BP 2010 Annual Report Download - page 54

Businessreview
Fortheexecutivedirectorsandseniormanagement,nospecicportionof
compensationbonusesisdirectlyrelatedtoprovedreservestargets.
Additionstoprovedreservesisoneofseveralindicatorsbywhichthe
performanceoftheExplorationandProductionsegmentisassessedbythe
remunerationcommitteeforthepurposesofdeterminingcompensation
bonusesfortheexecutivedirectors.Otherindicatorsincludeanumberof
nancialandoperationalmeasures.Inaddition,weareconductinga
fundamentalreviewofhowthegroupincentivizesbusinessperformance,
includingrewardstrategy,withtheaimofencouragingexcellenceinsafety,
complianceandoperationalriskmanagement.
BP’svariablepayprogrammefortheotherseniormanagersinthe
ExplorationandProductionsegmentisbasedonindividualperformance
contracts.Individualperformancecontractsarebasedonagreeditems
fromthebusinessperformanceplan,oneofwhich,ifchosen,couldrelate
toprovedreserves.
Compliance
InternationalFinancialReportingStandards(IFRSs)donotprovidespecic
guidanceonreservesdisclosures.BPestimatesprovedreservesin
accordancewithSECRule4-10(a)ofRegulationS-Xandrelevant
ComplianceandDisclosureInterpretations(C&DI)andStaffAccounting
BulletinsasissuedbytheSECstaff.
Bytheirnature,thereisalwayssomeriskinvolvedinthe
ultimatedevelopmentandproductionofprovedreserves,including,but
notlimitedto,nalregulatoryapproval,theinstallationofneworadditional
infrastructure,aswellaschangesinoilandgasprices,changesin
operatinganddevelopmentcostsandthecontinuedavailabilityof
additionaldevelopmentcapital.Allthegroup’sprovedreservesheldin
subsidiariesandequity-accountedentitiesareestimatedbythegroup’s
petroleumengineers.
Ourprovedreservesareassociatedwithbothconcessions(taxand
royaltyarrangements)andagreementswherethegroupisexposedtothe
upstreamrisksandrewardsofownership,butwhereourentitlementtothe
hydrocarbonsiscalculatedusingamorecomplexformula,suchasPSAs.In
aconcession,theconsortiumofwhichweareapartisentitledtothe
provedreservesthatcanbeproducedoverthelicenceperiod,whichmay
bethelifeoftheeld.InaPSA,weareentitledtorecovervolumesthat
equatetocostsincurredtodevelopandproducetheprovedreservesand
anagreedshareoftheremainingvolumesortheeconomicequivalent.As
partofourentitlementisdrivenbythemonetaryamountofcoststobe
recovered,priceuctuationswillhaveanimpactonbothproduction
volumesandreserves.
Wediscloseourshareofprovedreservesheldinequity-accounted
entities(jointlycontrolledentitiesandassociates),althoughwedonot
controltheseentitiesortheassetsheldbysuchentities.
BP’s estimated net proved reserves as at 31 December 2010
Seventy-vepercentofourtotalprovedreservesofsubsidiariesat
31December2010wereheldthroughunincorporatedjointventures
(76%in2009),and31%oftheprovedreserveswereheldthrough
suchunincorporatedjointventureswherewewerenottheoperator
(27%in2009).
Estimated net proved reserves of liquids at 31 December 2010a b c
      millionbarrels
    Developed Undeveloped Total
UK    364 431 795
RestofEurope 77 221 298
US    1,729 1,190 2,919d
RestofNorthAmerica – – –
SouthAmerica 44 58 102e
Africa   371 374 745
RestofAsia 269 325 594
Australasia  48 58 106
Subsidiaries 2,902 2,657 5,559
Equity-accountedentities 3,166 1,984 5,150f
Total   6,068 4,641 10,709
Estimated net proved reserves of natural gas at 31 December 2010a b
billioncubicfeet
    Developed Undeveloped Total
UK    1,416 829 2,245
RestofEurope 40 430 470
US    9,495 4,248 13,743
RestofNorthAmerica 58 – 58
SouthAmerica 3,575 6,575 10,150g
Africa   1,329 2,351 3,680
RestofAsia 1,290 268 1,558
Australasia  3,563 2,342 5,905
Subsidiaries 20,766 17,043 37,809
Equity-accountedentities 3,046 1,845 4,891h
Total   23,812 18,888 42,700
Net proved reserves on an oil equivalent basis
millionbarrelsofoilequivalent
    Developed Undeveloped Total
Subsidiaries 6,481 5,596 12,077
Equity-accountedentities 3,691 2,303 5,994
Total   10,172 7,899 18,071
aP rovedreservesexcluderoyaltiesduetoothers,whetherpayableincashorinkind,wherethe
royaltyownerhasadirectinterestintheunderlyingproductionandtheoptionandabilitytomake
liftingandsalesarrangementsindependently,andincludeminorityinterestsinconsolidated
operations.Wediscloseourshareofreservesheldinjointlycontrolledentitiesandassociatesthat
areaccountedforbytheequitymethodalthoughwedonotcontroltheseentitiesortheassets
heldbysuchentities.
b
The2010markerpricesusedwereBrent$79.02/bbl(2009$59.91/bbland2008$36.55/bbl)and
HenryHub$4.37/mmBtu(2009$3.82/mmBtuand2008$5.63/mmBtu).
cLiquids
includecrudeoil,condensate,naturalgasliquidsandbitumen.
dP rovedreservesinthePrudhoeBayeldinAlaskaincludeanestimated78millionbarrelsonwhich
anetprotsroyaltywillbepayableoverthelifeoftheeldunderthetermsoftheBPPrudhoeBay
RoyaltyTrust.
e
Includes22millionbarrelsofcrudeoilinrespectofthe30%minorityinterestinBPTrinidadand
TobagoLLC.
fIncludes
254millionbarrelsofcrudeoilinrespectofthe7.03%minorityinterestinTNK-BP.
gIncludes2,921billioncubicfeetofnaturalgasinrespectofthe30%minorityinterestinBPTrinidad
andTobagoLLC.
h
Includes137billioncubicfeetofnaturalgasinrespectofthe5.89%minorityinterestinTNK-BP.
52BPAnnualReportandForm20-F2010