BP 2010 Annual Report Download - page 168

Notesonnancialstatements
5.Disposalsandimpairmentcontinued
ExplorationandProduction
During2010,theExplorationandProductionsegmentrecognizedimpairmentlossesof$1,259million.Themainelementswerethewrite-downofassets
intheGulfofMexicoof$501milliontriggeredbyanincreaseinthedecommissioningassetasaresultofnewregulationsintheUSrelatingtoidle
infrastructure;impairmentsofoilandgaspropertiesintheGulfofMexicoandonshoreNorthAmericaof$310millionand$80millionrespectivelyasa
resultofdecisionstodisposeofassetsatapricelowerthantheassets’carryingvalues;awrite-downofaccumulatedcostsinSakhalin,Russiaby
$341million,triggeredbyachangeintheoutlookonthefuturerecoverabilityoftheinvestment;andseveralotherindividuallyinsignicantimpairment
chargesamountingto$27million.
During2009,theExplorationandProductionsegmentrecognizedimpairmentlossesof$118million.Themainelementswerethewrite-downof
our$42millioninvestmentintheEastShmidtinterestinRussia,triggeredbyadecisiontonotproceedtodevelopment;a$62millionchargeassociated
withournErgizegasschedulingsystem;andseveralotherindividuallyinsignicantimpairmentchargesamountingto$14million.
During2008,theExplorationandProductionsegmentrecognizedimpairmentlossesof$1,186million.Themainelementswerethewrite-downof
ourinvestmentinRosneftby$517million,toitsfairvaluedeterminedbyreferencetoanactivemarket,duetoasignicantdeclineinthemarketvalueof
theinvestment,impairmentofoilandgaspropertiesintheGulfofMexicoof$270milliontriggeredbydownwardrevisionsofreserves,animpairmentof
explorationassetsinVietnamof$210millionfollowingBP’sdecisiontowithdrawfromactivitiesintheareaconcerned,impairmentofoilandgasproperties
inEgyptof$85milliontriggeredbycostincreases,andseveralotherindividuallyinsignicantimpairmentchargesamountingto$104million.
Thesechargeswerepartlyoffsetbyreversalsofpreviouslyrecognizedimpairmentlossesamountingto$155million.Ofthistotal,$122million
resultedfromareassessmentoftheeconomicsofRhourdeElBaguelinAlgeria.
ReningandMarketing
During2010,theReningandMarketingsegmentrecognizedimpairmentlossesamountingto$144millionrelatingtoretailchurninEuropeanbusinesses
andotherminorassetdisposals.Theselosseswerelargelyoffsetbythereversalofapreviouslyrecognizedimpairmentchargeof$141millionrelatingto
theinvestmentinourassociateChinaAmericanPetrochemicalCompanyresultingfromachangeinmarketconditions.
During2009,animpairmentlossof$1,579millionwasrecognizedagainstthegoodwillallocatedtotheUSWestCoastfuelsvaluechain(FVC).The
goodwillwasoriginallyrecognizedatthetimeoftheARCOacquisitionin2000.Theprevailingweakreningenvironment,togetherwithareviewoffuture
marginexpectationsintheFVC,hasledtoareductionintheexpectedfuturecashows.Otherimpairmentlosseswerealsorecognizedbythesegment
onanumberofassetswhichamountedto$255million.
During2008,theReningandMarketingsegmentrecognizedimpairmentlossesonanumberofassetswhichamountedto$159million.
Otherbusinessesandcorporate
During2010,2009and2008,Otherbusinessesandcorporaterecognizedimpairmentlossestotalling$113million,$189millionand$227million
respectivelyrelatedtovariousassetsintheAlternativeEnergybusiness.
6.Eventsafterthereportingperiod
On22February2011,BPannounceditsintentiontosellitsinterestsinanumberofoperatedoilandgaseldsintheUK.TheassetsinvolvedaretheWytch
FarmonshoreoileldinDorsetandallofBP’soperatedgaseldsinthesouthernNorthSea,includingassociatedpipelineinfrastructureandtheDimlington
terminal.BPaimstocompletethedivestmentsaroundtheendof2011,subjecttoreceiptofsuitableoffersandregulatoryandthird-partyapprovals.The
assetsdonotyetmeetthecriteriatobereclassiedasnon-currentassetsheldforsaleanditisnotyetpossibletoestimatethenancialeffectofthese
intendedtransactions.
On21February2011,BPannouncedamajorstrategicalliancewithRelianceIndustriesLimited(Reliance)inIndia.Aspartofthisalliance,BPwill
purchasea30percentstakein23oilandgasproduction-sharingcontractsthatRelianceoperatesinIndia,includingtheproducingKGD6block,andthe
formationofa50:50jointventurebetweenthetwocompaniesforthesourcingandmarketingofgasinIndia.TheupstreamjointventurewillcombineBP’s
deepwaterexplorationanddevelopmentcapabilitieswithReliance’sprojectmanagementandoperationsexpertise.The23oilandgasblockstogether
coverapproximately270,000squarekilometres,andReliancewillcontinuetobetheoperatorundertheproduction-sharingcontracts.BPwillpayReliance
anaggregateconsiderationof$7.2billion,andcompletionadjustments,fortheintereststobeacquiredinthe23production-sharingcontracts.Future
performancepaymentsofupto$1.8billioncouldbepaidbasedonexplorationsuccessthatresultsindevelopmentofcommercialdiscoveries.Completion
ofthetransactionsissubjecttoIndianregulatoryapprovalsandothercustomaryconditions.
On1February2011,BPannouncedthat,followingastrategicreview,itintendstodivesttheTexasCityreneryandthesouthernpartofitsUS
WestCoastfuelsvaluechain,includingtheCarsonrenery,bytheendof2012subjecttoallnecessarylegalandregulatoryapprovals.BPwillensure
currentobligationsatTexasCityarefullled.Theassetsdonotyetmeetthecriteriatobereclassiedasnon-currentassetsheldforsaleanditisnotyet
possibletoestimatethenancialeffectoftheseintendedtransactions.
On14January2011,BPenteredintoashareswapagreementwithRosneftOilCompanywherebyBPwillreceiveapproximately9.5%ofRosneft’s
sharesinexchangeforBPissuingnewordinarysharestoRosneft,resultinginRosneftholding5%ofBP’sordinaryvotingshares.Theaggregatevalueof
thesharesinBPtobeissuedtoRosneftisapproximately$7.8billion(asatcloseoftradinginLondonon14January2011).BPhasagreedtoissue
988,694,683ordinarysharestoRosneft;Rosnefthasagreedtotransfer1,010,158,003ordinarysharestoBP.Completionofthetransactionissubjectto
theoutcomeofthecourtapplicationreferredtointheparagraphbelow,andrelatedpendingarbitralproceedings.Aftercompletion,BP’sincreased
investmentinRosneftwillcontinuetoberecognizedasanavailable-for-salenancialasset.Duringtheperiodfromenteringintotheagreementuntil
completion,theagreementrepresentsaderivativenancialinstrumentandchangesinitsfairvaluewillberecognizedinBP’sincomestatementin2011.
166BPAnnualReportandForm20-F2010