BP 2013 Annual Report Download - page 29

Strategic report
BP Annual Report and Form 20-F 2013 25
Our business model and strategy
Our Upstream segment is responsible for our activities in oil and
natural gas exploration, field development and production, and
midstream transportation, storage and processing. We also market
and trade natural gas, including liquefied natural gas, power and natural
gas liquids. In 2013 our activities took place in 27 countries.
We deliver our exploration, development and production activities
through five global technical and operating functions:
• The exploration function is responsible for renewing our resource
base through access, exploration and appraisal, while the reservoir
development function is responsible for the stewardship of our
resource portfolio.
• The global wells organization and the global projects
organization are responsible for the safe, reliable and compliant
execution of wells (drilling and completions) and major projects,
respectively.
• The global operations organization is responsible for safe, reliable
and compliant operations, including upstream production assets and
midstream transportation and processing activities.
The delivery of these activities is optimized and integrated with
support from global functions with specialist areas of expertise:
technology, finance, procurement and supply chain, human
resources and information technology.
Technologies such as seismic imaging, enhanced oil recovery and
real-time data support our upstream strategy by helping to gain new
access, increasing recovery and reserves and improving production
efficiency (see Our distinctive capabilities on page 16).
We actively manage our portfolio and are placing increasing emphasis
on accessing, developing and producing from fields able to provide the
greatest value (this includes those with the potential to make the
highest contribution to our operating cash flow). We sell assets that we
believe have more value to others. This allows us to focus our
leadership, technical resources and organizational capability on the
resources we believe are likely to add the most value to our portfolio.
Upstream Our strategy is to invest to grow long-term value by continuing to
build a portfolio of material, enduring positions in the world’s key
hydrocarbon basins. Our strategy is enabled by:
• A continued focus on safety and the systematic management of risk.
• A simpler, more focused portfolio with strengthened incumbent
positions and reduced operating complexity.
• Playing to our strengths – exploration, deep water, giant fields
and gas value chains.
• An execution model that drives improvement in efficiency
and reliability – through both operations and investment.
• A bias to oil with selective gas value chains focusing on where we
have strong core positions, can play in premium growth markets or
bring advantaged technology to bear.
• Strong relationships built on mutual advantage, deep knowledge
of the basins in which we operate, and technology.
Our performance – 2013 summary
• We continue our focus on improving safety performance. For more
details on personal and process safety (see Safety on page 41).
• Our exploration function gained access to new potential resources
covering more than 43,000km2 in seven countries.
• In 2013 there were three major upstream project start-ups.
• We achieved an upstream BP-operated plant efficiencya of 88%.
• Disposal transactions generated $1.3 billion in proceeds in 2013.
Upstream profitability ($ billion)
Underlying RC profit before interest and taxb RC profit before interest and tax
2009 2010 2011 2012 2013
20
10
30
40
22.9 19.7
25.1 25.2 22.4 19.6
26.4
16.7 18.3
28.3
See Financial performance on page 27 for an explanation of the main
factors influencing Upstream profit in 2013 compared with 2012.
Outlook
• We have announced plans to establish a separate BP business to
manage our onshore oil and gas assets in the US lower 48, which
we expect to be operational in early 2015. Our goal is to build a
stronger, more competitive and sustainable business that we expect
to be a key component of BP’s portfolio in the future.
• We expect reported production in 2014 to be lower than 2013,
mainly due to the expiration of the Abu Dhabi onshore concession,
with an impact of around 140mboe/d, and divestments. After
adjusting for the impacts of the concession expiry, divestments and
entitlement effects in our production-sharing agreements (PSAs),
we expect underlying production to be higher in 2014.
• In addition to the Chirag oil, Mars B and Na Kika Phase 3 projects,
which started up in January and February, we expect a further four
major projects to come onstream in 2014, which will contribute to
the group’s plan to generate an increase of around 50% in operating
cash flow in 2014 compared with 2011.c
• Capitalinvestment in 2014 is expected to increase, largely reflecting
the progression of our major projects.
Skarv started up in December 2012 and produces up to 160mboe/d. The
field development includes around 50 miles of gas export pipeline that
allows export to markets in Europe.
In 2013 we continued to actively manage and simplify
our portfolio, strengthening our incumbent positions
to provide a platform for growing value.
a Plant efficiency is the actual production of a plant facility expressed as a percentage of total
achievable installed production capacity of the asset including the reservoir, well, plant and export
system.
b Underlying replacement cost (RC) profit before interest and tax is not a recognized GAAP
measure. See footnote c on page 23 for further information. The equivalent measure on an IFRS
basis is RC profit before interest and tax.
c See footnote b on page 56.