BP 2011 Annual Report Download - page 100

98 BP Annual Report and Form 20-F 2011
Business review
The table below summarizes the volume, by region, of crude oil and
feedstock processed by BP for its own account and for third parties.
Utilization data is also summarized below.
thousand barrels per day
Refinery throughputsa2011 2010 2009
US 1,277 1,350 1,238
Europe 771 775 755
Rest of World 304 301 294
Total 2,352 2,426 2,287
Refinery capacity utilization
Crude distillation capacity
at 31 Decemberb2,679 2,667 2,666
Refinery utilizationc88% 91% 86%
US 87% 93% 85%
Europe 91% 91% 89%
Rest of World 84% 84% 83%
a Refinery throughputs reflect crude oil and other feedstock volumes.
b Crude distillation capacity is gross rated capacity, which is defined as the highest average sustained
unit rate for a consecutive 30-day period.
c Refinery utilization is annual throughput divided by crude distillation capacity, expressed as a
percentage.
Overall refinery throughputs decreased by 74mb/d in 2011 relative to
2010, mainly due to the second quarter weather-related power outages
in the US.
We continue to invest to develop the capability of producing cleaner
fuels to meet the requirements of our customers and their communities.
For example, in April 2011, BP announced a major investment in a new
hydrotreater unit and hydrogen plant at our Cherry Point refinery, called
the clean diesel project. This project will allow the refinery to produce fuels
that meet ultra-low sulphur diesel (ULSD) standards for rail and marine
diesel customers. In addition, the new hydrogen plant will allow improved
operation of naphtha reforming units at the refinery.
In addition to refined petroleum products, we also blend and
market biofuels at our refineries. Biogasoline (bioethanol) and biodiesel
(hydrogenated vegetable oils and fatty acid methyl esters) continue to
grow in volume, primarily in Europe and the US, as regulatory requirements
demand heavier blending levels. Our response is to continue to develop
blend capabilities and to work with regulators, biofuels supply chains and
other stakeholders to improve the sustainability of the biofuels we blend
and supply.
Downstream of our refineries, our priorities are to operate an
advantaged infrastructure and logistics network (which includes pipelines,
storage terminals and road or rail tankers), drive excellence in operational
and transactional processes, and deliver compelling customer offers in the
various markets in which we operate.
We supply fuel and related convenience services to retail
consumers through company-owned and franchised retail sites, as well
as other channels, including wholesalers and jobbers. We also supply
commercial customers within the transport and industrial sectors.
Our retail network is largely concentrated in Europe and the US,
but also has established operations in Australasia, and southern Africa. We
have developed networks in China in two separate joint ventures, one with
PetroChina and the other with China Petroleum and Chemical Corporation
(Sinopec) and these joint ventures in China operate around 700 dual
branded sites.
As at 31 December 2011, BP’s worldwide retail network consisted
of some 21,800 sites across the US, Europe, Australia, New Zealand and
southern Africa. This is a reduction of 300 since 2010, primarily due to
a focus on fewer higher throughput sites and portfolio changes such as
the southern African disposals. These retail sites are primarily branded
BP, ARCO and Aral. We expect the number of sites to fall in 2012 as we
dispose of the southern part of our US West Coast FVC. In 2011, branded
fuels sales in the US continued to recover from the oil effects of the
Deepwater Horizon oil spill, and market share stabilized but remained lower
than before the oil spill, partly caused by the slowdown in US gasoline
demand. We continue to invest in our fuels marketing in growing markets,
for example in 2011, we piloted a new convenience retail offer in Poland
with Carrefour.
The table below shows the number of BP-branded retail sites by region.
Number of retail sites operated under a BP brand
Retail sitesa b 2011 2010 2009
US 11,300 11,300 11,500
Europe 8,200 8,400 8,600
Rest of World 2,300 2,400 2,300
Total 21,800 22,100 22,400
a The number of retail sites includes sites not operated by BP but instead operated by dealers,
jobbers, franchisees or brand licensees that operate under a BP brand. These may move to or from
the BP brand as their fuel supply or brand licence agreements expire and are renegotiated in the
normal course of business. Retail sites are primarily branded BP, ARCO and Aral.
b Excludes our interest in equity-accounted entities which are dual-branded.
Some of these retail sites include a convenience store which offers
consumers a range of food, drink and other consumables and services in a
convenient and innovative manner. The convenience offer includes brands
such as ampm, Wild Bean Café and Petit Bistro and includes partnerships
with leading retailers such as Marks & Spencer in the UK and Carrefour in
Poland.
BP’s integrated supply and trading function is responsible for
delivering value across the overall crude and oil products supply chain.
This structure enables the optimization of BP’s FVCs to maintain a single
interface with the oil trading markets and to operate with a single set
of trading compliance processes, systems and controls. The oil trading
business (including support functions) has trading offices in Europe, the
US and Asia and employs around 1,500 people. This enables the function
to maintain a presence in the more actively traded regions of the global
oil markets in order to gain an overall understanding of the supply and
demand forces across this market. It has a two-fold strategic purpose in
our business.
First, it seeks to identify the best markets and prices for our crude
oil, source optimal feedstocks for our refineries, and provide competitive
supply for our marketing businesses. In addition, where refinery
production is surplus to marketing requirements or can be sourced more
competitively, it is sold into the market. Wherever possible, the group will
look to optimize value across the supply chain. For example, BP will often
sell its own crude and purchase alternative crudes from third parties for its
refineries where this will provide incremental margin.
Second, the function seeks to create and capture incremental
trading opportunities. It enters into the full range of exchange-traded
commodity derivatives, over-the-counter (OTC) contracts and spot and
term contracts (described in Certain definitions – commodity trading
contracts on page 111). In order to facilitate the generation of trading
margin from arbitrage, blending and storage opportunities, it also owns
and contracts for storage and transport capacity. The group has developed
a risk governance framework to manage and oversee the financial risks
associated with this trading activity, see Financial statements – Note 26 on
pages 217-222.
The group’s trading activities in oil are managed by the integrated
supply and trading function. In order to carry out the unique delegations
from the BP group, the integrated supply and trading function operates and
enforces a robust system of internal control. The internal control systems
operated by the regional business leads are augmented by internal support
functions that provide independent oversight, including product control,
risk, trade completion and accounting and reporting. They are further
supported by regional and group ethics and compliance and group
internal audit.
Aviation
Our global aviation business, Air BP, is one of the world’s largest and best
known aviation fuels suppliers, serving many major commercial airlines
as well as the general aviation and military sectors. We have marketing
sales in excess of 450 thousand barrels per day. Air BP’s strategic aim is
to grow its position in the core locations of Europe, the US, Australasia
and the Middle East, while focusing its portfolio towards airports that offer
long-term competitive advantage.