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

Business reviewAlternative EnergyIn Alternative Energy, we are aligning technology capability with futuregrowth platforms, particularly biofuels.• In addition to our expanding biofuel production business in Brazil, we aredeveloping advanced technologies that will unlock the commercialpotential of next generation biofuels. At our technology centre in SanDiego, bioscientists are advancing the technology to commercializecellulosic biofuels and utilizing our large scale demonstration facility inLouisiana to prove the scale-up of proprietary cellulosic technology. Inthe UK, BP and its partners have constructed a demonstration plant toaccelerate commercial-scale production of biobutanol, a highly-efficientfuel molecule.• Our portfolio of strategic venturing investments aims at putting BP at theforefront in terms of innovation, particularly in developing sustainableenergy solutions. Our emerging business and ventures unit bringstogether BP’s venturing and carbon markets expertise with extensivecarbon capture and storage capability and through this unit, we havemore than 29 separate investments spanning three broad areas:bioenergy, electrification and carbon solutions.The investments create insights and develop options togrow value for BP, for both its oil and gas assets as well as its lowcarbonbusinesses. They cover a range of specialized innovations andtechnologies, such as waste-heat recovery, energy storage, carbonfunds and land-carbon projects, new solar and bio-energy technologies.For example, we have an investment stake in GMZ Energy, basedin the US, which is commercializing materials that allow the efficientconversion of heat to electricity with a thermoelectric device – a buildingblock for a new generation of energy-efficient products. The investmentgives us insights into the ability of thermoelectric technology to recoverlow-grade waste heat sources cost-effectively across the group.Gulf of Mexico oil spillFrom response to restoration – summaryBuilding on the efforts of 2010, BP has continued to demonstrateits commitment to the US federal, state and local governments andcommunities of the Gulf Coast following the Deepwater Horizon oil spill.BP’s efforts in 2011 included:• Continuing the clean-up of the waters and shorelines impacted acrossthe Gulf of Mexico and the ongoing protection of fish and wildlife.• Supporting the economic restoration of impacted sectors of the GulfCoast economy through targeted support to the tourism and seafoodindustries.• Continuing the funding of the $20-billion Deepwater Horizon Oil SpillTrust for the purposes of paying all legitimate individual, business, stateand local government claims and funding of settlements and NaturalResource Damages (NRD) assessment and restoration activities.• Progressing the NRD activities in collaboration with the federal and statetrustee agencies and progressing both emergency and early restorationactivities, including our voluntary commitment of up to $1 billion in earlyrestoration projects.• Continuing the support of independent long-term research through theGulf of Mexico Research Initiative (GoMRI) to improve knowledge of theGulf ecosystem and to better understand and mitigate the potentialimpacts of oil spills in the region and elsewhere.Proposed settlement with the Plaintiffs’ Steering CommitteeOn 3 March 2012, BP announced that it had reached a settlement with thePlaintiffs’ Steering Committee (PSC), subject to final written agreementand court approvals, to resolve the substantial majority of legitimateeconomic loss and medical claims stemming from the Deepwater Horizonaccident and oil spill. The PSC acts on behalf of individual and businessplaintiffs in the Multi-District Litigation proceedings pending in NewOrleans (MDL 2179).The proposed settlement is comprised of two separateagreements, one to resolve economic loss claims and another to resolvemedical claims. Each proposed agreement provides that class memberswould be compensated for their claims on a claims-made basis, accordingto agreed compensation protocols in separate court-supervised claimsprocesses. The proposed agreement to resolve economic loss claimsincludes a BP commitment of $2.3 billion to help resolve economic lossclaims related to the Gulf seafood industry and a fund to support continuedadvertising that promotes Gulf Coast tourism.BP estimates that the cost of the proposed settlement, expected tobe paid from the $20 billion Trust, would be approximately $7.8 billion. Thisincludes the financial commitment for the Gulf seafood industry.The proposed economic loss settlement provides for a transitionfrom the Gulf Coast Claims Facility (GCCF). A court-supervised transitionalclaims process for economic loss claims will be in operation while theinfrastructure for the new settlement claims process is put in place. Duringthis transitional period, the processing of claims that have been submittedto the GCCF will continue, and new claimants may submit their claims. BPhas agreed not to wait for final approval of the economic loss settlementbefore claims are paid. The economic loss claims process will continueunder court supervision before final approval of the settlement, first underthe transitional claims process, and then through the settlement claimsprocess established by the proposed economic loss agreement.This proposed settlement does not include claims against BP madeby the United States Department of Justice or other federal agencies(including under the Clean Water Act and for Natural Resource Damagesunder the Oil Pollution Act) or by the states and local governments. Theproposed settlement also excludes certain other claims against BP, such assecurities and shareholder claims pending in MDL 2185, and claims basedsolely on the deepwater drilling moratorium and/or the related permittingprocess.For further details, see the Legal proceedings section on pages160-164.76 BP Annual Report and Form 20-F 2011