BP 2007 Annual Report Download - page 27

interest in Blocks P, J and O in the deepwater Indus basin offshore
Pakistan.
– In January 2007, BP signed a major PSA with the Sultanate of Oman
to appraise sour ‘tight gas’ reservoirs in Block 61. Major contracts
were awarded in November with 3D seismic planned to commence in
the first quarter of 2008 and drilling in the fourth quarter of 2008. The
full appraisal programme is expected to take up to six years.
– In September, BP signed a memorandum of understanding with Oil
and Natural Gas Corporation Ltd of India regarding co-operation in
coalbed methane and deepwater offshore exploration.
Midstream activities
Oil and natural gas transportation
The group has direct or indirect interests in certain crude oil
transportation systems, the principal ones being the Trans Alaska
Pipeline System (TAPS) in the US and the Forties Pipelines System (FPS)
in the UK sector of the North Sea. We also operate the Central Area
Transmission System (CATS) for natural gas in the UK sector of the
North Sea.
BP, as operator, manages and holds a 30.1% interest in the Baku-
Tbilisi-Ceyhan (BTC) oil pipeline. BP, as operator of AIOC, also operates
the Western Export Route Pipeline between Azerbaijan and the Black
Sea coast of Georgia and the Azeri leg of the Northern Export Route
Pipeline between Azerbaijan and Russia. Revenue is earned on pipelines
through charging tariffs.
BP’s onshore US crude oil and product pipelines and related
transportation assets are included under Refining and Marketing (see
page 27).
Assets and activity during 2007 included:
Alaska
– BP owns a 46.9% interest in TAPS, with the balance owned by four
other companies. Production transported by TAPS from Alaska North
Slope fields averaged 738mb/d during 2007.
– Work on the strategic reconfiguration project to upgrade and automate
four pump stations continued to progress during 2007. This project
will install electrically-driven pumps at four critical pump stations,
combined with increased automation and upgraded control systems.
Two of the reconfigured pump stations came online during 2007, one
in the first quarter and another in the fourth quarter. The remaining
two reconfigured pump stations are expected to come online
sequentially in 2009 and 2010.
– There are a number of unresolved challenges lodged by instate
refiners, Tesoro and Flint Hills, against BP and the other TAPS carriers,
regarding intrastate tariffs charged for shipping oil through TAPS.
These challenges were filed between 1986 and 2003 with the
Regulatory Commission of Alaska (RCA). In 2002, the RCA
determined that TAPS transportation rates charged since the
beginning of 1997 have been excessive and that refunds should be
paid. Proceedings relating to transportation charges covering the
period between 1986 and mid-2003, including an appeal by BP and the
other TAPS carriers of the RCA’s 2002 determination, are progressing
through the Alaska judicial system. No significant refunds have been
paid pending the resolution of these matters in the courts. In the
interim, the RCA has imposed intrastate rates effective from 1 July
2003 that are consistent with its 2002 order. Intrastate transport
makes up roughly 7% of total TAPS throughput.
– Tariffs for interstate and intrastate transportation on TAPS are
calculated using the RCA and Federal Energy Regulatory Commission
(FERC)-accepted TAPS Settlement Methodology (TSM) entered into
with the State of Alaska in 1985. The State of Alaska, Anadarko and
Tesoro have challenged BP’s and the other TAPS carriers’ 2005, 2006
and 2007 interstate tariffs with the FERC, and the State of Alaska and
Anadarko have challenged BP’s and the other TAPS carriers’ 2008
tariffs with the FERC. The challengers assert that the interstate
transportation rates charged by BP (in accordance with the TSM) and
the other TAPS carriers, are excessive and discriminatory and in
violation of the Interstate Commerce Act, and that costs related to the
TAPS Strategic Reconfiguration project were imprudently incurred.
That portion of the challenges filed by the State, Anadarko and Tesoro
relating to the TAPS Strategic Reconfiguration project costs, together
with all aspects of the 2007 challenges, are being held in abeyance by
the FERC until its decision on 2005 and 2006 rates is issued. There
have been no proceedings in the recently filed challenges to BP’s
2008 FERC tariff. The FERC’s hearings on the consolidated
proceedings commenced in October 2006 and concluded in January
2007. On 17 May 2007, a FERC Administrative Law Judge issued an
Initial Decision as to 2005 and 2006 rates. This Initial Decision, which
was adverse to BP and the other TAPS carriers, is now under
consideration by the FERC Commissioners, who will issue the
decision of the FERC. Pending the decision of the FERC
Commissioners, BP is continuing to collect its TSM-based interstate
tariffs; however, our tariffs are subject to refund depending on the
decision of the FERC. Interstate transport makes up roughly 93% of
total TAPS throughput.
North Sea
– FPS (BP 100%) is an integrated oil and NGLs transportation and
processing system that handles production from more than 50 fields
in the Central North Sea. The system has a capacity of more than 1
million barrels per day, with average throughput in 2007 at 653mb/d.
The tie-in of the Buzzard field was completed, with first Buzzard
production flowing through the system in January 2007. The Greater
Kittiwake Area also joined the system in late 2007.
– BP operates and has a 29.5% interest in CATS, a 400-kilometre
natural gas pipeline system in the central UK sector of the North Sea.
The pipeline has a transportation capacity of 1,700mmcf/d to a natural
gas terminal at Teesside in north-east England. CATS offers natural
gas transportation and processing services. In 2007, throughput was
778mmcf/d (gross), 230mmcf/d (net). During September, the CATS
pipeline resumed operation after divers installed a metal sleeve at the
location where a large vessel had dragged its anchor causing damage
to the pipeline. The pipeline was shutdown for 10 weeks resulting in a
loss of production of 11mboe/d for the year.
– BP operates the Dimlington/Easington gas processing terminal (BP
100%) on Humberside and the Sullom Voe oil and gas terminal in
Shetland.
Asia (including the former Soviet Union)
– BP, as operator, manages and holds a 30.1% interest in the BTC oil
pipeline. The 1,768-kilometre pipeline has a capacity of 1mmboe/d
from the BP-operated ACG oil field in the Caspian Sea to the eastern
Mediterranean port of Ceyhan. In the first quarter of 2007, the BTC
pipeline celebrated the loading of its 100-millionth barrel at the Ceyhan
terminal and loaded its 250th tanker in October 2007.
– Transportation of first gas to Turkey from Shah Deniz in Azerbaijan via
the South Caucasus Pipeline was achieved in July 2007. BP is
technical operator and holds a 25.5% interest.
– Through the LukArco joint venture, BP holds a 5.75% interest (with a
25% funding obligation) in the Caspian Pipeline Consortium (CPC)
pipeline. CPC is a 1,510-kilometre pipeline from Kazakhstan to the
Russian port of Novorossiysk and carries crude oil from the Tengiz
field (BP 2.3%). In addition to our interest in LukArco, we hold a
separate 0.87% interest (3.5% funding obligation) in CPC through a
49% holding in Kazakhstan Pipeline Ventures. In 2007, CPC total
throughput reached 33.03 million tonnes. During 2007, shareholders
agreed to restore the profitability of CPC by increasing the CPC tariff
and cutting interest rates on shareholder loans. Negotiations
continued between the CPC shareholders on an expansion plan and a
plan for financial restructuring. The expansion would require the
construction of 10 additional pump stations, additional storage
facilities and a third offshore mooring point.
Liquefied natural gas
Within BP, Exploration and Production is responsible for the supply of
LNG. BP’s Exploration and Production segment has interests in four
major LNG plants: the Atlantic LNG plant in Trinidad (BP 34% in Train 1,
42.5% in each of Trains 2 and 3 and 37.8% in Train 4); in Indonesia,
BP ANNUAL REPORT AND ACCOUNTS 2007 25