BP 2011 Annual Report Download - page 23

Business review: Group overview
BP Annual Report and Form 20-F 2011 21
Refining margins
In 2011, demand for oil products continued to grow, albeit more slowly than
a year ago, with all of the demand increase occurring in non-OECD markets
and with overall demand in the OECD resuming its structural decline. As new
refining capacity continued to be commissioned in Asia and the Far East, global
refinery utilization rates fell in 2011. Despite this, a number of factors supported an
increase in refining margins across all regions for a second consecutive year. The
BP refining marker margin (RMM)a averaged $11.64 per barrel in 2011, compared
with $10.02 per barrel in 2010 and $9.19 per barrel in 2009.
In 2011, diesel prices relative to crude reached highs not seen since 2008
as the trend to lower-sulphur fuels continued and demand grew. Gasoline prices
were volatile in 2011. In the US, short-term supply issues supported gasoline
prices in the middle of the year despite a reduction in demand compared with last
year. By the fourth quarter, US gasoline prices relative to crude had fallen to the
lowest levels seen for at least 23 years. Refining margins improved in Asia Pacific,
due to continuing oil demand growth and the disruption to Japanese refining
operations caused by the earthquake and tsunami.
US mid-continent crude oils (including the key marker grade of West Texas
Intermediate) were heavily discounted throughout the year because of increasing
production in the US Lower 48 states and in Canada, coupled with constrained
logistics. This allowed refiners that are able to access these crudes to capture
additional margins.
The loss of Libyan crude oil supply in the first quarter of 2011 and production
problems in the North Sea during the summer resulted in record high prices for
low-sulphur grades of crude oil. This adversely impacted the margin for refiners
configured to process these grades, particularly in Europe, the US East Coast and
Asia.
By contrast, in 2010 the RMM increase compared with 2009 was due to
strongly-improved demand for oil products, in line with the economic bounce-back
from recession, despite unused refining capacity.
Looking ahead, the overall economic environment is expected to result in
limited demand growth such that refinery utilization levels are likely to remain low,
despite the announced shutdown of capacity in Europe and the US.
a See page 94 for further information on RMM.
In detail
For more information, see
Refining and Marketing.
Page 94
Left In 2011, we
received local
government approval
for a 1.25mtpa PTA
plant to be added to
existing BP
petrochemicals facilities
in Zhuhai, China.