BP 2006 Annual Report Download - page 44

policy responses, recognizing the existence of different starting points,
perspectives, priorities and solutions and including the many potential
contributors to the common goal of addressing climate change. BP’s
actions focus on our own business activities and engaging in informed
external dialogue to influence policy, regulation and research. We support
the use of market mechanisms such as emissions trading to bring about
the most efficient forms of emissions reduction.
BP Alternative Energy
In 2006, we made further progress in building BP Alternative Energy,
launched in 2005, into a substantial business providing cleaner low-
carbon power from solar, wind, hydrogen and natural gas. In 2005, we
announced that we are investing $8 billion over 10 years in BP Alternative
Energy to address the major opportunity presented by the low-carbon
power market. Globally, the power sector is the biggest source of GHG
emissions – responsible for around twice the emissions of transport – so
creating low-carbon power is critical in the effort to stabilize global GHG
levels. During 2006, BP Alternative Energy doubled its production capacity
of solar cells and modules from the capacity produced in 2004, entered
into research partnerships in the US and Germany to improve the
performance of solar technology, acquired US wind energy developers
Orion Energy, LLC, and Greenlight Energy, Inc., and signed an agreement
with Clipper Windpower plc for the supply of wind turbines and the joint
development of two gigawatts of wind capacity in the US. Our joint
venture with SK Corporation in South Korea saw operations start at the
combined cycle gas turbine power station, the Kwangyang plant, in which
BP has a 35% stake, and we have started construction of a new 250MW
steam turbine power generating plant at the Texas City refinery site.
Looking ahead, we also plan to construct a 520MW co-generation facility
at Cherry Point in the US. During 2006, we announced a new strategic
relationship with General Electric to accelerate the development of
hydrogen power technology and the deployment of the concept. The
US government showed support for our proposed hydrogen plant at
Carson, California, by awarding the project $90 million in Federal
Investment credits.
Sustainable transport
In 2006, we increased our involvement in biofuels – fuels made from
crops, which limit GHG emissions from transport over their full life cycle
because they absorb CO
2
as the crops grow. We launched a dedicated
biofuels business and announced that we would be investing $500 million
over 10 years in a university-based Energy Biosciences Institute at which
specialist researchers will apply their biotechnology expertise to energy.
On 1 February 2007, BP announced that it had selected the University of
California, Berkeley, and its partners the University of Illinois at Urbana-
Champaign and the Lawrence Berkeley National Laboratory for the
research programme. Our ambition is that bioscience will deliver
comparable benefits in the energy sector to those achieved in medicine.
These new biofuels activities build upon our existing operations to
blend biocomponents into transport fuels in the US, Germany, Austria
and France.
We continued the roll-out of BP Ultimate, launched in 2003, in two
new markets, South Africa and Russia. This fuel delivers reductions in
emissions such as carbon monoxide and nitrogen oxide compared with
standard fuels.
We worked with several partners to develop lubricants that support
improvements in engine construction and emissions systems that are
intended to improve fuel efficiency and reduce pollution. We have also
developed longer-lasting driveline fluids that reduce total oil volumes over
a vehicle’s lifetime and improve fuel efficiency by up to 1.5%. Closer
co-operation between lubricants development and manufacturing
processes have resulted in significant energy and resource savings during
the blending of lubricants.
BP is also supporting a project at Tsinghua University in China to
investigate the challenges presented by the rapid growth of cities,
especially in Asia. The first phase, completed in March 2006,
demonstrated the need for an integrated approach across
many disciplines.
BP and development
We wish to make a positive contribution to social and economic
development wherever we operate. Our aim is to be a ‘local energy
company’ – an accepted member of the community, but one that
contributes global resources, standards and capabilities.
Following this approach, we seek to bring local people into our
leadership and workforce and to bring local companies into our supply
chains. Consequently, as well as increasing the number of our leaders
who are from beyond the US and UK, we have also invested in training
and support for local companies in many countries. In 2006, we invested
$10.7 million in support of enterprise development. In countries such
as Azerbaijan, where we and our co-venturers have invested in local
enterprise development through the Regional Development Initiative, and
in Angola, BP has worked with the US NGO Citizens Development Corp
to set up the Centro De Apoio Empresarial business support centre.
We support micro-finance systems to make loans to small businesses
in Angola, Azerbaijan, Colombia, Georgia and Trinidad & Tobago.
During 2006, we acted as a member of the International Advisory
Group for the Extractive Industries Transparency Initiative (EITI), and we
remain represented on the board, which has replaced the International
Advisory Group. EITI provides guidelines for publicly disclosing the
amount of revenue governments receive from energy companies, so
people can see how much is available for public spending. BP continues
to support the implementation of the EITI in Azerbaijan.
In 2006, Professor Tony Venables was appointed as the first BP
professor in the economics department of the University of Oxford, UK.
The chair was endowed in 2005, together with funding for the Oxford
Centre for the Analysis of Resource-Rich Economies, also in the
economics department of Oxford, to conduct research on resource-rich
economies and share best practice in managing energy revenues
effectively.
We also make direct contributions to communities through community
programmes. Our total contribution in 2006 was $106.7 million. This
includes $0.6 million contributed by BP to UK charities. The growing
focus of this is on education, the development of local enterprise and
providing access to energy in remote locations. We plan to spend around
$500 million in each five-year cycle focusing on these areas, with
enough flexibility to respond to local needs as appropriate.
In 2006, we spent $63.9 million promoting education, with investment
in three broad areas: energy and the environment; business leadership
skills; and basic education in developing countries where we operate
large projects.
We also help to promote development by assisting in providing access
to various forms of energy in many countries, working alongside
governments, NGOs and aid agencies. For example, we provide solar
power for rural communities in countries such as Algeria, Sri Lanka and
the Philippines and we have set up a new business in India to provide
access to energy. Our first offer is a biomass cooking stove to help
provide cleaner energy for cooking. Almost 13,000 customers have
purchased our biomass stove that significantly reduces emissions
compared with traditional wood-burning stoves made of mud.
Environmental protection
Health, safety and environmental regulation
The group is subject to numerous national and local environmental
laws and regulations concerning its products, operations and activities.
Current and proposed fuel and product specifications under a number of
environmental laws will have a significant effect on the production,
sale and profitability of many of our products. Environmental laws and
regulations also require the group to remediate or otherwise redress the
effects on the environment of prior disposal or release of chemicals or
petroleum substances by the group or other parties. Such contingencies
may exist for various sites, including refineries, chemicals plants, natural
gas processing plants, oil and natural gas fields, service stations, terminals
and waste disposal sites. In addition, the group may have obligations
relating to prior asset sales or closed facilities. Provisions for
environmental restoration and remediation are made when a clean-up
is probable and the amount is reasonably determinable. Generally, their
timing coincides with the commitment to a formal plan of action or, if
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