BP 2014 Annual Report Download - page 243

or its affiliates have knowingly engaged in certain, principally Iran-related,
activities.
Both the US and the EU have enacted strong sanctions against Syria,
including a prohibition on the purchase of Syrian-origin crude and a US
prohibition on the provision of services to Syria by US persons. The EU
sanctions against Syria include a prohibition on supplying certain
equipment used in the production, refining, or liquefaction of petroleum
resources as well as restrictions on dealing with the Central Bank of Syria
and numerous other Syrian financial institutions.
With effect from 20 January 2014, the US and the EU implemented
temporary, limited and reversible relief of certain sanctions related to Iran
pursuant to a Joint Plan of Action entered by Iran, China, France,
Germany, Russia, the UK and the US. BP has not changed its policy in
relation to Iran as a result of the Joint Plan of Action and has no plans to
engage in any new business with Iran which would now be permitted as
a result of the Joint Plan of Action.
BP has interests in and operates the North Sea Rhum field (Rhum) and
the Azerbaijan Shah Deniz field (Shah Deniz), in which Naftiran Intertrade
Co. Limited and NICO SPV Limited (collectively, NICO) or Iranian Oil
Company (U.K.) Limited (IOC UK) have interests. Additionally, BP has
interests in a gas marketing entity and a gas pipeline entity in which
NICO or IOC UK have interests, although both entities (and their related
assets) are located outside Iran. Production was suspended at Rhum (in
which IOC UK has a 50% interest) in November 2010. On 22 October
2013, the UK government announced a temporary management scheme
(the Temporary Scheme) under The Hydrocarbon (Temporary
Management Scheme) Regulations 2013 under which the
UK government assumed control of and now manages IOC UK’s interest
in the Rhum field, thereby permitting Rhum operations to recommence in
accordance with applicable EU regulations and in compliance with US
laws and regulations. Operations at the Rhum gas field recommenced in
mid-October 2014 in accordance with this Temporary Scheme.
Shah Deniz, its gas marketing entity and the gas pipeline entity (in which
NICO has a 10% or less non-operating interest) continue in operation.
The Shah Deniz joint operation and its gas marketing and pipeline entities
were excluded from the main operative provisions of the EU regulations
as well as from the application of the new US sanctions, and fall within
the exception for certain natural gas projects under Section 603 of ITRA.
BP has no operations in Iran and BP’s policy is that it shall not purchase
or ship crude oil or other products of Iranian origin. Participants in non-BP
controlled or operated joint arrangements*may purchase Iranian-origin
crude oil or other components as feedstock for facilities located outside
the EU and US. It is also BP’s policy that it shall not sell crude oil or other
products into Iran. BP currently holds an interest in a non-BP operated
Indian joint venture*which sold crude oil to an Indian entity in which
NICO holds a minority, non-controlling stake. Those sales ceased in
January 2014.
In 2012, BP became aware that a Canadian university had been using
graduate students, some of whom were nationals of Iran, on a research
programme funded in part by BP. BP suspended the programme and
made a voluntary disclosure to OFAC. Also in 2012, BP became aware
that in 2010, as consideration for certain auditing services, BP effected a
transfer of funds to a local Iranian consulting firm which may have been
in violation of relevant EU notification requirements. BP has made a
voluntary disclosure to the applicable EU regulator of such transfer.
Following the imposition in 2011 of further US and EU sanctions against
Syria, BP terminated all sales of crude oil and petroleum products into
Syria, though BP continues to supply aviation fuel to non-governmental
Syrian resellers outside of Syria.
BP has equity interests in non-operated joint arrangements with air fuel
sellers, resellers, and fuel delivery services around the world. From time
to time, the joint arrangement operator or other partners may sell or
deliver fuel to airlines from Sanctioned Countries or flights to Sanctioned
Countries without BP’s prior knowledge or consent. BP has registered
and paid required fees for patents and trade marks in Sanctioned
Countries.
BP sells lubricants in Cuba through a 50:50 joint arrangement and trades
in small quantities of lubricants.
During 2014 the US and the EU have imposed sanctions on certain
Russian activities, individuals and entities, including Rosneft. Certain
sectoral sanctions also apply to entities owned 50% or more by entities
on the relevant sectoral sanctions list. Ruhr Oel GmbH (ROG) is a 50:50
joint operation with Rosneft, operated by BP, which holds interests in a
number of refineries in Germany. To date, these sanctions have had no
material adverse impact on BP or ROG.
Disclosure pursuant to Section 219 of ITRA
To our knowledge, none of BP’s activities, transactions or dealings are
required to be disclosed pursuant to ITRA Section 219, with the following
possible exception:
Rhum, located in the UK sector of the North Sea, is operated by BP
Exploration Operating Company Limited (BPEOC), a non-US subsidiary of
BP. Rhum is owned under a 50:50 unincorporated joint arrangement
between BPEOC and Iranian Oil Company (U.K.) Limited (IOC). The
Rhum joint arrangement was originally formed in 1974. During the period
of production from the field, the Rhum joint arrangement supplied natural
gas and certain associated liquids to the UK. On 16 November 2010,
production from Rhum was suspended in response to relevant EU
sanctions. Operations at the Rhum gas field recommenced in mid-
October 2014 in accordance with the UK government’s Temporary
Scheme (see above). During the year ended 31 December 2014, BP
recorded gross revenues of $8.86 million related to its interests in Rhum.
BP had no net profits related to Rhum during the year ended
31 December 2014, recording an overall loss of $204.5 million (net)
following an impairment write-off of $198 million in the fourth quarter of
2014.
BP currently intends to continue to hold its ownership stake in the Rhum
joint arrangement.
Material contracts
On 13 March 2014, BP, BPXP, and other BP entities entered into an
administrative agreement with the US Environmental Protection Agency,
which resolved all issues related to the suspension or debarment of BP
entities arising from the 20 April 2010 explosions and fire on the semi-
submersible rig Deepwater Horizon and resulting oil spill. The
administrative agreement allows BP entities to enter into new contracts
or leases with the US government. Under the terms and conditions of
this agreement, which will apply for five years, BP has agreed to a set of
safety and operations, ethics and compliance and corporate governance
requirements. The agreement is governed by federal law.
Property, plant and equipment
BP has freehold and leasehold interests in real estate and other tangible
assets in numerous countries, but no individual property is significant to
the group as a whole. For more on the significant subsidiaries*of the
group at 31 December 2014 and the group percentage of ordinary share
capital see Financial statements – Note 35. For information on significant
joint ventures*and associates*of the group see Financial statements –
Notes 14 and 15.
Related-party transactions
Transactions between the group and its significant joint ventures and
associates are summarized in Financial statements – Note 14 and Note
15. In the ordinary course of its business, the group enters into
transactions with various organizations with which some of its directors
or executive officers are associated. Except as described in this report,
the group did not have material transactions or transactions of an unusual
nature with, and did not make loans to, related parties in the period
commencing 1 January 2014 to 17 February 2015.
Corporate governance practices
In the US, BP ADSs are listed on the New York Stock Exchange (NYSE).
The significant differences between BP’s corporate governance practices
as a UK company and those required by NYSE listing standards for US
companies are listed as follows:
Independence
BP has adopted a robust set of board governance principles, which
reflect the UK Corporate Governance Code and its principles-based
Additional disclosures
*Defined on page 252. BP Annual Report and Form 20-F 2014 239