccess in gaining access to and developingresources. This allows us to select and investin those projects with the potential to providethe highest returns. We will prioritize valuerather than seek to grow production volumefor its own sake. We will concentrate onhigher quality assets in both our Upstream andDownstream segments, starting with safetyand the delivery of strong and growing cashflows to the group.a Organic capital expenditure excludes acquisitions and assetexchanges.

b See footnote d on page 21.

Through our strategy we aim to create a distinctive platformfor value growth over the long term.

Our seismic technology helps minimize fieldappraisal and development risk. The abovemodel of a hydrocarbon field in the Gulf ofMexico shows large salt deposits obscuringa hydrocarbon reservoir.

Upstream portfolio simplification

50%

110 20,000 18,000 13

68%

50%

~90%

Operatedinstallations

Operatedwells

Operatedpipelines (km)

Reserves(bn boe)

We have divested a significant proportionof our operated assets while still retainingvirtually all our future major projectsaandaround 90% of our proved reserves.

a See pages 67-71 for information on our major Upstream projects.b Since April 2010.

Divestedb Retained


20


23/303

We will pursue new opportunities by applyingour distinctive strengths of relationships,technology and a strong balance sheet. Ourpast experience of co-ordinating complexprojects around the world can help us to gainaccess to new areas.

Business modelFor more information on our distinctivestrengths and how we create value seepages 15-19.

UpstreamOur analysis indicates that oil offers us themost attractive opportunities. Our investmentswill therefore be biased to oil. We also believethere will be opportunities to create highreturns from advantaged gas assets.

We have a long track record of value creationthrough exploration. We will invest in our

strong incumbent positions and look for newopportunities. Deepwaterdevelopments canprovide good opportunities for companies withthe requisite expertise. We will utilize ourscale and capability as we invest further in thisarea. We believe we are able to manage scaleand complexity, and improve the recovery of

conventional and unconventional resources.We expect to continue to invest in giantfields, where this expertise is particularlyvaluable.

We believe our ability to integrate complexgas valuechainsis another key strength.

We intend to hold a portfolio of gas positionsselected according to expected returns, witha balance across conventional andunconventional gas. We will optimize thesethrough our trading activities.

We are committed to Russia and the MiddleEast areas where we have a long history.

DownstreamWe believe BP has world-class downstreamoperations with a strong and improving trackrecord of performance in recent years. Wewill continue to focus on safe and reliableoperations and excellent execution, togetherwith disciplined investment and portfoliomanagement. Our focus on portfolio quality

will include improving the margin capability ofall of our businesses, and a focus on investingin attractive markets.

As the world changes, we expect to increaseour exposure to growth markets and demandfrom new consumers.

Longer-term objectives Maintain momentum on safety and risk reduction.

Develop and apply new technologies that access new hydrocarbons or extract andprocess them more efficiently.

Upstream

Generate strong returns within a disciplined financial framework.

Deliver growth through increased reinvestment in higher return opportunities.

Maintain our strong incumbent positions and a diversified portfolio of deep water, giant fieldsand gas value chains.

Build material new positions for the long term.

Downstream

Grow free cash flow.e

Reduce our exposure to refining when not part of an integrated value chain.

Re-orientate the geographic mix of our downstream footprint to growth markets.

10-point planLaunched in October 2011 and set out inBP Annual Report and Form 20-F 2011, our10-point plan described our intentions forbuilding a stronger, safer BP.

What you can expect

1 A relentless focus on safety and managing risk through the systematic application of global standards.

2 We will play to our strengths in exploration,deep water, giant fields and gas value chains.

3 Stronger and more focused with an asset base thatis high graded and higher performing.

4 Simpler and more standardized with fewerassets and operations in fewer countries; morestreamlined internal reward and performancemanagement processes.

5 Improved transparency through reporting TNK-BPas a separate segment and breaking out thenumbers for the three downstream businesses.

What you can measure

6 Active portfolio management to continue bycompleting $38 billion of disposals over the fouryears to the end of 2013, in order to focus on ourstrengths.

7 We expect to bring new upstream projectsonstream with unit operating cash marginsaarounddouble the 2011 average by 2014.b

8 We are aiming to generate an increase of around 50%in net cash provided by operating activities by 2014compared with 2011.c

9 We intend to use half our incremental operatingcash for reinvestment, half for other purposes.

10 Strong balance sheet with intention to target ourlevel of gearingdin the lower half of the 10-20%range over time.

a Unit cash margin is net cash provided by operating activities forthe relevant projects in our Upstream segment, divided by thetotal number of barrels of oil and gas equivalent produced for therelevant projects. It excludes dividends and production forTNK-BP.

b Assuming a constant oil price of $100 per barrel.c Assuming an oil price of $100 per barrel and a Henry Hub gasprice of $5/mmBtu in 2014. The projection assumes thecompletion of the agreed transaction with Rosneft and receipt of

the projected Rosneft dividend and excludes BPs share of theTNK-BP dividends from operating cash flow for 2011 and 2014.The projection includes BPs payment commitments under theDepartment of Justice and SEC settlements. It does not reflectany cash flows relating to other liabilities, contingent liabilities,settlements or contingent assets arising from the Gulf of Mexicooil spill which may or may not arise at that time. We are not ableto reliably estimate the amount or timing of a number ofcontingent liabilities. See Financial statements Note 43 onpage 253 for further information.

d Gearing refers to the ratio of the groups net debt to net debtplus equity and is a non-GAAP measure. See Financialstatements Note 35 on page 234 for further informationincluding a reconciliation to gross debt, which is the nearestequivalent measure on an IFRS basis.

e Free cash flow: net cash provided by operating activities lessnet cash used in investing activities.

The Skarv floating production, storage andoffloading unit one of the major project start-upsin 2012 on tow in a Norwegian fjord.



24/303

Our performance

2012 saw BP build on the strong foundations laid in the previous year. Despitefacing major uncertainties, we made progress against our 10-point plan andare reshaping our portfolio to increase efficiency, margins and cash flows.

During the year we made progress in our priorityareas of enhancing safety and risk management,restoring trust by meeting our commitments inthe Gulf of Mexico and delivering higher returnsfor shareholders, as evidenced by the increases in

quarterly dividend announced in 2012 (seeDividends on page 25). We worked to resolve theuncertainties facing the company in the US andRussia. We continued the major programme ofdivestments announced in 2010, which webelieve is making BP a more efficient organization.And we made investments in areas where webelieve we have advantages and higher marginopportunities. Safety remained our number onepriority throughout the year, across the company.

We reached the majority of the 2012 milestonesthat we set out when we launched our 10-pointplan in October 2011 (see 2012 in summary) andbelieve we are on course to improve ourmargins and cash flow by 2014.

SafetyWe continued our work to enhance safety andrisk management in everything we do. Inpersonal safety, sadly, we had four fatalities inour operations during 2012. We reported 43 Tier1 process safety events in 2012 and 74 in 2011.Loss of primary containment was reduced by19% compared with 2011. We continued ourprogramme of major upstream turnarounds,with 30 turnarounds completed in 2012. Weexpect to carry out up to 22 further turnaroundsin 2013.

Over the past 12 months, our safety andoperational risk function (S&OR) continued to

drive improvements to operational safety andreliability with enhanced independentassurance, improved engineering and operatingpractices, and training and coachingprogrammes. Our single global wells

organization is driving greater consistencyacross our operations. Our performance andreward system is reinforcing that everyone atBP is responsible for safe operations.

BPs operating management system (OMS)provides us with a systematic and controlledapproach to the way the companys operatingfacilities are managed. All of our operations,with the exception of those recently acquired,are now applying OMS and working to conformto these group-wide standards and practices.

We continue to make progress on all of theremaining recommendations from the Bly Report.As of December 2012, the total number ofcompleted recommendations was 14 out of 26.

Independent advice and monitoringIn June 2012 we appointed Carl Sandlin totrack the companys implementation of therecommendations of the Bly Report, our internalinvestigation into the Deepwater Horizon incident.He brings extensive experience in overseeingglobal drilling operations. In this role, he willprovide an objective and independent assessmentto the board of BPs progress against the reportsrecommendations. He will also observe andreport on process safety culture.

Following legal settlements with the USgovernment, BP has agreed to take additionalactions, enforceable by the court, to further

In 2012 our refineries particularly Toledo(above) and Whiting in the US benefited froma location advantage, as they were able toaccess discounted crudes.

BP has been in Azerbaijan since 1992 and is thelargest foreign investor in the country. Ourassets include the West Chirag production anddrilling platform (right) which is due to start upin late 2013.

Safety

For more information on our safetyperformance see pages 46-50.


22


25/303

High-margin production was brought backonstream in 2012 in Angola where the DeepseaStavanger rig is currently operating at the GreaterPlutonio development.

In 2012 we completed the acquisition of Shell andCosan Industria e Commercios interests inaviation fuels assets at seven Brazilian airports,which is an important growth market (below).

enhance the safety of drilling operations in theGulf of Mexico (see US regulatory update onpage 24). These actions include theappointment of two monitors, both with termsof four years. A process safety monitor willreview, evaluate, and provide recommendationsfor the improvement of BPs process safetyand risk management procedures concerningdeepwater drilling in the Gulf of Mexico.An ethics monitor will review and providerecommendations for the improvement of BPs

code of conduct and its implementation andenforcement. Additionally, an independentthird-party auditor will review and report onBPs implementation of key terms of theagreement, including procedures and systemsrelated to safety and environmentalmanagement, operational oversight, and oil spillresponse training and drills.

TrustBP has continued to meet its commitmentsto the Gulf Coast. During the year we workedwith state and federal trustees to assess impactson natural resources and progress earlyenvironmental restoration work. We supportedindependent research through the Gulf of Mexico

Research Initiative, so we can better understandand mitigate the potential impacts of future oilspills. And we continued to clean up the Gulfshoreline, which involved responding promptlywhen Hurricane Isaac brought deposits of buriedresidual oil to the surface at some beaches. Ofthe 4,376 miles (7,043km) that were in the area

of response covered in the Shoreline Clean-upCompletion Plana, 4,029 miles (6,484km) weredeemed complete by the end of 2012.

We have continued to promote economic recoveryby resolving legitimate claims and providingsupport to two of the regions most importantindustries tourism and seafood. In the fourthquarter we made a final payment into theDeepwater Horizon Oil Spill Trust fund (Trust),bringing our total payments to $20 billion. The Trustand BP had paid a total of $11.7 billion in claims,advances and other payments by the end of 2012.

Settlement reached with PSCIn April we announced we had reacheddefinitive and fully documented agreementswith the Plaintiffs Steering Committee (PSC)to resolve the substantial majority of eligibleprivate economic loss and medical claimsstemming from the Deepwater Horizonaccident and oil spill. The agreements wereapproved by the court in December 2012 andJanuary 2013 although BP is challenging arecent ruling by the court regarding theinterpretation of certain protocols established inthe economic and property damages settlementagreement. See Legal proceedings on page 167.

The settlement includes BPs commitment of$2.3 billion to help resolve economic loss claimsrelated to the Gulf seafood industry.

$20billionTotal BP payments made to theDeepwater Horizon Oil Spill Trust fund.

$11.6billionBPs profitain 2012.

$12.0billionBPs replacement cost profita bin 2012.

a Profit attributable to BP shareholders. This is themeasure of profit required for the group under IFRS.

b Replacement cost profit reflects the replacement costof supplies and, for the group, is not a recognizedGAAP measure. See footnote b on page 34.

2012 in summary We drew our TNK-BP partnership in Russia to a close through an agreed transaction with

Rosneft, which will provide BP with a net $12.3 billion in cash (which includes a dividend of$0.7 billion received from TNK-BP in December 2012) and an additional 18.5% share inRosneft, bringing our total shareholding to 19.75%.

We took the total of asset sales announced since the start of 2010 to around $38 billion,

effectively reaching our target a year early. We gained new exploration access in six countries.

Our 2012 reserves replacement ratio, on a combined basis of subsidiaries and equity-accounted entities, excluding acquisitions and disposals, was 77%, with net additions toreserves in 2012 being wholly from equity-accounted entities (see page 86).

The following points relate to particular milestones we set for 2012:

High-margin production was brought back onstream successfully in Angola, the North Seaand other regions during 2012.

Exploration drilling activity took place at nine wells against a target of 12 because additionaltime was required to ensure the rigs meet our enhanced safety standards.

Five major project start-ups were achieved (against a target of six): at Galapagos in the Gulf ofMexico; Clochas Mavacola and block 31 in PSVM in Angola; Devenick in the North Sea; andSkarv in Norway. The Angola LNG plant is being commissioned and is expected to startproduction in 2013.

Seven rigs were operational in the Gulf of Mexico in 2012 against a target of eight. An eighthrig is in place on the Mad Dog platform and is being commissioned and tested. It is expectedto start up in 2013.

We made the final payment to the Deepwater Horizon Oil Spill Trust, taking total payments tothe Trust to $20 billion.

In Downstream, we were unable to fully deliver the $2 billion of financial performanceimprovementbsince 2009, which we had identified as an opportunity in 2010, due mainly toa significant reduction in the supply and trading contribution in 2012.

Organic capital expenditurecduring the year was $23.1 billion compared with our originalexpectation of around $22 billion.

b See page 75 for further information on Downstreams performance improvement, which is a non-GAAP measure.c Organic capital expenditure excludes acquisitions and asset exchanges and, in 2012, expenditure associated with deepening ourUS natural gas and North Sea asset bases (see footnote b on page 35).

a Approved by the US Coast Guards Federal On-SceneCoordinator, the Shoreline Clean-up Completion Plan setsstandards for the surveying, verification and completion ofclean-up activities.



26/303

Our performance continued Significant uncertainties exist in relation to theamount of claims that are to be paid and willbecome payable through the claims process.There is significant uncertainty in relation to theamounts that ultimately will be paid in relation tocurrent claims, and the number, type andamounts payable for claims not yet reported. Inaddition, there is further uncertainty in relationto interpretations of the claims administratorregarding the protocols under the settlementagreement and judicial interpretation of these

protocols, and the outcomes of any furtherlitigation including in relation to potential opt-outsfrom the settlement or otherwise. The PSCsettl

reporte anual de energía de BP (British Petroleum)

Documents

Transcript of reporte anual de energía de BP (British Petroleum)