BP Annual Report and Form 20F 2014 PDF
BP Annual Report and Form 20F 2014 PDF
BP Annual Report and Form 20F 2014 PDF
Building a stronger,
safer BP
Who we are
BP is one of the worlds leading integrated oil and
gas companies.a We aim to create long-term value
for shareholders by helping to meet growing
demand for energy in a safe and responsible way.
We strive to be a world-class operator, a responsible
corporate citizen and a good employer.
a
On the basis of market capitalization, proved reserves
and production.
Your feedback
Front cover imagery
An operations technician and process engineer We welcome your comments and feedback on
perform safety checks on the Atlantis platform our reporting. Your views are important to us
in the Gulf of Mexico. The region is an important and help us shape our reporting for future years.
part of our upstream portfolio and Atlantis is one
You can provide this at
of four BP-operated platforms there. The Mardi
bp.com/annualreportfeedback or by emailing
Gras pipeline that stretches across 450 miles of
the corporate reporting team. Details are on
the Gulf moves oil and gas production to
the back cover.
onshore facilities from these platforms.
Strategic report
1 Strategic report
2 BP at a glance 24 Upstream
6 Chairmans letter 29 Downstream
We have reshaped and 8 Group chief executives letter 33 Rosneft
repositioned the business 10 Our market outlook 35 Other businesses and corporate
12 Our business model 36 Gulf of Mexico oil spill
for the future, with a clear 13 Our strategy 39 Corporate responsibility
strategy that has put us on 18 Our key performance indicators 46 Our management of risk
20 Our markets in 2014 48 Risk factors
course to grow value for 21 Group performance
shareholders.
51 Corporate governance
Corporate governance
52 Board of directors 68 Safety, ethics and environment
56 Executive team assurance committee
58 Governance overview 69 Gulf of Mexico committee
59 How the board works 71 Nomination committee
61 Board effectiveness 71 Chairmans committee
62 Shareholder engagement 72 Directors remuneration report
63 International advisory board
63 Internal control revised guidance
for directors (Turnbull)
64 Audit committee
Financial statements
Words with this symbol are dened 90 Statement of directors responsibilities 167 Supplementary information on oil and
in the glossary on page 252. 91 Consolidated nancial statements natural gas (unaudited)
of the BP group 197 Parent company nancial statements
100 Notes on nancial statements of BP p.l.c.
Additional disclosures
208 Selected nancial information 239 Property, plant and equipment
211 Liquidity and capital resources 239 Related-party transactions
213 Upstream analysis by region 239 Corporate governance practices
217 Downstream plant capacity 240 Code of ethics
219 Oil and gas disclosures for the group 240 Controls and procedures
225 Environmental expenditure 241 Principal accountants fees and services
225 Regulation of the groups business 241 Directors report information
228 Legal proceedings 241 Disclosures required under Listing
238 International trade sanctions Rule 9.8.4.R
239 Material contracts 241 Cautionary statement
244 Share prices and listings 251 Fees and charges payable by
244 Dividends ADSs holders
245 UK foreign exchange controls on dividends 251 Fees and payments made by
245 Shareholder taxation information the Depositary to the issuer
247 Major shareholders 251 Documents on display
247 Annual general meeting 252 Shareholding administration
247 Memorandum and Articles of Association 252 Exhibits
250 Purchases of equity securities by the 252 Abbreviations, glossary and trade marks
issuer and afliated purchasers
256 Signatures
257 Cross reference to Form 20-F
Strategic report
report 6 Chairmans letter
21 Group performance
21 10-point plan performance
22 Financial and operating performance
24 Upstream
29 Downstream
33 Rosneft
39 Corporate responsibility
39 Safety
42 Environment and society
44 Employees
48 Risk factors
Business model
For more information on our business
model see page 12.
28
2. Equity-accounted entities 717
Total 4,809
Natural gas
tier 1 process 3. Subsidiaries 5,603
safety events 4. Equity-accounted entities 409
Total 6,012 b
2013: 20 Excludes BPs share of Rosneft.
a
See footnote e on page 23. See Rosneft on page 33.
We move hydrocarbons using pipelines, We rene, process and blend We supply our customers with fuel for
ships, trucks and trains and we capture hydrocarbons to make fuels, lubricants transportation, energy for heat and light,
value across the supply chain. and petrochemicals. lubricants to keep engines moving and the
petrochemicals required to make a variety
of everyday items.
Fuels
Lubricants
Petrochemicals
Investing
in renewable energy
International oil and
gas markets We develop and invest in biofuels and operate
a wind business.
Biofuels
Operating capital
employed c $3.7bn 1.7 $5.9bn
replacement cost prot million barrels of oil rened dividends paid
1
3 before interest and tax per day
2
2013: $2.9bn 2013: 1.8mmb/d
6.2%
3. Petrochemicals $4.6bn
c
This is a non-GAAP measure, but is
ADS shareholders
provided for investors as it is used by annual dividend yield
BP management to make nancial
and strategic decisions. See page 210.
Downstream
Renery.
Petrochemicals site(s).
Downstream see page 29.
Alternative energies
Operational assets.
Technology assets.
05 06 07 08 09 10 11 12 13 14
One ADS represents six 25 cent ordinary shares.
Strategic report
Board performance
For information about the board and its The board has continued to maintain oversight of performance, risk and nancial efciency
committees see page 51. and kept a constant scrutiny on safety. Each year we review and monitor the group level
risks through our own work and our committees, who carry out the majority of the work,
Remuneration leaving the board free to address strategic issues.
For information about our directors
remuneration see page 72. There are, however, longer-term issues on which we also have to focus, such as carbon
and its role in climate change. It is clear that it is for governments and regulators to set the
boundary conditions to address these issues and we will develop our business within their
framework. For example, we already factor a price for carbon into our project evaluation.
We recognize that we need to play our part in informing this debate and we do this
through our projections for future world energy markets in the BP Energy Outlook 2035.
Throughout, we must remain alert to developments that may alter the world in which we
operate. The board is recommending that shareholders support the resolution at the
annual general meeting seeking greater transparency of reporting in this important area.
Governance and succession
The board regularly considers how it operates and the appropriate composition and mix
around the board table both to respond to todays challenges and BPs future strategic
direction. Antony Burgmans, the current chair of the remuneration committee, will stand
down as a director in 2016. In anticipation of his departure, Dame Ann Dowling will take
over the chair of that committee during 2015. We have also considered the chairs and
membership of all other committees. In 2012, upon Andrew Shilston joining the board and
being appointed the senior independent director, we announced that Antony Burgmans
would retain a role as an internal sounding board. This role will cease after the annual
general meeting. Andrew will join the remuneration and nomination committees.
I would like to welcome Alan Boeckmann who joined the board as a non-executive director
in July. Alan brings deep experience of contractor management, procurement and project
delivery in our industry following his career in Fluor Corporation. Alan will be joining the
remuneration committee after the annual general meeting. Our longest serving director,
Iain Conn, left the company in December to become chief executive of Centrica after an
almost 30-year career with BP, spanning different businesses and regions. George David
will retire from the board at our AGM in April. My fellow directors and I thank both Iain and
George for their huge contributions and work on behalf of the board.
Top: Members of BPs safety, ethics and
I would also like to thank Bob Dudley, his team, my board colleagues and all our
environmental assurance committee (SEEAC)
in Azerbaijan.
employees for all that they have done. Finally, my thanks go to you, our shareholders, for
the support you have shown us during the year.
Bottom: Cynthia Carroll attends a brieng during
a visit to Brazil with SEEAC.
Carl-Henric Svanberg
Chairman
3 March 2015
94.9%
$23 billion, relative to guidance of $24-25 billion. We also saw good project execution as
we met our plans to bring onstream seven start-up projects.
Quality portfolio
2014 rening availability. We continue to actively manage our portfolio, focusing on assets which play to our
strengths and divesting assets that no longer t our strategy. In both our Upstream and
Downstream businesses, we are taking a rigorous approach to capital allocation and
90%
concentrating on efciency and competitiveness in our activities. Making the right
investment choices is of the highest priority.
Strategic report
Delivery of our 10-point plan
For details of our performance against the hydrocarbon discoveries in the Gulf of Mexico, Brazil, the North Sea, Egypt and Angola.
plan see page 21. We began operating our onshore oil and gas operations in the Lower 48 states of the US
as a separate business in January 2015. In the Downstream, we improved performance
Our strategy from fuels marketing, increased our capacity to rene heavy crude and shale oil in the US,
For more on our strategic priorities and maintained the focus on premium brands and growth markets in lubricants and reviewed
longer-term objectives see page 13. the petrochemicals business to increase its earnings potential.
Our key performance indicators Having completed our $38-billion divestment programme ahead of schedule, we
Find out how we measure our committed to make a further $10 billion of divestments by the end of 2015. By the end of
performance on page 18.
2014 we had agreed transactions amounting to $4.7 billion.
Distinctive capabilities
BPs distinctive capabilities of advanced technology, proven expertise and strong
relationships underpin our progress. We have invested over the years to be a specialist in
several key areas of technology. For example, in 2014 we started using robots to test
enhanced oil recovery options, helping us reduce time to production.
The expertise of our people is central to our progress so developing our employees in
critical areas is an ongoing activity. For example, we run specialist academies dedicated to
global wells expertise and safety and operational risk, as well as other areas.
Strong relationships remain vital with communities, governments, partners, suppliers,
staff and shareholders. The rapid progress made on the Southern Corridor project, which
will pipe natural gas from the Caspian Sea to markets as far away as Italy, is just one
example. With our partners, we have already awarded more than $9 billion of contracts to
make, transport and install facilities.
A challenging environment
In 2015 we entered a very different landscape from that in which we began last year. The
lower oil price presents formidable challenges for the industry. In these volatile times, BP
continues to drive capital discipline by constraining the total level of capital spend in any
one year, taking account of the opportunities available and the exibility of our balance
sheet.
Top: Bob Dudley at the World Petroleum
Meanwhile, we continue to manage issues specic to BP. The legal proceedings in the US
Congress in Moscow.
associated with the Deepwater Horizon accident and oil spill continue. In the rst trial
Bottom: Bob Dudley congratulates winners at the phase the judge issued a nding of gross negligence and wilful misconduct. We strongly
Helios awards where teams from across the disagree with these ndings and have appealed. In the second phase the court found no
world are recognized for their contributions to gross negligence in our source control efforts and ruled that 3.19 million barrels of oil were
building a safer, stronger BP in line with our discharged into the Gulf of Mexico. We have also appealed this ruling. The penalty phase
values. trial nished in February, with the ruling to come at a later date. In all of the proceedings,
we are seeking fair and just outcomes while protecting the best interests of our
shareholders.
Our investment in Rosneft, funded from the proceeds of our sale of TNK-BP in 2013,
continues to attract attention. Our approach is to comply with all relevant sanctions and
otherwise to maintain our distinctive, long-term investment and relationship with Rosneft
in a country that holds some of the worlds largest oil and gas resources. There is strong
interdependence between Russia and its trading partners, and I believe that over time
such commercial links tend to ease tensions rather than exacerbate them.
The BP of 2015 is a robust and resilient business, a global team that has been through
some of the most difcult times an organization can face and emerged stronger, safer and
better than before.
Bob Dudley
Group chief executive
3 March 2015
Strategic report
(billion tonnes of oil equivalent) Renewables will play an increasingly important
We believe a diverse mix of fuels and
Other India China OECD role in addressing the long-term challenges of
technologies can enhance national and global
18 energy security and climate change. They are
energy security while supporting the transition
16 already the fastest-growing energy source, but
to a lower-carbon economy. These are reasons
14 are starting from a low base. By 2035, we
why BPs portfolio includes oil sands, shale gas,
12 estimate renewable energy, excluding large-
deepwater oil and gas and biofuels.
10 scale hydroelectricity, is likely to meet around
8 Oil and natural gas 8% of total global energy demand.
6 Oil and natural gas are likely to play a signicant
Temporary policy support is needed to help
4 part in meeting demand for several decades.
commercialize lower-carbon options and
2 We believe these energy sources will represent
technologies, but they will ultimately need to
1965 2000 2035 about 54% of total energy consumption in 2035.
become commercially self-sustaining, supported
Source: BP Energy Outlook 2035. Even under the International Energy Agencys
only by a carbon price.
most ambitious climate policy scenario (the 450
scenarioa), oil and gas would still make up 49% Beyond 2035
of the energy mix in 2030 and 43% in 2040.
Energy consumption by fuel We expect that growing population and per
(billion tonnes of oil equivalent) We expect oil to remain the dominant source for capita incomes will continue to drive growing
Renewables* Nuclear Gas transport fuels, accounting for almost 90% of demand for energy. These dynamics will be
Hydro Coal Oil demand in 2035. shaped by future technology developments,
18 changes in tastes, and future policy choices
Natural gas, in particular, is likely to play an
16 all of which are inherently uncertain. Concerns
increasing role in meeting global energy
14 about energy security, affordability and
demand. By 2035 gas is expected to provide
12 environmental impacts are all likely to be
26% of global energy, matching the share of
10 important considerations. These factors may
coal. Natural gas produces about half as much
8 accelerate the trend towards more diverse
CO2 as coal per unit of power generated, so
6 sources of energy supply, a lower average
4
increasing the share of gas versus coal helps to
carbon footprint, increased efciency and
2
restrain greenhouse gas emissions. Shale gas
demand management.
has already had a signicant impact on US gas
1965 2000 2035 a
From World Energy Outlook 2014. OECD/International
*Includes biofuels.
prices and demand, and is expected to
Energy Agency 2014, page 607. The IEAs 450 policy scenario
Source: BP Energy Outlook 2035. contribute 47% of the growth in global natural assumes governments adopt commitments to limit the
gas supplies between 2013 and 2035. long-term concentration of greenhouse gases in the
atmosphere to 450 parts-per-million of CO2 equivalent.
New sources of hydrocarbons may be more
difcult to reach, extract and process. BP and
others in our industry are working to improve Our strategy
techniques for maximizing recovery from Find out how BP can help meet energy
existing and currently inaccessible or demand for years to come on page 13.
undeveloped elds. In many cases, the
extraction of these resources might be more
energy-intensive, which means operating costs
and greenhouse gas emissions from operations
may also increase.
Our projections of future energy trends and We provide a long-term technology view on
factors that could affect them, based on our future trends and their potential impact on the
views of likely economic and population growth energy system. This helps assess lessons learned
and developments in policy and technology. Also from technologys evolution and how it may
available in Excel and video format. shape our future energy choices.
We believe the best way to achieve sustainable application of our own distinctive strengths and
A process engineer monitors instrument readings success as a group is to act in the long-term capabilities in performing those activities.
at our Castelln renery in Spain. The renery has interests of our shareholders, our partners and
the exibility to run sour, heavy and highly acidic A relentless focus on safety remains the top
society. By supplying energy, we support
crudes. priority for everyone at BP. Rigorous
economic development and help to improve
management of risk helps to protect the people
quality of life for millions of people. Our activities
In Trinidad & Tobago we are the largest at the front line, the places where we operate
also generate jobs, investment, infrastructure
hydrocarbon producer, accounting for about 50% and the value we create. We understand that
and revenues for governments and local
of the nations oil and gas. operating in politically complex regions and
communities.
technically demanding geographies requires
Our business model spans everything from particular sensitivity to local environments.
exploration to marketing. We have a diverse
integrated portfolio that is focused and adaptable
Illustrated business model
to prevailing conditions. Integration across the
For an at a glance overview of our
group allows us to share functional excellence
business model see page 2.
more efciently across areas such as safety and
operational risk, environmental and social Our businesses
practices, procurement, technology and treasury For more information on our upstream
management. and downstream business models, see
Every stage of the hydrocarbon value chain pages 24 and 29 respectively.
offers opportunities for us to create value,
through both the successful execution of
activities that are core to our industry, and the
First, we acquire the rights When we nd hydrocarbon resources, We move oil and gas through Using our technology and expertise,
to explore for oil and gas. Through we aim to create value by progressing pipelines and by ship, truck and rail. we manufacture fuels and products,
our exploration activities we them into proved reserves or by Using our trading and supply skills creating value by seeking to operate
are able to renew our portfolio, divesting if they do not t with our and knowledge, we buy and sell at a high-quality portfolio of well-
discover new resources and strategy. If we believe developing each stage of the value chain. Our located assets safely, reliably and
replenish our development and producing the reserves will be presence across major trading hubs efciently. We market our products
options. advantageous for BP, we produce gives us a good understanding of to consumers and other end-users
the oil and gas, then sell it to the regional and international markets and add value through the strength
market or distribute it to our and allows us to create value of our brands.
downstream facilities. through entrepreneurial trading.
Strategic report
Our goal is to be a focused oil and gas company that
delivers value over volume.
Quality portfolio
We undertake active portfolio management to
concentrate on areas where we can play to our
strengths. This means we continue to grow our
exploration position, reloading our upstream
pipeline. We focus on high-value upstream
assets in deep water, giant elds and selected
gas value chains. And, in our downstream
businesses, we plan to leverage our newly
upgraded assets, customer relationships and
technology to grow operating cash ow.
Our portfolio of projects and operations is
focused where we believe we can generate the
most value, and not necessarily the most
volume, through our production.
Competitive Disciplined
project nancial
Competitive project
execution choices
execution
Delivering energy
to the world Grow our
exploration
position
Grow our Focus on
exploration high-value
position upstream assets Focus on high-value
upstream assets
Quality portfolio
Build high-quality Build high-quality
downstream businesses downstream
businesses
Advanced
technology
28
We prioritize the safety and reliability of our Recordable injury Running reliably
operations to protect the welfare of our frequency, loss of primary Running operations safely
workforce and the environment. This also helps containment, greenhouse is Air BPs rst priority.
tier 1 process
preserve value and secure our right to operate gas emissions, tier 1 See page 40. safety events.
around the world. process safety events.
a
On a combined basis of subsidiaries and equity-accounted entities.
We use technology to nd and produce more oil Our upstream technology programmes include
and gas, improve our processes for conversion advanced seismic imaging to help us nd more
into valuable products and develop lower-carbon oil and gas and enhanced oil recovery to get
3
energy solutions. more from existing elds. New techniques are 1
We aim to build strategic relationships with improving the efciency of unconventional oil
universities for research, recruitment, policy and gas production.
insights and education. Our long-term research We focus our downstream technology
programmes around the world are exploring programmes on improving the performance of
areas from reservoir uid ow to novel lubricant our reneries and petrochemicals plants and on
additives. For example through the BP creating high quality, energy efcient, cleaner
International Centre for Advanced Materials products.
almost 70 researchers are working on around 20
We employ scientists and technologists at
projects to advance the understanding and use
seven major technology centres in the US, UK
of materials across a variety of energy and
and Germany. In 2014 we invested $663 million
industrial applications.
in research and development (2013 $707 million,
The rst priority for all our technology teams is 2012 $674 million). 2
improving the safety and integrity of our
operations. 4
See bp.com/technology
Proven expertise
We aim to maintain a skilled workforce to deliver our Graduate intake Internal promotion Group leaders
strategy and meet our commitments to investors, Our global graduate and We promoted 4,880 Our group leaders have
partners and the wider world. We compete for the postgraduate employees including an average of 20 years
best people within the energy sector and other programmes recruited 524 group and senior experience in BP.
industries. 670 people in 2014. level leaders.
Our people are talented in a wide range of disciplines
from geoscience, mechanical engineering and
research technology to government affairs, trading,
marketing, legal and others. Developing the talent pipeline
We have a bias towards building capability within the
organization, complemented by selective external
recruitment where necessary, and invest in all our
employees development to build a sustainable External hires
talent pipeline. We hired 8,640 people
including 97 group and
Our approach to professional development and senior level leaders.
training helps build individual capabilities, reducing a
potential skills gap. We believe our shared values help Employees
everyone at BP to contribute to their full potential. For more information about our
people and values see page 44.
10
7 Lubricants 9 Petrochemicals
We focus on providing energy-efcient and Our SaaBre technology converts synthesis gas
high-performance products to customers. In 2014 (carbon monoxide and hydrogen derived from
we launched Castrol EDGE with Titanium Fluid hydrocarbons) into acetic acid. The process
Strength Technology, which changes the way avoids the need to purify carbon monoxide or
engine oil behaves under extreme pressure, purchase methanol, reducing manufacturing
reducing friction by up to 15%. costs and environmental impacts.
Strong relationships
We work closely with governments, national oil Internally we put together collaborative teams of
companies and other resource holders to build people with the skills and experience needed to
long-lasting relationships that are crucial to the address complex issues, work effectively with
Universities National
success of our business. our partners, engage with our stakeholders and
and research and international
help create shared value. institutions oil companies
We place enormous importance on acting
responsibly and meeting our obligations as we
know from experience that trust can be lost. We l r e l a ti o n s Governments
work on big and complex projects with partners
Banks and
providers of
na and
hi
er
ps
nance
and contractors. Our activity creates value that
benets governments, customers, local BP
communities and other partners.
Industry Customers
bodies
Suppliers,
Communities partners and
contractors
94 300
0.41
0.36
0.34
0.50
0.31
0.27
0.26
0.25
0.25
92 200
0.25 100
90
2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014
Rening availability represents Solomon Reported recordable injury frequency Loss of primary containment (LOPC)
Key Associates operational availability. The (RIF) measures the number of reported is the number of unplanned or
measure shows the percentage of the work-related employee and contractor uncontrolled releases of oil, gas or other
KPIs used to measure year that a unit is available for incidents that result in a fatality or injury hazardous materials from a tank, vessel,
progress against our strategy. processing after deducting the time (apart from minor rst aid cases) per pipe, railcar or other equipment used for
spent on turnaround activity and all 200,000 hours worked. containment or transfer.
KPIs used to determine 2014 mechanical, process and regulatory
and 2015 remuneration. The measure gives an indication of the By tracking these losses we can monitor
downtime.
personal safety of our workforce. the safety and efciency of our
Rening availability is an important operations as well as our progress in
2014 performance Our workforce RIF,
indicator of the operational performance making improvements.
which includes employees and
of our Downstream businesses.
contractors combined, is 0.31, level with 2014 performance The increase in 2014
Underlying RC prot and gearing 2014 performance Rening availability 2013. While this is encouraging, we have reporting reects the introduction of
are non-GAAP measures, but decreased by 0.4% from 2013 to 94.9% seen an increase in our day away from enhanced automated monitoring for
are provided for investors reecting the completion of the Whiting work case frequency (see page 39). many remote sites in our Lower 48
because they are closely tracked renery modernization project and We are reviewing our personal safety business. Using a like-for-like approach
by management to evaluate ramp-up of operations. programmes and continue to focus our with previous years reporting, our 2014
efforts on safety. loss of primary containment gure is 246.
BPs operating performance and
to make nancial, strategic and
operating decisions.
6 5
4.5
20 100 3,600
3.0
2.5
2.6
3,454
4
77
0 80 4 3 3,400 3,331
63 2 3,230
3,151
-20 60 2 3,200
2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014
Total shareholder return (TSR) Proved reserves replacement ratio is the Major projects are dened as those with We report the volume of crude oil,
represents the change in value of a extent to which the years production has a BP net investment of at least $250 condensate, natural gas liquids (NGLs)
BP shareholding over a calendar year. been replaced by proved reserves added million, or considered to be of strategic and natural gas produced by subsidiaries
It assumes that dividends are reinvested to our reserve base. importance to BP, or of a high degree and equity-accounted entities. These are
to purchase additional shares at the of complexity. converted to barrels of oil equivalent
The ratio is expressed in oil-equivalent
closing price on the ex-dividend date. (boe) at 1 barrel of NGL = 1boe and
terms and includes changes resulting from We monitor the progress of our major
We are committed to maintaining a 5,800 standard cubic feet of natural gas
discoveries, improved recovery and projects to gauge whether we are
progressive and sustainable dividend = 1boe.
extensions and revisions to previous delivering our core pipeline of activity.
policy. estimates, but excludes changes resulting 2014 performance BPs total reported
Projects take many years to complete,
2014 performance TSR decreased during from acquisitions and disposals. The ratio production including our Upstream
requiring differing amounts of resource,
the year, primarily as a result of a fall in reects both subsidiaries and equity- segment and Rosneft was 2.4% lower
so a smooth or increasing trend should
the BP share price, partly offset by two accounted entities. than in 2013. This reduction reected
not be anticipated.
dividend per share increases in 2014. the Abu Dhabi onshore concession
This measure helps to demonstrate our
2014 performance In total we delivered expiry and divestments, partially offset
success in accessing, exploring and
seven major project start-ups in by increased production from
extracting resources.
Upstream. higher-margin areas and higher
2014 performance The reserves production in Rosneft in 2014 compared
replacement ratio reects lower reserves to the aggregate production in Rosneft
bookings as a result of fewer nal and TNK-BP in 2013.
investment decisions in 2014 and
revisions of previous estimates.
22
22
74 74 71 72 72 25
80 80 80
20
64.9 67
19
19
18
18
61.8 59.8
17
20 15
60 60 50.3 48.6 60
14
43
15
40 28 40 40
20 10
Data not
20 20 20 collected 5
2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014
We report tier 1 process safety events, We provide data on greenhouse gas We track how engaged our employees Each year we report the percentage of
which are the losses of primary (GHG) emissions material to our business are with our strategic priorities for women and individuals from countries
containment of greatest consequence on a carbon dioxide-equivalent basis. This building long-term value. This is derived other than the UK and the US among
causing harm to a member of the includes CO2 and methane for direct from survey questions about BPs group leaders. This helps us track
workforce, costly damage to equipment emissions.c Our GHG KPI encompasses perceptions of BP as a company and progress in building a diverse and
or exceeding dened quantities. all BPs consolidated entities as well as how it is managed in terms of leadership well-balanced leadership team.
our share of equity-accounted entities and standards.
2014 performance The number of tier 1 2014 performance The percentage of our
other than BPs share of TNK-BP and
process safety events has decreased 2014 performance The 2014 survey group leaders who are women or
Rosneft.d Emissions data for Rosneft can
substantially since 2010. We take a found that employees remain clear non-UK/US has remained steady this
be found on its website.
long-term view on process safety about safety procedures, standards and year. We remain committed to our aim
indicators because the full benet of the 2014 performance The decrease in our requirements that apply to them and that women will represent at least 25%
decisions and actions in this area is not GHG emissions is primarily due to the that pride in working at BP has increased of our group leaders by 2020.
always immediate. sale of our Carson and Texas City steadily since 2011. Understanding and
reneries in the US as part of our support of BPs strategy is strong at
a
This represents reported incidents occurring divestment programme. senior levels, but needs further
within BPs operational HSSE reporting
communication and engagement across
boundary. That boundary includes BPs own b
The reported 2013 gure of 49.2MteCO2e
operated facilities and certain other locations the organization.
has been amended to 50.3MteCO2e.
or situations. c
For indirect emissions data see page 42. e
Relates to BP employees.
d
For our emissions on an operational control
basis see page 42.
A mechanical technician works on the oating, Economic growth has remained relatively weak Natural gas
production, storage and ofoading vessel in globally, and was weaker in the emerging
Global price differentials in 2014 continued to
Angolas ultra-deep water. non-OECD economies than recent years. Within
narrow. US gas prices moved up, while
the OECD, the US and UK performed best
European and Asian spot LNG prices weakened.
Pipe alley at Cooper River petrochemicals plant. growing at around their medium-term potential
The Henry Hub index increased from $3.7 per
The site is one of the worlds largest producers of while Japan and the Eurozone have
million British thermal units (mmBtu) in 2013 to
PTA, a raw material primarily used to manufacture underperformed against their potential.
$4.4 in 2014.
polyester and plastic bottles. Oil Spot LNG prices in Europe and Asia fell with
Crude oil prices, as demonstrated by the rising global LNG supplies and weak demand
industry benchmark of dated Brent, averaged growth. New LNG projects in Papua New
$98.95 per barrel in 2014. For the period from Guinea and Australia, and recovering supplies in
2010 to mid-2014, oil prices followed a pattern of Africa have added to the market in 2014.
Crude oil prices (quarterly average) relative stability at around $110 a barrel. Prices
Moderating demand and milder weather
averaged $109 during the rst half of 2014, but
Brent dated reduced the UK National Balancing Point hub
fell sharply by more than 50% since June in the
$120 price to an average of 50 pence per therm in
face of continued strong growth of light, sweet
2014 (2013 68). The Japanese spot price fell to
oil production in the US, and weak global
an average of $13.9/mmBtu in 2014 (2013 $16.6).
US dollars per barrel
Rening margins a
From Oil Market Report 10 February 2015,
For more on downstream markets in 2014 OECD/IEA 2015, page 4.
see page 30. b
BP Statistical Review of World Energy June 2014.
Strategic report
A summary of our group nancial and operating performance.
Increasing value
Delivering our goal of value over volume means tough decisions can be
necessary to make the best nancial choices for BP.
An important part of our portfolio in the Gulf of Mexico is the
deepwater Atlantis eld which is early in its life cycle. To increase
recovery from the eld, we had planned to install new subsea
infrastructure, requiring a long and expensive construction period.
When reassessing our eld development plan we concluded that our
approach would not generate the most value from the eld, so we
decided to look for an alternative solution.
By using our existing subsea facilities to safely drill future wells, rather
than building new infrastructure, we aim to deliver just as much value
to BP as originally planned, while requiring millions less in capital
expenditure and reducing corresponding risk and demand for
resources. The change in plan could signicantly increase the Atlantis
elds capital efciency and cash ow over the next ve years.
This focus on capital allocation discipline is being rigorously applied on
all of our elds around the world.
a
Assumed an oil price of $100/bbl and a Henry Hub gas price of $5/mmBtu in 2014. 2011 excluded BPs share of TNK-BP dividends; 2014 included BPs share of Rosneft dividends. The projection
included the impact of payments in respect of federal criminal and securities claims with the US government and SEC where settlements have already been reached, but does not reect any cash
ows relating to other liabilities, contingent liabilities, settlements or contingent assets arising from the Gulf of Mexico oil spill.
Strategic report
disposal proceeds of $10.4 billion, partly offset by an increase in our disclosures for the group on page 219.
investments in equity-accounted entities, mainly relating to the completion
2014 2013 2012
of the sale of our interest in TNK-BP and subsequent investment in
Rosneft. There was also an increase in our other capital expenditure Estimated net proved reservesa
excluding acquisitions of $1.3 billion. (net of royalties)
Liquids million barrels
There were no signicant acquisitions in 2014, 2013 and 2012. Crude oilb
The group has had signicant levels of capital investment for many years. Subsidiaries 3,582 3,798 4,082
Cash ow in respect of capital investment, excluding acquisitions, was Equity-accounted entitiesc 5,663 5,589 5,275
$23.1 billion in 2014 (2013 $30 billion and 2012 $24.8 billion). Sources of 9,244 9,387 9,357
funding are fungible, but the majority of the groups funding requirements
Natural gas liquids
for new investment come from cash generated by existing operations.
Subsidiaries 510 551 591
We expect capital expenditure, excluding acquisitions and asset Equity-accounted entitiesc 62 131 103
exchanges, to be around $20 billion in 2015.
572 682 693
Total cash disposal proceeds received during 2014 were $3.5 billion (2013 Total liquids
$22 billion, 2012 $11.6 billion). In 2013 this included $16.7 billion for the
Subsidiaries 4,092 4,349 4,672
disposal of BPs interest in TNK-BP and in 2012 it included $5.6 billion for
the disposal of BPs interests in the Marlin hub, Horn Mountain, Holstein, Equity-accounted entitiesc 5,725 5,721 5,378
Ram Powell and Diana Hoover elds in the Gulf of Mexico. See Financial 9,817 10,070 10,050
statements Note 3 for more information on disposals. Natural gas billion cubic feet
Subsidiaries 32,496 34,187 33,264
Net cash used in nancing activities
Net cash used in nancing activities for the year ended 31 December 2014 Equity-accounted entitiesc 12,200 11,788 7,041
decreased by $5.1 billion compared with 2013. The decrease primarily 44,695 45,975 40,305
reected higher net proceeds of $3.3 billion from long-term nancing Total hydrocarbons million barrels of oil equivalent
and a decrease in the net repayment of short-term debt of $1.3 billion. Subsidiaries 9,694 10,243 10,408
The $8-billion share repurchase programme was completed in July 2014. Equity-accounted entitiesc 7,828 7,753 6,592
The increase in 2013 compared with 2012 primarily reected the buyback 17,523 17,996 17,000
of shares of $5.5 billion, as part of our $8-billion share repurchase Productiona (net of royalties)
programme, lower net proceeds of $1.1 billion from long-term nancing Liquids thousand barrels per day
and an increase in the net repayment of short-term debt of $1.4 billion.
Crude oild
Total dividends paid in 2014 were 39 cents per share, up 6.8% compared Subsidiaries 844 789 795
with 2013 on a dollar basis and 1.9% in sterling terms. This equated to a Equity-accounted entitiese 979 1,120 1,137
total cash distribution to shareholders of $5.9 billion during the year (2013
1,823 1,909 1,932
$5.4 billion, 2012 $5.3 billion).
Natural gas liquids
Net debt Subsidiaries 91 86 96
Net debt at the end of 2014 decreased by $2.5 billion from the 2013
Equity-accounted entitiese 12 19 27
year-end position. The ratio of net debt to net debt plus equity at the end of
2014 increased by 0.5%. 103 105 123
Total liquidsf
The total cash and cash equivalents at the end of 2014 were $7.2 billion
Subsidiaries 936 874 891
higher than 2013.
Equity-accounted entitiese 991 1,139 1,164
We will continue to target our net debt ratio in the 10-20% range while
1,927 2,013 2,056
uncertainties remain. Net debt and the ratio of net debt to net debt plus
equity are non-GAAP measures. See Financial statements Note 25 for Natural gas million cubic feet per day
decrease for liquids and 25% increase for gas) for equity-accounted
entities.
t The global operations organization is responsible for safe, reliable See Financial performance on page 25 for an explanation of the main
and compliant operations, including upstream production assets and factors inuencing upstream prot.
midstream transportation and processing activities.
We optimize and integrate the delivery of these activities with support Outlook for 2015
from global functions with specialist areas of expertise: technology, t We expect reported production in 2015 to be higher than 2014,
nance, procurement and supply chain, human resources and mainly reecting higher entitlements in production-sharing
information technology. agreement (PSA) regions on the basis of assumed lower oil prices.
In 2015 our US Lower 48 onshore business began operating as a Actual reported outcome will depend on the exact timing of project
separate business, with its own governance, processes and systems. start-ups, OPEC quotas and entitlement impacts in our PSAs. We
This is designed to promote nimble decision making and innovation so expect underlying production in 2015 to be broadly at with 2014,
that BP can be more competitive in the US onshore market, while with the base decline being offset by new major project volumes
maintaining BPs commitment to safe, reliable and compliant both from 2014 and 2015.
operations. The businesss approach is to operate in line with industry t We expect four major projects to come onstream in 2015 two in
standards developed within the context of the highly regulated US Angola and one each in Australia and Algeria.
environment. BPs US Lower 48 business manages a diverse portfolio
t Capital investment in 2015 is expected to decrease, largely reecting
which includes an extensive unconventional resource base.
the lower oil price environment and our commitment to continued
Technologies such as seismic imaging, enhanced oil recovery and capital discipline. The reduction is expected to come primarily from
real-time data support our upstream strategy by helping to gain new prioritizing activity in our operations, paring back exploration and
access, increase recovery and reserves and improve production access spend, and shelving a number of marginal projects.
efciency. See Our distinctive capabilities on page 16.
Sea and Angola reecting the impact of the lower near-term price 2014, with a corresponding reduction in net proved reserves of
environment, revisions to reserves and increases in expected 114mmboe, all within our subsidiaries.
decommissioning cost estimates. This also included a charge to write
The major disposal transactions during 2014 were the farm-out of a 40%
down the value ascribed to block KG D6 in India as part of the acquisition
stake in block 61 in the Khazzan eld, Oman, to government owned
of upstream interests from Reliance Industries in 2011. The charge arises
Makarim Gas Development LLC, for $545 million; the sale of our interests in
as a result of uncertainty in the future long-term gas price outlook,
four BP-operated oilelds on the North Slope of Alaska to Hilcorp, including
following the introduction of a new formula for Indian gas prices, although
all of BPs interests in the Endicott and Northstar oilelds and a 50% interest
we do see the commencement of a transition to market-based pricing as a
in each of the Milne Point eld and the Liberty prospect, together with BPs
positive step. We expect further clarity on the new pricing policy and the
interests in the oil and gas pipelines associated with these elds for $1.25
premiums for future developments to emerge in due course. Fair value
billion plus an additional carry of up to $250 million, if the Liberty eld is
accounting effects had a favourable impact of $31 million relative to
developed; and the sale of our interests in the Panhandle West and Texas
managements view of performance.
Hugoton gas elds to Pantera Acquisition Group, LLC for $390 million. Sales
The 2013 result included a net non-operating charge of $1,364 million, transactions are typically subject to post-closing adjustments and future
which included an $845-million write-off attributable to block BM-CAL-13 payments depending on oil price and production. More information on
offshore Brazil as a result of the Pitanga exploration well not encountering disposals is provided in Upstream analysis by region on page 213 and
commercial quantities of oil or gas, and had an unfavourable impact of Financial statements Note 3.
$244 million from fair value accounting effects. The 2012 result included Provisions for decommissioning increased from $17.2 billion at the end of
net non-operating gains of $3,189 million, primarily as a result of gains on 2013 to $18.7 billion at the end of 2014. The increase primarily reects
disposals being partly offset by impairment charges. In addition, fair value updated estimates of the cost of future decommissioning, additions and
accounting effects had an unfavourable impact of $134 million. a change in discount rate, partially offset by utilization of provisions,
After adjusting for non-operating items and fair value accounting effects, the exchange revaluation and impacts of divestments. Decommissioning costs
decrease in the underlying RC prot before interest and tax compared with are initially capitalized within xed assets and are subsequently depreciated
2013 reected lower liquids realizations, higher costs, mainly depreciation, as part of the asset.
depletion and amortization and exploration write-offs and the absence of
one-off benets which occurred in 2013 (see below). This was partly offset
Exploration
by higher production in higher-margin areas, higher gas realizations and a The group explores for oil and natural gas under a wide range of licensing,
benet from stronger gas marketing and trading activities. joint arrangement and other contractual agreements. We may do this
alone or, more frequently, with partners.
Compared with 2012 the 2013 result reected lower production due to
divestments, lower liquids realizations and higher costs, including New access in 2014
exploration write-offs and higher depreciation, depletion and amortization, We gained access to new potential resources covering more than
partly offset by an increase in underlying volumes, a benet from stronger 47,000km2 in ve countries (Australia, Greenland, UK (North Sea), the US
gas marketing and trading activities, one-off benets related to production (Gulf of Mexico) and Morocco, which received nal government approval in
taxes and a cost pooling settlement agreement between the owners of the April 2014). In December, we signed a new PSA with the State Oil
Trans-Alaska Pipeline System (TAPS), and higher gas realizations. Company of the Republic of Azerbaijan to jointly explore for and develop
potential prospects in the shallow water area around the Absheron
Total capital expenditure including acquisitions and asset exchanges in
Peninsula in the Azerbaijan sector of the Caspian Sea. This is pending nal
2014 was higher compared with 2013. This included $469 million in 2014
ratication by the government. Additionally, Rosneft and BP signed a
relating to the purchase of an additional 3.3% equity in Shah Deniz,
heads of agreement in May 2014 relating to a long-term project for the
Azerbaijan and the South Caucasus Pipeline.
exploration and potential development of the Domanik formations in the
In total, disposal transactions generated $2.5 billion in proceeds during Volga-Urals region of Russia.
Strategic report
concessions in Egypt after ratication and nalization of the agreements. The proved reserves replacement ratio for the Upstream segment in 2014,
During the year we participated in ve discoveries that are potentially excluding acquisitions and disposals, was 31% for subsidiaries and
commercial including: one in Egypt with the BG-operated Notus well in the equity-accounted entities (2013 93%), 29% for subsidiaries alone (2013
El Burg concession; one in the pre-salt play of Angola with the Orca well in 105%) and 43% for equity-accounted entities alone (2013 30%). For more
Block 20, operated by Cobalt International Energy; one at Xerelete in Brazils information on proved reserves replacement for the group see page 219.
Campos basin, operated by Total; one at Vorlich in the North Sea, which Developments
spans the GDF-SUEZ-operated block 30/1f and the BP-operated block 30/1c;
The map on page 26 shows our major development areas. We achieved
and Guadalupe in the deepwater Gulf of Mexico, operated by Chevron.
seven major project start-ups in 2014: the Chirag oil project in Azerbaijan;
Exploration and appraisal costs Na Kika Phase 3, Mars B and Atlantis North expansion Phase 2 in the Gulf
Excluding lease acquisitions, the costs for exploration and appraisal costs of Mexico; CLOV in Angola; Kinnoull in the North Sea and Sunrise in
were $2,911 million (2013 $4,811 million, 2012 $4,356 million). These Canada. In addition to starting up major projects, we made good progress
costs included exploration and appraisal drilling expenditures, which were in the four areas we believe most likely to provide us with higher-value
capitalized within intangible xed assets, and geological and geophysical barrels Angola, Azerbaijan, the North Sea and the Gulf of Mexico.
exploration costs, which were charged to income as incurred. t Angola we had an oil and gas discovery, Orca, in the pre-salt play of
Approximately 31% of exploration and appraisal costs were directed Angola in Block 20 (BP 30%), operated by Cobalt International Energy,
towards appraisal activity. We participated in 67 gross (32.75 net) Inc. and the CLOV project reached plateau production of 160mboe/d.
exploration and appraisal wells in 10 countries.
t "[FSCBJKBOo the Shah Deniz and South Caucasus Pipeline consortia
Exploration expense awarded further key contracts for the development of the Shah Deniz
Total exploration expense of $3,632 million (2013 $3,441 million, 2012 $1,475 Stage 2 and South Caucasus Pipeline expansion projects. The BP-
million) included the write-off of expenses related to unsuccessful drilling operated Azerbaijan International Operating Company celebrated the
activities or lease expiration in the Lower 48 ($665 million), Algeria ($524 20th anniversary of the Azeri-Chirag-Gunashli PSA.
million), India ($139 million), the Gulf of Mexico ($500 million), Brazil ($368
million), China ($112 million), Angola ($110 million), Morocco ($83 million) and t /PSUI4FBo we continued to see high levels of activity, including a new
others ($133 million). In addition, $395 million was written off KG D6 in India as discovery, Vorlich, in the central North Sea (see page 28); progress in the
a result of uncertainty in the future long-term gas price outlook (see page 216). major redevelopment of the west of Shetland Schiehallion and Loyal elds;
and the restart of operations at the Rhum eld. BP has been granted
Upstream reserves seven awards in the UK governments 28th licensing round. The blocks
Estimated net proved reservesa (net of royalties) are located in three of our core areas: to the north of our Magnus eld,
next to Vorlich, and west of our Kinnoull development. The government is
2014 2013 2012
still to award some blocks in this round. These blocks are undergoing
Liquids million barrels
environmental assessment.
Crude oilb
Subsidiaries 3,582 3,798 4,082
Equity-accounted entitiesc 702 729 813
4,283 4,527 4,895
Natural gas liquids
Subsidiaries 510 551 591
Equity-accounted entitiesc 16 16 25
526 567 616
Total liquids
Subsidiariesd 4,092 4,349 4,672
Equity-accounted entitiesc 717 745 838
4,809 5,094 5,510
Natural gas
Subsidiariese 32,496 34,187
billion cubic feet
33,264
Unlocking hidden resources
Equity-accounted entitiesc 2,373 2,517 2,549
Accessing gas resources locked in hot sandstone almost three miles
34,869 36,704 35,813 below the earths surface is a task that our advanced technology and
Total hydrocarbons million barrels of oil equivalent exploration experience has made possible.
Subsidiaries 9,694 10,243 10,408 Faced with the particular challenge of Omans remote desert, we used
Equity-accounted entitiesc 1,126 1,179 1,277 our expertise to safely and successfully complete one of our largest ever
10,821 11,422 11,685 3D seismic surveys across the Khazzan eld, an area the size of Greater
a
London. To unlock this huge resource, we used the technical knowledge
Because of rounding, some totals may not agree exactly with the sum of their component parts.
b
Includes condensate and bitumen. we gained from accessing the tight gas that is common in our US
c
BPs share of reserves of equity-accounted entities in the Upstream segment. During 2014, Lower 48 onshore business.
upstream operations in Abu Dhabi, Argentina and Bolivia, as well as some of our operations in
Angola and Indonesia, were conducted through equity-accounted entities.
We proved our approach by conducting an extended well test
d
Includes 21 million barrels (21 million barrels at 31 December 2013 and 14 million barrels at producing gas from four appraisal wells and acquiring a surveillance
31 December 2012) in respect of the 30% non-controlling interest in BP Trinidad & Tobago LLC. programme that signicantly helped our understanding of the reservoir
e
Includes 2,519 billion cubic feet of natural gas (2,685 billion cubic feet at 31 December 2013 and and enabled us to proceed with a eld development plan. By the end of
2,890 billion cubic feet at 31 December 2012) in respect of the 30% non-controlling interest in BP
Trinidad & Tobago LLC. 2014, we had three rigs in operation and large-scale construction under
way to build the central processing facility, roads and well pads, as well as
Reserves booking workforce accommodation and facilities.
Reserves booking from new discoveries will depend on the results of Khazzan represents the rst phase in developing one of the largest
ongoing technical and commercial evaluations, including appraisal drilling. known tight gas accumulations in the Middle East. It has the potential
The segments total hydrocarbon reserves on an oil equivalent basis, to be a major new source of gas supply for Oman over many decades.
including equity-accounted entities at 31 December 2014, decreased by
5% (5% for subsidiaries and 4% for equity-accounted entities) compared We seek efcient ways to deliver projects on time and on budget.
with reserves at 31 December 2013.
Strategic report
t Fuels marketing and lubricants we will invest in higher returning
businesses which have operating cash ow growth potential.
t Portfolio quality we will maintain our focus on quality by high-
grading of assets combined with capital discipline. Where businesses
In 2014 we saw continued improvement in our do not t our strategic frame, we will seek to divest.
process safety and delivered strong operational t Simplication and efciency we have launched a simplication and
efciency programme to support performance improvement and to
performance resulting in prot and operating cash make our businesses even more competitive.
ow growth. Implementing this strategy is expected to lead to a growing
downstream earnings prole and increasingly make the business more
robust to external environmental impacts. Growing operating cash
ows and capital discipline should ensure that Downstream remains a
source of increasing cash ow for BP.
After adjusting for non-operating items and fair value accounting effects,
8
underlying replacement cost (RC) prot before interest and tax in 2014 was
higher than 2013 but lower than 2012.
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Our fuels business
The average global RMM in 2014 was $14.4/bbl, the lowest level since
The fuels strategy focuses primarily on fuels value chains (FVCs). These
2010 and $1.0/bbl lower than 2013. This was largely due to the narrower
include large-scale, highly upgraded, feedstock-advantaged reneries
West Texas Intermediate-Brent spread as improving pipeline and rail
which are integrated with logistics and marketing businesses.
logistics in the US reduced the discount of US domestic crude oil relative
We believe that having a quality rening portfolio connected to strong to the international benchmark.
marketing positions is core to our integrated FVC businesses as this
Rening
provides optimization opportunities in highly competitive markets. We look
At 31 December 2014 we owned or had a share in 14 reneries producing
to build on our strong portfolio of rening assets and, through advantaged
rened petroleum products that we supply to retail and commercial
crude, optimize across the supply chain.
customers. For a summary of our interests in reneries and average daily
We have improved our rening portfolio quality in terms of crude feedstock crude distillation capacities see page 217.
and location advantage, scale and have sustained competitive complexity
In 2014, renery operations were strong, with Solomon rening availability
through portfolio rationalization and selective investment. Across all
sustained at around 95% and utilization rates of 88% for the year. Overall
regions we expect to operate our portfolio at top quartile availability and
renery throughputs in 2014 were lower than those in 2013, mainly due to
with improved efciency.
the divestment of the Texas City and Carson reneries.
Strategic report
Renery throughputsa thousand barrels per day Retail sitesf 2014 2013 2012
USb 642 726 1,310 US 7,100 7,700 10,100
Europe 782 766 751 Europe 8,000 8,000 8,300
Rest of world 297 299 293 Rest of world 2,100 2,100 2,300
Total 1,721 1,791 2,354 Total 17,200 17,800 20,700
% f
The number of retail sites includes sites not operated by BP but instead operated by dealers,
Rening availability 94.9 95.3 94.8 jobbers, franchisees or brand licensees under a BP brand. These may move to or from the BP
brand as their fuel supply or brand licence agreements expire and are renegotiated
Sales volumes thousand barrels per day
in the normal course of business. Retail sites are primarily branded BP, ARCO and Aral. Excludes
Marketing salesc 2,872 3,084 3,213 our interests in equity-accounted entities that are dual-branded.
Trading/supply salesd 2,448 2,485 2,444 Retail is the most material element of our fuels marketing operations and
Total rened product sales 5,320 5,569 5,657 has good exposure to growth markets. We have distinctive partnerships
Crude oile 2,360 2,142 1,518 with leading retailers in six countries and plan to expand elsewhere. Retail
Total 7,680 7,711 7,175 is a signicant source of growth today and is expected to be so in the
a
future. See Driving success below.
Renery throughputs reect crude oil and other feedstock volumes.
b
The Texas City and Carson reneries were both divested in 2013. Supply and trading
c
Marketing sales include sales to service stations, end-consumers, bulk buyers and jobbers BPs integrated supply and trading function is responsible for delivering
(i.e. third parties who own networks of a number of service stations) and small resellers.
d
Trading/supply sales are sales to large unbranded resellers and other oil companies. value across the overall crude and oil products supply chain. This structure
e
Crude oil sales relate to transactions executed by our integrated supply and trading function, enables the optimization of our FVCs to maintain a single interface with
primarily for optimizing crude oil supplies to our reneries and in other trading. 88,000 barrels oil trading markets and to operate with a single set of trading compliance
per day relate to revenues reported by the Upstream segment.
and risk management processes, systems and controls. The oil trading
Logistics and marketing function (including support functions) has trading ofces in Europe, the US
Downstream of our reneries, we operate an advantaged infrastructure and Asia. Our presence in the more actively-traded regions of the global oil
and logistics network that includes pipelines, storage terminals and tankers markets supports overall understanding of the supply and demand forces
for road and rail. We seek to drive for excellence in operational and across these markets. It has a two-fold strategic purpose in our
transactional processes and deliver compelling customer offers in the Downstream business.
various markets where we operate. For example, in 2014 we added the First, it seeks to identify the best markets and prices for our crude oil,
capability to receive additional US shale crudes by rail at our Cherry Point source optimal feedstocks for our reneries and provide competitive
renery in Washington. This increases the use of location-advantaged supply for our marketing businesses. Wherever possible we will look to
crudes at this renery, improving access and diversication of crude slates. optimize value across the supply chain. For example, we will often sell our
We supply fuel and related retail services to consumers through company- own crude and purchase alternative crudes from third parties for our
owned and franchised retail sites, as well as other channels, including reneries where this will provide incremental margin.
dealer wholesalers and jobbers. We also supply commercial customers
within the transport and industrial sectors.
Driving success
Since 2005, our retail partnership with Marks &
Spencer (M&S) has gone from strength
to strength, offering a premium convenience
experience thats helped to drive overall service
station sales growth above the industry average.
Our success is reected not only by our expansion
rate 26 stores opening across the UK in 2014
but also by strong sales growth across our
existing M&S Simply Food forecourts.
The combination of BP and M&S brands
complement each other, creating a highly
differentiated offer for our target customers who
are looking for a forecourt offer that combines
high-quality fuel, premium convenience foods
and the Wild Bean Cafe.
A typical customers spend in a M&S Simply
Food outlet is more than 50% higher than in our
other stores, and weve had a signicant increase
in customers visiting the store specically for our
food offer.
BP currently owns and operates nearly 200 BP
forecourts with an M&S Simply Food.
Strategic report
BP holds a unique position in Russia through its Upstream
19.75% share in Rosneft. Rosneft is the largest oil company in Russia and the largest publicly traded
oil company in the world based on hydrocarbon production volume.
Rosneft has a major resource base of hydrocarbons onshore and offshore,
with assets in all key hydrocarbon regions of Russia: Western Siberia,
Eastern Siberia, Timan-Pechora, Volga-Urals, North Caucasus, the
continental shelf of the Arctic Sea, and the Far East.
Rosneft participates in international exploration projects or has operations
in countries including the US, Canada, Vietnam, Venezuela, Brazil, Algeria,
United Arab Emirates, Turkmenistan and Norway.
To progress Arctic exploration, it conducted exploration drilling with
ExxonMobil in the South Kara Sea and announced a hydrocarbon discovery
in September. Exxon subsequently suspended its participation in this
project with Rosneft due to sanctions. Rosneft also began production
drilling in the Sea of Okhotsk in September 2014, and continued to grow its
gas business increasing gas production from 38 to 57bcm as well as
advancing plans for the development of LNG export capacity.
Downstream
Rosneft is the leader of the Russian rening industry. It owns and
Rosneft discovery in the South Kara Sea. operates 10 reneries in Russia and also has an interest in four reneries in
Germany through its Ruhr Oel GmbH partnership with BP. It continued
implementation of the modernization programme for its Russian reneries
BP and Rosneft in 2014 to signicantly upgrade and expand rening capacity.
t BPs shareholding in Rosneft allows us to benet from a diversied set Rosneft renery throughput in 2014 amounted to 2,027mb/d. As at
of existing and potential projects in the Russian oil and gas sector. 31 December 2014, Rosneft owned and operated more than 2,500 retail
t Russia has signicant hydrocarbon resources and will continue to play service stations, representing the largest network in Russia. This included
an important role in long-term energy supply to the global economy. BP-branded sites acquired as part of the TNK-BP acquisition in 2013 which
continue to operate under the BP brand under a licence agreement with
t BP believes the primary sources of value to BP shareholders from its BP. Downstream operations also include jet fuel, bunkering, bitumen and
investment in Rosneft will be potential long-term share price lubricants.
appreciation and dividend growth.
Rosneft segment performance
t BP is positioned to contribute to Rosnefts strategy implementation
BPs investment in Rosneft is managed and reported as a separate
through collaboration on technology and best practice. We also have segment under IFRS. The segment result includes equity-accounted
the potential to undertake standalone projects with Rosneft, both in earnings from Rosneft, representing BPs share in Rosneft.
Russia and internationally.
$ million
t We remain committed to our strategic investment in Rosneft while 2014 a 2013b
complying with all relevant sanctions.
Prot before interest and taxc d 2,076 2,053
2014 summary Inventory holding (gains) losses 24 100
t US and EU sanctions were imposed on certain Russian activities, RC prot before interest and tax 2,100 2,153
individuals and entities, including Rosneft. Net charge (credit) for non-operating items (225) 45
Underlying RC prot before interest and tax 1,875 2,198
t BP received $693 million, net of withholding taxes, in July
Average oil marker prices $ per barrel
representing our share of Rosnefts dividend of 12.85 Russian
roubles per share for 2013. Urals (Northwest Europe CIF) 97.23 107.38
Russian domestic oil 50.40 54.97
t Rosneft and BP signed a contract in June to supply BP with up to
a
12 million tons of oil products over ve years. A syndicate of banks, The operational and nancial information of the Rosneft segment for 2014 is based on preliminary
operational and nancial results of Rosneft for the three months ended 31 December 2014.
through a pre-export nancing agreement, made a payment of Actual results may differ from these amounts.
approximately $1.935 billion to Rosneft. b
From 21 March 2013.
c
BPs share of Rosnefts earnings after nance costs, taxation and non-controlling interests
t Rosneft and BP signed a heads of agreement in May relating to a is included in the BP group income statement within prot before interest and taxation.
d
long-term project for the exploration and potential development of the Includes $25 million (2013 $5 million loss) of foreign exchange losses arising on the
dividend received.
Domanik formations in the Volga-Urals region of Russia.
Replacement cost (RC) prot before interest and tax for the segment
t Rosneft and BP concluded framework agreements in May to enable
included a non-operating gain of $225 million, relating to Rosnefts sale of
technical collaboration between the parties. Work is ongoing in a
its interest in the Yugragazpererabotka joint venture . In addition, the result
number of areas pursuant to these agreements in both upstream and
was affected by an unfavourable duty lag effect, lower oil prices and other
downstream.
items, partially offset by certain foreign exchange effects which had a
t Bob Dudley serves on the Rosneft board of directors, and its strategic favourable impact on the result. See also Financial statements Notes 15
planning committee. and 30 for other foreign exchange effects.
Strategic report
growing sustainable higher-yielding and lower-carbon feedstocks through
to the development, production and marketing of the advantaged fuel
and corporate molecule biobutanol which has higher energy content than ethanol and
delivers improved fuel economy.
In conjunction with our partner DuPont, we are undertaking research into
the production of biobutanol under the company name Butamax.
Comprises our biofuels and wind businesses, Across our biofuels business, BPs share of ethanol-equivalent production
shipping, treasury and corporate activities including (which includes ethanol and sugar) for 2014 was 653 million litres
compared with 521 million litres in 2013. The majority of this production
centralized functions. was from BPs sugar cane mills in Brazil.
Wind
We have a wind energy business in the US, with interests in 16 operating
wind farms. Gross generating capacity from this portfolio is 2,585MW of
electricity. Our focus is on safe operations and optimizing performance at
our owned and joint venture wind farms.
Based on our nancial stake, BPs net wind generation capacity b was
1,588MW at 31 December 2014, compared with 1,590MW at
31 December 2013. Our net share of wind generation for 2014 was
4,617GWh, compared with 4,203GWh a year ago.
b
Capacity gures include 32MW in the Netherlands managed by our Downstream segment.
Shipping
The primary purpose of BPs shipping and chartering activities is the
transportation of the groups hydrocarbon products using a combination of
BP-operated, time-chartered and spot-chartered vessels. Surplus capacity
may also be used to transport third-party products. All vessels conducting BP
shipping activities are subject to our health, safety, security and environmental
Crew carrying out mooring operations on the deck of BPs oil tanker, British requirements. At 31 December 2014, our eet included four Alaskan vessels,
Chivalry, as it berths in Singapore. 46 BP-operated and 41 time-chartered vessels for our deep-sea, international
oil and gas shipping operations. In December 2014 BP shipping entered into
Financial performance contracts with Daewoo Shipbuilding & Marine Engineering in South Korea for
the construction of LNG tankers to be delivered in 2018 and 2019.
$ million
2014 2013 2012 Treasury
Sales and other operating revenuesa 1,989 1,805 1,985 Treasury manages the nancing of the group centrally, with responsibility
RC prot (loss) before interest and for managing the groups debt prole, share buyback programmes and
tax (2,010) (2,319) (2,794) dividend payments while ensuring liquidity is sufcient to meet group
Net (favourable) unfavourable impact requirements. It also manages key nancial risks including interest rate,
of non-operating items 670 421 798 foreign exchange, pension and nancial institution credit risk. From
Underlying RC prot (loss) before locations in the UK, the US and Singapore, treasury provides the interface
interest and tax (1,340) (1,898) (1,996) between BP and the international nancial markets and supports the
nancing of BPs projects around the world. Treasury trades foreign
Capital expenditure and acquisitions 903 1,050 1,435
exchange and interest rate products in the nancial markets, hedging group
a
Includes sales to other segments. exposures and generating incremental value through optimizing and
The replacement cost (RC) loss before interest and tax for the year ended managing cash ows and the short-term investment of operational cash
31 December 2014 was $2.0 billion (2013 $2.3 billion, 2012 $2.8 billion). balances. Trading activities are underpinned by the compliance, control and
The 2014 result included a net charge for non-operating items of risk management infrastructure common to all BP trading activities. For
$670 million (2013 $421 million, 2012 $798 million). This represented further information, see Financial statements Note 27.
restructuring provisions and impairments, principally in respect of our Insurance
biofuels businesses in the UK and US.
The group generally restricts its purchase of insurance to situations where
After adjusting for these non-operating items, the underlying RC loss this is required for legal or contractual reasons. We bear losses as they
before interest and tax for the year ended 31 December 2014 was arise, rather than spreading them over time through insurance premiums
$1.3 billion (2013 $1.9 billion, 2012 $2.0 billion). This result reected with attendant transaction costs. This approach is reviewed on a regular
improved shipping, biofuels and wind performance and a number of basis and if specic circumstances require such a review.
one-off credits.
Outlook
Biofuels Other businesses and corporate annual charges, excluding non-operating
Our investment in alternative energies is focused on biofuels, where our items, are expected to be around $1.6 billion in 2015.
strategy is to focus on the conversion of cost-advantaged and sustainable
feedstocks that are materially scalable and can be competitive without
subsidies.
We operate three sugar cane mills in Brazil producing bioethanol and sugar
and exporting power to the local grid. We continue to evaluate options to
increase production at these facilities and completed work on expanding
ethanol production capacity at one mill as planned.
Strategic report
The district court issued its ruling on the second phase of the trial in
Two independent monitors a process safety monitor and an ethics
January 2015. It found that 3.19 million barrels of oil were discharged into
monitor were appointed under the terms of the criminal plea agreement
the Gulf of Mexico. In addition, the district court found that BP was not
BP reached with the US government in 2012 to resolve all federal criminal
grossly negligent in its source control efforts. We have also appealed this
claims arising out of the Deepwater Horizon incident. Under the terms of
Phase 2 ruling.
the agreement, BP is taking additional actions, enforceable by the court, to
Penalty phase further enhance the safety of drilling operations in the Gulf of Mexico.
The penalty phase of the trial concluded in February 2015. In this phase,
The process safety monitor is reviewing and providing recommendations
the district court will determine the amount of civil penalties owed to the
concerning BPXPs process safety and risk management procedures for
United States under the Clean Water Act. This will be based on the courts
deepwater drilling in the Gulf of Mexico.
rulings or ultimate determinations on appeal as to the presence of
negligence, gross negligence or wilful misconduct and the volume of oil The ethics monitor is reviewing and providing recommendations
spilled, as well as the application of the penalty factors under the Clean concerning BPs ethics and compliance programme.
Water Act. The monitors have interviewed BP employees, reviewed policies and
BP is not currently aware of the timing of the district courts ruling for the procedures and made site visits in preparation for their initial reports, which
penalty phase. will be delivered in 2015.
Plaintiffs Steering Committee settlements A third-party auditor has also been retained and will review and report
BP reached settlements in 2012 with the Plaintiffs Steering Committee to the probation ofcer, the US government and BP on BPXPs
(PSC) to resolve the substantial majority of legitimate individual and compliance with the plea agreements implementation plan. See
business claims and medical claims stemming from the accident and oil bpxpcompliancereports.com for annual updates on BPs compliance with
spill. The PSC was established to act on behalf of individual and business the plea agreement.
plaintiffs in MDL 2179. During 2014, amounts paid out under the PSC Other legal proceedings
settlements totalled approximately $600 million.
BP is subject to a number of different legal proceedings in connection
Individual and business claims with the Deepwater Horizon incident in addition to the legal proceedings
As part of its monitoring of payments made by the court-supervised relating to the PSC settlements and the multi-district litigation proceedings
programme for the economic and property damages settlement, BP in New Orleans. For more information see Legal proceedings on page 228.
identied and disputed multiple business economic loss claim
OPA 90 and other civil claims
determinations that appeared to result from an incorrect interpretation
BP p.l.c., BPXP and various other BP entities have been among the
of the economic and property damages settlement agreement by the
companies named as defendants in approximately 3,000 civil lawsuits
claims administrator. BP has also raised issues about misconduct and
resulting from the accident and oil spill, including the claims by several
inefciency in the facility administering the settlement.
states and local government entities. The majority of these lawsuits assert
In December 2013 the district court ruled that, for the purposes of claims under OPA 90, as well as various other claims, including for
determining business economic loss claims, revenues must be matched economic loss and real property damage, and claims under maritime law
with expenses incurred by claimants in conducting their business even and state law. These lawsuits seek various remedies including economic
when the revenues and expenses were recorded at different times. In May and compensatory damages, punitive damages, removal costs and natural
2014, the district court approved the claims administrators revised resource damages. Many of the lawsuits assert claims excluded from the
matching policy reecting this order and the policy is now in effect. The PSC settlements, such as claims for recovery for losses allegedly resulting
PSC has led a motion with the district court to alter or amend the policy. from the 2010 federal deepwater drilling moratoria and the related
permitting process. Many of these lawsuits have been consolidated into
In September 2014 the district court denied BPs motion to order the
MDL 2179.
return of excessive payments made by the Deepwater Horizon Court
Supervised Settlement Program under the matching policy in effect Alabama, Mississippi, Florida, Louisiana, Texas and various local
before the district courts December 2013 ruling requiring a claimants government entities have submitted or asserted claims to BP under OPA
revenue to be matched with variable expenses. BP has appealed this 90 for alleged losses including economic losses and property damage as a
decision to the US Court of Appeals for the Fifth Circuit (Fifth Circuit). result of the Gulf of Mexico oil spill. BP has provided for the current best
estimate of the amount required to settle these obligations. BP considers
Following the ruling by the district court, which was afrmed by the
most of these claims to be unsubstantiated and the methodologies used to
Fifth Circuit, that the settlement agreement did not contain a causation
calculate them to be seriously awed, not supported by OPA 90, not
requirement beyond the revenue and related tests set out in an exhibit
supported by documentation and to be substantially overstated.
to that agreement, the district court in May dissolved the injunction that
had halted the processing and payment of business economic loss claims Securities litigation proceedings
and instructed the claims administrator to resume the processing and The multi-district litigation proceedings pending in federal court in
payment of claims. In August BP petitioned the US Supreme Court for Houston (MDL 2185), including a purported class action on behalf of
review of the Fifth Circuits decisions relating to compensation of claims purchasers of American Depositary Shares under US federal securities
for losses with no apparent connection to the Deepwater Horizon spill. law, are continuing. A jury trial is scheduled to begin in January 2016.
In December 2014 the US Supreme Court denied BPs petition for review.
SEC settlement
Business economic loss claims continue to be assessed and paid under In connection with the 2012 settlement with the SEC resolving the SECs
the revised matching policy. The deadline for submitting claims is 8 June Deepwater Horizon-related civil claims, in August 2014, the nal instalment
2015. of $175 million was paid under the civil penalty of $525 million.
In September 2014 BP sought to remove Patrick Juneau from his roles as US Environmental Protection Agency (EPA) suspension
claims administrator and settlement trustee for the economic and property and debarment
damages settlement for reasons including a conict of interest. This was In March 2014, BP p.l.c., BPXP, and all other BP entities that the EPA had
denied by the district court and BP has appealed this decision. suspended from receiving new federal contracts or renewing existing ones
entered into an administrative agreement with the EPA resolving all issues
Medical claims
related to suspension or debarment arising from the Deepwater Horizon
The medical benets class action settlement provides for claims to
incident. The administrative agreement restores the eligibility of BP entities
be paid to qualifying class members from the agreements effective
to enter into new contracts or leases with the US government. Under the
date. Following the resolution of all appeals relating to this settlement,
terms and conditions of the administrative agreement, which applies for
the agreements effective date was 12 February 2014. The deadline
ve years, BP has agreed to safety and operations, ethics and compliance
for submitting claims under the settlement was one year from the
and corporate governance requirements.
effective date.
Strategic report
Additional information on our safety, environmental and social
performance is available in our Sustainability Report. See
bp.com/sustainability for case studies, country reports
and an interactive tool for health, safety and environmental data.
We believe we have a positive role to play in shaping
the long-term future of energy.
Group safety performance
In 2014, BP reported three fatalities; a fall from height in the UK, an
incident involving a forklift in Indonesia and an incident that occurred while
working inside a process vessel in Germany. We deeply regret the loss of
these lives.
Personal safety performance
2014 2013 2012
Recordable injury frequency (group)b 0.31 0.31 0.35
Day away from work case frequencyc
(group)b 0.081 0.070 0.076
Severe vehicle accident rated 0.132 0.120 0.130
b
Incidents per 200,000 hours worked.
c
Incidents that resulted in an injury where a person is unable to work for a day (shift) or more.
d
Number of vehicle incidents that result in death, injury, a spill, a vehicle rollover, or serious
disabling vehicle damage per one million kilometres travelled.
t Contractors carried out 52% of the 357 million hours worked by BP We report our safety performance using industry metrics including the
in 2014. American Petroleum Institute (API) RP-754 standard. These include tier 1
process safety events, dened as the loss of primary containment from
Process safety events a process of greatest consequence causing harm to a member of the
(number of incidents) workforce or costly damage to equipment, or exceeding dened
Tier 1 Tier 2 Loss of primary containment
quantities. Tier 2 process safety events are those of lesser
500 consequence than tier 1. We take a long-term view on process safety
400 indicators because the full benet of the decisions and actions in this area
is not always immediate.
300
We seek to record all losses of primary containment (LOPC), regardless of
200 the volume of the release and report on losses over a severity threshold.
100
These include unplanned or uncontrolled releases from a tank, vessel,
pipe, rail car or equipment used for containment or transfer. Our 2014 data
2010 2011 2012 2013 2014 reects increases in part due to the introduction of enhanced automated
monitoring for many remote sites in our Lower 48 business.
Recordable injury frequency
(workforce incidents per 200,000 hours worked) Our performance in these areas over time suggests that our focus on
American Petroleum Institute US benchmarka
safety is having a positive impact. However, we need to continue to
International Association of Oil & Gas Producers benchmarka remain vigilant and focused on delivering safe, reliable and compliant
1.0 operations.
Every day Air BP fuels around 6,000 ights thats around four a In January 2013, the In Amenas gas plant in Algeria, which is run as a joint
minute, making safe and efcient processes critical to the way we operation between BP, the Algerian state oil and gas company Sonatrach
operate for each and every one of these ights. and Statoil, came under armed terrorist attack. Algerian military action
regained control of the site. Forty people, including four BP employees,
With a combination of ammable liquids, people and aircraft, running and a former employee, lost their lives in the incident. This was a tragic
operations safely is Air BPs rst priority. Technical and operations and unprecedented event which impacted many employees and their
teams are dedicated to servicing customers safely at more than 700 families.
locations across 50 countries.
BP participated fully in the UK Coroners inquest, which we considered
The business designs, builds and operates aviation fuelling facilities the most effective means of providing a greater understanding of what
around the world, and each year it supplies more than 23.2 billion litres happened. The UK Coroner handed down his verdicts, conclusions and
of aviation fuel, helping to make it one of the worlds largest aviation detailed factual ndings on 26 February 2015.
fuel products and services suppliers.
Since the attack, BP and Statoil have jointly carried out an extensive review
Air BP is delivering its growth strategy through efcient operations and of security arrangements in Algeria and have been working with Sonatrach
investment in assets. In 2014 we expanded our activities with a supply and the Algerian authorities on a programme of security enhancements.
contract at Brazils largest heliport, Helibase, in So Paulo. We also The Coroner accepted the opinion of his independent security expert who
acquired Statoil Fuel & Retails aviation fuel business, which is endorsed the security measures now in place and commented that in his
principally based in Scandinavia. This has added more than 70 airports opinion the security enhancements now provide a signicantly safer
to our global network, helping to position Air BP as one of Scandinavias environment for the staff working there.
leading, competitive suppliers.
Upstream safety
We prioritize the safety and reliability of our operations.
Key safety metrics 2010-2014
Recordable injury frequency
Loss of primary containment
Each business segment has a safety and operational risk committee, Tier 1 process safety events
chaired by the business head, to oversee the management of safety and 120
operational risk in their respective areas of the business. In addition, the
100
group operations risk committee facilitates the group chief executives
oversight of safety and operational risk management across BP. 80
The boards safety, ethics and environment assurance committee
60
(SEEAC) receives updates from the group chief executive and the head of
safety and operational risk on the management of the highest priority 40
risks. SEEAC also receives updates on BPs process and personal safety
performance, and the monitoring of major incidents and near misses 20
across the group. See Our management of risk on page 46.
2010 2011 2012 2013 2014
Operating management system (OMS) Indexed (2010=100)
BPs OMS is a group-wide framework designed to help us manage risks in
our operating activities. It brings together BP requirements on health, Safety performance
safety, security, the environment, social responsibility and operational 2014 2013 2012
reliability, as well as related issues, such as maintenance, contractor Recordable injury frequency 0.23 0.32 0.32
relations and organizational learning, into a common management system.
Day away from work case frequency 0.051 0.068 0.053
Any necessary variations in the application of OMS in order to meet local
regulations or circumstances are subject to a governance process. Loss of primary containment
incidents number 187 143 151
OMS also helps us improve the quality of our operating activities.
All businesses covered by OMS undertake an annual performance
Safer drilling
improvement cycle and assess alignment with the OMS framework.
Our global wells organization is responsible for planning and executing all
Recently acquired operations need to transition to OMS. We review and
our wells operations across the world. It is also responsible for
amend our group requirements within OMS from time to time to reect
establishing standards on compliance, risk management, contractor
BPs priorities and experience or changing external regulations. See page
management, performance indicators, technology and capability for our
41 for information about contractors and joint arrangements .
well operations.
Strategic report
BPs investigation into the Deepwater Horizon accident, the Bly Report, leaders in process safety performance.
made 26 recommendations aimed at further reducing risk across our
global drilling activities. A total of 25 recommendations had been Working with contractors and partners
completed by the end of 2014. BP, like our industry peers, rarely works in isolation we need to work
We expect the nal recommendation to be completed by the end of 2015, with contractors, suppliers and partners to carry out our operations. In
as scheduled. This recommendation involves verifying the implementation 2014, 52% of the 357 million hours worked by BP were carried out by
of revised well control and monitoring standards to BP-owned and contractors.
BP-contracted offshore rigs. It takes time to fully implement as it requires Our ability to be a safe and responsible operator depends in part on the
training a large proportion of our global wells operating personnel on the capability and performance of those who help us carry out our operations.
revised standards. We therefore seek to identify and manage risks in the supply chain
Our group audit team has veried closure of the recommendations. relating to areas such as safety, corruption and money laundering, and aim
to have suitable provisions in our contracts with contractors, suppliers and
See bp.com/26recommendations for the Bly Report recommendations. partners.
The BP board appointed Carl Sandlin as independent expert in 2012 to Contractors
provide an objective assessment of BPs global progress in implementing We expect and encourage our contractors and their employees to act in a
the recommendations from the Bly Report. Mr Sandlin also provides his way that is consistent with our code of conduct. Our OMS includes
views on the organizational effectiveness and culture of the global wells requirements and practices for working with contractors.
organization, and process safety observations.
We seek to set clear and consistent expectations of our contractors. Our
As part of his activities in 2014, Mr Sandlin conducted his third round of standard model upstream contracts, for example, include health, safety,
visits to regional wells teams with active drilling operations. Mr Sandlin security and environmental requirements. Bridging documents are
visited 10 regions in total. During each visit he conducted reviews with necessary in some cases to dene how our safety management system
senior managers, and held discussions with key wells personnel and and those of our contractors co-exist to manage risk on site.
drilling contractors on site.
To help us manage risks effectively and take advantage of economies of
Mr Sandlin is engaged through to June 2016. scale, we are focusing on developing deeper, longer-term relationships
Downstream safety with selected upstream contractors. We have established global
agreements in areas such as engineered equipment and well services.
Key safety metrics 2010-2014
Recordable injury frequency
Our partners in joint arrangements
Loss of primary containment We seek to work with companies that share our commitment to ethical,
Tier 1 process safety events safe and sustainable working practices. Our code of conduct states that
140 we seek to clearly communicate our relevant expectations to our business
120 partners, agreeing contractual obligations where applicable.
100 We have a group framework for identifying and managing BPs exposure
related to safety, operational, and bribery and corruption risk from our
80
participation in non-operated joint arrangements.
60
Typically, our level of inuence or control over a joint arrangement is linked
40 to the size of our nancial stake compared with other participants. In
20
some joint arrangements we act as the operator. Our OMS applies to the
operations of joint arrangements only where we are the operator.
2010 2011 2012 2013 2014
In other cases, one of our partners may be the designated operator, or the
Indexed (2010=100)
operator may be an incorporated joint arrangement company owned by
BP and other companies. In those cases, our OMS does not apply as the
Safety performance
management system to be used by the operator, but is generally available
2014 2013 2012 as a reference point for engagement with operators and co-venturers.
Recordable injury frequency 0.34 0.25 0.33
Day away from work case frequency 0.121 0.063 0.089
Severe vehicle accident rate 0.09 0.10 0.16
Loss of primary containment
incidents number 82 101 117
We take measures to prevent leaks and spills at our reneries and other
downstream facilities through well-designed, well-maintained and properly
operated equipment. We also seek to provide safe locations, emergency
procedures and other mitigation measures in the event of a release, re or
explosion.
We focus on managing the highest priority risks associated with our
storage, handling and processing of hydrocarbons. We use technology,
such as automated systems, which are intended to prevent our gasoline
storage tanks from overlling, to help manage our operations within safe
operating and design limits. In 2014 a total of 12 facilities participated in
our exemplar programme, which aims to help sites apply our OMS using
continuous improvement processes.
Process safety expert
The board appointed Duane Wilson as process safety expert for our
downstream activities in 2012 for a three-year term and assigned him to
work in a global capacity with the business. Mr Wilson provided an
independent perspective on the progress that BPs fuels, lubricants and
The Toledo renery in Ohio processes around 160,000 barrels of crude oil
each day to make gasoline, jet fuel and other products.
Acquisitions
Divestments
Operational
changes
Real sustainable
reductions
sea.
We seek to work collaboratively with government regulators in planning
for oil spill response, with the aim of improving any potential future
response. For example, in 2014 we shared lessons on dispersant use and
oil spill response technologies with government regulators in Angola, the
a
This is based on BPs equity share basis. UK and the US.
b
The reported 2013 gure of 49.2 MteCO2e has been amended to 50.3 MteCO2e.
See page 39 for information on volume of oil spilled by our operations in
2014, including volume of oil unrecovered.
Managing our impacts
Our operating sites can have a lifespan of several decades and our Climate change
operations are expected to work to reduce their impacts and risks. BP believes that climate change is an important long-term issue that
This starts in early project planning and continues through operations justies global action. We are taking steps to address carbon risk and
and decommissioning. collaborating with others on climate change issues. For example, we
Our operating management system (OMS) includes practices that set require our operations to incorporate energy use considerations in their
out requirements and guidance for how we identify and manage business plans and to assess, prioritize and implement technologies and
environmental and social impacts. The practices apply to our major systems that could improve usage. We factor a carbon cost into our own
projects , projects that involve new access, those that could affect an investments and engineering designs for large new projects, and invest in
international protected area and some BP acquisition negotiations. lower-carbon energy products. We seek to address potential climate
change impacts on our new projects in the design phase. We have
In the early planning stages of these projects, we complete a screening guidance for existing operations and projects on how to assess potential
process to identify the most signicant environmental and social impacts. climate risks and impacts to enable mitigation steps to be incorporated
We completed the process for 19 projects in 2014. Following screening, into project planning, design and operations.
projects are required to carry out impact assessments, identify mitigation
measures and implement these in project design, construction and Greenhouse gas emissions
operations. We report on direct and indirect GHG emissions on a carbon dioxide-
equivalent (CO2e) basis. Direct emissions include CO2 and methane from
BPs environmental expenditure in 2014 totalled $4,024 million (2013 the combustion of fuel and the operation of facilities, and indirect
$4,288 million, 2012 $7,230 million). For a breakdown of environmental emissions include those resulting from the purchase of electricity, heat,
expenditure see page 225. This gure includes a charge of $190 million steam or cooling. In 2014 we changed our GHG reporting boundary from
relating to the Gulf of Mexico oil spill. For reference, expenditure related to a BP equity-share basis to an operational control basis.
the Gulf of Mexico oil spill was a credit of $66 million in 2013 and a charge
of $919 million in 2012. For Regulation of the groups business Our approach to reporting GHG emissions broadly follows the IPIECA/
Environmental regulation see page 225. API/IOGP Petroleum Industry Guidelines for Reporting GHG Emissions
(the IPIECA guidelines). We calculate emissions based on the fuel
We review our management of material issues such as greenhouse gas consumption and fuel properties for major sources rather than the use
emissions, water, sensitive and protected areas and oil spill response. of generic emission factors. We do not include nitrous oxide,
This includes examining emerging risks and actions taken to mitigate hydrouorocarbons, peruorocarbons and sulphur hexauoride as
them. they are not material and it is not practical to collect this data.
Strategic report
2014 2013 2012
operation and uid handling practices to mitigate these risks.
Operational controla Water and sand constitute on average 99.5% of the injection material
Direct emissions 54.1 used in hydraulic fracturing. Some of the chemicals that are added to this
Indirect emissions 7.2 when used in certain concentrations, are classied as hazardous by the
BP equity shareb relevant regulatory authorities. BP works with service providers to
Direct emissions 48.6 50.3c 59.8 minimize their use where possible. We list the chemicals we use in the
fracturing process in material safety data sheets at each site. We also
Indirect emissions 6.6 6.6 8.4
submit data on chemicals used at our hydraulically fractured wells in the
a
Operational control data comprises 100% of emissions from activities that are operated by BP, US, to the extent allowed by our suppliers who own the chemical
going beyond the IPIECA guidelines by including emissions from certain other activities such as formulas, at fracfocus.org or other state-designated websites.
contracted drilling activities. Data for emissions on an operational control basis was not available
prior to 2014. We aim to minimize air pollutant and GHG emissions, such as methane, at
b
BP equity share comprises our share of BPs consolidated entities and equity-accounted entities,
our operating sites. For example, we use a process called green
other than BPs share of TNK-BP and Rosneft. Rosnefts emissions data can be found on its
website. completions at the majority of our gas operations in the US. This process,
c
The reported 2013 gure of 49.2 MteCO2e has been amended to 50.3 MteCO2e. which we have been using since 2001, captures natural gas that would
otherwise be ared or vented during the completion and commissioning
The decrease in our GHG emissions is primarily due to the sale of our
of wells.
Carson and Texas City reneries in the US as part of our divestment
programme. See bp.com/greenhousegas for more information about our Our US Lower 48 onshore businesss approach is to operate in line with
GHG emissions from upstream production, rening throughput and industry standards developed within the context of the highly regulated
chemicals produced. US environment.
Intensity See bp.com/unconventionalgas for information about our approach to
In 2014 we changed the intensity ratio we report on from a nancial to a unconventional gas and hydraulic fracturing.
production-based one. The ratio of our total GHG emissions reported on
an operational control-based boundary to gross production was Canadas oil sands
0.25teCO2e/te production in 2014. Gross production comprises upstream BP is involved in three oil sands lease areas in Canada. Sunrise Phase 1,
production, rening throughput and petrochemicals produced. operated by Husky Energy, started up at the end of 2014 and we expect
rst oil to be recovered in the rst quarter of 2015. Pike Phase 1, operated
In 2013 we reported the ratio of our total GHG emissions on a BP
by Devon Energy, was granted regulatory approval in November 2014 and
equity-share basis to adjusted revenue of those entities or share of
is at the design and planning stage. Terre de Grace, which is BP-operated,
entities included in GHG reporting. This was 0.15kte/$million. Adjusted
is currently under appraisal for development.
revenue reects total revenues and other income, less gains on sales of
businesses and xed assets. Our decision to invest in Canadian oil sands projects takes into
consideration GHG emissions, impacts on land, water use, local
Greenhouse gas regulation
communities and commercial viability. Projects are managed through
GHG regulation is increasing globally. For example, we are seeing the
governance committees, with equal representation from BP and our
growth of emission pricing schemes in Europe, California and China,
partners, and approval rights laid out in agreements with our partners.
additional monitoring regulations in the US and increased focus on
reducing aring and methane emissions in many jurisdictions. See bp.com/oilsands for information on BPs investments in Canadas
oil sands.
We expect that GHG regulation will have an increasing impact on our
businesses, operating costs and strategic planning, but may also offer Human rights
opportunities for the development of lower-carbon technologies and We are committed to conducting our business in a manner that respects
businesses. the rights and dignity of all people. We respect internationally recognized
Accordingly, we require larger projects, and those for which emissions human rights, as set out in the International Bill of Human Rights and the
costs would be a material part of the project, to apply a standard carbon International Labour Organizations Declaration on Fundamental Principles
cost to the projected GHG emissions over the life of the project. In and Rights at Work. We set out our commitments in our human rights
industrialized countries, our standard cost assumption is currently $40 per policy. Our code of conduct references the policy, requiring employees to
tonne of CO2 equivalent. We use this cost as a basis for assessing the report any human rights abuse in our operations or in those of our
economic value of the investment and as one consideration in optimizing business partners.
the way the project is engineered with respect to GHG emissions. We are delivering our human rights policy by implementing the relevant
See page 225 for information on other environmental regulations. sections of the United Nations Guiding Principles on Business and Human
Rights and incorporating them into the processes and policies that govern
Water our business activities. Our action plan aims to achieve closer alignment
BP recognizes the importance of managing fresh water use and water with the UN Guiding Principles over a number of years using a risk-based
discharges effectively in our operations and evaluates risks, including approach. Representatives from key functions, including human
water scarcity, wastewater disposal and the long-term social and resources, ethics and compliance, procurement, security, and safety and
environmental pressures on local water resources. operational risk oversee the plans implementation.
We have invested in a specialist water treatment company to support In 2014 our actions included:
operations in areas of water scarcity. The company manufactures t Human rights training events for more than 270 people, including
desalinization and brine management systems and we aim to trial these
awareness training for relevant senior leadership teams and
technologies at our operations.
representatives from functions such as procurement, shipping, nance
Unconventional gas and hydraulic fracturing and legal.
Natural gas resources, including unconventional gas, have an increasingly t The inclusion of human rights clauses in a number of our standard model
important role in meeting the worlds growing energy needs. New contracts.
technologies are making it possible to extract unconventional gas t Participation in the work of oil and gas industry organization IPIECA on
resources safely, responsibly and economically. BP has unconventional developing shared industry approaches to managing human rights risks in
gas operations in Algeria, Indonesia, Oman and the US. the supply chain and guidance on responding to community grievances.
Some stakeholders have raised concerns about the potential t Continued implementation of the Voluntary Principles on Security and
environmental and community impacts of hydraulic fracturing. Human Rights, with periodic internal assessments to identify areas for
improvement.
t Our values and code of conduct set out the expected qualities and
actions of all our people.
t We aim for a workforce that is engaged and representative of the
societies where we operate.
t We have a bias towards building capability and promoting within the
organization. Where necessary, this is complemented by selective
external recruitment.
Our values
Construction work on the Sunrise energy project, based in the Canadian oil
sands of northern Alberta. Safety
See bp.com/humanrights for more information about our approach to Respect
human rights.
Business ethics Excellence
Bribery and corruption are signicant risks in the oil and gas industry.
We have a responsibility to our shareholders and the countries
and communities in which we do business to be ethical and lawful in all Courage
our dealings. Our code of conduct explicitly states that we do not
tolerate bribery and corruption in any of its forms.
One Team
Our group-wide anti-bribery and corruption policy applies to all
BP-operated businesses. The policy governs areas such as appropriate
clauses in contracts, risk assessments and training. We target training on BP headcount
a risk basis and to those employees for whom it is thought to be most Number of employees at 31 Decembera 2014 2013 2012
relevant, for example, given specic incidents or the nature or location of Upstream 24,400 24,700 24,200
their role. Downstream 48,000 48,000 51,800
Financial transparency Other businesses and corporate 12,100 11,200 10,400
Total 84,500 83,900 86,400
We have taken part in consultations in relation to new or proposed a
Reported to the nearest 100. For more information see Financial statements Note 33.
revenue transparency reporting requirements in the US and EU for
companies in the extractive industries. We are preparing to comply with The above table includes:
the transposed EU Accounting Directive in the UK and are participating in
2014 2013 2012
the development of industry guidance. We are awaiting publication of the
nal rules of the US Dodd-Frank Act, expected to be issued before the Retail staff 14,400 14,100 14,700
end of 2015. Agricultural, operational and
seasonal workers in Brazil 5,300 4,300 3,500
As a founding member of the Extractive Industries Transparency Initiative
(EITI), BP works with governments, non-governmental organizations and At the end of December 2014, we had 84,500 employees. This includes
international agencies to improve transparency and disclosure of 14,400 service station staff and 5,300 agricultural, operational and
payments to governments. We support governments efforts towards seasonal workers in Brazil, which has increased by 1,000 in 2014 due to
EITI certication in countries where we operate and have worked with the expansion of one of our sugar cane processing mills which was
many countries on implementation of their EITI commitments, including completed in 2014. Meanwhile, operational headcount decreased in other
Australia, Azerbaijan, Indonesia, Iraq, Norway, Trinidad & Tobago, the UK areas. We expect our number of employees to align with BPs smaller
and the US. footprint in 2015 and 2016 as we right-size the organization as part of our
Enterprise and community development response to a lower oil price.
We run programmes to help build the skills of businesses and to develop Our values
the local supply chain in a number of locations. For example, in Indonesia, Our values of safety, respect, excellence, courage and one team align
we provide one-on-one business consultancy and technical assistance to explicitly with BPs code of conduct and translate into the responsible
local businesses during the tender process. actions necessary for the work we do every day. Our values represent the
BPs community investments support development that meets local qualities and actions we wish to see in BP, they guide the way we do
needs and are relevant to our business activities. We contributed $85 business and the decisions we make. We use these values as part of our
million in social investment in 2014. recruitment, promotion and individual performance assessment
processes. See bp.com/values for more information.
See bp.com/society for more information about our social contribution.
Our people
We aim to develop the talents of our workforce with a focus on
maintaining safe and reliable operations, engaging and developing our
employees, and increasing the diversity of our workforce.
The group people committee, chaired by the group chief executive, has
overall responsibility for key policy decisions relating to employees and
governance of BPs people management processes. In 2014 the
Strategic report
our diversity and inclusion programme; recruitment priorities including dignity and without discrimination.
graduate recruitment and improvements to our learning and
We aim to ensure equal opportunity in recruitment, career development,
development programmes.
promotion, training and reward for all employees regardless of race,
Attracting and retaining our people colour, national origin, religion, gender, age, sexual orientation, gender
The complex projects we work on require a wide range of specialist skills identity, marital status, disability, or any other characteristic protected by
from the capability to explore for new sources of energy through to applicable laws. Where existing employees become disabled, our policy is
transporting and distributing hydrocarbons safely across the world. We to provide continuing employment and training wherever possible.
have a bias towards building capability and promoting from within the
organization. Where necessary, we complement this with selective Employee engagement
external recruitment. In 2014, 84% of new senior leaders were recruited Executive team members hold regular meetings and webcasts with
from within the organization. employees around the world. Team and one-to-one meetings are
complemented by formal processes through works councils in parts of
A total of 670 graduates joined BP in 2014. We target the elds of science,
Europe. We seek to maintain constructive relationships with labour
technology, engineering and maths and run initiatives and awareness days
unions.
at universities and colleges. We also run future leader programmes to
recruit post-graduates. In 2014, 37% of our graduate intake were women Each year, we conduct a survey to gather employees views on a wide
and 50% were from outside the UK and US. range of business topics and to identify areas where we can improve.
Approximately 38,000 people in 70 countries completed our 2014 survey.
We conduct external assessments for people entering senior managerial
We measure employee engagement with our strategic priorities using
roles to help achieve rigour and objectivity in our hiring and talent
questions about perceptions of BP and how it is managed in terms of
processes. These provide an in-depth analysis of leadership behaviour and
leadership and standards. This measure remained stable in 2014 at 72%
whether candidates have the necessary experience and skills for the role.
(2013 72%, 2012 71%).
Building enduring capability
Business leadership teams review the results of the survey and agree
Our development opportunities help to build the diverse skills and
actions to address focus areas. The 2014 survey found that employees
expertise that we need. We provide a range of opportunities for our
remain clear about the safety procedures, standards and requirements
employees, with an increased focus on on-the-job learning. This can
that apply to them and that pride in working at BP has increased steadily
include mentoring, team development days, workshops, seminars, online
since 2011. Understanding and support of BPs strategy is strong at senior
learning and international assignments.
levels, but needs further communication and engagement across the
A career transition is a critical moment in an employees professional organization this is a focus area for 2015. Scores related to development
growth. We have moved towards prioritizing learning at these points, for and career opportunities have fallen slightly compared to 2013. We have
example, for those joining BP or moving into a new level of management. been making changes to how we deliver learning and manage talent and
We also offer in-role development that covers a range of levels and we expect to see benets in the longer term.
subject areas, from effective planning to inclusive leadership and change
management. Employees from 51 countries attended leadership training, Share ownership
delivered in six different languages in 2014. We encourage employee share ownership. For example, through our
ShareMatch plan, which operates in more than 50 countries, we match
Through our internal academies, we provide leading technical, functional,
BP shares purchased by our employees. We operate a single group-wide
compliance and leadership learning opportunities. In 2014, we launched
equity plan which allows employee participation at different levels globally
ve academies including the operating management system (OMS)
and is linked to the companys performance.
academy that provides training to operations personnel on implementing
and applying OMS. The BP code of conduct
Diversity Our code of conduct is based on our values and claries the principles and
As a global business, we aim for a workforce representative of the expectations for everyone who works at BP. It applies to all employees,
societies in which we operate. ofcers and members of the board.
We have set out our ambitions for diversity and our group people Employees, contractors or other third parties who have a question about
committee reviews performance on a quarterly basis. We aim for women our code of conduct or see something they feel to be unsafe, unethical or
to represent at least 25% of our group leaders the most senior potentially harmful can get help through OpenTalk, a confidential helpline
managers of our businesses and functions by 2020. We continue to operated by an independent company.
support the UK governments review of gender diversity on boards, In 2014 1,114 people contacted OpenTalk with concerns or enquiries (2013
undertaken by Lord Davies in 2011. Currently we have two women on our 1,121, 2012 1,295). The most common concerns related to the people
board. We are actively seeking qualied candidates and remain committed section of the code. This includes treating people fairly, with dignity and
to Lord Davies goal of a quarter of our board to be female by the end of giving everyone equal opportunity; creating a respectful, harassment-free
2015. For more information on our board composition see page 58. workplace; and protecting privacy and condentiality.
Workforce by gender We take steps to identify and correct areas of non-conformance and take
Numbers as at 31 December Male Female Female % disciplinary action where appropriate. In 2014, our businesses dismissed
Board directors 12 2 14 157 employees for non-conformance with our code of conduct or unethical
Group leaders 426 95 18 behaviour (2013 113). This excludes dismissals of staff employed at our
Subsidiary directors 776 125 14 retail service stations for incidents such as thefts of small amounts of
All employees 58,700 25,800 31 money. We have enhanced our human resources processes, resulting in
improved identication and recording of code-related dismissals.
At the end of 2014, 22% of our group leaders came from countries other
than the UK and the US, compared with 14% in 2000. We have continued
Policy on political activity
to increase the number of local leaders and employees in our operations We do not use BP funds or resources to support any political candidate or
so that they reect the communities in which we operate. This is party. Employees rights to participate in political activity are governed by
monitored at a local, business and national level. the applicable laws in the countries in which we operate. For example, in
the US, BP provides administrative support to the BP employee political
Inclusion
action committee to facilitate employee involvement and to assess
Our goal is to create an environment of inclusion and acceptance. For our
whether contributions comply with the law and satisfy all necessary
employees to be motivated and to perform to their full potential, and for
reporting requirements.
t Understand the risk environment, and assess the specic risks and Group people committee for employee risks.
potential exposure for BP. Resource commitment meeting for investment decision risks.
t Determine how best to deal with these risks to manage overall potential
Group ethics and compliance committee for legal and regulatory
exposure.
compliance and ethics risks.
t Manage the identied risks in appropriate ways.
t Monitor and seek assurance of the effectiveness of the management Board and its committees
of these risks and intervene for improvement where necessary.
BP board.
t Report up the management chain and to the board on a periodic basis
on how signicant risks are being managed, monitored, assured and the Audit committee.
improvements that are being made. Safety, ethics and environment assurance committee.
Our risk management activities Gulf of Mexico committee.
Day-to-day risk Business and Oversight and Board committees
management strategic risk governance For information on the board and its committees see page 58.
Identify, manage management Set policy
and report risks Plan, manage and monitor Risk management processes
performance principal risks As part of BPs annual planning process, we review the groups principal
and assure risks and uncertainties. These may be updated throughout the year in
response to changes in internal and external circumstances.
We aim for a consistent basis of measuring risk to allow comparison on
a like-for-like basis, taking into account potential likelihood and impact, and
to inform how we prioritize specic risk management activities and invest
Facilities, Business Executive Board resources to manage them.
assets and segments and corporate
operations and functions functions Our risk prole
The nature of our business operations is long term, resulting in many of our
risks being enduring in nature. Nonetheless, risks can develop and evolve
Day-to-day risk management management and staff at our
over time and their potential impact or likelihood may vary in response to
facilities, assets and functions identify and manage risk, promoting safe,
internal and external events.
compliant and reliable operations. BP requirements, which take into
account applicable laws and regulations, underpin the practical plans We identify those risks as having a high priority for particular oversight by
developed to help reduce risk and deliver strong, sustainable performance. the board and its various committees in the coming year. Those identied
For example, our operating management system (OMS) integrates BP for 2015 are listed on page 47. These may be updated throughout the year
requirements on health, safety, security, environment, social responsibility, in response to changes in internal and external circumstances.
operational reliability and related issues. The oversight and management of other risks is undertaken in the
Business and strategic risk management our businesses and normal course of business throughout the business and in executive
functions integrate risk into key business processes such as strategy, and board committees. For example market pricing and liquidity reviews
planning, performance management, resource and capital allocation, are conducted on a regular basis by the board and executive committees,
and project appraisal. We do this by using a standard framework for including the group nancial risk committee, to consider how we respond
collating risk data, assessing risk management activities, making further to market conditions and when making or reviewing investment decisions.
improvements and planning new activities. For further information see page 10.
Oversight and governance functional leadership, the executive team, There can be no certainty that our risk management activities will mitigate
the board and relevant committees provide oversight to identify, or prevent these, or other risks, from occurring.
understand and endorse management of signicant risks to BP. They also
Further details of the principal risks and uncertainties we face are set
put in place systems of risk management, compliance and control to
out in Risk factors on page 48.
mitigate these risks. Executive committees set policy and oversee the
management of signicant risks, and dedicated board committees review
and monitor certain risks throughout the year.
Strategic report
committees in 2015 Process safety, personal safety and environmental risks
The risks for particular oversight by the board and committees in 2015 The nature of the groups operating activities exposes us to a wide range of
remain the same as those for 2014 except that we have replaced risks signicant health, safety and environmental risks such as incidents associated
associated with delivery of our 10-point plan, which has now been with releases of hydrocarbons when drilling wells, operating facilities and
delivered, with those relating to major project delivery one of our group transporting hydrocarbons.
key performance indicators. Our OMS helps us manage these risks and drive performance improvements.
Gulf of Mexico oil spill It sets out the rules and principles which govern key risk management
activities such as inspection, maintenance, testing, business continuity and
A wide range of risks have arisen as a result of the Gulf of Mexico oil crisis response planning and competency development. In addition, we
spill. These include legal, operational, reputational and compliance risks. conduct our drilling activity through a global wells organization in order to
BPs management and mitigation of these risks is overseen by the boards promote a consistent approach for designing, constructing and managing
Gulf of Mexico committee, which seeks to ensure that BP fulls all wells.
legitimate obligations while protecting and defending BPs interests.
For more information on safety and our OMS see page 39.
The committees responsibilities include oversight and review of the
following activities: the legal strategy for litigation; the strategy connected Security
with settlements and claims; the environmental work to remediate or Hostile acts such as terrorism or piracy could harm our people and disrupt our
mitigate the effects of the oil spill; management strategy and actions to operations. We monitor for emerging threats and vulnerabilities to manage our
restore the groups reputation in the US; and compliance with government physical and information security.
settlement and administrative agreements arising out of the accident and
oil spill. Our central security team provides guidance and support to a network of
regional security advisers who advise and conduct assurance with respect to
See Legal proceedings page 228, Financial statements Note 2 and the management of security risks affecting our people and operations. We
Gulf of Mexico committee page 69 for further information. also maintain disaster recovery, crisis and business continuity management
plans. We continue to monitor the situation in the Middle East and North Africa
Strategic and commercial risks closely.
Geopolitical Compliance and control risks
The diverse locations of our operations around the world expose us to a wide
range of political developments and consequent changes to the economic and Ethical misconduct and legal or regulatory non-compliance
operating environment. Geopolitical risk is inherent to many regions in which Ethical misconduct or breaches of applicable laws or regulations could
we operate, and heightened political or social tensions or changes in key damage our reputation, adversely affect operational results and shareholder
relationships could adversely affect the group. value, and potentially affect our licence to operate.
We seek to actively manage this risk through development and maintenance Our code of conduct and our values and behaviours, applicable to all
of relationships with governments and stakeholders and becoming trusted employees, are central to managing this risk. Additionally, we have various
partners in each country and region. In addition, we closely monitor events group requirements and training covering areas such as anti-bribery and
(such as the situation that arose in Ukraine in 2014) and implement risk corruption, anti-money laundering, competition/anti-trust law and international
mitigation plans where appropriate. trade regulations. We seek to keep abreast of new regulations and legislation
and plan our response to them. We offer an independent condential helpline,
Major project delivery OpenTalk, for employees, contractors and other third parties. Under the terms
Renewing our portfolio requires ongoing innovation and development in of the US Department of Justice settlement, an ethics monitor will also review
exploration, production, processing and distribution. Major projects contribute and provide recommendations concerning BPs ethics and compliance
signicantly to reshaping our portfolio and delivering our strategy. programme.
To manage the risks associated with major project delivery, each stage of a
projects life cycle must meet certain criteria to proceed to the next stage, Find out more about our code of conduct, our business ethics and
or it will be re-assessed to improve value or be discontinued. Additionally, the ethics monitor on pages 45, 44 and 37 respectively.
executive directors regularly review capital allocation at the resource Trading non-compliance
commitment meetings. In the upstream our global projects organization In the normal course of business, we are subject to risks around our trading
focuses specically on major projects and the risks to their delivery. We activities which could arise from shortcomings or failures in our systems, risk
undertake post-project evaluations to review decision-making processes, management methodology, internal control processes or employees.
project execution and project outcomes, and share these with other major
projects as appropriate to support continuous improvement. We have specic operating standards and control processes to manage these
risks, including guidelines specic to trading, and seek to monitor compliance
For information on our major projects portfolio see page 26, and for through our dedicated compliance teams. We also seek to maintain a positive
a recent example of how we remodel projects see Increasing value and collaborative relationship with regulators and the industry at large.
on page 21.
For further information see Upstream gas marketing and trading
Cybersecurity activities on page 28, Downstream supply and trading on page 31
The threats to the security of our digital infrastructure continue to evolve and Financial statements Note 27.
rapidly and, like many other global organizations, our reliance on computers
and network technology is increasing. A cybersecurity breach could have a
signicant impact on business operations.
We seek to manage this risk through cybersecurity standards, ongoing
monitoring of threats, testing of cyber response procedures and close
co-operation with authorities. Over the past few years our employee
campaigns on topics such as email phishing and the protection of our
information and equipment have helped to raise awareness of these issues.
The spill has had and could continue to have a material adverse impact We operate and may seek new opportunities in countries and regions
on BP. where political, economic and social transition may take place. Political
instability, changes to the regulatory environment or taxation, international
There is signicant uncertainty regarding the extent and timing of the sanctions, expropriation or nationalization of property, civil strife, strikes,
remaining costs and liabilities relating to the 2010 Gulf of Mexico oil spill insurrections, acts of terrorism and acts of war may disrupt or curtail our
(the incident), including the amount of claims, nes and penalties that operations or development activities. These may in turn cause production
become payable by BP (including as a result of any ultimate determination to decline, limit our ability to pursue new opportunities, affect the
of BPs appeal of the ruling of gross negligence), the outcome or resolution recoverability of our assets or cause us to incur additional costs, particularly
of current or future litigation and any costs arising from any longer-term due to the long-term nature of many of our projects and signicant capital
environmental consequences of the incident, the impact of the incident on expenditure required.
our reputation and the resulting possible impact on our licence to operate.
The provisions recognized in the income statement represent the current Rosneft investment our investment in Rosneft may be impacted by
best estimates of expenditures required to settle certain present events in or relating to Russia and our ability to recognize our share of
obligations that can be reliably estimated at the end of the reporting period, Rosnefts income, production and reserves may be adversely impacted.
and there are future expenditures for which we currently cannot measure Events in or relating to Russia, including further trade restrictions and other
our obligations reliably. These uncertainties are likely to continue for a sanctions, could adversely impact our investment in Russia. To the extent
signicant period. See Financial statements Note 2. we are unable in the future to exercise signicant inuence over our
The risks associated with the incident could also heighten the impact of investment in Rosneft or pursue growth opportunities in Russia, our
other risks the group is exposed to as described below. business and strategic objectives in Russia and our ability to recognize our
share of Rosnefts income, production and reserves may be adversely
Strategic and commercial risks impacted.
Liquidity, nancial capacity and nancial, including credit,
Prices and markets our nancial performance is subject to uctuating
exposure failure to work within our nancial framework could impact our
prices of oil, gas, rened products, exchange rate uctuations and the
ability to operate and result in nancial loss.
general macroeconomic outlook.
Failure to accurately forecast, manage or maintain sufcient liquidity and
Oil, gas and product prices are subject to international supply and demand
credit could impact our ability to operate and result in nancial loss. Trade
and margins can be volatile. Political developments, increased supply from
and other receivables, including overdue receivables, may not be recovered
new oil and gas sources, technological change, global economic conditions
and a substantial and unexpected cash call or funding request could disrupt
and the inuence of OPEC can impact supply and prices for our products.
our nancial framework or overwhelm our ability to meet our obligations.
Decreases in oil, gas or product prices could have an adverse effect on
revenue, margins and protability and, if signicant, we may have to write An event such as a signicant operational incident, legal proceedings or a
down assets and re-assess the viability of certain projects. A prolonged geopolitical event in an area where we have signicant activities, could
period of low prices may impact our cash ows, prot, capital expenditure reduce our credit ratings. This could potentially increase nancing costs
and ability to maintain our long-term investment programme. Conversely, and limit access to nancing or engagement in our trading activities on
an increase in oil, gas and product prices may not improve margin acceptable terms, which could put pressure on the groups liquidity. Credit
performance as there could be increased scal take, cost ination and rating downgrades could trigger a requirement for the company to review
more onerous terms for access to resources. The protability of our its funding arrangements with the BP pension trustees and may cause
rening and petrochemicals activities can be volatile, with periodic other impacts on nancial performance. In the event of extended
over-supply or supply tightness in regional markets and uctuations in constraints on our ability to obtain nancing, we could be required to
demand. reduce capital expenditure or increase asset disposals in order to provide
additional liquidity. See Liquidity and capital resources on page 211 and
Exchange rate uctuations can create currency exposures and impact
Financial statements Note 27.
underlying costs and revenues. Crude oil prices are generally set in US
dollars, while products vary in currency. Many of our major project Joint arrangements and contractors we may have limited control
development costs are denominated in local currencies, which may be over the standards, operations and compliance of our partners, contractors
subject to uctuations against the US dollar. and sub-contractors.
Access, renewal and reserves progression our inability to access, We conduct many of our activities through joint arrangements,
renew and progress upstream resources in a timely manner could associates or with contractors and sub-contractors where we may have
adversely affect our long-term replacement of reserves. limited inuence and control over the performance of such operations. Our
partners and contractors are responsible for the adequacy of the resources
Delivering our group strategy depends on our ability to continually replenish
and capabilities they bring to a project. If these are found to be lacking,
a strong exploration pipeline of future opportunities to access and produce
there may be nancial, operational or safety risks for BP. Should an incident
oil and natural gas. Competition for access to investment opportunities,
occur in an operation that BP participates in, our partners and contractors
heightened political and economic risks in certain countries where
may be unable or unwilling to fully compensate us against costs we may
signicant hydrocarbon basins are located and increasing technical
incur on their behalf or on behalf of the arrangement. Where we do not
challenges and capital commitments may adversely affect our strategic
have operational control of a venture, we may still be pursued by regulators
progress. This, and our ability to progress upstream resources and sustain
or claimants in the event of an incident.
long-term reserves replacement, could impact our future production and
nancial performance.
Strategic report
or failure of our digital infrastructure could damage our operations and our locations, where the consequences of such events could be greater than in
reputation. other locations.
A breach or failure of our digital infrastructure due to intentional actions Drilling and production challenging operational environments and other
such as attacks on our cybersecurity, negligence or other reasons, could uncertainties can impact drilling and production activities.
seriously disrupt our operations and could result in the loss or misuse of
data or sensitive information, injury to people, disruption to our business, Our activities require high levels of investment and are often conducted in
harm to the environment or our assets, legal or regulatory breaches and extremely challenging environments which heighten the risks of technical
potentially legal liability. These could result in signicant costs or integrity failure and the impact of natural disasters. The physical
reputational consequences. characteristic of an oil or natural gas eld, and cost of drilling, completing or
operating wells is often uncertain. We may be required to curtail, delay or
Climate change and carbon pricing public policies could increase cancel drilling operations because of a variety of factors, including
costs and reduce future revenue and strategic growth opportunities.
unexpected drilling conditions, pressure or irregularities in geological
Changes in laws, regulations and obligations relating to climate change formations, equipment failures or accidents, adverse weather conditions
could result in substantial capital expenditure, taxes and reduced and compliance with governmental requirements.
protability. In the future, these could potentially impact our upstream
assets, revenue generation and strategic growth opportunities. Security hostile acts against our staff and activities could cause harm to
people and disrupt our operations.
Competition inability to remain efcient, innovate and retain an
appropriately skilled workforce could negatively impact delivery of our Acts of terrorism, piracy, sabotage and similar activities directed against our
strategy in a highly competitive market. operations and facilities, pipelines, transportation or digital infrastructure
could cause harm to people and severely disrupt business and operations.
Our strategic progress and performance could be impeded if we are
Our activities could also be severely affected by conict, civil strife or
unable to control our development and operating costs and margins, or to
political unrest.
sustain, develop and operate a high-quality portfolio of assets efciently.
We could be adversely affected if competitors offer superior terms for Product quality supplying customers with off-specication products
access rights or licences, or if our innovation in areas such as exploration, could damage our reputation, lead to regulatory action and legal liability,
production, rening or manufacturing lags the industry. Our performance and potentially impact our nancial performance.
could also be negatively impacted if we fail to protect our intellectual
property. Failure to meet product quality standards could cause harm to people and
the environment, damage our reputation, result in regulatory action and
Our industry faces increasing challenge to recruit and retain skilled and legal liability, and impact nancial performance.
experienced people in the elds of science, technology, engineering and
mathematics. Successful recruitment, development and retention of
specialist staff is essential to our plans.
Compliance and control risks
Crisis management and business continuity potential disruption US government settlements our settlements with legal and regulatory
to our business and operations could occur if we do not address an bodies in the US in respect of certain charges related to the Gulf of Mexico
incident effectively. oil spill may expose us to further penalties, liabilities and private litigation or
could result in suspension or debarment of certain BP entities.
Our business and operating activities could be disrupted if we do not
respond, or are perceived not to respond, in an appropriate manner to any Settlements with the US Department of Justice (DoJ) and the US
major crisis or if we are not able to restore or replace critical operational Securities and Exchange Commission (SEC) impose signicant compliance
capacity. and remedial obligations on BP and its directors, ofcers and employees,
Insurance our insurance strategy could expose the group to material including the appointment of an ethics monitor, a process safety monitor
uninsured losses. and an independent third-party auditor. Failure to comply with the terms
of these settlements could result in further enforcement action by the DoJ
BP generally purchases insurance only in situations where this is legally and the SEC, expose us to severe penalties, nancial or otherwise, and
and contractually required. We typically bear losses as they arise rather subject BP to further private litigation, each of which could impact our
than spreading them over time through insurance premiums. This means
operations and have a material adverse effect on the groups reputation
uninsured losses could have a material adverse effect on our nancial
and nancial performance. Failure to satisfy the requirements or comply
position, particularly if they arise at a time when we are facing material
costs as a result of a signicant operational event which could put pressure with the terms of the administrative agreement with the US Environmental
on our liquidity and cash ows. Protection Agency (EPA), under which BP agreed to a set of safety and
operations, ethics and compliance and corporate governance
Safety and operational risks requirements, could result in suspension or debarment of certain
BP entities.
Process safety, personal safety, and environmental risks we are
Regulation changes in the regulatory and legislative environment could
exposed to a wide range of health, safety, security and environmental risks
increase the cost of compliance, affect our provisions and limit our access
that could result in regulatory action, legal liability, increased costs, damage
to our reputation and potentially denial of our licence to operate. to new exploration opportunities.
Technical integrity failure, natural disasters, human error and other adverse Governments that award exploration and production interests may impose
events or conditions could lead to loss of containment of hydrocarbons or specic drilling obligations, environmental, health and safety controls,
other hazardous materials, as well as res, explosions or other personal controls over the development and decommissioning of a eld and
and process safety incidents, including when drilling wells, operating possibly, nationalization, expropriation, cancellation or non-renewal of
facilities and those associated with transportation by road, sea or pipeline. contract rights. Royalties and taxes tend to be high compared with those of
other commercial activities, and in certain jurisdictions there is a degree of
There can be no certainty that our operating management system or other
uncertainty relating to tax law interpretation and changes. Governments
policies and procedures will adequately identify all process safety, personal
safety and environmental risks or that all our operating activities will be may change their scal and regulatory frameworks in response to public
conducted in conformance with these systems. See Safety on page 39. pressure on nances, resulting in increased amounts payable to them or
their agencies.
Such events, including a marine incident, or inability to provide safe
environments for our workforce and the public while at our facilities, Such factors could increase the cost of compliance, reduce our protability
premises or during transportation, could lead to injuries, loss of life or in certain jurisdictions, limit our opportunities for new access, require us to
environmental damage. We could as a result face regulatory action and divest or write-down certain assets or curtail or cease certain operations, or
legal liability, including penalties and remediation obligations, increased affect the adequacy of our provisions for pensions, tax, decommissioning,
costs and potentially denial of our licence to operate. Our activities are environmental and legal liabilities. Potential changes to pension or nancial
market regulation could also impact funding requirements of the group.
The Strategic report was approved by the board and signed on its behalf by David J Jackson, company secretary on 3 March 2015.
58 Governance overview
58 Board diversity
59 Board and committee attendance
Corporate governance
59 Role of the board
59 Board composition
59 Key roles and responsibilities
60 Appointment and time commitment
60 Independence and conicts of interest
60 Succession
60 Board activity
60 Risk and assurance
61 Board effectiveness
61 Induction and board learning
61 Board evaluation
62 Shareholder engagement
62 Institutional investors
62 Private investors
62 AGM
62 UK Corporate Governance Code compliance
64 Committee reports
64 Audit committee
68 Safety, ethics and environment assurance committee
69 Gulf of Mexico committee
71 Nomination committee
71 Chairmans committee
Ian Davis Professor Dame Ann Dowling Dr Brian Gilvary Brendan Nelson
Independent non-executive director Independent non-executive director Chief nancial ofcer Independent non-executive director
Chair of the Gulf of Mexico Member of the chairmans, SEEAC Chair of the audit committee;
committee; member of the and remuneration committees member of the chairmans and
chairmans, nomination and nomination committees
remuneration committees
Corporate governance
Group as president and chief executive the Caspian region, Angola, Algeria greatly assisted the work of the Gulf of Outside interests
ofcer. and Egypt. Mexico committee. President of Strategic Decisions, LLC
Director of Morgan Stanley
From 2003 until 31 December 2009, From 2003 to 2008, he was president Paul has continued to ensure that the
Mutual Funds
he was president and chief executive and chief executive ofcer of TNK-BP. SEEACs activities are not limited to the
Director of Naval and Nuclear
ofcer of Ericsson, also serving as the On his return to BP in 2009 he was UK by leading visits, in this year, to Baku
Technologies, LLP
chairman of Sony Ericsson Mobile appointed to the BP board and oversaw and Brazil.
Communications AB. He was a the groups activities in the Americas Age 70 Nationality American
non-executive director of Ericsson and Asia. Between 23 June and
between 2009 and 2012. He was 30 September 2010, he served as the Alan Boeckmann Career
appointed chairman and a member of president and chief executive ofcer Frank L Bowman served for more than
the board of AB Volvo on 4 April 2012. of BPs Gulf Coast Restoration Independent non-executive director
38 years in the US Navy, rising to the
Organization in the US. He was Tenure rank of Admiral. He commanded the
He is a member of the External Advisory appointed a director of Rosneft in
Board of the Earth Institute at Columbia Appointed 24 July 2014 nuclear submarine USS City of Corpus
2013 following BPs acquisition of a Christi and the submarine tender USS
University and a member of the stake in Rosneft. Outside interests
Advisory Board of Harvard Kennedy Holland. After promotion to ag ofcer,
Non-executive director of Sempra
School. He is also the recipient of the Relevant skills and experience he served on the joint staff as director of
Energy and Archer Daniels Midland
King of Swedens medal for his Bob Dudley has spent his entire career political-military affairs and as the chief
Board member and trustee of
contribution to Swedish industry. in the oil and gas industry. He has held of naval personnel. He then served over
Eisenhower Medical Center in Rancho
senior management roles in Amoco and eight years as director of the Naval
Relevant skills and experience Mirage, California Nuclear Propulsion Program where he
BP and has signicant experience as the
Carl-Henric Svanberg has, throughout chief executive ofcer of TNK-BP. Age 66 Nationality American was responsible for the operations of
his career, been involved with more than one hundred reactors aboard
businesses with a global reach. He has Over the four years that he has been the US navys aircraft carriers and
group chief executive, Bob has used Career
done this as both a chairman and a chief submarines. He holds two masters
these skills in leading BPs recovery. He Alan Boeckmann retired as non-
executive ofcer. His experience is very degrees in engineering from the
initiated the 10-point plan, the main executive chairman of Fluor Corporation
broad which has assisted him in leading Massachusetts Institute of Technology.
2014 tasks of which have been in February 2012, ending a 35-year
the board in the development of the
completed. He has changed the way in career with the company. Between After his retirement as an Admiral in
groups strategy. He is focused on the
which the group operates and focused 2002 and 2011, he held the post of 2004, he was president and chief
development of the board as the
its delivery on value not volume. He has chairman and chief executive ofcer, executive ofcer of the Nuclear Energy
long-term stewards of the company and
reshaped the group through non-core and was president and chief operating Institute until 2008. He served on the
ensuring the right combination of skills
asset divestment and has achieved a ofcer from 2001 to 2002. His tenure BP Independent Safety Review Panel
and diversity on the board to deliver that
clear direction through a set of with the company included and was a member of the BP America
task.
consistent values. responsibility for global operations. External Advisory Council. He was
Carl-Henric Svanbergs performance appointed Honorary Knight Commander
Bob Dudleys performance has been As chairman and chief executive ofcer,
has been evaluated by the chairmans of the British Empire in 2005. He was
considered and evaluated by the he refocused the company on
committee, led by Andrew Shilston. elected to the US National Academy of
chairmans committee. engineering, procurement, construction
and maintenance services. Engineering in 2009.
Bob Dudley After graduating from the University Frank is a member of the CNA military
Paul Anderson of Arizona with a degree in electrical advisory board and has participated in
Group chief executive engineering, he joined Fluor in 1974 as studies of climate change and its impact
Independent non-executive director an engineer and worked in a variety of on national security. Additionally he was
Tenure co-chair of a National Academies study
Appointed to the board 6 April 2009 Tenure domestic and international locations,
including South Africa and Venezuela. investigating the implication of climate
Appointed 1 February 2010
Outside interests change for naval forces.
Non-executive director of Rosneft Outside interests Alan was previously a non-executive
director of BHP Billiton and the Relevant skills and experience
Member of Tsinghua Management No external appointments
Burlington Santa Fe Corporation, and Frank Bowman has a deep knowledge
University Advisory Board, Age 69 Nationality American of engineering coupled with exceptional
Beijing, China has served on the boards of the
American Petroleum Institute, the experience in safety issues arising from
Member of BritishAmerican Business his time with the US Navy and, later, the
Career National Petroleum Council and the
International Advisory Board Nuclear Energy Institute. When coupled
Paul Anderson was formerly chief advisory board of Southern Methodist
Member of UAE/UK CEO Forum with his work on the BP Independent
executive at BHP Billiton and at Duke Universitys Cox School of Business.
Member of the Emirates Foundation Safety Review Panel, Admiral Bowman
Energy, where he also served as
Board of Trustees He led the formation of the World has direct experience of BPs safety
chairman of the board. Having previously
Age 59 Nationality American been chief executive ofcer and Economic Forums Partnering Against goals. In addition, the other roles in his
managing director of BHP Limited and Corruption initiative in 2004. career give him a broader perspective of
Career then BHP Billiton Limited and BHP Relevant skills and experience systems and of people. He continues to
Bob Dudley became group chief Billiton Plc, he rejoined these latter two Alan Boeckmann was asked to join the make important contributions to the
executive on 1 October 2010. boards in 2006 as a non-executive board because of his deep experience as work of the SEEAC and the Gulf of
director, retiring on 31 January 2010. He a chairman and chief executive ofcer in Mexico committee.
Corporate governance
engagement with shareholders. civil engineer in the US and as a project as the chair of the audit committee at
manager for infrastructure Cairn Energy.
Brian Gilvarys performance has been
evaluated by the group chief executive developments in southern Africa. Andrew has very broad experience of
and considered by the chairmans Following this, he became a senior the oil and gas industry which has
committee. executive of the Standard Corporate and assisted the board in its work in
Merchant Bank in South Africa. He later overseeing the groups strategy and
held a succession of directorships in particular the evaluation of capital
Brendan Nelson before joining MTN Group, a pan-African projects.
and Middle Eastern telephony group
Independent non-executive director represented in 21 countries, as group As senior independent director he
president and chief executive ofcer in has contributed to the work of the
Tenure 2002. During his tenure at the MTN nomination committee. He has also
Appointed 8 November 2010 Group he led a number of substantial overseen the evaluation of the chairman
Outside interests mergers and acquisitions transactions. in 2014 and will lead the external
Non-executive director and chairman of evaluation of the board in 2015.
He stepped down as group chief
the group audit committee of executive of MTN Group at the end of
The Royal Bank of Scotland Group plc
Member of the Financial Reporting
March 2011 and became chairman. David Jackson
He was formerly a director of a number
Council Monitoring Committee of listed South African companies, Company secretary
Age 65 Nationality British including Johnnic Holdings (formerly a
subsidiary of the Anglo American group Tenure
of companies), Nedbank Group, Bidvest Appointed 2003
Career
Brendan Nelson is a chartered Group and Alexander Forbes.
David Jackson, a solicitor, is a director of
accountant. He was made a partner of Relevant skills and experience BP Pension Trustees Limited.
KPMG in 1984 and served as a member Phuthuma Nhlekos background in
of the UK board of KPMG from 2000 to engineering and his broad experience
2006, subsequently being appointed as a chief executive of a multinational
vice chairman until his retirement in company enables him to make a broad
2010. At KPMG International he held contribution to the board. This is
a number of senior positions including particularly so in the areas of emerging
global chairman, banking and global market economies and the evolution of
chairman, nancial services. the groups strategy. His nancial and
He served for six years as a member of commercial experience is also very
the Financial Services Practitioner Panel relevant to his work on the audit
and in 2013 was the president of the committee.
Institute of Chartered Accountants
of Scotland.
Andrew Shilston
Relevant skills and experience
Brendan Nelson has had a long career in Senior independent non-executive
nance and auditing, particularly in the director
areas of nancial services and trading.
Tenure
During his career he has also had
Appointed 1 January 2012
management experience at a very
senior level. He is well qualied to chair Outside interests
the audit committee and to act as its Non-executive director of Circle
nancial expert. As chair of the audit Holdings plc
committee he has focused particularly Chairman of the Morgan Advanced
on the oversight of the groups trading Materials plc
operations.
Age 59 Nationality British
All of this is complemented by his
broader business experience and his Career
role as the chair of the audit committee Andrew Shilston trained as a chartered
of a major bank. accountant before joining BP as a
management accountant. He
subsequently joined Abbott Laboratories
before moving to Enterprise Oil plc in
1984 at the time of otation. In 1989 he
became treasurer of Enterprise Oil and
was appointed nance director in 1993.
Corporate governance
deputy group chief executive. Lamar
Executive team tenure
became group vice president, Russia
Appointed 1 November 2010
and Kazakhstan in 2003. He served as a
Outside interests member of the board of directors of
Member of the Stanford University TNK-BP between February 2004 and
Graduate School of Business May 2007. In 2007 he was appointed
Advisory Council executive vice president, BP America.
Fellow of the Energy Institute In 2008 he became executive vice Helmut Schuster
president, special projects where he
Age 44 Nationality Irish Current position
led BPs efforts to restructure the
governance framework for TNK-BP. In Executive vice president, group human
Career 2009 Lamar was appointed chairman resources director
Bernard Looney is responsible for BPs and president of BP America, serving
operated production, with specic Executive team tenure
as BPs chief representative in the US. Appointed 1 March 2011
accountability for drilling, operations, In January 2013, he became chief
engineering, procurement and supply executive, Upstream. Outside interests
chain management, and health, safety Non-executive director of Ivoclar
and environment in the Upstream. Vivadent AG
Bernard joined BP in 1991 as a drilling Age 54 Nationality Austrian
engineer, working in the North Sea,
Vietnam and the Gulf of Mexico. In 2001 Career
Bernard took responsibility for drilling Helmut Schuster became group human
operations on Thunder Horse in the resources director in March 2011. In this
deepwater Gulf of Mexico. In 2005 he role he is accountable for the BP human
became senior vice president for BP resources function.
Alaska, before moving in 2007 to be
head of the group chief executives Helmut began his career working for
ofce. In 2009 he became the managing Henkel in a marketing capacity. Since
director of BPs North Sea business in joining BP in 1989 Helmut has held a
the UK and Norway. At the same time, number of major leadership roles within
Bernard became a member of the Oil & Dev Sanyal the organization. He has worked in BP
Gas UK Board the North Sea oil and ofces in the US, the UK and continental
gas trade association. He became Current position Europe and within most parts of
co-chair in mid-2010. Bernard became Executive vice president, strategy and rening, marketing, trading and gas and
executive vice president, developments, regions power. Before taking on his current role,
in October 2010 and took up his current Executive team tenure his responsibilities as a vice president,
role in February 2013. Appointed 1 January 2012 human resources included the rening
and marketing segment of BP, and
Outside interests corporate and functions. That role saw
Independent non-executive director, him leading the people agenda for
Man Group plc. roughly 60,000 people across the globe
Member, Accenture Global Energy that includes businesses such as
Board petrochemicals, fuels value chains,
Member, Board of Advisors of the lubricants and functional experts across
Fletcher School of Law and the group.
Diplomacy
Age 49 Nationality British and Indian
Career
Dev Sanyal is responsible for Europe,
Lamar McKay Asia, strategy and long-term planning,
risk management, government and
political affairs, policy and group The executive team represents the
Current position
integration and governance. principal executive leadership of the
Chief executive, Upstream
Dev joined BP in 1989 and has held a BP group. Its members include
Executive team tenure
variety of international roles in London, BPs executive directors (Bob
Appointed 16 June 2008
Athens, Istanbul, Vienna and Dubai. He Dudley and Dr Brian Gilvary whose
Outside interests was appointed chief executive, BP biographies appear on pages 52-55)
Member of Mississippi State University eastern Mediterranean fuels in 1999. and the senior management listed
Deans Advisory Council He moved to London as chief of staff
left.
of BPs worldwide downstream
Age 56 Nationality American
The ages of the executive team are
correct as at 3 March 2015.
Carl-Henric Svanberg
I believe that the system of governance Chairman
Corporate governance
Ann Dowling 10 10 7 7 5 5 5 5
Brendan Nelson 10 10 13c 13 6 6 5 5
Phuthuma Nhleko5 10 10 13 12 5 5
Andrew Shilston6 10 9 13 12 5 5
Executive directors
Bob Dudley 10 9
Iain Conn 9 9
Brian Gilvary 10 10
A = Total number of meetings the director was eligible to attend.
B = Total number of meetings the director did attend.
C
Committee chairman.
* Includes a joint audit committee-SEEAC meeting to review BPs system of internal control and risk management.
1
Paul Anderson attended all scheduled Gulf of Mexico committee meetings in 2014; however he was unable to attend the meeting on 15 September that was called at short notice due to long-standing
travel arrangements.
2
Antony Burgmans was unable to attend the board teleconference scheduled at short notice on 5 September due to a prior commitment. He was unable to attend the telephone board meeting on 27
October 2014 for health reasons and the board and chairmans committee meeting on 4 December 2014 due to a conict with other board meetings on the same day.
3
Cynthia Carroll was unable to attend the telephone board meeting on 27 October 2014 due to a conicting board meeting.
4
George David was unable to attend the telephone audit committee meeting on 26 February 2014 due to a clash with travel arrangements.
5
Phuthuma Nhleko was unable to attend the telephone audit committee on 24 April due to a clash with the AGM of another company.
6
Andrew Shilston attended all scheduled board and audit committee meetings in 2014; however he was unable to attend the board and audit teleconferences scheduled at short notice on
5 September 2014 due to a prior overseas commitment.
Corporate governance
The evaluation, which considered the work of the board and its
Non-executive directors are expected to attend at least one eld visit per
committees, concluded that the processes of the board had worked well.
year. In 2014 the board visited the Whiting renery in the US and members
The evaluation focused on how the board would continue to ensure that it
of the SEEAC visited BPs operations in Baku and Brazil. After each visit,
was discussing the right issues and that, overall the board was adding
the board or appropriate committee was briefed on the impressions gained
value.
by the directors during the visit.
Reports from the business and on major projects were in very good shape.
On the rapidly shifting economic and geopolitical climate, the board was
Board visit to the Whiting renery keen to ensure that it manages its time to allow appropriate levels of
discussion. The need to balance its monitoring activities with discussion on
Ahead of its meeting in Chicago, the board visited the Whiting renery. strategic matters was recognized and ought to be continually borne in
Directors met the renerys leadership team as well as staff and mind. The future role of technology in delivering BPs strategy was
contractors on-site. They got a rst-hand view of progress on the Whiting highlighted.
renery modernization project and an opportunity to see existing Follow up from our previous evaluation
operations. Following the 2013 evaluation, more agenda time was allocated to the
As well as seeing the application of BPs OMS at the renery, the board development of strategy and governance around capital projects, resulting
also heard details of the role the renery plays in delivering results for in the creation of a regular performance report on the groups major
North America Fuels and the wider BP group. projects. The board also had a detailed brieng on the groups view on
long-term technology trends and examined organizational capability,
including diversity and inclusion, at one of its strategic days.
Institutional investors
Senior management regularly meet with institutional investors through
roadshows, group and one-to-one meetings and events for socially
responsible investors.
During the year the chairman, senior independent director and chairs of the
audit and remuneration committees held individual investor meetings to
discuss strategy, the boards view on BPs performance, governance, audit
and remuneration. An annual investor event was held in March 2014 with
the chairman and all the board committee chairs. This meeting enables
BPs largest shareholders to hear about the work of the board and its
committees and for non-executive directors to engage with investors.
In December the chairman and members of the executive team met with
socially responsible investors as part of BPs annual SRI meeting. The
meeting examined a number of operational and strategic issues, including
how the board looks at risk and strategy, BPs Energy Outlook 2035,
how the company approaches operational risk, upstream contractor
management, technology and BPs portfolio.
See bp.com/investors to download materials from investor presentations,
including the groups nancial results and information on the work of the
board and its committees.
Corporate governance
Code. This process enables the board and its committees to consider the
system of internal control being operated for managing signicant risks,
including strategic, safety and operational and compliance and control
risks, throughout the year. Material joint ventures and associates have
not been dealt with as part of the group in this process.
As part of this process, the board and the audit, Gulf of Mexico and safety,
ethics and environment assurance committees requested, received and
reviewed reports from executive management, including management of
the business segments, corporate activities and functions, at their regular
meetings.
In considering the systems, the board noted that such systems are
designed to manage, rather than eliminate, the risk of failure to achieve
business objectives and can only provide reasonable, and not absolute,
assurance against material misstatement or loss.
During the year, the board through its committees regularly reviewed with
executive management processes whereby risks are identied, evaluated
and managed. These processes were in place for the year under review,
remain current at the date of this report and accord with the guidance on
the UK Corporate Governance Code provided by the Financial Reporting
Council. In December 2014 the board considered the groups signicant
risks within the context of the annual plan presented by the group chief
executive.
A joint meeting of the audit and safety, ethics and environment assurance
committees in January 2015 reviewed a report from the group head of
audit as part of the boards annual review of the risk management and
internal control systems. The report described the annual summary of
group audits consideration of the design and operation of elements of
BPs system of internal control over signicant risks arising in the
categories of strategic and commercial, safety and operational and
compliance and control, and considered the control environment for the
group. The report also highlighted the results of audit work conducted
during the year and the remedial actions taken by management in
response to signicant failings and weaknesses identied.
During the year, these committees engaged with management, group
head of audit and other monitoring and assurance providers (such as the
group ethics and compliance ofcer, head of safety and operational risk
and the external auditor) on a regular basis to monitor the management of
risks. Signicant incidents that occurred and managements response to
them were considered by the appropriate committee and reported to the
board.
In the boards view, the information it received was sufcient to enable it
to review the effectiveness of the companys system of internal control in
accordance with the Internal Control Revised Guidance for Directors
(Turnbull).
Subject to determining any additional appropriate actions arising from
items still in process, the board is satised that, where signicant failings
or weaknesses in internal controls were identied during the year,
appropriate remedial actions were taken or are being taken.
Corporate governance
also examined the groups oil and gas reserves disclosures
that appear in this BP Annual Report and Form 20-F 2014.
Recoverability of asset Determining whether and how much an asset is impaired The committee reviewed the discount rates for impairment
carrying values involves management judgement and estimates on highly testing as part of its annual process and examined the
uncertain matters such as future pricing or discount rates. assumptions for long-term oil and gas prices and rening
Judgements are also required in assessing the recoverability margins, particularly in light of the decline in prices in the latter
of overdue receivables and deciding whether a provision is part of the year. The committee considered the judgements
required. made in assessing the existence of indicators of impairment of
assets as well as the signicant estimates made in the
measurement of the impairment losses recognized. The
committee also continued to discuss periodically with
management the recoverability of overdue receivables.
Provisions and The group holds provisions for the future decommissioning of The committee received briengs on the groups
contingencies oil and natural gas production facilities and pipelines at the decommissioning, environmental remediation and litigation
end of their economic lives. Most of these decommissioning provisioning, including key assumptions used, discount rates
events are in the long term and the requirements that will and the movement in provisions over time.
have to be met when a removal event occurs are uncertain.
Judgement is applied by the company when estimating
issues such as settlement dates, technology and legal
requirements.
Gulf of Mexico oil spill Judgement was applied during the year around the provisions The committee regularly discussed the provisioning for and
and contingencies relating to the incident. the disclosure of contingent liabilities relating to the Gulf of
Mexico oil spill with management, external auditors and
external counsel, including as part of the review of BPs stock
exchange announcement at each quarter end. The committee
examined developments relating to US court rulings (including
Clean Water Act penalties, business and economic loss
settlement payments and natural resource damages) and
monitored legal developments while considering the impact
on the nancial statements and other disclosures.
Pensions and other Accounting for pensions and other post-retirement benets The committee examined the assumptions used by
post-retirement involves judgement about uncertain events, including management as part of its annual reporting process.
benets discount rates, ination and life expectancy.
Taxation Computation of the groups tax expense and liability, the The committee reviewed the judgements exercised on tax
provisioning for potential tax liabilities and the level of deferred provisioning as part of its annual review of key provisions.
tax asset recognition in relation to accumulated tax losses are
underpinned by management judgement.
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Risk reviews The effectiveness of the audit process was evaluated through a survey of
The group risks allocated to the audit committee for monitoring in 2014 the committee and those impacted by the audit. It used a set of criteria to
included those associated with trading activities, compliance with applicable measure the auditors performance against the quality commitment set
laws and regulations and security threats against BPs digital infrastructure. out in their annual audit plan. This related to both the quality of opinion
The committee held in-depth reviews of these group risks over the year. It and of service. This included the robustness of the audit process,
also examined the groups governance of the tax function and its approach independence and objectivity, quality of delivery, quality of people and
to tax planning and reviewed how risk is assessed and considered when service and value added advice. The 2014 evaluation concluded that there
evaluating BPs capital investment projects. was a good quality audit process and that the external auditors were
regarded as technically knowledgeable and unafraid to challenge and
Internal control and risk management
intervene where necessary. Areas of suggested focus for the auditors
The committee reviewed the groups system of internal control and risk
included audit team turnover and the identication of risk areas for audit
management over the year, holding a joint meeting with the SEEAC to
focus. There was also support for the independence of the external
discuss key audit ndings and managements actions to remedy signicant
auditors and feedback that they should continue sharing good industry
issues. The committee reviewed the scope, activity and effectiveness of
practice.
the group audit function and met privately with the general auditor and his
segment and functional heads during the year. The committee held private meetings with the external auditors during the
year and its chair met privately with the external auditor before each
The committee received quarterly reports on the ndings of group audit,
meeting.
on signicant allegations and investigations and on key ethics and
compliance issues. Further joint meetings were held with the SEEAC to Auditor appointment and independence
discuss the annual certication report of compliance with the BP code of The committee considers the reappointment of the external auditor each
conduct and the role and remit of the newly formed business integrity year before making a recommendation to the board and shareholders. It
function. The two committees also met to discuss the group audit and assesses the independence of the external auditor on an ongoing basis
ethics and compliance programmes for 2014. The committee held a private and the external auditor is required to rotate the lead audit partner every
meeting with the group ethics and compliance ofcer during the year. ve years and other senior audit staff every seven years. No partners or
senior staff associated with the BP audit may transfer to the group. The
External audit
current lead partner has been in place since the start of 2013.
The external auditors started the annual cycle with their audit strategy
which identied key risks to be monitored during the year including the Audit tendering
provisions and contingencies related to the Gulf of Mexico oil spill, the During the year the committee considered the groups position on its audit
impact of the estimation of the quantity of oil and gas reserves and services contract taking into account the UK Corporate Governance Code,
resources on impairment testing, depreciation, depletion and amortization the EU Audit Regulation 2014 and the Statutory Audit Service Order 2014,
and decommissioning provisions, unauthorized trading activity and BPs order issued by the UK Competitions and Markets Authority. Having
ability to maintain signicant inuence over Rosneft and consequently our considered the impact of these regimes, the committee concluded that
ability to recognize our share of Rosnefts income, production and the best interests of the group and its shareholders would be served by
reserves. The committee received updates during the year on the audit utilizing the transition arrangements outlined by the Financial Reporting
process, including how the auditors had challenged the groups Council in relation to the governance code and retaining BPs existing audit
assumptions on these issues. rm until the conclusion of the term of its current lead partner. Accordingly
the committee intends that the audit contract will be put out to tender in
The audit committee reviews the fee structure, resourcing and terms of
2016, in order that a decision can be taken and communicated to
engagement for the external auditor annually. Fees paid to the external
shareholders at BPs AGM in 2017; the new audit services contract would
auditor for the year were $53 million, of which 8% was for non-assurance
then be effective from 2018.
work (see Financial statements Note 34). Non-audit or non-audit related
assurance fees were $5 million (2013 $5 million). Non-audit or non-audit
related assurance services consisted of tax compliance services, tax
advisory services and services relating to corporate nance transactions.
The audit committee is satised that this level of fee is appropriate in
respect of the audit services provided and that an effective audit can be
conducted for this fee.
Corporate governance
broader segment and business reviews, undertaking more deep dive
the committee has agreed to pre-approve these services up to an annual
reviews and suggestions for further committee training.
aggregate level. For all other services which fall under the permitted
Corporate governance
investigations reports. t.BSJOFJODJEFOU
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Process safety expert Downstream its work, in particular by giving committee members the ability to examine
Mr Duane Wilson continued to report to the committee in his role as how risk management is being embedded in businesses and facilities,
process safety expert for the Downstream segment. He continues to work including management culture.
with segment management on a worldwide basis (having previously
focused on US reneries) to monitor and advise on the process safety Gulf of Mexico committee
culture and lessons learned across the segment. He twice reported
directly to the SEEAC in 2014 and presented detailed reports on his work
(including reporting on a number of visits he has made to reneries and
other downstream facilities). Mr Wilson will complete his engagement in
April 2015 and delivered his nal report to the SEEAC in January 2015. The
committee wishes to thank him for all of his work during the course of his
engagement and believes he has made a lasting and positive impact on the
process safety culture in the Downstream segment.
Reports from group audit and group ethics and compliance
The committee received quarterly reports from both of these functions.
These included summaries of investigations into signicant alleged fraud or
misconduct (which are now undertaken through the business integrity
team established in 2014). In addition, both the general auditor and the
group ethics and compliance ofcer met in private with the chairman and
other members of the committee.
Field trips
In May the chairman and other members of the committee visited Baku in Chairmans introduction
Azerbaijan to examine both offshore facilities (Central Azeri platform) and The Gulf of Mexico committee continues to oversee the groups response
the onshore gas reception terminal (Sangachal) operated by the group. In to the Deepwater Horizon accident, ensuring that BP fulls all its legitimate
October the chairman and another committee member visited operations obligations while protecting and defending the interests of the group. In the
at the biofuels business in central Brazil. In September all members of the past year the focus has been on the review of ongoing proceedings in
committee visited the Whiting renery in Indiana, US, as part of a larger Multi-District Litigation (MDL) 2179 and 2185, the assessment of natural
board visit. In all cases, the visiting committee members received briengs resource damages, and of a number of other legal proceedings in relation
on operations, the status of local OMS implementation, and risk to the Deepwater Horizon accident.
management and mitigation. Committee members then reported back in
detail about each visit to the committee and subsequently to the board. In I believe the committee has been thorough in the execution of its duties.
addition the local management team reported back to the committee The high frequency of meetings and long tenure of committee
regarding the status of the issues raised during the visit. membership has enabled members to review an evolving and complex
spectrum of issues.
Committee review
Ian Davis
For its 2014 evaluation, the SEEAC examined its performance and Committee chair
effectiveness with a questionnaire administered by external consultants.
The topics covered included the balance of skills and experience among its
Role of the committee
membership, the quality and timeliness of the information the committee
receives, the level of challenge between committee members and The committee was formed in July 2010 to oversee the management and
management and how well the committee communicates its activities and mitigation of legal and licence-to-operate risks arising out of the Deepwater
ndings to the board. Horizon accident and oil spill. Its work is integrated with that of the board,
which retains ultimate accountability for oversight of the groups response to
The evaluation results were generally positive. Committee members the accident.
considered that the committee possessed the right mix of skills and
background, had an appropriate level of support and had received open and
transparent briengs from management. The committee considered that
the eld trips made by its members had become an important element in
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tImpact on nancial reporting.
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Corporate governance
t Evaluate the performance and the effectiveness of the group chief
executive.
t Review the structure and effectiveness of the business organization.
Chairmans introduction t Review the systems for senior executive development and determine
the succession plan for the group chief executive, the executive
I am pleased to report on the two board committees that I chair. Both have directors and other senior members of executive management.
been active during the year in seeking to develop the membership of the t Determine any other matter that is appropriate to be considered
board and its governance. by all of the non-executive directors.
Nomination committee t Opine on any matter referred to it by the chairman of any committees
comprised solely of non-executive directors.
Role of the committee
Members
The committee ensures an orderly succession of candidates for directors
The committee comprises all the non-executive directors who join
and the company secretary.
the committee at the date of their appointment to the board. The chief
Key responsibilities executive attends the committee when requested.
t Identify, evaluate and recommend candidates for appointment or Activities during the year
reappointment as directors.
The committee met ve times in the year to:
t Identify, evaluate and recommend candidates for appointment as
company secretary. t Assess the effect of sanctions on Russia on BPs relationship
t Keep under review the mix of knowledge, skills and experience of the with Rosneft.
board to ensure the orderly succession of directors. t Monitor the progress of the Gulf of Mexico litigation.
t Review the outside directorship/commitments of the non-executive t Determine the framework for board evaluation in 2015.
directors. t Review the background to the 2015 plan in light of the decline
in oil prices.
Members t Consider the chief executives plans for the succession and organization
Name Membership status of the executive team.
t Evaluate the performance of the chairman and chief executive.
Carl-Henric Svanberg (chair) Member since September 2009;
committee chair since January 2010
Paul Anderson Member since April 2012
Antony Burgmans Member since May 2011
Cynthia Carroll Member since May 2011
Ian Davis Member since August 2010
Brendan Nelson Member since April 2012
Corporate governance
The committee believes that this represents a fair outcome for a our approach in this changing world. It is likely that, within our policy, we
continually improving performance over the period. Again, there is will need to exercise judgement and discretion based on solid data. Should
retrospective disclosure of many of the targets used for the 2012-2014 we be required to do so, it will be done within our policy and with
performance share plan in this report. subsequent disclosure so that our shareholders are clear on the decisions
that we have taken.
2015 and the future Finally, I will be standing down as the chair of the committee in June and I
During 2014, BP set out a clear proposition to shareholders aimed at will be succeeded by Professor Dame Ann Dowling. Ann has sat on the
delivering value rather than volume through active portfolio management, committee after joining the board in 2012 and I look forward to introducing
growing sustainable free cash ow through capital discipline and growing her to our shareholders. I would like to thank our shareholders for the
distributions for shareholders. The companys key performance indicators support, and the challenge, over the past four years.
(KPIs) are designed to measure performance against this proposition. The
committee is determined that the remuneration of the directors remains
clearly linked to the companys strategy. There has been a refocus of some Antony Burgmans
of the measures for the 2015 annual bonus to reect this and the current Chairman of the remuneration committee
short-term imperatives facing BP. The graphic below sets out BPs 3 March 2015
strategic priorities and links them to the measures used for short and long
term remuneration with further detail in this report.
Previously, the committee reviewed the executive directors salaries in
May each year. In future, it will do so in January for implementation in April,
at the same time as the rest of the organization. Given the general company
pay freeze, no salary increases were awarded to directors for 2015.
Strategic priorities
Focus on
Grow our high-value
Safe, reliable and exploration upstream Advanced
compliant operations position assets technology
Clear priorities Quality portfolio Distinctive capabilities
Competitive Disciplined Build high-quality Proven Strong
project nancial downstream businesses expertise relationships
execution choices
Underlying replacement
Net investment (organic) Total shareholder return
cost prot
Major projects delivery Corporate and functional costs Major projects delivery Reserves replacement
Group key performance indicator. Safety and operational risk KPIs include loss of primary containment, tier 1 process safety events and recordable
injury frequency.
Corporate governance
environmental sustainability performance over the period 2012 through to
Vested equity
Deferred bonus and matchb $3,401 $0 0 0 1,698 242
Performance shares $6,391c $5,963d 1,904c 505 2,014c 1,688d
Total $9,792 $5,963 1,904 505 3,712 1,930
Annual bonus
Provides a variable level of remuneration dependent on short-term performance against the annual plan.
Policy summary
Operation and opportunity
t 5
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reects BPs strategy.
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nature of the measure in question.
Performance framework
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recordable injury frequency and tier 1 process safety events.
t 5 IFQSJODJpal measures of annual bonus will be based on value creation and may include nancial measures such as operating cash ow,
replacement cost operating prot and cost management, as well as operating measures such as major project delivery, downstream net income
per barrel and upstream unplanned deferrals. The specic metrics chosen each year will be set out and explained in the annual report on
remuneration.
Framework Value made up 70% of group annual bonus objectives. Measures included
The committee determined performance measures and their weightings delivering operating cash ow in line with the 10-point plan; increasing
for the 2014 annual bonus at the beginning of the performance year, underlying replacement cost prot; reducing corporate and functional
focusing on two key priorities: safety and value. costs; improving operating efciency in upstream operations by minimizing
unplanned deferrals; completing major projects planned within the year;
Performance measures remained largely unchanged from last year in order
and delivering downstream prot per barrel of rening capacity.
to maintain continuity and build momentum for delivery of the 10-point
plan. Measures and targets reected the business plan for the year and Iain Conns annual bonus was based 70% against the group annual bonus
were set so that meeting plan would result in an on target bonus reward. objectives and 30% against safety, operating efciency and protability
performance of the downstream segment.
Bob Dudley and Dr Brian Gilvarys annual bonus was based 100% on
group annual bonus objectives.
Safety made up 30% of group annual bonus objectives. Safety measures
related to loss of primary containment, tier 1 process safety events and
recordable injury frequency. Challenging targets for these measures were
set, both to build on the improving trend of the last three years and to
continue to reduce the number of safety events.
Corporate governance
Underlying replacement cost prot of $12.1 billion was below target of
A summary of the outcomes for each measure, set against the target for
$14.5 billion. Through greater simplication and efciency across all
the year, is shown below.
functions, corporate and functional costs were reduced by 9% against a
Tier 1 Corporate
Measures Loss of process Recordable Operating Underlying and Downstream Major Upstream Total
primary safety injury cash replacement functional net income/ project unplanned
containment eventsa frequency owb cost protb costs bblb delivery deferrals
Weight
On target 10% 10% 10% 16.33% 16.33% 16.33% 7% 7% 7% 100%
Maximum 20% 20% 20% 32.67% 32.67% 32.67% 14% 14% 14% 200%
110% =
Weighted
outcome %
7.96 Nil 6.07 32.67 13.78 28.26 4.77 10.50 5.95 score
1.10
32.67%
28.26%
Target
Met
Not met 13.78%
Group key 10.50%
7.96%
performance 0% 6.07% 5.95%
indicator
4.77%
7% 6 project 9%
Plan/target 3-10% improvement $30bn $14.5bn $6.4/bbl
reduction start-ups reduction
0.307 per 9% 7 project 6%
Outcome 246 events 28 events $32.8bn $12.1bn $4.4/bbl
200k hrs reduction start-ups reduction
a
Dened by American Petroleum Institute (API).
b
Assessment of the nancial outcomes was done using the same conditions as the targets were set at oil price, rening margin and other environmental factors were taken into account.
The overall bonus for directors was determined by multiplying the group Annual bonus summary
score of 1.10 times target by the on-target bonus level of 150% of salary. Overall bonus Paid in cash Deferred in BP shares
Bob Dudleys total overall bonus was 165% of salary, as was Dr Brian Bob Dudley $3,014,550 $1,004,850 $2,009,700
Gilvarys. Iain Conns total overall bonus was 159% of salary, based on Dr Brian Gilvary 1,189,238 396,413 792,825
both group and downstream segment performance (accounting for 30% of
Iain Conn 1,252,480 1,252,480 0
his bonus). Under the terms of the deferred element of the EDIP, one third
of the total bonus is paid in cash. A director is required to defer a further
third and the nal third is paid either in cash or voluntarily deferred at the
individuals election.
Bob Dudley and Dr Brian Gilvary have both elected to defer the nal third of
their annual bonus. Iain Conn, who left at the end of the year, was not
eligible for deferral and so all his bonus (reecting his 12 months of service)
was paid in cash. The following table outlines the amounts paid in cash and
amounts deferred into shares.
Deferred bonus
Reinforces the long-term nature of the business and the importance of sustainability, linking a further part of remuneration to equity.
Policy summary
Operation and opportunity
t " UIJSEPGthe annual bonus is required to be deferred and up to a further third can be deferred voluntarily. This deferred bonus is awarded in shares.
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the committee of safety and environmental sustainability over the three-year period.
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retention period.
Performance framework
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in safety and environmental management then the committee, with advice from the safety, ethics and environmental assurance committee, may
conclude that shares vest in part, or not at all.
t "MMEFGFSSFETIBSFTBSFTVCKFDUUPDMBXCBDLQSPWJTJPOTJGUIFZBSFGPVOEUPIBWFCFFOHSBOUFEPOUIFCBTJTPGNBUFSJBMMZNJTTUBUFEmOBODJBMPSPUIFSEBUB
Corporate governance
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fourth or fth position.