BP 2013 Annual Report Download - page 40

Upstream
Rosneft is the largest oil company in Russia and the largest publicly traded
oil company in the world based on hydrocarbon production volume.
Rosneft also has significant hydrocarbon reserves.
Rosneft has assets in all key hydrocarbon regions of Russia: Western Siberia,
Eastern Siberia, Timan-Pechora, Volga-Urals, North Caucasus and Far East.
Internationally, Rosneft participates in exploration projects or has operations
in countries including the US, Canada, Vietnam, Venezuela, Brazil, Algeria,
UAE, Kazakhstan and Norway. Rosneft and Gazprom, the majority of whose
shares are owned by the Russian state, have exclusive rights to explore and
develop significant hydrocarbon resources in the Russian Arctic offshore
(including the Sea of Okhotsk). To progress Arctic exploration, Rosneft has
concluded partnerships with ExxonMobil, ENI, Statoil, CNPC and Inpex.
In 2013 Rosneft signed new gas sales contracts with Enel, Fortum and
others to monetize produced gas. Also Russian legislation introduced in
December 2013 allows Rosneft and Novatek to export LNG for the
first time.
Downstream
Rosneft has interests in 23 refineries including four in Germany through its
Ruhr Oel GmbH partnership with BP. In 2013 Rosneft acquired a 21%
share in the Saras S.p.A. refinery in Italy.
Rosneft refinery throughput in 2013 amounted to 1,818mb/d. Rosneft
continues to implement its refinery modernization programme which is
intended to significantly upgrade and expand its refining capacity. As at
31 December 2013, Rosneft owned and operated more than 2,400 retail
service stations, representing the largest network in Russia. This included
BP-branded sites acquired as part of Rosneft’s acquisition of TNK-BP which
will continue to operate under the BP brand. Rosneft’s downstream
operations also include jet fuel, bunkering, bitumen and lubricants.
Rosneft segment performance
BP’s investment in Rosneft is managed and reported as a separate
segment under IFRS. The Rosneft segment result includes equity-
accounted earnings from Rosneft, representing BP’s share in Rosneft and
foreign currency effects on the dividends received in 2013. For more
information on the sale and purchase agreements, see Financial
statements – Note 6.
$ million
2013a
Profit before interest and taxb c 2,053
Inventory holding (gains) losses 100
Replacement cost profit before interest and taxc2,153
Net charge (credit) for non-operating items 45
Underlying replacement cost profit before interest and taxc d 2,198
a From 21 March 2013.
b BP’s share of Rosneft’s earnings after finance costs, taxation and non-controlling interests
is included in the BP group income statement within profit before interest and taxation.
c Includes $5 million of foreign exchange losses arising on the dividend received. This amount
is not reflected in the following table.
d Underlying replacement cost profit is not a recognized GAAP measure. See footnote c on page
23 for information on underlying replacement cost profit.
Replacement cost profit before interest and tax for the Rosneft segment
was $2.2 billion in 2013. The result included a net non-operating charge of
$45 million, primarily relating to impairment charges. After adjusting for
non-operating items, underlying replacement cost profit before interest
and tax in 2013 was $2.2 billion.
BP received a dividend from Rosneft in 2013 of $456 million, after the
deduction of withholding tax.
BP completed the exercise to determine the fair value of its share of
Rosneft’s assets and liabilities as at 21 March 2013, as required under
IFRS, and the results of this exercise are reflected in the 2013 reported
amounts.
BP Annual Report and Form 20-F 201336
BP’s share of the components of Rosneft’s net income are shown in the
table below.
$ million
2013a
Income statement (BP share)
Profit before interest and tax 2,786
Finance costs (264)
Taxation (422)
Non-controlling interests (42)
Net income 2,058
Inventory holding (gains) losses, net of tax 100
Net income on a replacement cost basis 2,158
Net charge (credit) for non-operating items, net of tax 45
Net income on an underlying replacement cost basis 2,203
Balance sheet
$ million
31 December
2013
Investments in associates 13,681
Production and reserves
2013
Production (net of royalties) (BP share)e f
Liquids (mb/d)g650
Natural gas (mmcf/d)617
Total hydrocarbons (mboe/d)h756
Estimated net proved reserves (net of royalties)
(BP share)
Liquids (million barrels)g 4,975
Natural gas (billion cubic feet) 9,271
Total hydrocarbons (mmboe)6,574
Average oil marker prices $ per barrel
Urals (Northwest Europe – CIF) 107.38
Russian domestic oil 54.97
e Reflects production for the period 21 March to 31 December, averaged over the full year.
f Information on BP’s share of TNK-BP’s production for comparative periods is provided
on pages 248 and 250.
g Liquids comprise crude oil, condensate and natural gas liquids.
h Natural gas is converted to oil equivalent at 5.8 billion cubic feet = 1 million barrels.