BP 2006 Annual Report Download - page 10

using reserves calculated in accordance with SEC guidance,
was 113% on a combined basis of subsidiaries and equity-
accounted entities, excluding acquisitions and disposals –
an excellent result.
We produced more than 3.9 million barrels of oil equivalent
per day and continued to build our presence as a producer and
supplier of natural gas. The production level was affected by
strategic divestments but, excluding the historic impact of
these, our production continues to grow. Since the year-end,
we have signed a significant gas production-sharing agreement
with the Sultanate of Oman. In refining and marketing, we
continued to develop strong positions in areas of fast-growing
demand, supplying millions of customers every day. Our low-
carbon power business, BP Alternative Energy, made a strong
start, with significant additions in wind and solar capacity.
Specific highlights of the year included the start of production
in the East and West Azeri oil fields in the Caspian Sea and
the start of operations for the Baku-Tbilisi-Ceyhan pipeline,
which links the Caspian Sea to the Mediterranean. There
were discoveries in Angola and the Gulf of Mexico. We saw
our first gas produced from the Cannonball platform in Trinidad
& Tobago and from In Amenas in Algeria. With our partners,
we commissioned a new LNG regasification terminal in China.
We announced a major investment at our Whiting refinery
in the US to process Canadian heavy crude, providing a new
source of supply for the North American market.
2006 was also a year when environmental issues, chiefly
climate change, remained at the top of the public agenda.
BP Alternative Energy, launched in 2005, is a rapidly growing
business devoted to providing low-carbon power from solar,
wind, hydrogen and natural gas sources. The business
developed strongly in 2006, doubling its solar manufacturing
capacity since 2004, acquiring wind power interests with a
potential total generating capacity of some 15,000 megawatts
and increasing gas-fired capacity. It also further developed its
ground-breaking plans for hydrogen power stations fed by
fossil fuel feedstocks from which carbon dioxide is extracted
and stored underground, minimizing the environmental impact.
In the transport sector, we took new steps towards providing
more sustainable energy by announcing the forthcoming
establishment of a university-based Energy Biosciences
Institute, seeking to mirror in energy the benefits that biological
sciences have brought to medicine. We also set up a dedicated
biofuels business and entered into a partnership with DuPont
to produce a new generation of biofuels.
Our guiding principle remains that of mutual advantage –
creating benefits for others as well as for ourselves. I hope
this year has shown that, when we fail in that respect, we
will work relentlessly and transparently to solve the problems.
The future This is my last letter to shareholders as I am
soon to retire as group chief executive. I have devoted my
working life to BP and I would like to thank shareholders,
the board and our employees for their support over the
past 12 years.
I believe that, although our journey has not always been
smooth, the fundamentals of the company – its assets, its
strategy and its people – are very sound. BP has certainly
changed dramatically since 1995. By most measures it has
doubled or tripled in size and has grown from being a regional
player, based principally around the North Sea and Alaska,
to a truly international company. We now produce more
than 100,000 barrels of oil equivalent per day from eight
different countries, up from three countries in 1995. And
long-term investors should gain comfort from our creditable
reserves position.
BP is widely recognized as a pioneer in the oil and gas
industry for both reducing greenhouse gas emissions and
investing substantially in alternative and renewable energy
businesses. Shareholders have benefited too and, from
mid-1995 until the end of 2006, total returns were 278%
in dollars and 203% in sterling.
Our financial framework is robust. We aim to invest in our
operations; to pursue a progressive dividend policy; to maintain
our gearing within a range of 20-30%; and to return any surplus
cash to shareholders, circumstances permitting. During the
year, we bought back 1.3 billion of our shares, of which
358 million were for cancellation, with the remainder being
held in treasury. We also paid total dividends of 38.40 cents,
or 21.104 pence, a share, an increase of 10% on 2005.
BP’s strategic priorities are enduring: to build production
in some of the world’s largest oil and gas fields; to focus
on advantaged refineries and retail markets; to capture world-
scale gas market positions; and to participate in fast-growing
markets for gas and low-carbon power.
We are emerging from 2006 with our basic values tested,
but reaffirmed. My successor as group chief executive,
Tony Hayward, is a wonderful choice and I wish him and
the company every good fortune. The best is yet to come.
The Lord Browne of Madingley
Group Chief Executive
23 February 2007
8 BP Annual Report and Accounts 2006