BP 2014 Annual Report Download - page 28

Our business model and strategy
The Upstream segment is responsible for our activities in oil and natural
gas exploration, field development and production, and midstream
transportation, storage and processing. We also market and trade
natural gas, including liquefied natural gas, power and natural gas
liquids. In 2014 our activities took place in 28 countries.
With the exception of the US Lower 48 onshore business, we deliver
our exploration, development and production activities through five
global technical and operating functions:
 The exploration function is responsible for renewing our resource
base through access, exploration and appraisal, while the reservoir
development function is responsible for the stewardship of our
resource portfolio.
 The global wells organization and the global projects
organization are responsible for the safe, reliable and compliant
execution of wells (drilling and completions) and major projects .
 The global operations organization is responsible for safe, reliable
and compliant operations, including upstream production assets and
midstream transportation and processing activities.
We optimize and integrate the delivery of these activities with support
from global functions with specialist areas of expertise: technology,
finance, procurement and supply chain, human resources and
information technology.
In 2015 our US Lower 48 onshore business began operating as a
separate business, with its own governance, processes and systems.
This is designed to promote nimble decision making and innovation so
that BP can be more competitive in the US onshore market, while
maintaining BP’s commitment to safe, reliable and compliant
operations. The business’s approach is to operate in line with industry
standards developed within the context of the highly regulated US
environment. BP’s US Lower 48 business manages a diverse portfolio
which includes an extensive unconventional resource base.
Technologies such as seismic imaging, enhanced oil recovery and
real-time data support our upstream strategy by helping to gain new
access, increase recovery and reserves and improve production
efficiency. See Our distinctive capabilities on page 16.
Upstream
An operator works the controls at the Rumaila oilfield in Iraq. The field
extends 50 miles from end to end.
We continued to actively manage our portfolio to
play to our strengths, divesting non-core assets and
finding alternative ways to create long-term value.
We actively manage our portfolio and are placing increasing emphasis
on accessing, developing and producing from fields able to provide
the greatest value (including those with the potential to make the
highest contribution to our operating cash flow ). We sell assets that
we believe have more value to others. This allows us to focus our
leadership, technical resources and organizational capability on the
resources we believe are likely to add the most value to our portfolio.
Our strategy is to grow long-term value by continuing to
build a portfolio of material, enduring positions in the world’s key
hydrocarbon basins. Our strategy is enabled by:
 A continued focus on safety and the systematic management of risk.
 Prioritizing value over volume:
– A more focused portfolio with strengthened incumbent positions
and reduced operating complexity.
– Efficient execution of our base activities, a quality set of major
projects and leveraging our access and exploration expertise.
 Disciplined investment in three distinctive engines for growth: deep
water, gas value chains and giant fields. We maintain a balanced
portfolio of opportunities.
 Delivery of competitive operating cash growth through
improvements in efficiency and reliability – for both operations and
investment.
 Strong relationships built on mutual advantage, deep knowledge of
the basins in which we operate and technology.
Outlook for 2015
 We expect reported production in 2015 to be higher than 2014,
mainly reflecting higher entitlements in production-sharing
agreement (PSA) regions on the basis of assumed lower oil prices.
Actual reported outcome will depend on the exact timing of project
start-ups, OPEC quotas and entitlement impacts in our PSAs. We
expect underlying production in 2015 to be broadly flat with 2014,
with the base decline being offset by new major project volumes
both from 2014 and 2015.
 We expect four major projects to come onstream in 2015 – two in
Angola and one each in Australia and Algeria.
 Capital investment in 2015 is expected to decrease, largely reflecting
the lower oil price environment and our commitment to continued
capital discipline. The reduction is expected to come primarily from
prioritizing activity in our operations, paring back exploration and
access spend, and shelving a number of marginal projects.
Our performance summary
 For upstream safety performance see page 40.
 Our exploration function gained access to new potential resources
covering more than 47,000km2 in five countries.
 We started up seven major upstream projects.
 We achieved an upstream BP-operated plant efficiency of 90%.
 Our disposals generated $2.5 billion in proceeds in 2014.
See Financial performance on page 25 for an explanation of the main
factors influencing upstream profit.
Upstream profitability ($ billion)
Underlying RC profit before interest and taxRC profit before interest and tax
2010 2011 2012 2013 2014
20
10
3
0
4
0
25.1 25.2 22.5 19.4
26.4
28.3
8.9
15.2
16.7 18.3
BP Annual Report and Form 20-F 201424