BP 2010 Annual Report Download - page 42

Businessreview
ExplorationandProduction
Organizational and governance changes in Exploration and
Production
AspartofourresponsetotheGulfofMexicooilspill,atthebeginningof
thefourthquarterwedecidedtoreorganizeourExplorationandProduction
segmenttocreatethreeseparatedivisions:Exploration,Developments,
andProduction,integratedthroughaStrategyandIntegrationorganization.
Thisisdesignedtochangefundamentallythewayweoperate,with
aparticularfocusonmanagingrisk,deliveringcommonstandards
andprocessesandbuildingpersonnelandtechnologicalcapability
forthefuture.
TheExplorationdivisionisaccountableforrenewingourresource
basethroughaccess,explorationandappraisal.TheDevelopmentsdivision
isaccountableforthesafeandcompliantexecutionofwells(drillingand
completions)andmajorprojects,buildingonthecentralizeddevelopments
organizationestablishedin2010.TheProductiondivisionisaccountablefor
safeandcompliantoperations,includingupstreamproductionassets,
midstreamtransportationandprocessingactivities,andthedevelopment
ofourresourcebase.Divisionalactivitiesareintegratedonaregionalbasis
byaregionalpresidentreportingtotheProductiondivision.
ThegroupSafetyandOperationalRisk(S&OR)functionisbeing
enhancedtofurtherourobjectivesinsafety,complianceandrisk
managementanddemonstratesourcommitmenttopreventingfuture
low-probability,high-impactincidents.Ithasitsownexpertstaffembedded
inthedivisionsandisresponsibleforensuringthatalloperationsarecarried
outtocommonstandardsandforauditingcompliancewiththose
standards.
TheStrategyandIntegrationorganizationisaccountablefor
optimizationandintegrationacrossthedivisions,includingdeliveryof
supportfromnance,procurementandsupplychain,humanresourcesand
informationtechnology.
OurExplorationandProductionsegmentincludedupstreamand
midstreamactivitiesin29countriesin2010,includingAngola,Azerbaijan,
Canada,Egypt,Norway,Russia,Trinidad&Tobago(Trinidad),theUK,theUS
andotherlocationswithinAsia,Australasia,SouthAmericaandAfrica,as
wellasgasmarketingandtradingactivities,primarilyinCanada,Europeand
theUS.Upstreamactivitiesinvolveoilandnaturalgasexplorationandeld
developmentandproduction.Ourexplorationprogrammeiscurrently
focusedonEgypt,thedeepwaterGulfofMexico,Libya,theNorthSea,
OmanandonshoreUS.MajordevelopmentareasincludeAngola,
Azerbaijan,Canada,Egypt,thedeepwaterGulfofMexico,theUKNorth
SeaandRussia.During2010,productioncamefrom20countries.The
principalareasofproductionareAngola,Azerbaijan,Egypt,Russia,Trinidad,
theUKandtheUS.
Midstreamactivitiesinvolvetheownershipandmanagementof
crudeoilandnaturalgaspipelines,processingfacilitiesandexport
terminals,LNGprocessingfacilitiesandtransportation,andourNGL
extractionbusinessesintheUS,theUK,CanadaandIndonesia.Ourmost
signicantmidstreampipelineinterestsaretheTrans-AlaskaPipeline
SystemintheUS,theFortiesPipelineSystemandtheCentralArea
TransmissionSystempipeline,bothintheUKsectoroftheNorthSea;the
SouthCaucasusPipeline(SCP),whichtakesgasfromAzerbaijanthrough
GeorgiatotheTurkishborder;andtheBaku-Tbilisi-Ceyhanpipeline,running
throughAzerbaijan,GeorgiaandTurkey.MajorLNGactivitiesarelocatedin
Trinidad,IndonesiaandAustralia.BPisalsoinvestingintheLNGbusiness
inAngola.
Additionally,ouractivitiesincludethemarketingandtradingof
naturalgas,powerandnaturalgasliquids.Theseactivitiesprovideroutes
intoliquidmarketsforBP’sgasandpower,andgeneratemarginsandfees
associatedwiththeprovisionofphysicalandnancialproductstothird
partiesandadditionalincomefromassetoptimizationandtrading.
Ouroilandnaturalgasproductionassetsarelocatedonshoreandoffshore
andincludewells,gatheringcentres,in-eldowlines,processingfacilities,
storagefacilities,offshoreplatforms,exportsystems(e.g.transitlines),
pipelinesandLNGplantfacilities.
UpstreamoperationsinArgentina,Bolivia,Chile,AbuDhabi,
VenezuelaandRussia,aswellassomeofouroperationsinAngola,Canada
andIndonesia,areconductedthroughequity-accountedentities.
Our market
Energymarketsrecoveredin2010fromtheimpactoftheglobaleconomic
recession,withcrudeoilpricesinparticularbouncingbackfollowinga
declinein2009–therstsince2001.
DatedBrentfortheyearaveraged$79.50perbarrel,29%above
2009’saverageof$61.67perbarrel.Pricesuctuatedinarelativelynarrow
bandof$70-$80perbarrelformostoftheyearbeforerisinginthefourth
quarter.Pricesexceeded$90perbarrelinDecember,thehighestlevel
sinceOctober2008.
In2011,weexpectoilpricemovementstocontinuetobedrivenby
thepaceofglobaleconomicgrowthanditsresultingimplicationsforoil
consumption,andbyOPECproductiondecisions.
Naturalgaspricesstrengthenedin2010,butwerevolatile.The
averageUSHenryHubFirstofMonthIndexroseto$4.39/mmBtu,a10%
increasefromthedepressedpricesin2009.
Gasconsumptionrecoveredacrosstheworldalongwiththe
economy.IntheUS,acoldstartto2010followedbyahotsummerand
lowtemperaturestowardstheendoftheyearalsocontributedtodemand
strength.Yetdomesticproductiongrowth–ofshalegasinparticular–
continuedapaceandlimitedpricerises.HenryHubgaspricesstayed
belowcoalparityinUSpowergenerationfromthesummer,leadingto
thedisplacementofcoalbygas.Thedifferentialsofproductionarea
pricestoHenryHubpricescontinuedtonarrowaspipelinebottlenecks
werereduced.
InEurope,spotgaspricesattheUKNationalBalancingPoint
increasedby38%toanaverageof42.45penceperthermfor2010.Yet
plentifulglobalLNGsupplykeptspotgaspricesbelowoil-indexedcontract
levelsformostoftheyear,causingcompetitionwithcontractpipeline
suppliesandmarginalEuropeangasproduction.UKspotgaspricesonly
attainedcontractpricelevelsfromtheendofNovemberascoldweather
causedrapidinventorydraw-downs.
In2011,weexpectgasmarketstocontinuetobedrivenbythe
economy,weather,domesticproductiontrendsandcontinuedsignicant
growthofglobalLNGsupply.
Our strategy
InExplorationandProduction,ourpriorityistoensuresafe,reliableand
compliantoperationsworldwide.Ourstrategyistoinvesttogrow
long-termvaluebycontinuingtobuildaportfolioofenduringpositionsin
theworld’skeyhydrocarbonbasinswithafocusondeepwater,gas
(includingunconventionalgas)andgiantelds.Ourstrategyisenabledby:
• Continuouslyreducingoperatingrisk.
• Strongrelationshipsbuiltonmutualadvantage,deepknowledgeofthe
basinsinwhichweoperate,andtechnology.
• BuildingcapabilityalongthevaluechaininExploration,Developments
andProduction.
WeareincreasinginvestmentinExploration,akeysourceofvaluecreation
atthefrontendofthevaluechain,andweareevolvingthenatureofour
relationships,particularlywithNationalOilCompanies.Wewillalso
continuetoactivelymanageourportfolio,withafocusonvaluegrowth.
40BPAnnualReportandForm20-F2010