BP 2013 Annual Report Download - page 256

Environmental expenditure
$ million
2013 2012 2011
Environmental expenditure relating to
the Gulf of Mexico oil spill (66) 919 1,838
Operating expenditure 657 742 704
Capital expenditure 1,091 1,207 819
Clean-ups 42 47 53
Additions to environmental remediation
provision 472 549 512
Additions to decommissioning provision 2,092 3,766 4,595
Environmental expenditure relating to the Gulf of
Mexico oil spill
The environmental expenditure credit of $66 million relating to the Gulf
of Mexico oil spill arises primarily from the write-back of a spill response
provision. For full details of all environmental activities in relation to the
Gulf of Mexico oil spill, see Financial statements – Note 2.
Other environmental expenditure
Operating and capital expenditure on the prevention, control, abatement
or elimination of air, water and solid waste pollution is often not incurred
as a separately identifiable transaction. Instead, it forms part of a larger
transaction that includes, for example, normal maintenance
expenditure. The figures for environmental operating and capital
expenditure in the table are therefore estimates, based on the
definitions and guidelines of the American Petroleum Institute.
Environmental operating expenditure of $657 million in 2013 was lower
than in 2012 and 2011. This is primarily due to the divestment of the
Texas City and Carson refineries during 2013.
Capital expenditure in 2013 was lower than in 2012 principally due to
reduced levels of construction activity at our Whiting refinery in 2013 as
compared to 2012. All of the major new units associated with the
Whiting refinery modernization project were progressively
commissioned during 2013 with the final major unit being brought
onstream in December. Similar levels of operating and capital
expenditures are expected in the foreseeable future.
In addition to operating and capital expenditures, we also establish
provisions for future environmental remediation. Expenditure against such
provisions normally occurs in subsequent periods and is not included in
environmental operating expenditure reported for such periods.
Provisions for environmental remediation are made when a clean-up is
probable and the amount of the obligation can be reliably estimated.
Generally, this coincides with the commitment to a formal plan of action
or, if earlier, on divestment or on closure of inactive sites.
The extent and cost of future environmental restoration, remediation
and abatement programmes are inherently difficult to estimate. They
often depend on the extent of contamination, and the associated impact
and timing of the corrective actions required, technological feasibility
and BP’s share of liability. Though the costs of future programmes
could be significant and may be material to the results of operations in
the period in which they are recognized, it is not expected that such
costs will be material to the group’s overall results of operations or
financial position.
Additions to our environmental remediation provision decreased in 2013
largely due to scope reassessments of the remediation plans of a
number of our sites in the US and Canada. The charge for
environmental remediation provisions in 2013 included $13 million in
respect of provisions for new sites (2012 $19 million and 2011
$12 million).
In addition, we make provisions on installation of our oil- and gas-
producing assets and related pipelines to meet the cost of eventual
decommissioning. On installation of an oil or natural gas production
facility a provision is established that represents the discounted value of
the expected future cost of decommissioning the asset.
In 2013 additions to the decommissioning provision were less than in
2012, and were driven by detailed reviews of expected future costs,
and to a lesser extent increases to the asset base. The additions in
2011 and 2012 were driven by changes in estimation and detailed
reviews of expected future costs. The majority of these additions
related to our sites in Trinidad, the Gulf of Mexico, Alaska, Angola and
the North Sea.
In 2011 and 2012, the Gulf of Mexico was impacted by the Bureau of
Ocean Energy Management, Regulation and Enforcement’s (BOEMRE)
Notice to Lessees (NTL) 2010-G05, issued in October 2010, which
requires that idle infrastructure on active leases be decommissioned
earlier than previously was required and establishes guidelines to
determine the future utility of idle infrastructure on active leases.
We undertake periodic reviews of existing provisions. These reviews
take account of revised cost assumptions, changes in decommissioning
requirements and any technological developments.
Provisions for environmental remediation and decommissioning are
usually established on a discounted basis, as required by IAS 37
‘Provisions, Contingent Liabilities and Contingent Assets’.
Further details of decommissioning and environmental provisions
appear in the financial statements – Note 29.
Contractual obligations
The following table summarizes the group’s principal contractual obligations at 31 December 2013, distinguishing between those for which a liability is
recognized on the balance sheet and those for which no liability is recognized. Further information on borrowings is given in Financial statements –
Note 27 and more information on operating leases is given in Financial statements – Note 9.
$ million
Payments due by period
Expected payments by period under contractual obligations Total 2014 2015 2016 2017 2018
2019 and
thereafter
Balance sheet obligations
Borrowingsa51,393 8,186 7,307 7,275 6,263 5,607 16,755
Finance lease future minimum lease paymentsb871 8075666360527
Decommissioning liabilitiesc20,850 988 731 699 568 865 16,999
Environmental liabilitiesc3,546 861 1,277 281 267 186 674
Pensions and other post-retirement benefitsd24,145 1,916 1,904 1,894 1,633 1,325 15,473
100,805 12,031 11,294 10,215 8,794 8,043 50,428
Off-balance sheet obligations
Operating lease future minimum lease paymentse19,186 5,188 3,790 2,871 2,117 1,630 3,590
Unconditional purchase obligationsf232,757 116,856 25,387 16,193 12,275 10,687 51,359
251,943 122,044 29,177 19,064 14,392 12,317 54,949
Total 352,748 134,075 40,471 29,279 23,186 20,360 105,377
aExpected payments include interest totalling $3,736 million ($846 million in 2014, $717 million in 2015, $588 million in 2016, $468 million in 2017, $360 million in 2018 and $757 million thereafter).
252 BP Annual Report and Form 20-F 2013