BP 2014 Annual Report Download - page 36

Second, the function aims to create and capture incremental trading
opportunities by entering into a full range of exchange-traded commodity
derivatives, over-the-counter contracts and spot and term contracts. In
order to facilitate the generation of trading margin from arbitrage, blending
and storage opportunities, it also owns and contracts for storage and
transport capacity.
The group’s risk governance framework, which seeks to manage and
oversee the financial risks associated with this trading activity, is described
in Financial statements – Note 27.
The range of contracts that the group enters into is described in Glossary –
commodity trading contracts on page 252.
Aviation
Air BP’s strategic aim is to maintain its position in the core locations of
Europe and the US, while expanding its portfolio in airports that offer
long-term competitive advantage in material growing markets such as Asia
and South America. We are one of the world’s largest global aviation fuels
suppliers. Air BP serves many major commercial airlines as well as the
general aviation sectors. We have marketing sales of approximately
400,000 barrels per day. For details of acquisitions in 2014, see Running
reliably on page 40.
Our lubricants business
Our lubricants strategy is to focus on our premium brands and growth
markets while leveraging technology and customer relationships. With
more than 50% of profit generated from growth markets and continued
growth in premium lubricants, we have an excellent base for further
expansion and sustained profit growth.
Our lubricants business manufactures and markets lubricants and related
products and services to the automotive, industrial, marine and energy
markets across the world. Our key brands are Castrol, BP and Aral. Castrol
is a recognized brand worldwide which we believe provides us with
significant competitive advantage. In technology, we apply our expertise to
create quality lubricants and high-performance fluids for customers in
on-road, off-road, sea and industrial applications globally.
We are one of the largest purchasers of base oil in the market, but have
chosen not to produce it or manufacture additives at scale. Our
participation choices in the value chain are focused on areas where we can
leverage competitive differentiation and strength, such as:
 Applying cutting-edge technologies in the development and formulation
of advanced products.
 Creating and developing product brands and clearly communicating their
benefits to our customers.
 Building and extending our relationships with customers to better
understand and meet their needs.
The lubricants business delivered an underlying RC profit before interest
and tax which is largely consistent with 2013 and 2012 levels. The 2014
result saw an underlying 6% year-on-year improvement in results, which
was offset by adverse foreign exchange translation impacts.
Our petrochemicals business
Our petrochemicals strategy is to own and develop petrochemicals value
chain businesses that are built around proprietary technology to deliver
leading cost positions against our competition. We manufacture and
market four main product lines:
 Purified terephthalic acid (PTA).
 Paraxylene (PX).
 Acetic acid.
 Olefins and derivatives.
We also produce a number of other specialty petrochemicals products.
We aim to improve our earnings potential and make the business more
robust to a bottom of cycle environment. We are taking steps to
significantly improve the cash break even performance of the business.
This should improve our earnings potential and make the business more
robust to a bottom of cycle environment. The actions to achieve this
include:
 Restructuring a significant portion of our portfolio, primarily in our
aromatics business, to shut down older capacity in the US and Asia and
assess disposal options for less advantaged assets.
 Retrofitting our best technology in our advantaged sites to reduce overall
operating costs.
 Growing third-party licensing income to create additional value.
 Delivering operational improvements focused on turnaround efficiency
and improved reliability.
In addition to the assets we own and operate, we have also invested in a
number of joint arrangements in Asia, where our partners are leading
companies within their domestic market. An example of this is our latest
generation technology PTA plant in China, which we are building with our
partner, Zhuhai Port Co. The plant is currently commissioning with planned
start-up in the first half of 2015.
In 2014 the petrochemicals business delivered a lower underlying RC profit
before interest and tax compared with 2013 and 2012. This result reflected
a continuation of the weak margin environment, particularly in the Asian
aromatics sector, and unplanned operational events.
Our petrochemicals production in 2014 was flat compared with 2013 and
slightly lower than 2012, with the low margin environment in 2014 and
2013 driving reduced output.
In November 2014 we announced plans to invest more than $200 million
to upgrade PTA plants at Cooper River in South Carolina and Geel in
Belgium using our latest proprietary technology. We expect these
investments to significantly increase manufacturing efficiency at these
facilities. We plan to continue deploying our technology in new asset
platforms to access Asian demand and advantaged feedstock sources.
BP Annual Report and Form 20-F 201432