BP 2010 Annual Report Download - page 201

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Notesonnancialstatements
Financial statements
37.Provisions
 $million
Litigation and Clean Water
Decommissioning Environmental Spill response claims Act penalties Other Total
At1January2010  9,020 1,719 – 1,076 – 2,815 14,630
Exchangeadjustments  (114) – – (7) – (50) (171)
Acquisitions  188 – – 2 – 15 205
Neworincreasedprovisions  1,800 1,290 10,883 15,171 3,510 808 33,462
Write-backofunusedprovisions  (12) (120) – (51) – (466) (649)
Unwindingofdiscount  168 29 – 18 – 19 234
Changeindiscountrate  444 22 – 9 – (6) 469
Utilization   (164) (460) (9,840) (4,250) – (755) (15,469)
Reclassiedasliabilitiesdirectlyassociatedwith
 assetsheldforsale  (381) (1) – – – (1) (383)
Deletions   (405) (14) – (1) – (1) (421)
At31December2010  10,544 2,465 1,043 11,967 3,510 2,378 31,907
Ofwhich–current  432 635 982 7,011 – 429 9,489
   –non-current  10,112 1,830 61 4,956 3,510 1,949 22,418
   
 $million
        Decommissioning Environmental Litigation Other Total
At1January2009    8,418 1,691 1,446 2,098 13,653
Exchangeadjustments    398 15 22 29 464
Neworincreasedprovisions    169 588 302 1,256 2,315
Write-backofunusedprovisions    – (259) (99) (228) (586)
Unwindingofdiscount    184 32 15 16 247
Changeindiscountrate    324 18 (35) 8 315
Utilization     (383) (308) (574) (361) (1,626)
Deletions     (90) (58) (1) (3) (152)
At31December2009    9,020 1,719 1,076 2,815 14,630
Ofwhich–current    287 368 433 572 1,660
   –non-current    8,733 1,351 643 2,243 12,970

Thegroupmakesfullprovisionforthefuturecostofdecommissioningoilandnaturalgasproductionfacilitiesandrelatedpipelinesonadiscountedbasison
theinstallationofthosefacilities.Theprovisionforthecostsofdecommissioningtheseproductionfacilitiesandpipelinesattheendoftheireconomiclives
hasbeenestimatedusingexistingtechnology,atcurrentpricesorfutureassumptions,dependingontheexpectedtimingoftheactivity,anddiscounted
usingarealdiscountrateof1.5%(20091.75%).Thesecostsaregenerallyexpectedtobeincurredoverthenext30years.Whiletheprovisionisbasedon
thebestestimateoffuturecostsandtheeconomiclivesofthefacilitiesandpipelines,thereisuncertaintyregardingboththeamountandtimingofthese
costs.
Provisionsforenvironmentalremediationaremadewhenaclean-upisprobableandtheamountoftheobligationcanbeestimatedreliably.
Generally,thiscoincideswithcommitmenttoaformalplanofactionor,ifearlier,ondivestmentoronclosureofinactivesites.Theprovisionfor
environmentalliabilitieshasbeenestimatedusingexistingtechnology,atcurrentpricesanddiscountedusingarealdiscountrateof1.5%(20091.75%).
Themajorityofthesecostsareexpectedtobeincurredoverthenext10years.Theextentandcostoffutureremediationprogrammesareinherently
difculttoestimate.Theydependonthescaleofanypossiblecontamination,thetimingandextentofcorrectiveactions,andalsothegroup’sshareofthe
liability.
Thelitigationcategoryincludesprovisionsformattersrelatedto,forexample,commercialdisputes,productliability,andallegationsofexposures
ofthirdpartiestotoxicsubstances.Includedwithintheothercategoryat31December2010areprovisionsfordeferredemployeecompensationof
$728million(2009$789million)andforexpectedrentalshortfallsonsurpluspropertiesof$45million(2009$246million).Theseprovisionsarediscounted
usingeitheranominaldiscountrateof3.75%(20094.0%)orarealdiscountrateof1.5%(20091.75%),asappropriate.
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BPAnnualReportandForm20-F2010 199