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

Business reviewThe Deepwater Horizon oil spill demanded a response at an order ofmagnitude never required before. We learned a great deal and madeadvances in response technology and systems. As a result we are updatingour group requirements and are sharing our knowledge with the industryand regulators.In 2012, we will be working on the development of enhancedoil spill preparedness and response requirements for all BP entities thathandle oil in a way that gives rise to a risk of an oil spill. Once theserequirements are incorporated into OMS, they will require relevantbusinesses to follow a planning process to predict how the spilled oil willbehave; identify, assess and understand the environmental and socialsensitivities at risk; define effective response strategies and confirm thatappropriate response capabilities are in place. This practice will incorporateour deepwater technical requirements, further enabling a single, consistentprocess across BP.Sensitivity mappingUnderstanding the environmental and socio-economic sensitivities wherewe operate is an important part of planning for an effective response. Weobtain sensitivity information from many sources, including environmentaland social impact assessments (ESIAs) for many of our projects. TheseESIAs include information about the potential environmental and socioeconomicimpacts of planned activities and also the potential impacts thatmight occur in the event of an unplanned event, such as an oil spill. In 2011,we have used high resolution satellite imagery to enhance our sensitivitymapping across thousands of miles of coastlines, and submersibles tocharacterize the deep ocean. This has helped us better understand ourenvironmental risks in regions like Angola, Brazil and the US.Contingency planningIdentifying and assessing environmentally and socio-economicallysensitive areas helps us to develop appropriate oil spill response and crisismanagement plans. The objective is to use response techniques to avoidor minimize the environmental and socio-economic impact of a spill to theextent feasible based upon an assessment of the sensitivity of the localenvironment. These plans are backed up by robust response ‘capability’, thetools and people required to mount an effective response to an incident.How we work with designated government regulatory bodies inthe event of a spill is critical. Sharing lessons learned and maintaining adialogue with regulators in the regions where we operate is an importantpart of our approach. In many countries where BP operates, the regulatorwill ultimately determine the procedures to deal with the environmental andsocio-economic impact.Acute response plans are often focused on the physicalcontainment and recovery of the spilled oil, though they also recognize thatcomponents in dispersed oil will be subject to processes of biodegradation,which may be facilitated and accelerated by the application of chemicaldispersants.For onshore operations, for example, BP refineries’ spill responseplans include passive and active containment measures that are designedfor the specific location and types of operations.In the event of concurrent spills at multiple locations, each affectedfacility would activate its independent oil spill response plan and respondaccordingly. Although responding to multiple spills of the same magnitudeand complexity as occurred in the Gulf of Mexico in 2010 would be achallenge for the group, our response plans are not interdependent.See Safety on pages 65-69 for further information on BP’s approachto oil spill prevention and preparedness.Gulf of Mexico – our long-term commitmentsSee Gulf of Mexico oil spill on pages 76-79 for further information onBP’s response to the incident and environment and economic restorationefforts.Canadian oil sandsCanada’s oil sands are believed to hold one of the world’s largest untappedsupplies of oil, third in size to the resources in Saudi Arabia and Venezuela.BP is involved in three oil sands projects, all of which are located in theprovince of Alberta. Development of the Sunrise project, our joint ventureoperated by Husky Energy, is under way, with production from Phase 1expected to start in 2014. The other two proposed projects – Pike, whichwill be operated by Devon, and Terre de Grace, which will be BP-operated– are still in the early stages of development.We reviewed and approved the decision to invest in Canadian oilsands projects, taking into consideration greenhouse gas (GHG) emissions,impacts on land, water use and local communities, and commercialviability. As with all joint ventures in which we are not the operator, we willmonitor the progress of these projects and the mitigation of risk.The extraction process to be used, in situ steam-assistedgravity drainage (SAGD) technology, involves the injection of steamunderground. The steam liquefies the bitumen, allowing it to flow to thesurface through production wells. This production technique reduces landdisturbance and aligns to our strengths, particularly to our expertise withwells and improving large-scale reservoir performance. Unlike mining,in situ processes create a smaller physical footprint and do not involvetailing ponds.A key concern around oil sands operations using SAGD is theamount of greenhouse gas emissions produced for steam generationand the processing of the produced bitumen. A ‘well-to-wheels’ studyconducted in 2009, which measured total GHG emissions from productionthrough to consumption, found the lifecycle emissions for oil sands-basedproducts to be 5-15% higher than those from products from average crudeoils consumed in the US.Climate changeClimate change represents a significant challenge for society, the energyindustry and BP. In response to the challenges and opportunities, BP istaking a number of practical steps, including investing in lower-carbonenergy products such as biofuels and wind, and ventures focused onsustainable energy solutions; and seeking to manage our own GHGemissions through a focus on operational energy efficiency, reductionsin flaring and venting and the engineering design for new projects. Wesee natural gas playing a key strategic role as a lower-carbon fuel that isincreasingly secure and affordable. We also consider the potential impactsof a changing climate on our operations.Greenhouse gas emissionsOur direct GHG emissions a were 61.8 million tonnes (Mte) in 2011,compared with 64.9 Mte in 2010. This decrease of 3.1 Mte is primarilyexplained by the temporary reduction in activity in some of our businessesas a result of maintenance work and also by the sale of assets as part ofour disposal programme. We achieved 0.2 Mte of sustainable emissionsreductions in 2011.Over the long-term it is likely that the carbon intensity of parts ofour business will increase. In our upstream operations this is becausewe expect to move further into technically difficult and potentially moreenergy intensive areas. The intensity of certain refining operations may alsoincrease with the trend towards processing heavier crudes which requiresmore energy.In 2010 we did not report on GHG emissions associated withthe Deepwater Horizon incident or response. We have since estimatedthe CO 2equivalent emissions from response activities in 2010 to beapproximately 481,000 metric tonnes, which includes major vesselsdeployed. This figure does not include emissions associated with the‘vessels of opportunity programme’, the onshore vehicles and equipmentand the incident itself, which are estimated to be minor.a We report GHG emissions on a CO 2-equivalent basis, including CO 2and methane. This representsall consolidated entities and BP’s share of equity-accounted entities except TNK-BP.70 BP Annual Report and Form 20-F 2011