BP 2009 Annual Report Download - page 43

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BP Annual Report and Accounts 2009
Business review
Business review
Business review
At 31 December 2009, BP’s worldwide network consisted of some
22,400 sites branded BP, Amoco, ARCO and Aral, around the same as in
the previous year. We continue to improve the efficiency of our retail
network and increase the consistency of our site offer through a process
of regular review. In 2009, we sold over 600 company-owned sites to
dealers, jobbers and franchisees who continue to operate these sites
under the BP brand. In addition we sold around 1,200 sites in Greece
to Hellenic Petroleum, which will continue to be operated under the BP
brand through a brand licensing agreement. We also divested around
100 company-owned sites to third parties.
Our retail convenience operations offer consumers a range of
food, drink and other consumables and services on the fuel forecourt in a
convenient and innovative manner. The convenience offer includes brands
such as ampm, Wild Bean Café and Petit Bistro.
During 2009, we continued the implementation of our ampm
convenience retail franchise model in the US. We expect this model to
provide a reliable, long-term sales outlet for transport fuels from our
refinery systems, together with reduced costs and lower levels of capital
investment. Overall in the US, by the end of 2009 there were 11,500
branded retail sites of which 1,200 were branded ampm, compared with
11,700 and 1,100 respectively at the beginning of 2009.
In Europe, we are one of the largest forecourt convenience
retailers, with about 2,500 convenience retail sites in 10 countries.
We are growing our food-on-the-go and fresh grocery services through
BP-owned brands and partnerships with leading retailers such as Marks
& Spencer. In addition, at the end of 2009, we had approximately 500
sites outside Europe and the US in countries such as Australia, New
Zealand and South Africa.
International businesses
Our IBs provide quality products and offers to customers in more than 80
countries worldwide with a significant focus on Europe, North America
and Asia. Our products include aviation fuels, lubricants that meet the
needs of various industries and consumers, LPG, and a range of
petrochemicals that are sold for use in the manufacture of other products
such as fabrics, fibres and various plastics. We believe each of these IBs
is competitively advantaged in the markets in which we have chosen to
participate. Such advantage is derived from several factors, including
location, proximity of manufacturing assets to markets, physical asset
quality, operational efficiency, technology advantage and the strength of
our brands. Each business has a clear strategy focused on investing in its
key assets and market positions in order to deliver value to its customers
and outperform its competitors.
In 2009, the IBs accounted for just under a quarter of the
segment’s operating capital employedaand just over half the profit, after
adjusting for non-operating items and fair value accounting effects.
Without these adjustments, the profit for the IBs more than offset the
loss for the FVCs.
Significant events in the international businesses in 2009 were:
• Our expanded purified terephthalic acid (PTA) facility in Geel, Belgium
was successfully commissioned in the first quarter of 2009. The
expansion, which has a design capacity of 350 thousand tonnes per
annum (ktepa), has improved operating costs and by the end of 2009
had already increased the site’s PTA capacity by 255ktepa.
• SECCO completed its first major turnaround in the third quarter of
2009 and at the same time expanded production capacity, creating
China’s largest ethylene cracker capable of producing 1.3mtpa of
ethylene per year, an increase of 25%.
aOperating capital employed is total assets (excluding goodwill) less total liabilities, excluding
finance debt and current and deferred taxation.
• Construction of the new 500ktepa acetic acid plant in Jiangsu
province, China by BP YPC Acetyls Company (Nanjing) Limited
(BYACO) was completed. This is a BP joint venture with Yangzi
Petrochemical Co. Ltd (a subsidiary of Sinopec). Commercial
production is expected to begin in the second quarter of 2010.
• BP and Sinopec continued to progress the project to add a new acetic
acid plant at their Yangtze River Acetyls Co. (YARACO) joint venture
site in Chongqing, China. This world-scale (650ktepa) acetic acid plant
will use BP’s leading Cativa™ technology. The expected plant start-up
date is under review due to current market conditions. When
complete, total production at the YARACO site is expected to be in
excess of one million tonnes per annum, making this one of the
largest acetic acid production locations in the world.
Lubricants
We manufacture and market lubricants and related products and services
to the automotive, industrial, marine and energy markets across the
world. Following a decision to simplify and focus our channels of trade,
we now sell products direct to our customers in around 46 countries and
use approved local distributors for the remaining locations. Customer
focus, distinctive brands, superior technology and relationships remain
the cornerstones of our long-term strategy.
BP markets primarily through its major brands of Castrol and BP,
and also the Aral brand in some specific markets. Castrol is recognized as
one of the most powerful lubricants brands worldwide and we believe it
provides us with a significant competitive advantage. In the automotive
lubricants sector, we supply lubricants and other related products and
services to intermediate customers such as retailers and workshops.
These, in turn, serve end-consumers such as car, truck and motorcycle
owners in the mature markets of Western Europe and North America
as well as the markets of Russia, China, India, the Middle East, South
America and Africa, which we believe have the potential for significant
long-term growth. In 2009, more than 30% of pre-tax operating income
was generated from emerging markets.
BP marine lubricants is one of the largest global suppliers of
lubricants to the marine industry. We supply many types of vessels from
bulkers to container ships to dredgers and cruise ships, with global
presence in over 850 ports. BP’s industrial lubricants business is a
leading supplier to those sectors of the market involved in the
manufacture of automobiles, trucks, machinery components and
steel. BP is also a leading supplier of lubricants for the offshore oil
and aviation industries.
Petrochemicals
Our petrochemicals operations comprise the global Aromatics & Acetyls
businesses (A&A) and the Olefins & Derivatives (O&D) businesses,
predominantly in Asia. New investments are targeted principally in the
higher-growth Asian markets.
In A&A we manufacture and market three main product lines:
purified terephthalic acid (PTA), paraxylene (PX) and acetic acid. Our
strategy is to leverage our industry-leading technology in selected
markets, to grow the business and to deliver industry-leading returns.
PTA is a raw material used in the manufacture of polyesters used in
fibres, textiles and film, and polyethylene terephthalate (PET) bottles.
Acetic acid is a versatile intermediate chemical used in a variety of
products such as paints, adhesives and solvents, as well as its use in the
production of PTA. We have a strong global market share in the PTA and
acetic acid markets with a major manufacturing presence in Asia,
particularly China. PX is a feedstock for PTA production. In addition to
these three main products, we produce a number of other speciality
petrochemicals products. We have a total of 14 manufacturing sites
operating in the UK, the US, Belgium, China, Indonesia, Korea, Malaysia
and Taiwan, including our joint ventures.
In O&D, we crack naptha and ethane as feedstocks to produce
ethylene and other products and derivatives, within equity-accounted
entities.