BP 2011 Annual Report Download - page 89

BP Annual Report and Form 20-F 2011 87
Business review: BP in more depth
Business review
• In March 2011, TNK-BP completed the acquisition of 74.9% of CJSC
‘Toplivozapravochny kompleks Sheremetyevo’, the operator of jet fuel
storage and into-wing fuelling services at Sheremetyevo International
Airport in Moscow.
• In June 2011, TNK-BP completed the acquisition from BP of stakes in
three upstream assets in Venezuela. Acquisition of these assets was
announced in October 2010.
• In October 2011, TNK-BP entered into an agreement with HRT Oil & Gas
for the acquisition of a 45% stake in 21 blocks in the Brazilian Solimoes
Basin. These oil and gas exploration blocks are operated by HRT Oil &
Gas, and cover an area of approximately 48,000km2.
• Also in October 2011, TNK-BP announced that the Vietnamese Ministry
of Investment and Trade granted TNK Vietnam, a Vietnam-based
subsidiary of TNK-BP, the investment licence to operate offshore gas
Block 6.1. TNK-BP acquired BP’s 35% stake in Block 6.1, an integrated
gas to power project which contains the Lan Tay and Lan Do gas
condensate fields. As part of the deal, TNK-BP also acquired BP’s 32.7%
interest in the Nam Con Son Pipeline. Acquisition of these assets was
announced in October 2010.
• Five minority shareholders of OAO TNK-BP Holding (TBH) filed a civil
action in Tyumen, Siberia, against BP Russia Investments Limited and
BP p.l.c. seeking to recover alleged losses of $13 billion relating to BP’s
attempt to form a strategic alliance with Rosneft in January 2011. The
action was dismissed by the Tyumen court fully on its merits. The Omsk
Appellate court confirmed the Tyumen court of first instance’s dismissal
of the minority suits. See Legal proceedings on page 166 for further
information.
• On 9 February 2012, BP reached agreement with its Russian partners
in TNK-BP on temporary amendments to the memorandum and articles
of association of TNK-BP Limited and the SHA that reduce quorum
requirements to require presence of directors nominated by BP and
AAR only. The amendments are aimed at enabling the continuing
functioning of the board of directors of TNK-BP (board of directors) while
two independent directors who recently resigned are being replaced.
This change is currently set to expire on 31 March 2012, unless both
independent directors are appointed earlier.
• On 9 February 2012, BP also reached agreement with its Russian
partners in TNK-BP regarding certain changes to the management board
of its main management company in Russia OAO TNK-BP Management
(management board). The changes were aimed at restructuring and
optimizing the management board, following the elimination of the
deputy TNK-BP group chief executive officer role. The restructured
management board will now consist of six people. BP will have the
right to nominate the chairman of the management board, as well
as two executive directors in charge of upstream and downstream
respectively (the BP members). AAR will have the right to nominate
two other executive directors (the AAR members). The sixth member
— the chief financial officer — will be nominated by the chairman of the
management board. The chairman of the management board will in time
also have the right to nominate the executive directors, subject to prior
concurrence by the respective shareholder. All of the aforementioned
nominations will require approval by the board of directors as a majority
matter, except for the chairman of the management board whose
appointment will require approval as a unanimous reserved matter. As
part of the agreement, BP and AAR agreed to approve the continued
appointment of the chief executive officer and the appointment of their
respective executive directors, with such appointments to expire no later
than 31 December 2013.
• All other provisions of the SHA (including those related to the review
of new business opportunities, the board of directors and dispute
resolution) remain unchanged.
Sakhalin
BP has interests in Sakhalin through a joint venture company, Elvary
Neftegaz, in which BP holds a 49% equity interest, and its partner,
Rosneft, holds the remaining 51% interest. In 2011, the process to exit
the licence areas held by Elvary Neftegaz and liquidate the joint venture
commenced. This follows the write-down of BP’s investment at the end of
2010 following an unsuccessful exploration programme.
Middle East
Production in the Middle East consists principally of the production
entitlement of associates in Abu Dhabi, where we have equity interests of
9.5% and 14.67% in onshore and offshore concessions respectively. The
Abu Dhabi onshore concession expires in January 2014 with a consequent
reduction in production of approximately 140mb/d.
• In the first quarter of 2011, extended well test production began in Oman.
• In August 2011, the seismic survey of the Risha concession in Jordan
was successfully completed.
India
• On 30 August 2011, BP and Reliance Industries Limited (RIL) announced
the completion of BP’s acquisition of a 30% stake in 21 oil and gas PSAs
that RIL operates in India, including the producing KG D6 block. BP paid
RIL an aggregate consideration of $7.0 billion for the interests acquired
in the 21 PSAs. Further performance payments of up to $1.8 billion could
be paid in case of exploration success in certain blocks that result in
the development of commercial discoveries. This step commenced the
planned alliance which will operate across the gas value chain in India,
from exploration and production to distribution and marketing.
• On 17 November 2011, the two companies formed a 50:50 joint venture
for the sourcing and marketing of gas in India.
Iraq
Following a successful bid with PetroChina to run the Rumaila oilfield
in June 2009, the technical service contract (TSC) became effective
on 17 December 2009. BP holds a 38% working interest and is the
lead contractor. Rumaila is one of the world’s largest oilfields and was
discovered by BP in 1953 and comprises five producing reservoirs. BP
together with its partners is actively refurbishing the wells and facilities.
With the achievement of the improved production target on 25 December
2010, BP and PetroChina became eligible for service fees pursuant to the
TSC. In 2011 both companies lifted cargoes from the Basra terminal as
payment for service fees due.
Australasia
Australia
BP is one of seven partners in the North West Shelf (NWS) venture which
has been producing LNG, pipeline gas, condensate, LPG and oil since the
1980s. Six partners (including BP) hold an equal 16.67% interest in the
gas infrastructure and an equal 15.78% interest in the gas and condensate
reserves, with a seventh partner owning the remaining 5.32%. BP also has
a 16.67% interest in the NWS oil reserves and related infrastructure. The
NWS venture is currently the principal supplier to the domestic market in
Western Australia and one of the largest LNG export projects in Asia with
five LNG trainsa in operation. BP also holds a 5.375% interest in the
Jansz-Io field which is part of the Greater Gorgon project (Chevron,
ExxonMobil and Shell) and is currently being developed.
• In January 2011, BP announced that it had been awarded four
deepwater offshore exploration blocks in the Ceduna Sub Basin
within the Great Australian Bight, off the coast of South Australia. The
exploration work is to be phased over six years with a 3D seismic survey
covering approximately 12,500km2 commenced in November 2011 and
continuing into 2012. Following interpretation of the seismic survey, BP
will drill four deepwater wells in this frontier exploration basin.
Eastern Indonesia
BP has a 100% interest in an exploration asset, the North Arafura PSA,
located on the coast of the Arafura Sea, 480 kilometres south east of our
Tangguh LNG plant (BP 37.16% and operator) and covering an area of just
over 5,000km2. In addition, BP owns a 32% interest in Chevron’s operated
West Papua I and III PSAs, located circa 120 kilometres to the south of the
Tangguh LNG plant (see Liquefied natural gas on page 88).
• In December 2011, BP signed contracts with the Government of
Indonesia for two deepwater PSAs; West Aru I and II. The PSAs are
located 500 kilometres south west of the North Arafura PSA and 200
kilometres west of the Aru island group, covering areas of 8,100km2 and
8,300km2 respectively. BP holds 100% interest in the PSAs and expects
to commence seismic operations in the near future.
a An LNG train is a processing facility used to liquefy and purify LNG.