BP 2008 Annual Report Download - page 128

Financial statements
BP Annual Report and Accounts 2008
Notes on financial statements
9. Production and similar taxes
$ million
2008 2007 2006
UK 370 197 260
Overseas 6,156 3,816 3,361
6,526 4,013 3,621
10. Depreciation, depletion and amortization
$ million
By business 2008 2007 2006
Exploration and Productiona
UK 1,168 1,698 1,735
Rest of Europe 203 213 225
US 3,012 2,365 2,336
Rest of World 4,057 3,580 2,393
8,440 7,856 6,689
Refining and Marketing
UKb288 278 299
Rest of Europe 761 729 603
US 825 1,076 1,047
Rest of World 334 338 290
2,208 2,421 2,239
Other businesses and corporate
UK 154 157 105
Rest of Europe 33 17 12
US 132 117 76
Rest of World 18 11 7
337 302 200
By geographical area
UKb1,610 2,133 2,139
Rest of Europe 997 959 840
US 3,969 3,558 3,459
Rest of World 4,409 3,929 2,690
10,985 10,579 9,128
aAt the end of 2006, BP adopted the US Securities and Exchange Commission (SEC) rules for estimating oil and natural gas reserves instead of the UK accounting rules contained in the Statement of
Recommended Practice ‘Accounting for Oil and Gas Exploration, Development, Production and Decommissioning Activities’ (UK SORP). This change in accounting estimate had a direct impact on the
amount of depreciation, depletion and amortization (DD&A) charged in the income statement in respect of oil and natural gas properties which are depreciated on a unit-of-production basis as described
in Note 1. The change in estimate was applied prospectively, with no restatement of prior periods’ results. The group’s actual DD&A charge for 2006 was $9,128 million, whereas the charge based on UK
SORP reserves would have been $9,057 million, i.e. an increase of $71 million due to the change in reserves estimates that was used to calculate DD&A for the last three months of 2006. For 2007, it
was estimated that the DD&A charge would have increased by approximately $400 million to $500 million as a result of the change. No estimate has been made in respect of 2008. Over the life of a
field, this change has no overall effect on DD&A. The main differences between the UK SORP and SEC rules relate to the SEC requirement to use year-end prices and costs, the application of SEC
interpretations of SEC regulations relating to the use of technology (mainly seismic) to estimate reserves in the reservoir away from wellbores and the reporting of fuel gas (i.e. gas used for fuel in
operations) within proved reserves. Consequently, reserves quantities under SEC rules differ from those that would be reported under application of the UK SORP. The change to SEC reserves in 2006
represented a simplification of the group’s reserves reporting, as only one set of reserves estimates is disclosed. In addition, the use of SEC reserves for accounting purposes makes our results more
comparable with those of our major competitors.
bUK area includes the UK-based international activities of Refining and Marketing.
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