Growing The Business And Advancing The Energy Transition
Growing the businessand advancing theenergy transitionBP Annual Report and Form 20-F 2018
Advancing energy toimprove people’s livesContentsStrategic reportOverview2BP at a glance4How we run our business6Chairman’s letter8Group chief executive’s letter9The changing energy mixFinancial statementsHelge Lund succeededCarl-Henric Svanbergas chairman. Helgejoined the board in Julyand took the chair on1 January 2019.113 Consolidated financial statementsof the BP group134 Notes on financial statementsSupplementary information on210 oil and natural gas (unaudited)238 Parent company financialstatements of BP p.l.c.See page 6.Strategy10Our strategy12BP investor proposition14Major project start-upsPerformance16Measuring our progress18Global energy markets19Group performance22Upstream28Downstream34Rosneft37Other businesses and corporate38 Alternative energyInnovation in BP4043Sustainability43 Safety and security45 Climate change48 Managing our impacts49 Value to society49 Human rights50 Ethical conduct51 Our people53How we manage risk55Risk factorsAdditional disclosuresCorporate governance58 Board of directors63 Executive team68 Introduction from the chairman70 Board activity in 201874 Shareholder engagement74 International advisory board75 Audit committee81 Safety, ethics and environmentassurance committee83 Remuneration committee84 Geopolitical committee85 Chairman’s committee86 Nomination and governance committee87 Directors’ remuneration report110 Directors’ statements273 Contents Including information on liquidityand capital resources, oil and gasdisclosures, upstream regionalanalysis and legal proceedings.Shareholder information305 Contents Including information on dividends,our annual general meetingand share prices.315 Glossary320 Non-GAAP measures reconciliations323 Signatures324 Cross-reference to Form 20-F325 Information about this reportGlossary Words and terms with this symbolare defined in the glossary on page 315.Cautionary statementThis document should be read in conjunction with the cautionary statement on page 303.
What we doWe provide customers with fuel fortransport, energy for heat and light,power for industry, lubricants to keepengines moving and the petrochemicalsproducts used to make everyday itemssuch as paints, clothes and packaging. Find out more about our activitieson page 4.Our peopleand our valuesThe BP values express who we areand what we stand for. They capture theindividual and collective behaviours weexpect from everyone who works for us.Our people help build enduringrelationships based on mutual trustwith governments, customers, partners,suppliers and communities.Read more about our people on page 51 or visit bp.com/values.Informing our thinkingGlobal prosperity is shaping economicand energy trends.By 2040:SafetyGDP doubling 2.5 billion peopleRespectExcellencelifted from low incomesCourage See how we consider a range ofscenarios on page 9.One teamOur performancein 2018Our strategyOur four strategic priorities are designedto allow us to be competitive at a timewhen prices, policy, technology andcustomer preferences are evolvingrapidly.See how our businesses have performedand how we are reducing our emissions,improving our products and creating lowcarbon businesses.Find out more on pages 16 to 56.Find out more on page 10.BP Annual Report and Form 20-F 20181
BP at a glanceWe are a global energy businesswith wide reach across theworld’s energy system. We haveoperations in Europe, North andSouth America, Australasia, Asiaand Africa.ScaleData as at or for the year ended 31 December 2018unless otherwise stated.BP in actionHighlights of some ofour activities in 2018.Completed a significantturnaround at our largestrefinery, Whiting inthe US.73,0007819,945employeescountriesmillion barrels of oilequivalent – provedhydrocarbon reservesa18,70063,000retail sitessquare kilometres ofnew explorationaccessAcquired Chargemaster,operator of the UK’slargest electric vehiclecharging network.a n a combined basis ofOsubsidiaries and equityaccounted entities.Purchased a 16.5% interestin the UK’s Clair field fromConocoPhillips – increasingour share to 45.1%.Opened more than220 REWE to Go convenience retailsites in Germany.Signed a production-sharingagreement with SOCAR toexplore and develop in theNorth Absheron basin inAzerbaijan’s Caspian Sea.Acquired a portfolio ofunconventional assets from BHPin some of the best basins acrossTexas and Louisiana.Opened our 440thBP-branded retail sitein Mexico.Formed a strategic alliancewith Petrobras to explorejoint projects in upstream,downstream, trading and lowcarbon. And accessed newacreage in the Santos basin,offshore Brazil, making us thesecond-largest explorationholder in the basin.2See GlossaryBP Annual Report and Form 20-F 2018Signed an agreementwith the governments ofMauritania and Senegalto enable development ofthe BP-operated GreaterTortue Ahmeyim gasproject.Gained approval for theGhazeer project to developthe second phase of theKhazzan field in Oman.
9.4bn 3.7profit attributableto BP shareholders(2017 3.4 billion)16Strategic report – overviewPerformanceSix major projectsstarted up in 2018million barrels of oiltier 1 processequivalent per day –safety eventshydrocarbon productionaKPI(2017 3.6mmboe/d)KPI(2017 18)KPI 12.7bn 100%underlying replacement group proved reservescost profitreplacement ratio aKPI See key performanceindicators on page 16.(2017 6.2 billion)Completed a deal todevelop resources inthe Kharampurskoe andFestivalnoye licenceareas in Russia, jointlywith Rosneft.KPI(2017 143%)KPIa On a combined basis ofsubsidiaries and equityaccounted entities.Invested in PowerShare – a Chinesecompany that’s connecting EVdrivers, charge point operatorsand power suppliers. And signeda memorandum of understandingwith NIO Capital to exploreopportunities in advanced mobility. See pages 14 and 15.More on ourrenewables activity Investments in electric vehicletechnology on page 42.carbon ambitions on Low pages 46-48.Took delivery of BritishPartner – the first of sixstate-of-the-art liquefiednatural gas ships beingconstructed inSouth Korea.Fuelled the first non-stopflight from Perth toLondon with Air BP jetfuel produced at ournearby Kwinana refinery.Lightsource BP delivered itsfirst Indian solar project. And BPsanctioned the second phase ofthe KG D6 development in the‘Satellite cluster’ deepwater gasfields in India with Reliance.BP Annual Report and Form 20-F 2018See Glossary3
How we run our businessBusiness model foundationsSafe and reliable operationsFrom the deep sea to the desert,from rigs to retail, we deliverenergy products and servicesto people around the world.We provide customers with fuel fortransport, energy for heat and light,power for industry, lubricants to keepengines moving and the petrochemicalsproducts used to make everyday itemssuch as paints, clothes and packaging.We strive to create and maintain a safeoperating culture where safety is front andcentre. This is not only safer for peopleand the environment – it also improves thereliability of our assets.See Safety and security on page 43.1Talented peopleWe work to attract, motivate, develop andretain the best talent the world offers andequip our people with the right skills forthe future. Our performance and abilityto thrive globally depend on it.See Our people on page 51.Finding oil and gasWe have a diverse portfolio acrossbusinesses, resource types andgeographies. Having upstream,downstream and renewables businesses,along with well-established tradingcapabilities, helps to mitigate the impactof commodity pricing cycles. Ourgeographic reach gives us access togrowing markets and new resources,as well as diversifying exposure togeopolitical events. We are helping tomeet the dual challenge of society’sneed for more energy while reducingemissions through our ‘reduce, improve,create’ framework (see page 46).We believe that our long history,well-recognized brands and customeroffers, combined with our uniquepartnership with Rosneft, helpdifferentiate us from our peers.2Creating valueOur role in societyThe energy we produce helps supporteconomic growth and improve qualityof life for millions of people. We strive tobe a world-class operator, a responsiblecorporate citizen and a great employer.We believe the societies andcommunities we work in should benefitfrom our presence. We aim to createpositive, meaningful and sustainableimpacts in those communities throughour social investments.We contribute to economies aroundthe world by employing local people,helping to develop national and localsuppliers, and through the funds wepay to governments from taxes andother agreements.1 Finding oil and gasNew access allows us to renew our portfolio,discover additional resources and replenishour development options. We focus ourexploration activities in the areas that arecompetitive in the portfolio, and develop anduse technology to reduce costs and risks.2 D eveloping and extractingoil and gasWe develop the resources that meet ourreturn threshold and produce hydrocarbonsthat we then sell to the market or distributeto our downstream facilities. Our upstreampipeline of future projects gives us choiceabout which we pursue. See bp.com/society for more informationon how we generate value to society.4Developing and extracting oil and gasBP Annual Report and Form 20-F 2018We also seek to grow or extend the life ofexisting fields – such as our Clair Ridge project,which is helping unlock additional resourcesfrom the Clair field in the UK North Sea.See Upstream on page 22.3 Transporting and tradingWe move oil and gas through pipelines and byship, truck and rail. We also trade a variety ofproducts including oil, natural gas, liquefiednatural gas, power and carbon products, aswell as derivatives and currencies. BP’s tradersserve more than 12,000 customers acrosssome 140 countries in a year. Our customersrange from independent power producers toutilities and municipalities. We are the largesttrader of natural gas in North America.We use our market intelligence to analysesupply and demand for commodities acrossour global network.
Partnerships and collaborationNew technologies help us produce energysafely and more efficiently. We selectivelyinvest in areas with the potential to add greatestvalue to our business, now and in the future,including building lower carbon businesses.We aim to build enduring relationshipswith governments, customers, partners,suppliers and communities in the countrieswhere we operate.See Innovation in BP on page 40. See Rosneft on page 34 and Upstream analysisby region on page 279.3Transporting and trading6Venturing4 M anufacturing and marketing fuelsand productsWe produce refined petroleum productsat our refineries and supply distinctivefuels and convenience retail services toconsumers. Our advantaged infrastructure,logistics network and key partnerships helpus to have differentiated fuels businessesand deliver compelling customer offers,including lower carbon products.Our lubricants business has premiumbrands and access to growth markets.It also leverages technology and customerrelationships, all of which we believe givesus competitive advantage. We serveautomotive, industrial, marine and energylubricant markets across the world.4Strategic report – overviewTechnology and innovationGovernance and oversightOur risk management systems and policyprovide a consistent and clear frameworkfor managing and reporting risks. The boardregularly reviews how we identify, evaluateand manage risks. See How we manage risk on page 53and Corporate governance on page 57.Manufacturing and marketing5Generating renewable energyIn petrochemicals our proprietary technologysolutions deliver leading cost positionscompared to our competitors. In addition toour own petrochemicals plants, we workwith partners and license our technologyto third parties.See Downstream on page 28.5 Generating renewable energyWe have been investing in renewables formany years. Our focus is on biofuels,biopower, wind energy and solar energy.We operate a biofuels business in Brazil,using one of the world’s most sustainable andadvantaged feedstocks to produce renewableethanol and power. We also provide renewablepower through our significant interests inonshore wind energy in the US, and developand deploy technology to drive efficiency.And in solar energy we target the growingdemand for large-scale solar projectsworldwide through Lightsource BP. See Alternative energy on page 38 andClimate change on page 45.6 VenturingWe invest in high-tech companies to helpaccelerate and commercialize newtechnologies, products and businessmodels. Our focus is on five areas thatare core to our strategy for advancing theenergy transition: advanced mobility,bio and low carbon products, carbonmanagement, digital transformation andpower and storage.See bp.com/venturing.BP Annual Report and Form 20-F 20185
Chairman’s letterI am of the view that more energy withfewer emissions – the dual challenge– can be met if a progressive andpragmatic approach is taken to theenergy transition.Dear fellow shareholder,2018 has been a year of very good operating performance, importantstrategic progress and continued change. Our teams have deliveredstrong results across the business and we are well positioned tocontinue to deliver value as we play our part in the dual challengeof delivering more energy with fewer emissions.It was an honour to be appointed chairman of BP. I have hugerespect for the responsibilities that come with the role and I will domy utmost to provide thoughtful leadership to the board of directorsand support for Bob Dudley and his team as we advance BP in achanging energy landscape.BP’s strong position is a great tribute to my predecessor as chairman,Carl-Henric Svanberg. During his nine-year tenure Carl-Henric did anoutstanding job of guiding our company through difficult times.On behalf of the board, I want to thank him for his contribution.It has been a pleasure to get to know my new colleagues on the board,and I believe we have a wide ranging combination of diversity, skills,experience and knowledge that we need to steer the company througha landscape that is both uncertain and presents possibilities. Last yearwe welcomed Dame Alison Carnwath and Pamela Daley to the board,each with extensive experience gained in a range of executive andnon-executive roles in large companies. And this year we say farewell toAlan Boeckmann and Admiral Frank ‘Skip’ Bowman. Alan and Skip haveboth made valuable contributions during their tenures, particularlythrough their leadership and membership of our safety, ethics andenvironment assurance committee. 8.1bntotal dividends distributedto BP shareholders Strengthening organizational culture and capability6.3%The work of the board will continue to evolve over time to make surethat BP is best positioned to advance the energy transition, embracedigital disruption and meet society’s changing expectations of majorcompanies. In my short time so far at BP I have already seen for myselfmany examples of the commitment of our people. Their drive anddetermination have brought BP to where it is today, and I want to thankthem for their hard work. It is critically important we continue tostrengthen our organizational capabilities – both by developing ourpeople and by continuing to attract the world’s top talent. We lookforward to doing this by continuing to foster a diverse and inclusiveculture, where everyone feels valued.ordinary shareholdersannual dividend yield6.4%ADS shareholdersannual dividend yield6See GlossaryBP Annual Report and Form 20-F 2018
Strategic report – overviewOur progressive, pragmatic approach to theenergy transitionThere are two defining priorities for our industry. One is to producemore energy to meet growing global demand as emerging economiesdevelop and provide people with a better quality of life. The other isto play our part in reducing greenhouse gas emissions. I am of theview that more energy with fewer emissions – the dual challenge –can be met if a progressive and pragmatic approach is taken to theenergy transition.In BP we recognize that energy in many forms will be required, producedin ways that are cleaner and better. That is why we see ourselves notjust as an oil and gas business but as a global energy business. We alsorecognize that we must be constantly improving and seeking out newideas and possibilities. We must be able to learn fast and harness all thepotential of the rapid advances in digital and other new technologies.This year, the board is pleased to support a resolution that has beenproposed by a group of investors at our annual general meeting in May.The resolution, if passed, will pave the way for additional reporting tohelp investors better understand how BP’s strategy is consistent withthe Paris climate goals. We see this as an important opportunity forinvestors to appraise our progress in responding to the dual challenge.Further details can be found in the Notice of Meeting, to be publishedin April.Our clear purposeEarning trust through strong valuesFinally, I think it is important for BP’s success that we have a clearpurpose – one that is strongly linked to society’s needs. That is whyone of the first things I have done with the board is review our purposein line with our strategy and values. Our purpose is to advance energyto improve people’s lives. Today the world needs more energy thanever but with fewer emissions. To help meet this dual challenge wehave to be financially strong and make sure we continue to be anattractive investment through the energy transition.Pursuing this approach, BP is guided by its values of safety, respect,excellence, courage and one team. These are values I personallyshare. I believe they help to build trust with our people, partners,the communities in which we work, and with you, the owners ofthe company.I look forward to working with Bob and the team as we advance theenergy transition, delivering through our strategy, guided by our valuesand inspired by our purpose. I also look forward to hearing from you, andmeeting many of you, in the coming months and years as we look toreward your trust and confidence in BP.Above all, our primary focus has to always be on operating safelyand reliably, minute by minute, day after day. Protecting people, theenvironment and our assets is always our top priority and the bedrockon which success is built. I think of it as having the tightest defence inthe league, like a good football team. If you have a strong defence, youcan be more forward looking, compete harder and be better positionedto win.We value the dialogue we have with you and others, sharing ourachievements, our challenges and our plans and seeking your views.This report is one of many ways we update you on our activitiesand progress.Helge LundChairman29 March 2019More informationCorporate governancePage 57BP Annual Report and Form 20-F 20187
Group chief executive’s letterOur strategy is delivering value for you,our shareholders, while being flexibleand agile for the energy transitionunderway.Advancing the energy transitionThe deals we made and the strategy we have in place are evidence thatBP is a forward-looking energy business. One that is already playing anactive role in advancing the energy transition.That’s why we are making bold changes across our entire business toreduce emissions in our operations, improve products to help customersreduce their own emissions, and to create new low carbon businesses.This is our ‘reduce, improve, create’ (RIC) framework which we arebacking up with clear targets. I am pleased to report we are makinggood progress against these targets.Dear fellow shareholder,I am pleased to report that 2018 was another remarkable year for BP.Our safety performance continued to improve overall, helping to createrecord operational reliability, which led to strong production, and recordrefining throughput.Strength in numb
Advancing energy to improve people’s lives Strategic report Overview 2 BP at a gla nce 4 How we ru n our business 6 Chair man’s letter 8 Group c hief executive’s letter 9 The cha nging energy mix Strategy 10 Our strat egy 12 BP inv estor proposition 14 Major p roject start-ups Performance 16 Measu ring our progress 18 Globa l energy markets 19 Group p erformance 22 Upstream
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