BP 2009 Annual Report Download - page 49

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BP Annual Report and Accounts 2009
Business review
Business review
Business review
Environment
Climate change
BP recognizes that climate change is a global concern representing a
significant challenge for society, the energy industry, and BP.
We monitor and report on greenhouse gas (GHG) emissionsa, and
we manage our GHG emissions through a focus on operational energy
efficiency. Each year since 2002, we have estimated the reduction in our
reported annual emissions due to efficiency projects and the running
total of these estimated reductions is now 7.9 million tonnes (Mte),
including 0.3Mte estimated for the last year.
However, last year’s sustainable reductions have been more
than offset by additional emissions from increased operational activity.
As such, we are reporting 65.0Mte of GHG emissions for the year 2009,
3.6Mte higher than the 61.4Mte reported for 2008. Increased throughput
from US refineries, the start-up of our Tangguh LNG project in Indonesia
and deepwater production platforms in the Gulf of Mexico account for
much of this increase.
We expect that additional regulation of GHG emissions in the
future and international accords aimed at addressing climate change
will have an increasing impact on our businesses, operating costs and
strategic planning, but may also offer opportunities in the development of
low-carbon technologies and businesses. See Regulation – Greenhouse
gas regulation on page 48.
To address this expectation, we factor a carbon cost into our
investment appraisals and the engineering design of new projects. We
do this by requiring projects to make realistic assumptions about the likely
carbon price during the lifetime of the project. This is used as a basis for
assessing the economic value of the investment, and for assessing
options to optimize the way the project is engineered. This is our way of
evaluating investments to ensure they are competitive not only in today’s
world but in a future where carbon has a more robust price.
Environmental management
During 2009, we began integrating our environmental management
systems into our operating management system (OMS) and piloted an
integrated approach to identify potential environmental and social
impacts in new projects. These are intended to improve our consistency
and effectiveness in identifying and mitigating the environmental and
social impacts of our operations. Our major operating sites are all
certified under the international environmental management system
standard ISO 14001, with the exception of the Texas City petrochemicals
plant which is seeking certification in 2010.
None of our new projects entered a protected area in 2009.
Our protected areas classification includes the International Union for
the Conservation of Nature (IUCN) I-IV, Ramsar and World Heritage
designations.
We continue to strengthen our processes for managing
compliance with environmental regulations in each of the countries in
which we operate. In addition, each employee is required to comply with
the health, safety and environmental requirements of the BP code of
conduct. We expect our partners, suppliers and contractors to comply
with legal requirements and operate consistently with the principles of
our code of conduct.
Information on the environmental impact of our operations and
our efforts to manage resources responsibly are discussed in our annual
BP Sustainability Report which is available on our website at
www.bp.com/sustainability.
aWe report greenhouse gas (GHG) emissions, and emission reductions, on a CO2-equivalent basis
including CO2and methane. This represents all consolidated entities and BP’s share of equity-
accounted entities except TNK-BP.
Technology development
BP invests in, or jointly funds, research and development seeking
opportunities to reduce our potential environmental impacts, for example,
sound and marine life research, a range of water management projects
and advanced drill cuttings treatment. BP also participates in public and
private partnerships to develop new technologies. These include:
• the Energy Biosciences Institute (EBI) in the US, which conducts
research into biofuel technologies, improved oil and gas recovery and
carbon sequestration;
• the Energy Technologies Institute (ETI) in the UK, which seeks to
accelerate the development of energy technologies to reduce GHG
emissions including offshore wind and for marine, tidal and wave
energy; and
• the Carbon Mitigation Initiative at Princeton University, to research
the fundamental environmental, and technological issues in carbon
management.
Regulation
BP operates in more than 80 countries and is subject to a wide variety
of environmental regulations concerning our products, operations and
activities. Current and proposed fuel and product specifications,
emission controls and climate change programmes under a number of
environmental laws may have a significant effect on the production, sale
and profitability of many of our products.
There also are environmental laws that require us to remediate
and restore areas damaged by the accidental or unauthorized release of
hazardous materials or petroleum associated with our operations. These
laws may apply to sites that BP currently owns or operates, sites that it
previously owned or operated, or sites used for the disposal of its and
other parties’ waste. Provisions for environmental restoration and
remediation are made when a clean-up is probable and the amount
of BP’s legal obligation can be reliably estimated. The cost of future
environmental remediation obligations is often inherently difficult to
estimate. Uncertainties can include the extent of contamination, the
appropriate corrective actions, technological feasibility and BP’s share of
liability. See Financial statements – Note 34 on page 160 for the amounts
provided in respect of environmental remediation and decommissioning.
A number of pending or anticipated governmental proceedings
against BP and certain subsidiaries under environmental laws could result
in monetary sanctions of $100,000 or more. We are also subject to
environmental claims for personal injury and property damage alleging
the release or exposure to hazardous substances. The costs associated
with such future environmental remediation obligations, governmental
proceedings and claims could be significant and may be material to the
results of operations in the period in which they are recognized, but it is
not expected that such costs will be material to the group’s overall
results of operations, our financial position or liquidity. However, we
cannot accurately predict the effects of future developments on the
group, such as stricter environmental laws or enforcement policies or
future events at our facilities, and there can be no assurance that material
liabilities and costs will not be incurred in the future. For a discussion of
the group’s environmental expenditure see page 60.