BP 2013 Annual Report Download - page 257

bExpected payments include interest totalling $336 million ($39 million in 2014, $35 million in 2015, $33 million in 2016, $30 million in 2017, $28 million in 2018 and $171 million thereafter).
cThe amounts are undiscounted. Environmental liabilities include those relating to the Gulf of Mexico oil spill, including liabilities for spill response costs.
dRepresents the expected future contributions to funded pension plans and payments by the group for unfunded pension plans and the expected future payments for other post-retirement benefits.
eThe future minimum lease payments are before deducting related rental income from operating sub-leases. In the case of an operating lease entered into solely by BP as the operator of a joint
operation, the amounts shown in the table represent the net future minimum lease payments, after deducting amounts reimbursed, or to be reimbursed, by joint operation partners. Where BP is not
the operator of a joint operation BP’s share of the future minimum lease payments are included in the amounts shown, whether BP has co-signed the lease or not. Where operating lease costs are
incurred in relation to the hire of equipment used in connection with a capital project, some or all of the cost may be capitalized as part of the capital cost of the project.
f Represents any agreement to purchase goods or services that is enforceable and legally binding and that specifies all significant terms. The amounts shown include arrangements to secure long-term
access to supplies of crude oil, natural gas, feedstocks and pipeline systems. In addition, the amounts shown for 2014 include purchase commitments existing at 31 December 2013 entered into
principally to meet the group’s short-term manufacturing and marketing requirements. The price risk associated with these crude oil, natural gas and power contracts is discussed in Financial
statements – Note 19.
The following table summarizes the nature of the group’s unconditional purchase obligations.
$ million
Payments due by period
Unconditional purchase obligations Total 2014 2015 2016 2017 2018
2019 and
thereafter
Crude oil and oil products 133,774 84,558 13,854 9,026 6,533 5,281 14,522
Natural gas 37,005 23,417 5,612 2,751 1,768 1,309 2,148
Chemicals and other refinery feedstocks 17,005 3,976 3,190 2,590 2,306 2,248 2,695
Power 3,208 2,067 794 250 97 — —
Utilities 796 200 168 108 83 73 164
Transportation 22,727 1,589 1,084 965 1,041 1,031 17,017
Use of facilities and services 18,242 1,049 685 503 447 745 14,813
Total 232,757 116,856 25,387 16,193 12,275 10,687 51,359
The information above contains forward-looking statements, which by their nature involve risk and uncertainty because they relate to events and
depend on circumstances that will or may occur in the future and are outside the control of BP. You are urged to read the cautionary statement on
page 271 and Risk factors on page 51, which describe the risks and uncertainties that may cause actual results and developments to differ materially
from those expressed or implied by these forward-looking statements.
Regulation of the group’s business
BP’s activities, including its oil and gas exploration and production,
pipelines and transportation, refining and marketing, petrochemicals
production, trading, alternative energy and shipping activities, are
conducted in many different countries and are subject to a broad range
of EU, US, international, regional and local legislation and regulations,
including legislation that implements international conventions and
protocols. These cover virtually all aspects of BP’s activities and include
matters such as licence acquisition, production rates, royalties,
environmental, health and safety protection, fuel specifications and
transportation, trading, pricing, anti-trust, export, taxes and foreign
exchange.
The terms and conditions of the leases, licences and contracts under
which our oil and gas interests are held vary from country to country.
These leases, licences and contracts are generally granted by or
entered into with a government entity or state-owned or controlled
company and are sometimes entered into with private property owners.
Arrangements with governmental or state entities usually take the form
of licences or production-sharing agreements (PSAs), although
arrangements with the US government can be by lease. Arrangements
with private property owners are usually in the form of leases.
Licences (or concessions) give the holder the right to explore for and
exploit a commercial discovery. Under a licence, the holder bears the
risk of exploration, development and production activities and provides
the financing for these operations. In principle, the licence holder is
entitled to all production, minus any royalties that are payable in kind. A
licence holder is generally required to pay production taxes or royalties,
which may be in cash or in kind. Less typically, BP may explore for and
exploit hydrocarbons under a service agreement with the host entity in
exchange for reimbursement of costs and/or a fee paid in cash rather
than production.
PSAs entered into with a government entity or state-owned or
controlled company generally require BP to provide all the financing and
bear the risk of exploration and production activities in exchange for a
share of the production remaining after royalties, if any.
In certain countries, separate licences are required for exploration and
production activities and, in certain cases, production licences are
limited to only a portion of the area covered by the original exploration
licence. Both exploration and production licences are generally for a
specified period of time. In the US, leases from the US government
typically remain in effect for a specified term, but may be extended
beyond that term as long as there is production in paying quantities. The
term of BP’s licences and the extent to which these licences may be
renewed vary from country to country.
Frequently, BP conducts its exploration and production activities in joint
arrangements or co-ownership arrangements with other international oil
companies, state-owned or controlled companies and/or private
companies. These joint arrangements may be incorporated or
unincorporated arrangements, while the co-ownerships are typically
unincorporated. Whether incorporated or unincorporated, relevant
agreements set out each party’s level of participation or ownership
interest in the joint arrangement or co-ownership. Conventionally, all
costs, benefits, rights, obligations, liabilities and risks incurred in carrying
out joint-arrangement or co-ownership operations under a lease or licence
are shared among the joint-arrangement or co-owning parties according to
these agreed ownership interests. Ownership of joint-arrangement or
co-owned property and hydrocarbons to which the joint arrangement or
co-ownership is entitled is also shared in these proportions. To the extent
that any liabilities arise, whether to governments or third parties, or as
between the joint arrangement parties or co-owners themselves, each
joint arrangement party or co-owner will generally be liable to meet these
in proportion to its ownership interest. In many upstream operations, a
party (known as the operator) will be appointed (pursuant to a joint
operating agreement (JOA)) to carry out day-to-day operations on behalf of
the joint arrangement or co-ownership. The operator is typically one of the
joint arrangement parties or a co-owner and will carry out its duties either
through its own staff, or by contracting out various elements to third-party
contractors or service providers. BP acts as operator on behalf of joint
arrangements and co-ownerships in a number of countries where we
have exploration and production activities.
Frequently, work (including drilling and related activities) will be contracted
out to third-party service providers who have the relevant expertise and
equipment not available within the joint arrangement or the co-owning
operator’s organization. The relevant contract will specify the work to be
done and the remuneration to be paid and typically will set out how major
risks will be allocated between the joint arrangement or co-ownership and
the service provider. Generally, the joint arrangement or co-owner and the
contractor would respectively allocate responsibility for and provide
reciprocal indemnities to each other for harm caused to their respective
staff and property. Depending on the service to be provided, an oil and
gas industry service contract may also contain provisions allocating risks
and liabilities associated with pollution and environmental damage,
damage to a well or hydrocarbon reservoir and for claims from third
Additional disclosures
BP Annual Report and Form 20-F 2013 253