BP 2010 Annual Report Download - page 51

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Businessreview
Business review
Alaska
BPownsa46.9%interestintheTrans-AlaskaPipelineSystem(TAPS),with
thebalanceownedbyfourothercompanies.BPalsoownsa50%interest
inajointventurecompanycalled‘Denali–TheAlaskaGasPipeline’(Denali).
Theremaining50%ofDenaliisownedbyasubsidiaryofConocoPhillips.
TheproposedDenaliprojectconsistsofagastreatmentplant(GTP)on
Alaska’sNorthSlope,transmissionlinesfromthePrudhoeBayandPoint
ThomsoneldstotheGTP,anAlaskamainlinethatwouldrunfromthe
NorthSlopeofAlaskatotheAlaska-Yukonborder,andaCanadamainline
thatwouldtransportgasfromtheAlaska-YukonbordertoAlberta.Also
includedaredeliverypointsalongtheroutetohelpmeetlocalnaturalgas
demandinAlaskaandCanada.Denali’scostestimatefortheGTPand
pipelinesisapproximately$35billion.
• Denaliconductedconcurrent90-dayopenseasonbiddingprocesses
forboththeUSandCanadianportionsoftheDenaliprojectduringthe
thirdquarterof2010,thebiddingforeachconcludedon4October
2010.Conditionalbidswerereceivedforsignicantcapacityfrom
potentialshippers.Attheendof2010,Denaliisevaluatingthebids
received,andcondentialnegotiationswithpotentialshipperscontinue
inanefforttoreachbindingagreements.Ifagreementscanbe
concludedforsufcientcapacity,Denaliwillseekcerticationfromthe
FederalEnergyRegulatoryCommission(FERC)oftheUSandthe
NationalEnergyBoard(NEB)ofCanadatomoveforwardwithproject
construction.Denaliwouldmanagetheproject,andwouldownand
operatethepipelinewhencompleted.BPmayconsiderotherequity
participants,includingpipelinecompanies,thatcanaddvaluetothe
projectandhelpmanagetherisksinvolved.
• On12January2010,anagreementtosettlechallengestoTAPScarrier
interstatetariffratelingsforthecalendaryear2008andthersthalfof
2009wassignedbytheTAPScarriersandthosechallengingthetariffs
attheUSFERC.TheagreementwasapprovedbytheUSFERCon
1April2010.Underthetermsofthesettlement,inthesecondquarter
of2010BPpaidadditionalrefundstothird-partyshippers,amounting
to$0.4million,representingthe$0.12/bbldifferencebetweenthe
$3.45/bbltariffrateonwhichtheinterimrefundspaidin2009forthis
periodwerebased,andthe$3.33/bbltariffrateintheapproved
settlementagreement.
North Sea
IntheUKsectoroftheNorthSea,BPoperatestheFortiesPipelineSystem
(FPS)(BP100%),anintegratedoilandNGLstransportationandprocessing
systemthathandlesproductionfrommorethan50eldsintheCentral
NorthSea.Thesystemhasacapacityofmorethan1millionbarrelsper
day,withaveragethroughputin2010of598mboe/d.BPalsooperatesand
hasa29.5%interestintheCentralAreaTransmissionSystem(CATS),a
400-kilometrenaturalgaspipelinesysteminthecentralUKsectorofthe
NorthSea.Thepipelinehasatransportationcapacityof1,700mmcf/dtoa
naturalgasterminalatTeessideinnorth-eastEngland.CATSoffersnatural
gastransportationandprocessingservices.Inaddition,BPoperatesthe
Dimlington/Easingtongasprocessingterminal(BP100%)onHumberside
andtheSullomVoeoilandgasterminalinShetland.
Asia
BP,asoperator,holdsa30.1%interestinandmanagestheBaku-Tbilisi-
Ceyhan(BTC)oilpipeline.The1,768-kilometrepipelinetransportsoilfrom
theBP-operatedACGoileldintheCaspianSeatotheeastern
MediterraneanportofCeyhan.BPistechnicaloperatorof,andholdsa
25.5%interestin,the693-kilometreSouthCaucasusPipeline(SCP),which
takesgasfromAzerbaijanthroughGeorgiatotheTurkishborder.Inaddition,
BPoperatestheAzerbaijansectionoftheWesternExportRoutePipeline
betweenAzerbaijanandtheBlackSeacoastofGeorgia(asoperatorof
AzerbaijanInternationalOperatingCompany).
On21July2010,theBTCpipelineexceededadailyaverageof
1millionbarrelsperdayforthersttime,recordingadailyexportgureof
1.057millionbarrels.ADragReducingAgent(DRA)wasutilizedtoachieve
thismilestone.
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Liqueed natural gas
OurLNGactivitiesarefocusedonbuildingcompetitivelyadvantaged
liquefactionprojects,establishingdiversiedmarketpositionstocreate
maximumvalueforourupstreamnaturalgasresourcesandcapturing
third-partyLNGsupplytocomplementourequityows.
Assetsandsignicanteventsin2010included:
• InTrinidad,BP’snetshareofthecapacityofAtlanticLNGTrainsa
1,2,3and4is6milliontonnesofLNGperyear(292billioncubicfeet
equivalentregasied).AlloftheLNGfromAtlanticTrain1andmostof
theLNGfromTrains2and3issoldtothirdpartiesintheUSandSpain
underlong-termcontracts.AllofBP’sLNGentitlementfromAtlantic
LNGTrain4andsomeofitsLNGentitlementfromTrains2and3is
marketedviaBP’sLNGmarketingandtradingbusinesstoavarietyof
marketsincludingtheUS,theDominicanRepublic,Spain,theUKand
theFarEast.
• Wehavea10%equityshareholdingintheAbuDhabiGasLiquefaction
Company,whichin2010supplied5.85milliontonnes(302,231mmscf)
ofLNG.
• BPhasa13.6%shareintheAngolaLNGproject,whichisexpectedto
receiveapproximately1billioncubicfeetofassociatedgasperdayfrom
offshoreproducingblocksandtoproduce5.2milliontonnesperyearof
LNG(gross),aswellasrelatedgasliquidsproducts.Constructionand
implementationoftheprojectisproceedingandtheplantisexpectedto
startupin2012.
• InIndonesia,BPisinvolvedintwoofthethreeLNGcentresinthe
country.BPparticipatesinIndonesia’sLNGexportsthroughitsholdings
intheSanga-SangaPSA(BP38%).Sanga-Sangacurrentlydelivers
around13%ofthetotalgasfeedtoBontang,oneoftheworld’slargest
LNGplants.TheBontangplantproducedmorethan17milliontonnesof
LNGin2010.
• AlsoinIndonesia,BPhasitsrstoperatedLNGplant,Tangguh
(BP37.16%),inPapuaBarat.TherstphaseofTangguh,whichisinits
rstfullyearofoperations,comprisestwooffshoreplatforms,two
pipelinesandanLNGplantwithtwoproductiontrainswithatotalcapacity
of7.6mtpa.TheTangguhprojecthassixlong-termcontractsinplaceto
supplyLNGtocustomersinChina,SouthKorea,MexicoandJapan.
• InAustralia,weareoneofsevenpartnersintheNWSventure.Thejoint
ventureoperationcoversoffshoreproductionplatforms,trunklines,
onshoregasandLNGprocessingplantsandLNGcarriers.BP’snet
shareofthecapacityofNWSLNGTrains1-5is2.7mtpaofLNG.
• BPhasa30%equitystakeinthe7mtpacapacityGuangdongLNG
regasicationandpipelineprojectinsouth-eastChina,makingitthe
onlyforeignpartnerinChina’sLNGimportbusiness.Theterminalis
alsosuppliedunderalong-termcontractwithAustralia’sNWSproject.
• InboththeAtlanticandAsianregions,BPismarketingLNGusingBP
LNGshippingandcontractualrightstoaccessimportterminalcapacity
intheliquidmarketsoftheUS(viaCovePointandElbaIsland),theUK
(viatheIsleofGrain)andItaly(Rovigo),andissupplyingAsian
customersinJapan,SouthKoreaandTaiwan.
Gas marketing and trading activities
Gasandpowermarketingandtradingactivityisundertakenprimarilyinthe
US,CanadaandEuropetomarketbothBPproductionandthird-party
naturalgas,supportLNGactivitiesandmanagemarketpricerisk,aswellas
tocreateincrementaltradingopportunitiesthroughtheuseofcommodity
derivativecontracts.Additionally,thisactivitygeneratesfeeincomeand
enhancesmarginsfromsourcessuchasthemanagementofpriceriskon
behalfofthird-partycustomers.Thesemarketsarelarge,liquidandvolatile.
Marketconditionshavebecomemorechallengingoverthepastyeardueto
theaccessibilityofshalegasandincreasedpipelinebuildsinNorth
America.Thishasresultedinlimitedbasisdifferentialsandfaster
productionresponsestoprice.However,newmarketsarecontinuingto
developwithcontinentalEuropeanmarketsopeningupandLNGbecoming
moreliquid.Thesupplyandtradingfunctionsupportedthegroupthrougha
periodofuncertaintyinthecreditmarketsconcerningBP’snancial
positionduringtheGulfofMexicooilspill.
aSeefootnoteaonpage48.
BPAnnualReportandForm20-F2010 49