BP 2013 Annual Report Download - page 34

BP Annual Report and Form 20-F 201330
Discovering gas in India
In India, one of the fastest growing economies in the world, we operate
across the full gas value chain as part of our strategic alliance with
Reliance Industries. The relationship gives us a 30% share of key
deepwater basin blocks off the country’s east coast.
In 2013 we made two significant gas and condensate discoveries in the
Krishna-Godavari basin and the Cauvery basin, a key milestone for our
partnership with Reliance. Along with our exploration efforts to find new
oil and gas, we aim to add value to our existing production in India by
developing the gas we have already discovered.
These resources have the potential to help meet India’s growing
demand for energy, increasing gas supplied to market from 2018
onwards and improving energy security in the country.
We continue to grow our exploration position using our leading
subsurface capabilities.
2013 2012 2011
Production (net of royalties)a
Liquidsbthousand barrels per day
Subsidiaries 879 896 992
Equity-accounted entities 297 284 294
1,176 1,179 1,285
Natural gas million cubic feet per day
Subsidiaries 5,845 6,193 6,393
Equity-accounted entities 415 416 415
6,259 6,609 6,807
Total hydrocarbonscthousand barrels of oil equivalent per day
Subsidiaries 1,887 1,963 2,094
Equity-accounted entities 369 355 366
2,256 2,319 2,460
a Includes BP’s share of production of equity-accounted entities in the Upstream segment.
Because of rounding, some totals may not agree exactly with the sum of their component parts.
b Liquids comprise crude oil, condensate and NGLs.
c Natural gas is converted to oil equivalent at 5.8 billion cubic feet = 1 million barrels.
Our total hydrocarbon production during 2013 averaged 2,256 thousand
barrels of oil equivalent per day (mboe/d). This comprised 1,887mboe/d
for subsidiaries and 369mboe/d for equity-accounted entities, a
decrease of 4% (decreases of 2% for liquids and 6% for gas) and an
increase of 4% (increase of 5% for liquids and no change for gas)
respectively compared with 2012. More information on production can
be found in Oil and gas disclosures for the group on page 245.
In aggregate, after adjusting for the impact of price movements on our
entitlement to production in our PSAs and the effect of acquisitions and
disposals, underlying production was 3.2% higher compared with 2012.
This primarily reflects new major project volumes in Angola, the North
Sea and the Gulf of Mexico.
The group and its equity-accounted entities have numerous long-term
sales commitments in their various business activities, all of which are
expected to be sourced from supplies available to the group that are not
subject to priorities, curtailments or other restrictions. No single
contract or group of related contracts is material to the group.
Gas marketing and trading activities
We market and trade natural gas, power and natural gas liquids (NGLs).
This provides us with routes into liquid markets for the gas we produce.
It also generates margins and fees from selling physical products and
derivatives to third parties, together with income from asset optimization
and trading. The integrated supply and trading function manages the
group’s trading activities in natural gas, power and NGLs. This means we
have a single interface with the gas trading markets and one consistent
set of trading compliance processes, systems and controls.
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, to support group 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 historically volatile. Market conditions have
become more challenging in recent years as volatility and geographic
basis/seasonal spreads have fallen to very low levels with the emergence
of shale gas in the US and generally over-supplied markets in Europe.
However, the traded LNG business has benefited from wide price
variations between the main gas consuming regions of North America,
Europe and Asia. As part of the LNG strategy, during 2013 we entered
into a 20-year gas liquefaction tolling contract for 4.4 million tons per
annum capacity which is located in Texas, US.
The gas and power marketing and trading function operates primarily
from offices in Houston and London and employs around 1,200 people.
The group’s risk governance framework seeks to manage and oversee
the financial risks associated with this trading activity, which is
described in Financial statements – Note 19.
In connection with its trading activities, the group uses a range of
commodity derivative contracts, storage and transport contracts.
The range of contracts that the group enters into is described in Certain
definitions – commodity trading contracts on page 270.
Analysis by region
See Upstream analysis by region on page 239.