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Businessreview
Business review
• DuetotherecentsignicantpoliticalunrestinCairoandothermajor
citiesinEgypt,theBPEgyptofceinCairowasclosedfrom28January
foraperiodof10days.Furthermore,BPexpatriatestaffandtheir
familieswereevacuatedfromEgypt.TheBPEgyptofcewas
reopenedon7February,andnationalstaffreturnedtowork.Most
expatriatestaffandfamiliesreturnedtoEgyptduringFebruary.
ProductionatBPEgypt’sjointventures(GUPCOandPHP)wasnot
affectedbytheofceclosures.Theofceclosureandstaffevacuation
willhavesomeshort-termimpactsonprojectactivity.On11February,
PresidentMubarakresignedandhandedoverpowertotheSupreme
CounciloftheEgyptianArmedForces.Currently,itisnotpossibleto
saywhatimpact,ifany,futurepoliticialchangeswillhaveonthe
BPEgyptbusiness.
Asia
WesternIndonesia
BPhasajointinterestinVirginiaIndonesiaCompanyLLC(VICO),the
operatoroftheSanga-SangaPSA(BP38%)supplyinggastoIndonesia’s
largestLNGexportfacility,theBontangLNGplantinKalimantan.
• InJune2010,BPwasawardedjointstudyrightswiththeIndonesia
DirectorateGeneralofOilandGasontheWestSangaSangablock
immediatelyadjacenttotheSanga-SangaPSA.Thisstudyinvolves
gathering,processingandinterpretingdatatoevaluatetheviabilityofa
coalbedmethane(CBM)projectinthearea.Theawardofthejoint
studysecuresmatchingrightsforBPanditspartneroverthe
3,500-squarekilometreareawhentheareawillbetenderedfor
production-sharingcontracts(PSC),allowingthemtochangetheirbid
tomatchthatofthehighestbidderatthattime.
China
BP’supstreamassetinthecountryistheYachengoffshoregaseld(BP
34.3%)intheSouthChinaSea,oneofthebiggestoffshoregaseldsin
China.YachengsuppliestheCastlePeakPowerCompanygasforupto
70%ofHongKong’sgas-redelectricitygeneration.Additionalgasisalso
soldtotheHainanHoldingsFuel&ChemicalCorporationLimited.
• On12January2011,BPannouncedthatithadsignedanewagreement
withtheChinaNationalOffshoreOilCorporation(CNOOC)for
deepwaterexplorationinBlock43/11intheSouthChinaSea,subjectto
partnerandgovernmentapproval.
Azerbaijan
BPisthelargestforeigninvestorinthecountry.BPoperatestwoPSAs,
Azeri-Chirag-Gunashli(ACG)andShahDeniz,andalsoholdsother
explorationleases.
• On9March2010,thesteeringcommitteeforthedevelopmentofthe
ACGeldsanctionedinvestmentintheChiragOilProject(COP).
Thisisthenextmajorcapitalinvestmentintheongoingdevelopment
oftheACGeldintheAzerbaijansectoroftheCaspianSea.Theproject
isplannedtoincreaseoilproductionandrecoveryfromtheeldthrough
anewoffshorefacilitywhichisdesignedtollacriticalgapinthe
eldinfrastructurebetweentheexistingDeepwaterGunashliand
Chirag-1platforms.
• On7June2010,thegovernmentofAzerbaijanandthegovernmentof
TurkeysignedaMemorandumofUnderstanding(MOU)aspartofa
packageofdocumentsthatwillregulatethesaleofAzerbaijanigasto
TurkeyandtransittermsfortransportationofthegastotheEuropean
marketsthroughtheterritoryofTurkey.Thismarksamajorstep
forwardtowardsconclusionofrequiredagreementsforShahDeniz
Stage2gassalestoTurkeyandbeyond,andisamilestonethat
underpinsthesignicanceoftheStage2developmentplansandpaves
thewayfortheprojecttomoveforwardtowardsanalinvestment
decisionbytheShahDenizpartnership.Atthisstage,discussionsto
denethebestoptionforfurthergasmarketingandsalescontinueand
theseareledbytheAzerbaijanigovernmentinconjunctionwiththe
ShahDenizpartnership.
• On7October2010,BPandtheStateOilCompanyoftheRepublicof
Azerbaijan(SOCAR)signedanewPSAforthejointexplorationand
developmentoftheShafag-AsimanstructureintheAzerbaijansectoro
theCaspianSea.UnderthePSA,whichisfor30years,BPwillbethe
operatorwith50%workinginterestandSOCARwillholdtheremainin
50%equity.Theblockliessome125kilometres(78miles)tothesouth
eastofBaku.Itcoversanareaofsome1,100squarekilometresandha
neverbeenexploredbefore.Itislocatedinadeepwatersectionof
about650-800metreswithreservoirdepthofabout7,000metres.
• On24December2010,BPanditspartnersreceivedave-yearPSA
extensionforShahDenizfromSOCAR.ThePSAextensionallowsthe
ShahDenizpartnerstonegotiatenewlong-termgascontractsand
underpinstheeconomicsoftheproject.
• During2010,theremedialworknecessaryfollowingthesubsurface
gasreleasethatoccurredbeneaththeCentralAzeriplatformin
September2008wascompleted.Withtheexceptionoftwowellsthat
wereabandoned,allwellsontheCentralAzeriplatformareonlineand
inservice.
• NaftiranIntertradeCo(NICO)LtdisanIraniancompanyandhasaless
than10%non-operatinginterestinShahDeniz.NICOwasselectedas
ShahDenizprojectparticipantbytheStateofAzerbaijanwhentheSha
DenizPSAwasawardedinJune1996.Underarticle30ofthenewEU
RegulationsconcerningrestrictivemeasuresagainstIran,anybody,
entityorholderofrightsderivedfromanawardofaPSAbeforethe
entryintoforceoftheEURegulationsbyasovereigngovernmentother
thanIran,shallnotbeconsideredan‘Iranianperson,entityorbody’for
thepurposesofthemainoperativeprovisionsoftheEURegulations.
Russia
• O n14January2011,BPandRosneftaannouncedastrategicglobal
alliance.RosneftandBPhaveagreedtoexploreanddevelopthree
licenceblocksinRussia’sSouthKaraSeacoveringapproximately
125,000squarekilometres.Additionally,BPhasagreedtoissue
988,694,683ordinaryBPsharestoRosneft(representing5%ofBP)in
aswapwhereRosnefthasagreedtotransfer1,010,158,003ordinary
RosneftsharestoBP(representing9.5%ofRosneft).Finally,BPand
Rosnefthaveagreedtootherjointpursuitsincludingtheestablishment
ofanArctictechnologycentreinRussia,jointtechnicalstudiesinthe
RussianArcticbeyondtheSouthKaraSeaareaandthesearchfor
additionalinternationalcollaborationopportunities.Theshareswap
transactionissubjecttocertainlistingapprovalsandthecompletionof
certainadministrativerequirements.Theshareswapagreementis
subjecttotheoutcomeofarbitrationproceedingsbetweenBPandAlfa
PetroleumHoldingsLimited(APH)andOGIPVenturesLimited(OGIP)
whohaveraisedissuesrelatingtotheshareswapagreementandthe
alliance.APHisacompanyownedbyAlphaGroup.APHandOGIP
eachown25%ofTNK-BPinwhichBPalsohasa50%shareholding.
SeefurtherinformationinLegalproceedingsonpage133.
TNK-BP
TNK-BP,anassociateownedbyBP(50%)andAlfaGroupandAccess-
Renova(AAR)(50%),isanintegratedoilcompanyoperatinginRussiaand
Ukraine.BP’sinvestmentinTNK-BPisreportedintheExplorationand
Productionsegment.TheTNK-BPgroup’smajorassetsareheldinOAO
TNK-BPHolding.OtherassetsincludetheBP-brandedretailsitesinthe
MoscowregionandinterestsinOAORusiaPetroleumandtheOAO
Slavneftgroup.Theworkforcecomprisesmorethan43,000people.
• Downstream,TNK-BPhasinterestsinsixreneriesinRussiaand
Ukraine(includingRyazanandLisichanskandSlavneft’sYaroslavl
renery),withthroughputofapproximately715thousandbarrelsper
day.TNK-BPsuppliesapproximately1,400brandedllingstationsin
RussiaandUkraineandhasmorethan25%marketshareofthe
Moscowretailmarket.
aBPalreadyholdsa1.3%investmentinRosneftOilCompanywithacarryingvalueof$948million.
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