BP 2011 Annual Report Download - page 51

Business review: Group overview
BP Annual Report and Form 20-F 2011 49
On 3 March 2012, we announced we had reached a settlement with the
Plaintiffs’ Steering Committee (PSC), subject to final written agreement and
court approvals, to resolve the substantial majority of legitimate economic loss
and medical claims stemming from the Deepwater Horizon accident and oil spill.
The PSC acts on behalf of individual and business plaintiffs in the Multi-District
Litigation proceedings pending in New Orleans (MDL 2179). We estimate that
the cost of the proposed settlement would be approximately $7.8 billion, but with
no net impact on either the income or cash flow statements, since the proposed
settlement is expected to be payable from the $20-billion Trust. While this is
BP’s reliable best estimate of the cost of the proposed settlement, it is possible
that the actual cost could be higher or lower than this estimate depending on the
outcomes of the court-supervised claims processes. See Legal proceedings on
page 162 for further information.
Exploration and Production
The replacement cost profit before interest and tax for 2011 was $30,500 million,
compared with $30,886 million for the previous year. See Exploration and
Production on page 80 for further information on the segment’s financial results.
Our production was lower than in 2010 due to divestments, the suspension
of drilling in the Gulf of Mexico and the high number of turnarounds and
maintenance projects undertaken during the year. However, production began to
increase from the fourth quarter with the completion of turnarounds in the North
Sea, Angola and the Gulf of Mexico. Also, two new major projects were brought
onstream during the year – the BP-operated Serrette field in Trinidad and the
Pazflor field in Angola, operated by Total.
We had our best year for a decade in terms of access to new upstream
opportunities, with awards for a total of 55 new exploration licences. We also
gained approval for our exploration plan for the Kaskida field in the Gulf of Mexico
– our first drilling permit for an exploration well in the US since the Deepwater
Horizon oil spill.
In India, we completed a transaction that brings us into a unique relationship
with Reliance Industries and access to 21 oil and gas blocks which covered
approximately 83,000 square miles (216,000 square kilometres). In November
2011 we formed a 50:50 gas marketing joint venture to source and market gas.
In Russia, our plans to form a strategic alliance with Rosneft did not reach
fruition. Nonetheless, we remain committed to Russia and the ongoing success
of TNK-BP, which comprises 27% of our reserves and 29% of our production.
In Brazil, we acquired assets from Devon Energy, giving us a material
position in one of the great deepwater provinces of the world. We started
upstream operations during the year.
20
10
40
20
60
30
80
40
$ billion $/boe
2007 2008 2009 2010 2011
Exploration and Production
Replacement cost profit
before interest & taxa
US
Non-US
Average hydrocarbon
realizations ($/boe)b
a See Financial statements – Note 6 on page 200.
b Based on sales of consolidated subsidiaries
only – this excludes equity-accounted entities.
Liquidsb
Natural gasc
Total net proved reserves 2011a
(million barrels of oil equivalent)
a Combined basis of subsidiaries and
equity-accounted entities, on a basis
consistent with general industry practice.
bLiquids comprise crude oil, condensate, natural gas
liquids and bitumen and include totals of 5,153 million
barrels for subsidiaries and 5,412 million barrels for
equity-accounted entities.
c Natural gas is converted to oil equivalent at 5.8 billion
cubic feet (bcf) = 1 million barrels and includes
6,273 million barrels of oil equivalent for subsidiaries
and 910 million barrels of oil equivalent for
equity-accounted entities.
7,183
10,565
Left BP employees
at work in Prudhoe
Bay, Alaska – the
largest oilfield in North
America and among
the 20 largest fields
ever discovered.
Right Operations on
the BP-operated
Atlantis PQ, Gulf of
Mexico – the deepest
moored semi-
submersible platform in
the world when it was
installed in 2007.