BP 2012 Annual Report Download - page 98

Business review: BP in more depth
BP Annual Report and Form 20-F 2012
96
methyl bromide uses may result in future pressure to reduce our
emissions of methyl bromide. In addition, the European Commission
recently proposed a revised regulation to phase out the use of fluorinated
gases, including hydrofluorocarbons (HFCs). While targeting all HFCs,
there is specific emphasis on those with a high global-warming potential.
If adopted, this may have an impact on some of BP’s operations.
t The EU Fuel Quality Directive affects our production and marketing of
transport fuels. Revisions adopted in 2009 mandate reductions in the
life cycle GHG emissions per unit of energy and tighter environmental
fuel quality standards for petrol and diesel.
The EU Registration, Evaluation and Authorization of Chemicals (REACH)
Regulation requires registration of chemical substances, manufactured in,
or imported into, the EU in quantities greater than 1 tonne per annum per
legal entity, together with the submission of relevant hazard and risk data.
REACH affects our refining, petrochemicals, exploration and production,
biofuels, lubricants and other manufacturing or trading/import operations.
Having completed registration of all the substances that we were required
to submit by the regulatory deadline of 1 December 2010, we are now
preparing registration dossiers for substances manufactured or imported
in amounts in the range 100-1,000 tonnes per annum/legal entity that are
due to be submitted before 1 June 2013. Some substances registered
previously in 2010, including substances that we use that are supplied to
us by third parties, are now subject to thorough evaluation and/or potential
authorization/restriction procedures by the European Chemicals Agency
and EU Member state authorities. Legislation similar to REACH is in place
in Turkey, which requires the registration of manufactured and imported
chemicals.
t In addition, Europe has adopted the UN Global Harmonization System
for hazard classification and labelling of chemicals and products through
the Classification Labelling and Packaging (CLP) Regulation. This
requires BP to assess the hazards of all of our chemicals and products
against new criteria and will, over time, result in significant changes to
warning labels and material safety data sheets. All our European
Material Safety Data Sheets will need to be updated to include both
REACH and CLP information. We have already completed updates for
all chemical substances we manufacture and market in the EU by the
compliance deadline in 2011, and have implemented a process to
maintain compliance in our European operations. We have also notified
the European Chemicals Agency of hazard classifications for our
manufactured and imported chemicals, for inclusion in a publicly
available inventory of hazardous chemicals. CLP will also apply to
mixtures (e.g. lubricants) by 2015. Activities covered by both CLP and
REACH are subject to possible enforcement activity by national
regulatory authorities.
t In the UK, significant health and safety legislation affecting BP includes
the Health and Safety at Work Act and regulations and the Control of
Major Accident Hazards Regulations.
The EU Commission has proposed the adoption of a regulation on safety
of offshore oil and gas prospection, exploration and production activities.
While the proposal at this stage is likely to be adopted in the form of a
directive rather than a regulation, it aims to introduce a harmonized regime
aimed at reducing the potential environmental, health and safety impacts
of the offshore oil and gas industry throughout EU waters. Although the
legislative process is not complete, as proposed, the legislation would not
be entirely aligned with the regime currently operating in the UK and could
also, if adopted, have the effect of extending liability for clean-up and
compensation of environmental damage to marine waters.
Environmental maritime regulations
BP’s shipping operations are subject to extensive national and
international regulations governing liability, operations, training, spill
prevention and insurance. These include:
t In US waters, OPA 90 imposes liability and spill prevention and planning
requirements governing, among others, tankers, barges and offshore
facilities. It also mandates a levy on imported and domestically produced
oil to fund the oil spill response. Some states, including Alaska,
Washington, Oregon and California, impose additional liability for oil
spills. Outside US territorial waters, BP Shipping tankers are subject to
international liability, spill response and preparedness regulations under
the UN’s International Maritime Organization, including the International
Convention on Civil Liability for Oil Pollution, the MARPOL Convention,
the International Convention on Oil Pollution, Preparedness, Response
and Co-operation and the International Convention on Civil Liability for
Bunker Oil Pollution Damage. In April 2010, a new protocol, the
Hazardous and Noxious Substance (HNS) Protocol 2010, was adopted
to address issues that have inhibited ratification of the International
Convention on Liability and Compensation for Damage in Connection
with the Carriage of Hazardous and Noxious Substances by Sea 1996
(the HNS Convention). This protocol will enter into force when at least
12 states have agreed to be bound by it (four of the states must have at
least 2 million gross tonnes of shipping) and contributing parties in the
consenting states have received at least 40 million tonnes of
contributing cargoes in the preceding year. As at 3 January 2013, 14
states had signed or acceded to the Convention subject to ratification
but it had not yet entered into force.
t In April 2008, the International Maritime Organization approved
amendments to Annex VI of The International Convention for the
Prevention of Pollution from Ships (MARPOL) to reduce the sulphur
content in marine fuels. With effect from 1 January 2012 the global limit
of sulphur content in marine fuels was reduced and now shall not
exceed 3.50%. This global limit will be further reduced to 0.5% in 2020,
provided there is enough fuel available. Annex VI also provides for
stricter sulphur emission restrictions on ships in SOx Emission Control
Areas (SECAs). EU ports and inland waterways and the North Sea and
Baltic Sea have been covered by SECAs since 2010 imposing a sulphur
content limit of 0.1%. These restrictions require the use of compliant
heavy fuel oil (HFO) or distillate, or the installation of abatement
technologies on ships. These restrictions are expected to place
additional costs on refineries producing marine fuel, including costs to
dispose of sulphur, as well as increased GHG emissions and energy
costs for additional refining.
To meet its financial responsibility requirements, BP Shipping maintains
marine liability pollution insurance to a maximum limit of $1 billion for each
occurrence through mutual insurance associations (P&I Clubs) but there
can be no assurance that a spill will necessarily be adequately covered by
insurance or that liabilities will not exceed insurance recoveries.
Greenhouse gas regulation
Increasing concerns about climate change have led to a number of
international climate agreements and negotiations are ongoing.
At the UN summit in Cancun in December 2010, the parties to the UN
Framework Convention on Climate Change (UNFCCC) reached formal
agreement on a balanced package of measures to 2020. The Cancun
Agreement recognizes that deep cuts in global GHG emissions are
required to hold the increase in global temperature to below 2°C.
Signatories formally committed to carbon reduction targets or actions
by 2020. Around 114 countries, including all the major economies and
many developing countries, have made such commitments supplemented
currently by an additional 27 parties that have agreed to be listed as
agreeing to the accord. Supporting those efforts, principles were agreed
for monitoring, verifying and reporting emissions reductions;
establishment of a green fund to help developing countries limit and
adapt to climate change; and measures to protect forests and transfer
low-carbon technology to poorer nations. In November 2011, parties to
the UNFCCC conference in Durban (COP17) agreed several measures.
One was a ‘roadmap’ for negotiating a legal framework by 2015 for action
on climate change involving all countries by 2020, to close the ‘ambition
gap’ between existing GHG reduction pledges and what is required to
achieve the goal of limiting global temperature rise to 2°C. Another was a
second commitment period for the Kyoto Protocol, to begin immediately
after the first period. An amendment was subsequently adopted at the
2012 conference of parties (COP18) in Doha establishing a second
commitment period to run until the end of 2020. However, it will not
include the US, Canada, Japan and Russia, thus covers only about 15% of
global emissions.
Aspects of these international concerns and agreements are reflected in
national and regional measures seeking to limit GHG emissions.
Additional, more stringent, measures can be expected in the future. These
measures can increase BP’s production costs for certain products,
increase demand for competing energy alternatives or products with