BP 2014 Annual Report Download - page 30

Sea and Angola reflecting the impact of the lower near-term price
environment, revisions to reserves and increases in expected
decommissioning cost estimates. This also included a charge to write
down the value ascribed to block KG D6 in India as part of the acquisition
of upstream interests from Reliance Industries in 2011. The charge arises
as a result of uncertainty in the future long-term gas price outlook,
following the introduction of a new formula for Indian gas prices, although
we do see the commencement of a transition to market-based pricing as a
positive step. We expect further clarity on the new pricing policy and the
premiums for future developments to emerge in due course. Fair value
accounting effects had a favourable impact of $31 million relative to
management’s view of performance.
The 2013 result included a net non-operating charge of $1,364 million,
which included an $845-million write-off attributable to block BM-CAL-13
offshore Brazil as a result of the Pitanga exploration well not encountering
commercial quantities of oil or gas, and had an unfavourable impact of
$244 million from fair value accounting effects. The 2012 result included
net non-operating gains of $3,189 million, primarily as a result of gains on
disposals being partly offset by impairment charges. In addition, fair value
accounting effects had an unfavourable impact of $134 million.
After adjusting for non-operating items and fair value accounting effects, the
decrease in the underlying RC profit before interest and tax compared with
2013 reflected lower liquids realizations, higher costs, mainly depreciation,
depletion and amortization and exploration write-offs and the absence of
one-off benefits which occurred in 2013 (see below). This was partly offset
by higher production in higher-margin areas, higher gas realizations and a
benefit from stronger gas marketing and trading activities.
Compared with 2012 the 2013 result reflected lower production due to
divestments, lower liquids realizations and higher costs, including
exploration write-offs and higher depreciation, depletion and amortization,
partly offset by an increase in underlying volumes, a benefit from stronger
gas marketing and trading activities, one-off benefits related to production
taxes and a cost pooling settlement agreement between the owners of the
Trans-Alaska Pipeline System (TAPS), and higher gas realizations.
Total capital expenditure including acquisitions and asset exchanges in
2014 was higher compared with 2013. This included $469 million in 2014
relating to the purchase of an additional 3.3% equity in Shah Deniz,
Azerbaijan and the South Caucasus Pipeline.
In total, disposal transactions generated $2.5 billion in proceeds during
2014, with a corresponding reduction in net proved reserves of
114mmboe, all within our subsidiaries.
The major disposal transactions during 2014 were the farm-out of a 40%
stake in block 61 in the Khazzan field, Oman, to government owned
Makarim Gas Development LLC, for $545 million; the sale of our interests in
four BP-operated oilfields on the North Slope of Alaska to Hilcorp, including
all of BP’s interests in the Endicott and Northstar oilfields and a 50% interest
in each of the Milne Point field and the Liberty prospect, together with BP’s
interests in the oil and gas pipelines associated with these fields for $1.25
billion plus an additional carry of up to $250 million, if the Liberty field is
developed; and the sale of our interests in the Panhandle West and Texas
Hugoton gas fields to Pantera Acquisition Group, LLC for $390 million. Sales
transactions are typically subject to post-closing adjustments and future
payments depending on oil price and production. More information on
disposals is provided in Upstream analysis by region on page 213 and
Financial statements – Note 3.
Provisions for decommissioning increased from $17.2 billion at the end of
2013 to $18.7 billion at the end of 2014. The increase primarily reflects
updated estimates of the cost of future decommissioning, additions and
a change in discount rate, partially offset by utilization of provisions,
exchange revaluation and impacts of divestments. Decommissioning costs
are initially capitalized within fixed assets and are subsequently depreciated
as part of the asset.
Exploration
The group explores for oil and natural gas under a wide range of licensing,
joint arrangement and other contractual agreements. We may do this
alone or, more frequently, with partners.
New access in 2014
We gained access to new potential resources covering more than
47,000km2 in five countries (Australia, Greenland, UK (North Sea), the US
(Gulf of Mexico) and Morocco, which received final government approval in
April 2014). In December, we signed a new PSA with the State Oil
Company of the Republic of Azerbaijan to jointly explore for and develop
potential prospects in the shallow water area around the Absheron
Peninsula in the Azerbaijan sector of the Caspian Sea. This is pending final
ratification by the government. Additionally, Rosneft and BP signed a
heads of agreement in May 2014 relating to a long-term project for the
exploration and potential development of the Domanik formations in the
Volga-Urals region of Russia.
Major projects portfolio
North Sea
Egypt
Azerbaijan
Chirag oil
Shah Deniz Stage 2
West Nile Delta –
Taurus/Libra
West Nile Delta –
Giza/Fayoum/Raven
East Nile Delta
Salamat
Satis
Canada
Alaska
Trinidad & Tobago
Algeria
India
KG D6 R Series
KG D6 Satellites
KG D6 D55
Brazil
Itaipu
Wahoo
z
Middle East
Oman Kha zan
Norway
Snadd
Valhall West Flank
Hod redevelopment
Indonesia
Tangguh expansion
Sanga Sanga CBM
Kinnoull
Quad 204
Clair Ridge
Culzean
Greater Clair
Alligin
Vorlich
Sunrise Phase 1
Pike Phase 1
Pike Phase 2
Sunrise Phase 2
Sunrise South
Terre de Grace
Point Thomson
West end
development
Liberty
Alaska LNG
In Salah gas southern fields
In Amenas compression
Juniper
Angelin
Cassia
Manakin
SEQ-B
Gulf of Mexico
Mars B
Na Kika Phase 3
Atlantis North expansion Phase 2
Thunder Horse water injection
Thunder Horse South expansion
Mad Dog Phase 2
Atlantis water injection expansion
Kaskida
Thunder Horse Northwest expansion
Gila
Tiber
Australia
Western Flank Phase A
Persephone
Western Flank Phase B
Browse
Angola
CLOV
Greater Plutonio Phase 3
Kizomba Satellites Phase 2
Angola LNG re-start
Zinia Phase 2
Dalia Phase 1b
B18 PCC
B31 SE
On track for 2015 start-up.
In progress for 2016
and beyond.
Started up in 2014.
Key
BP Annual Report and Form 20-F 201426