BP 2006 Annual Report Download - page 16

Information on the company
General
Unless otherwise indicated, information in this document reflects 100%
of the assets and operations of the company and its subsidiaries that
were consolidated at the date or for the periods indicated, including
minority interests. Also, unless otherwise indicated, figures for business
sales and other operating revenues include sales between BP businesses.
The British Petroleum Company p.l.c., incorporated in 1909 in England
and Wales, became known as BP Amoco p.l.c. following the merger with
Amoco Corporation (incorporated in Indiana, US, in 1889). The company
subsequently changed its name to BP p.l.c.
BP is one of the world’s leading oil companies on the basis of market
capitalization and proved reserves. Our worldwide headquarters is located
at 1 St James’s Square, London SW1Y 4PD, UK. Telephone +44 (0)20
7496 4000. Our agent in the US is BP America Inc., 4101 Winfield Road,
Warrenville, Illinois 60555. Telephone [phone].
Overview of the group
BP is a global group, with interests and activities held or operated through
subsidiaries, jointly controlled entities or associates established in, and
subject to the laws and regulations of, many different jurisdictions. These
interests and activities cover three business segments, supported by a
number of organizational elements comprising group functions or regions.
The three business segments are Exploration and Production, Refining
and Marketing and Gas, Power and Renewables. Exploration and
Production’s activities include oil and natural gas exploration, development
and production (upstream activities), together with related pipeline,
transportation and processing activities (midstream activities). The
activities of Refining and Marketing include oil supply and trading and the
manufacture and marketing of petroleum products, including aromatics
and acetyls, as well as refining and marketing. Gas, Power and
Renewables activities include marketing and trading of gas and power;
marketing of liquefied natural gas (LNG); natural gas liquids (NGLs); and
low-carbon power generation through our Alternative Energy business.
The group provides high-quality technological support for all its businesses
through its research and engineering activities.
Group functions serve the business segments, aiming to achieve
coherence across the group, manage risks effectively and achieve
economies of scale. Each head of region ensures regional consistency of
the activities of business segments and group functions and represents
BP to external parties.
The group’s system of internal control is described in the BP
management framework. It is designed to meet the expectations of
internal control of the Turnbull Guidance on the Combined Code in the UK
and of COSO (committee of the sponsoring organization for the Treadway
Commission in the US). The system of internal control is the complete set
of management systems, organizational structures, processes, standards
and behaviours that are employed to conduct the business of BP and
deliver returns to shareholders. The design of the management
framework addresses risks and how to respond to them. Each
component of the framework is in itself a device to respond to a particular
type or collection of risks.
The group strategy describes the group’s strategic objectives and the
presumptions made by BP about the future. It describes strategic risks
that arise from making such presumptions and the actions to be taken
to manage or mitigate the risks. The board delegates to the group chief
executive responsibility for developing BP’s strategy and its
implementation through five-year and annual plans (the group plan) that
determine the setting of priorities and allocation of resources. The group
chief executive is obliged to discuss with the board, on the basis of the
strategy and group plan, all material matters currently or prospectively
affecting BP’s performance.
As the group’s business segments are managed on a global, not on a
regional, basis, geographical information for the group and segments is
given to provide additional information for investors but does not reflect
the way BP manages its activities.
We have well-established operations in Europe, the US, Canada,
Russia, South America, Australasia, Asia and parts of Africa. Currently,
around 70% of the group’s capital is invested in Organisation for
Economic Co-operation and Development (OECD) countries, with just
under 40% of our fixed assets located in the US and around 25% located
in the UK and the Rest of Europe.
We believe that BP has a strong portfolio of assets in each of its main
segments:
– In Exploration and Production, we have upstream interests in 26
countries. In addition to our drive to maximize the value of our existing
portfolio, we are continuing to develop new profit centres. Exploration
and Production activities are managed through operating units that
are accountable for the day-to-day management of the segment’s
activities. An operating unit is accountable for one or more fields. Profit
centres comprise one or more operating units. Profit centres are, or
are expected to become, areas that provide significant production and
income for the segment. Our new profit centres are in Asia Pacific
(Australia, Vietnam, Indonesia and China), Azerbaijan, North Africa
(Algeria), Angola, Trinidad & Tobago and the deepwater Gulf of Mexico;
and in Russia/Kazakhstan (including our operations in TNK-BP, Sakhalin
and LukArco), where we believe we have competitive advantage and
which we believe provide the foundation for volume growth and
improved margins in the future. We also have significant midstream
activities to support our upstream interests.
– In Refining and Marketing, we have a strong presence in the US and
Europe. We market under the Amoco and BP brands in the Midwest,
East and Southeast and under the ARCO brand on the West Coast of
the US, and under the BP and Aral brands in Europe. We have a long-
established supply and trading activity responsible for delivering value
across the crude and oil products supply chain. Our Aromatics and
Acetyls business maintains a manufacturing position globally, with
emphasis on growth in Asia. We also have, or are growing, businesses
elsewhere in the world under the BP and Castrol brands, including
a strong global Lubricants portfolio and other business-to-business
marketing businesses (aviation and marine) covering the mobility
sectors. We continue to seek opportunities to broaden our activities
in growing markets such as China and India.
– In Gas, Power and Renewables, we have a growing marketing and
trading business in the US, Canada, UK and continental Europe. Our
marketing and trading activities include natural gas, power and NGLs.
Our international natural gas monetization activities identify and capture
worldwide opportunities for our upstream natural gas resources and
are focused on growing natural gas markets, including the US, Canada,
Spain and many of the emerging markets of the Asia Pacific region,
notably China. We have a significant NGLs processing and marketing
business in North America. In 2005, we established BP Alternative
Energy, which aims to extend significantly our capabilities in solar,
wind, hydrogen power and gas-fired power generation. Alternative
Energy has solar production facilities in US, Spain and India and
Australia, wind farms in the Netherlands and a substantial portfolio of
development projects in the US. We are advancing development of
hydrogen power plants and are involved in power projects in the US,
UK, Spain and South Korea.
Through non-US subsidiaries or other entities, BP conducts or has
conducted limited marketing, licensing and trading activities and technical
studies in certain countries subject to US sanctions, in particular in Iran
and with Iranian counterparties, including the National Iranian Oil
Company (NIOC) and affiliated entities, and has a small representative
office in Iran. BP believes that these activities are immaterial to the group.
In addition, BP has interests in, and is the operator of, two fields outside
Iran in which NIOC and an affiliated entity have interests. However, BP
does not seek to obtain from the government of Iran licences or
agreements for oil and gas projects in Iran and does not own or operate
any refineries or chemicals plants in Iran.
Acquisitions and disposals
In 2006, there were no significant acquisitions. BP purchased 9.6% of
the shares issued under Rosneft’s IPO for a consideration of $1 billion
(included in capital expenditure). This represents an interest of around
1.4% in Rosneft. Disposal proceeds were $6,254 million, which included
$2.1 billion on the sale of our interest in the Shenzi discovery and around
$1.3 billion from the sale of our producing properties on the Outer
Continental Shelf of the Gulf of Mexico to Apache Corporation.
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