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

Business reviewAcquisitions and disposalsWe have been managing our portfolio actively, investing in businesseswhere we have strengths in terms of location, configuration, integration,technology and brand, while divesting assets that do not display thesestrategic characteristics.• We completed the divestment programme of non-strategic pipelines andterminals in the US East of Rockies and West Coast, announced in 2009.• We completed the disposal of our fuels marketing businesses in Malawi,Namibia, Tanzania, Zambia and Zimbabwe following the 2010 disposal ofthe business in Botswana. This portfolio rationalization now allows us tofocus our activities within the continent on South Africa and Mozambique.• We also announced our intention to divest the Texas City refinery and thesouthern part of the US West Coast FVC, including the Carson refinery,roughly halving our US refining capacity. BP is aiming to complete thesales by the end of 2012 subject to signing definitive agreements forthe sales and subsequent satisfaction of any legal, regulatory or otherconditions. BP will ensure that the fulfilment of current regulatoryobligations associated with the Texas City refinery is reflected in anytransaction. These assets are classified as held for sale in the groupbalance sheet as at 31 December 2011.• In December 2011, Air BP announced the purchase of aviation fuelsassets at seven Brazilian airports from Shell Brasil Holding B.V. andCosan S.A. Industria e Commercio for approximately $100 million. Theacquisition will give Air BP access to several new airports in Brazil aswell as increasing capacity at existing Air BP operations. This deal isexpected to be completed in the first quarter of 2012 subject to regulatoryapprovals.• In February 2012, we announced our intent to sell our bulk and bottledLPG marketing businesses in nine countries.Fuels value chainsThe six FVCs seek to optimize the activities of our assets across the supplychain: crude delivery to the refineries; manufacture of high-quality fuels;distribution through pipeline and terminal infrastructure; and marketingand sales to our customers on a regional basis (see map on pages 34-35).This integration, together with a focus on excellent execution and costmanagement as well as a strong brand, market presence and customerbase, are key to our financial performance.The FVC strategy focuses on feedstock-advantaged, upgraded,well-located refineries integrated into advantaged logistics and marketing.Consequently, in the US we intend to roughly halve our US refining capacityby the end of 2012 (subject to all necessary legal and regulatory approvals)(see also the Acquisitions and disposals section on this page).In our remaining FVCs, we believe that we have a portfolio ofwell-located refineries, integrated with strong marketing positions offeringthe potential for improvement and growth. We currently own or havea share in 16 refineries, which refine crude oil and produce refined fuelproducts which we supply to retail and commercial customers. Strategicinvestments in our refineries are focused on securing the safety andreliability of our assets while improving our competitive position.Key to our future refining capability is the Whiting refinerymodernization project (WRMP), which will allow the capture of additionalmargin through the processing of heavy Canadian crudes. The projectcontinued to make significant progress in 2011. The coker’s six new drumsare now set in place, and the Southern Lights pipeline to Canada, andWhiting’s interconnection to it, are in operation. This new pipeline capabilityallows transport of diluent streams back to Canada which are used todilute heavy Canadian oils to facilitate their flow back to the US. WRMP isexpected to come onstream in the second half of 2013.Business review: BP in more depthFuelsOur fuels business is made up of six regionally organized integrated FVCs(as shown in the refineries table below), the Texas City refinery, our globalaviation fuel and LPG marketing businesses, and a number of regionallyfocusedfuels marketing businesses notably the UK, Turkey, China andFrance. At the end of 2011, the operating capital employed relating to thefuels business was approximately $44 billion.The following tables summarize the BP group’s interests in refineries and average daily crude distillation capacities as at 31 December 2011.thousand barrels per dayCrude distillation capacities aRefineryFuels value chainGroup interest b% TotalBPshareUSCalifornia Carson US West Coast 100.0 266 266Washington Cherry Point US West Coast 100.0 234 234Indiana Whiting US East of Rockies 100.0 413 413Ohio Toledo US East of Rockies 50.0 160 80Texas Texas City – 100.0 475 475Total US 1,548 1,468EuropeGermany Bayernoil c Rhine 22.5 217 49Gelsenkirchen Rhine 50.0 265 132Karlsruhe c Rhine 12.0 322 39Lingen Rhine 100.0 93 93Schwedt c Rhine 18.8 239 45Netherlands Rotterdam Rhine 100.0 377 377Spain Castellón Iberia 100.0 110 110Total Europe 1,623 845Rest of WorldAustralia Bulwer ANZ 100.0 102 102Kwinana ANZ 100.0 146 146New Zealand Whangerei c ANZ 23.7 118 28South Africa Durban c Southern Africa 50.0 180 90Total Rest of World 546 366Total 3,717 2,679a Crude distillation capacity is gross rated capacity, which is defined as the highest average sustained unit rate for a consecutive 30-day period.b BP share of equity, which is not necessarily the same as BP share of processing entitlements.c Indicates refineries not operated by BP.BP Annual Report and Form 20-F 2011 97