BP Annual Report and Form 20-F 2011 - Company Reporting

Business reviewFurther note on certain activitiesDuring the period covered by this report, non-US subsidiaries or othernon-US entities of BP conducted limited activities in, or with personsfrom, certain countries identified by the US Department of State asState Sponsors of Terrorism or otherwise subject to US sanctions(‘Sanctioned Countries’). These activities continue to be insignificant tothe group’s financial condition and results of operations. In 2011, the USenacted additional sanctions against Iran which included lower monetarythresholds for certain investments in Iran for the development or refiningof petroleum resources, new restrictions on the petrochemicals industryand restrictions on transactions with the Iran Central Bank, includingfinancial transactions for the purchase of Iranian-origin crude oil. Furtherlegislation is pending in the US Congress which may enact additionalsanctions against Iran. The UK adopted sanctions prohibiting UK personsfrom engaging in any financial transactions with the Iran Central Bankor other financial institutions incorporated in Iran. Both the US and theEU enacted strong sanctions against Syria including a prohibition on thepurchase of Syrian-origin crude and a US prohibition on the provision ofservices by US persons. (Libya sanctions were enacted in early 2011 andlargely lifted by the end of the year.) In January 2012, the EU imposed anembargo on Iranian crude, among other measures, to be phased in over aperiod of months. The EU also adopted more stringent sanctions againstSyria including a prohibition on supplying certain equipment used in theproduction, refining, or liquefaction of petroleum resources as well asrestrictions on dealing with the Central Bank of Syria and numerous otherSyrian financial institutions. BP monitors its activities with SanctionedCountries and keeps them under review to ensure compliance withapplicable laws and regulations of the US, the EU and other countrieswhere BP operates.BP has interests in, and is the operator of, two fields (the NorthSea Rhum field and the Azerbaijan Shah Deniz field) and, serving the ShahDeniz field, a gas marketing entity and an entity that owns a gas pipeline(both entities and related assets located outside Iran), in which NaftiranIntertrade Co. Ltd (NICO) and NICO SPV Limited (collectively NICO) orIranian Oil Company (UK) Limited (IOC UK) have interests. Productionwas suspended at the North Sea Rhum field (in which IOC UK has a 50%interest) in November 2010 and Rhum remains shut-in. It is presentlyunclear when it may be possible to resume production. The Shah Denizfield, its gas marketing entity and the entity that owns a pipeline (in whichNICO has a 10% or less non-operating interest) continues in operation infull compliance with current US and EU sanctions. BP has no operationsin Iran and does not purchase or ship crude oil or other products of Iranianorigin. Joint venture participants in non-BP controlled or operated jointventures may purchase Iranian-origin crude oil or other componentsas feedstock for facilities located outside the EU and US. BP does notsell crude oil or other products into Iran, except that small quantities oflubricants are sold to non-Iranian third parties for resale or use in Iran. UntilJanuary 2010, BP held an equity interest in an Iranian joint venture thatblended and marketed lubricants for sale to domestic consumers in Iran.BP sold its equity interest but continues to sell small quantities of lubricantcomponents to the current owner. Transactions with Iranian shippingcompanies have been terminated.Following the imposition in 2011 of further US and EU sanctionsagainst Syria, BP terminated all sales of crude oil and petroleum productsinto Syria, though continues to supply aviation fuel to non-governmentalSyrian resellers outside of Syria. Prior to the imposition of Syrian sanctionsin 2011, BP sold lubricants through third parties and obtained crude oil andrefinery feedstocks for sale to third parties in Europe and for use in certainof its non-US refineries. BP also bought and sold crude oil and refinedproducts into and from Syria and incurred port costs for vessels utilizingSyrian ports. Sales and purchases to and from Syrian shipping companieshave been terminated.BP sells lubricants in Cuba through a 50:50 joint venture and trades insmall quantities of lubricants. BP sold small quantities of lubricants to thirdparties that were resold in Sudan; BP has terminated these sales.BP has equity interests in non-operated joint ventures with airfuel sellers, re-sellers, and fuel delivery services around the world. Fromtime to time, the joint venture operator may sell or deliver fuel to airlinesfrom Sanctioned Countries or flights to Sanctioned Countries withoutBP’s knowledge or consent. BP has registered and paid required fees forpatents and trademarks in Sanctioned Countries.64 BP Annual Report and Form 20-F 2011