BP 2009 Annual Report Download - page 28

BP Annual Report and Accounts 2009
Business review
Compliance
International Financial Reporting Standards (IFRSs) do not provide
specific guidance on reserves disclosures. BP estimates proved reserves
in accordance with SEC Rule 4-10 (a) of Regulation S-X and relevant
Compliance and Disclosure Interpretations (C&DI) and Staff Accounting
Bulletins as issued by the SEC staff. On 31 December 2008, the SEC
published a revision of Rule 4-10 (a) of Regulation S-X for the estimation
of reserves. These revised rules form the basis of the 2009 year-end
estimation of proved reserves and the application of the technical aspects
resulted in an immaterial increase of less than 1% to BP’s total proved
reserves. The reasons for the increase are primarily due to the application
of reliable technologies and inclusion of proved reserves more than one
spacing away from existing penetrations as discussed below.
By their nature, there is always some risk involved in the ultimate
development and production of proved reserves, including, but not
limited to, final regulatory approval, the installation of new or additional
infrastructure as well as changes in oil and gas prices, changes in
operating and development costs and the continued availability of
additional development capital. All the group’s proved reserves held in
subsidiaries and equity-accounted entities are estimated by the group’s
petroleum engineers.
Our proved reserves are associated with both concessions (tax
and royalty arrangements) and agreements where the group is exposed
to the upstream risks and rewards of ownership, but where title to the
hydrocarbons is not conferred, such as PSAs. In a concession, the
consortium of which we are a part is entitled to the proved reserves that
can be produced over the licence period, which may be the life of the
field. In a PSA, we are entitled to recover volumes that equate to costs
incurred to develop and produce the proved reserves and an agreed
share of the remaining volumes or the economic equivalent. As part of
our entitlement is driven by the monetary amount of costs to be
recovered, price fluctuations will have an impact on both production
volumes and reserves. Fourteen percent of our proved reserves are
associated with PSAs. The main countries in which we operate under
PSAs are Algeria, Angola, Azerbaijan, Egypt, Indonesia and Vietnam.
We disclose our share of proved reserves held in equity-
accounted entities (jointly controlled entities and associates), although
we do not control these entities or the assets held by such entities.
Production
Our total hydrocarbon production during 2009 averaged 3,998 thousand
barrels of oil equivalent per day (mboe/d). This comprised 2,684mboe/d
for subsidiaries and 1,314mboe/d for equity-accounted entities, an
increase of 6.6% and a decrease of 0.5% respectively compared with
2008. For subsidiaries, 40% of our production was in the US, 17% in
Trinidad and 10% in the UK. For equity-accounted entities, 71% of
production was from Russia, 14% in the United Arab Emirates and 11%
in Argentina.
The strong growth in production in 2009 benefited by about
40mboe/d on an annual basis from a combination of the absence of a
significant hurricane season and from the make-up of a prior period
underlift. As a result, we expect production in 2010 to be slightly lower
than in 2009. The actual growth rate will depend on a number of factors,
including our pace of capital spending, the efficiency of that spend, the
oil price and its impact on PSAs, as well as OPEC quota restrictions.
The group and its equity-accounted entities have numerous long-
term sales commitments in their various business activities, all of which
are expected to be sourced from supplies available to the group which
are not subject to priorities, curtailments or other restrictions. No single
contract or group of related contracts is material to the group.
The following tables show BP’s estimated net proved reserves as at
31 December 2009.
Estimated net proved reserves of liquids at 31 December 2009a b
million barrels
Developed Undeveloped Total
UK 403 291 694
Rest of Europe 83 184 267
US 1,862 1,211 3,073c
Rest of North America 11 1 12
South America 49 56 105d
Africa 422 454 876
Rest of Asia 182 334 516
Australasia 58 57 115
Subsidiaries 3,070 2,588 5,658
Equity-accounted entities 3,121 1,732 4,853e
Total 6,191 4,320 10,511
Estimated net proved reserves of natural gas at 31 December 2009a b
billion cubic feet
Developed Undeveloped Total
UK 1,602 670 2,272
Rest of Europe 49 397 446
US 9,583 5,633 15,216
Rest of North America 716 453 1,169
South America 3,177 7,393 10,570f
Africa 1,107 1,454 2,561
Rest of Asia 1,579 249 1,828
Australasia 3,219 3,107 6,326
Subsidiaries 21,032 19,356 40,388
Equity-accounted entities 3,035 1,707 4,742g
Total 24,067 21,063 45,130
Net proved reserves on an oil equivalent basis
million barrels of oil equivalent
Developed Undeveloped Total
Subsidiaries 6,696 5,925 12,621
Equity-accounted entities 3,644 2,027 5,671
Total 10,340 7,952 18,292
aProved reserves exclude royalties due to others, whether payable in cash or in kind, where the
royalty owner has a direct interest in the underlying production and the option and ability to make
lifting and sales arrangements independently, and include minority interests in consolidated
operations. We disclose our share of reserves held in jointly controlled entities and associates that
are accounted for by the equity method although we do not control these entities or the assets
held by such entities.
bThe 2009 marker prices used were Brent $59.91/bbl (2008 $36.55/bbl and 2007 $96.02/bbl) and
Henry Hub $3.82/mmBtu (2008 $5.63/mmBtu and 2007 $7.10/mmBtu).
cProved reserves in the Prudhoe Bay field in Alaska include an estimated 68 million barrels on which
a net profits royalty will be payable over the life of the field under the terms of the BP Prudhoe Bay
Royalty Trust.
dIncludes 23 million barrels of crude oil in respect of the 30% minority interest in BP Trinidad and
Tobago LLC.
eIncludes 243 million barrels of crude oil in respect of the 6.86% minority interest in TNK-BP.
fIncludes 3,068 billion cubic feet of natural gas in respect of the 30% minority interest in BP Trinidad
and Tobago LLC.
gIncludes 131 billion cubic feet of natural gas in respect of the 5.79% minority interest in TNK-BP.
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