BP 2011 Annual Report Download - page 99

BP Annual Report and Form 20-F 2011 97
Business review: BP in more depth
Business review
Acquisitions and disposals
We have been managing our portfolio actively, investing in businesses
where we have strengths in terms of location, configuration, integration,
technology and brand, while divesting assets that do not display these
strategic characteristics.
• We completed the divestment programme of non-strategic pipelines and
terminals in the US East of Rockies and West Coast, announced in 2009.
• We completed the disposal of our fuels marketing businesses in Malawi,
Namibia, Tanzania, Zambia and Zimbabwe following the 2010 disposal of
the business in Botswana. This portfolio rationalization now allows us to
focus our activities within the continent on South Africa and Mozambique.
• We also announced our intention to divest the Texas City refinery and the
southern part of the US West Coast FVC, including the Carson refinery,
roughly halving our US refining capacity. BP is aiming to complete the
sales by the end of 2012 subject to signing definitive agreements for
the sales and subsequent satisfaction of any legal, regulatory or other
conditions. BP will ensure that the fulfilment of current regulatory
obligations associated with the Texas City refinery is reflected in any
transaction. These assets are classified as held for sale in the group
balance sheet as at 31 December 2011.
• In December 2011, Air BP announced the purchase of aviation fuels
assets at seven Brazilian airports from Shell Brasil Holding B.V. and
Cosan S.A. Industria e Commercio for approximately $100 million. The
acquisition will give Air BP access to several new airports in Brazil as
well as increasing capacity at existing Air BP operations. This deal is
expected to be completed in the first quarter of 2012 subject to regulatory
approvals.
• In February 2012, we announced our intent to sell our bulk and bottled
LPG marketing businesses in nine countries.
Fuels
Our fuels business is made up of six regionally organized integrated FVCs
(as shown in the refineries table below), the Texas City refinery, our global
aviation fuel and LPG marketing businesses, and a number of regionally-
focused fuels marketing businesses notably the UK, Turkey, China and
France. At the end of 2011, the operating capital employed relating to the
fuels business was approximately $44 billion.
Fuels value chains
The six FVCs seek to optimize the activities of our assets across the supply
chain: crude delivery to the refineries; manufacture of high-quality fuels;
distribution through pipeline and terminal infrastructure; and marketing
and sales to our customers on a regional basis (see map on pages 34-35).
This integration, together with a focus on excellent execution and cost
management as well as a strong brand, market presence and customer
base, are key to our financial performance.
The FVC strategy focuses on feedstock-advantaged, upgraded,
well-located refineries integrated into advantaged logistics and marketing.
Consequently, in the US we intend to roughly halve our US refining capacity
by the end of 2012 (subject to all necessary legal and regulatory approvals)
(see also the Acquisitions and disposals section on this page).
In our remaining FVCs, we believe that we have a portfolio of
well-located refineries, integrated with strong marketing positions offering
the potential for improvement and growth. We currently own or have
a share in 16 refineries, which refine crude oil and produce refined fuel
products which we supply to retail and commercial customers. Strategic
investments in our refineries are focused on securing the safety and
reliability of our assets while improving our competitive position.
Key to our future refining capability is the Whiting refinery
modernization project (WRMP), which will allow the capture of additional
margin through the processing of heavy Canadian crudes. The project
continued to make significant progress in 2011. The coker’s six new drums
are now set in place, and the Southern Lights pipeline to Canada, and
Whiting’s interconnection to it, are in operation. This new pipeline capability
allows transport of diluent streams back to Canada which are used to
dilute heavy Canadian oils to facilitate their flow back to the US. WRMP is
expected to come onstream in the second half of 2013.
The following tables summarize the BP group’s interests in refineries and average daily crude distillation capacities as at 31 December 2011.
thousand barrels per day
Crude distillation capacitiesa
Refinery Fuels value chain
Group interestb
%Total
BP
share
US
California Carson US West Coast 100.0 266 266
Washington Cherry Point US West Coast 100.0 234 234
Indiana Whiting US East of Rockies 100.0 413 413
Ohio Toledo US East of Rockies 50.0 160 80
Texas Texas City –100.0 475 475
Total US 1,548 1,468
Europe
Germany BayernoilcRhine 22.5 217 49
Gelsenkirchen Rhine 50.0 265 132
KarlsruhecRhine 12.0 322 39
Lingen Rhine 100.0 93 93
SchwedtcRhine 18.8 239 45
Netherlands Rotterdam Rhine 100.0 377 377
Spain Castellón Iberia 100.0 110 110
Total Europe 1,623 845
Rest of World
Australia Bulwer ANZ 100.0 102 102
Kwinana ANZ 100.0 146 146
New Zealand WhangereicANZ 23.7 118 28
South Africa DurbancSouthern Africa 50.0 180 90
Total Rest of World 546 366
Total 3,717 2,679
a Crude distillation capacity is gross rated capacity, which is defined as the highest average sustained unit rate for a consecutive 30-day period.
b BP share of equity, which is not necessarily the same as BP share of processing entitlements.
c Indicates refineries not operated by BP.