BP 2013 Annual Report Download - page 36

BP Annual Report and Form 20-F 201332
Our markets
Economic growth in 2013 varied widely, with certain economies shrinking
and others showing some signs of recovery. OECD oil consumption was
up slightly in 2013, rising for the first time since 2010. Demand in
non-OECD economies also continued to grow, but at a slower rate than
2012 partly due to reduced GDP growth, for example in India, South East
Asia and the Middle East.
In oil markets in 2013, European refineries were impacted by limited
economic options to process sour grades, such as Urals, and by the loss
of Libyan sweet crude supplies for much of the year. In addition, crude
supplies were constrained by the loss of Iranian oil due to US and European
trade embargoes and by ongoing decline in European oil production. This
was partially offset by Saudi Arabia crude production, which reached a
30-year high.
Non-OPEC oil supply increased by over 1 million barrels per day in 2013,
primarily in the US due to increased production of shale oil. North
American crudes remained cheaper than waterborne crudes of a similar
quality, such as European Brent and Gulf Coast LLS, due to increased
production, combined with logistical constraints in transporting inland
crude production to the coast. Our refineries, particularly Toledo and
Whiting in the US, benefited from a location advantage as they were
able to access these discounted crudes. In addition, these refineries
benefited from a wider discount of Canadian heavy to West Texas
intermediate (WTI) crude in 2013, a factor that will become increasingly
important to the BP refining portfolio in 2014 with the commissioning of
the Whiting refinery modernization project.
Refining marker margin
We track the margin environment by way of a global refining marker
margin (RMM). Refining margins are a measure of the difference between
the price a refinery pays for its inputs (crude oil) and the market price of its
products. Although refineries produce a variety of petroleum products, we
track the margin environment using a simplified indicator that reflects the
margins achieved on gasoline and diesel only. The RMM may not be
representative of the margin achieved by BP in any period because of BP’s
particular refinery configurations and crude and product slates. The RMM
does not include estimates of fuel costs or other variable costs.
$ per barrel
Crude marker 2013 2012 2011
Refining marker margin (RMM)
US North West Alaska North
Slope 15.2 18.0 14.1
US Midwest West Texas
Intermediate 21.7 27.8 24.7
Northwest Europe Brent 12.9 16.1 11.9
Mediterranean Azeri Light 10.5 12.7 9.0
Australia Brent 13.4 14.8 12.2
BP average RMM 15.4 18.2 14.5
In February 2013 BP updated the RMM methodology and regions to
reflect the changes to our US portfolio after the refinery divestments and
account for trends in regional crude markets since the RMM was
established. The effect of this update is that the 2012 and 2011 BP average
RMMs were restated from $15.0 per barrel (as originally reported) to
$18.2 per barrel and from $11.6 per barrel to $14.5 per barrel, respectively.
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
32
40
16
24
8
Global refining marker margin ($/bbl)
2012
5-year range 2013
The average RMM for 2013 was $2.8 per barrel lower compared to 2012,
with a slightly stronger first half and falling sharply in the second half of the
year. However, it was higher than 2011. Margins in 2013 declined primarily
due to increased product and gasoline supply, high gasoline inventories,
competitor capacity additions and lower seasonal turnarounds.
Financial performance
$ million
2013 2012 2011
Sale of crude oil through spot
and term contracts 79,394 56,383 57,055
Marketing, spot and term sales
of refined products 258,015 274,666 273,940
Other sales and operating revenues 13,786 15,342 13,038
Sales and other operating revenuesa 351,195 346,391 344,033
RC profit before interest and taxb
Fuels 1,518 1,403 2,999
Lubricants 1,274 1,276 1,350
Petrochemicals 127 185 1,121
2,919 2,864 5,470
Net (favourable) unfavourable impact
of non-operating items and fair
value accounting effectsc
Fuels 712 3,609 640
Lubricants (2) 9 (100)
Petrochemicals 3 (19) (1)
713 3,599 539
Underlying RC profit before interest
and taxb d
Fuels 2,230 5,012 3,639
Lubricants 1,272 1,285 1,250
Petrochemicals 130 166 1,120
3,632 6,463 6,009
Capital expenditure and acquisitions 4,506 5,249 4,285
a Includes sales to other segments.
b
Income from petrochemicals produced at our Gelsenkirchen and Mülheim sites is reported within
the fuels business. Segment-level overhead expenses are included within the fuels business.
c
Fair value accounting effects are not a recognized GAAP measure and represent the (favourable)
unfavourable impact relative to management’s measure of performance (see page 238 for further
details). For Downstream, these arise solely in the fuels business.
d
Underlying RC profit is not a recognized GAAP measure. See footnote c on page 23 for
information on underlying RC profit.
Sales and other operating revenues in 2013 were $351 billion (2012
$346 billion, 2011 $344 billion). This increase in 2013, compared with 2012
reflects increased crude sales volumes, largely offset by lower prices. The
increase in 2012, compared with 2011, reflected higher prices almost
offset by lower volumes and foreign exchange losses.
In 2013 RC profit before interest and tax for the segment was $2.9 billion
(2012 $2.9 billion, 2011 $5.5 billion). The 2013 result included a net
non-operating charge of $535 million, primarily relating to impairment
charges in our fuels business, versus charges of $3,172 million in 2012
mainly related to impairment charges and $602 million in 2011 for
impairment charges associated with our disposal programme, partially
offset by gains on disposal. In addition, fair value accounting effects had an