BP 2012 Annual Report Download - page 117

Corporate governance
Corporate governance
BP Annual Report and Form 20-F 2012
115
Board visit to US hydraulic fracturing operations
In May, six non-executive directors travelled to East Texas to visit our
North America gas operations for a first-hand look at onshore natural
gas production sites and the technique known as hydraulic fracturing
or ‘fracking’. The visit was an opportunity for the board to learn more
about BP’s natural gas business in the US, and in particular about
production from unconventional gas resources. More than 80% of
BP’s onshore gas is from unconventional gas resources such as shale
gas, tight gas and coalbed methane.
Following a site specific safety briefing, the directors toured a drilling
rig at the well site where they were given an overview of the drilling
process and saw a hydraulic fracturing set up with pump trucks and
other associated equipment. The tour also included a visit to the
production facility, where board members obtained insights on the
water and gas separation operations, and how product coming from
wells in the area is handled prior to processing.
In commenting on his impressions of the visit, the chairman of SEEAC
Paul Anderson said: “We have a professional, dedicated team that is
doing a good and responsible job of developing the resource.”
Board evaluation
BP undertakes an annual review of the board, its committees and
individual directors. The chairman’s own performance is evaluated by the
chairman’s committee (led by Antony Burgmans in consultation with the
senior independent director).
For the past three years an external review of the board’s performance
has been undertaken, and for 2012 the board undertook an evaluation
facilitated by external legal counsel on the basis of a questionnaire, which
tested key areas of the board’s work including strategy, monitoring, risk
and governance processes. The evaluation also considered the balance of
skills, experience, independence and knowledge of the company on the
board, its diversity (including gender), how the board works together as a
unit and other factors relevant to its effectiveness. The results of the
review were discussed at the board and individually at each committee in
January 2013.
Key conclusions from the evaluation
The review concluded that there had been significant progress in dealing
with major strategic issues over the year and there had been a continued
improvement in board processes, particularly in the areas of time
management and board materials.
Going forward, it was agreed that the emphasis on improving board
processes would continue and that as the group transitioned to a more
stable business environment, the board would focus on re-aligning its
agenda to increase the focus on strategic issues. There would also be
more use of forward agenda planning to enable this to be realised.
Tracking issues from our previous evaluation
In 2012, the board progressed recommendations of the 2011 board
evaluation. The board continued to track the risk management review and
the implementation of enhancements to the company’s risk management
system. Emphasis was given to key governance processes raised by the
2011 evaluation, with board and committee papers adopting a common
template and risk matrices in board materials using a consistent
methodology aligned with the group’s risk management reports.
There was also increased focus on financial and non-financial metrics
used by the board and this will continue into 2013.
A further outcome of the last evaluation was the wish to move back to a
steady state of operation. However, developments during the year led to
an increase in the scheduled number of board meetings from 11 to 19; the
board will again endeavour to find this equilibrium over the course of 2013.