BP Annual Report and Form 20-F 2010

Our performance
Performance in 2010 was overshadowed by the
well blowout and subsequent oil spill in the Gulf of
Mexico. Beyond this tragic event, the ongoing
underlying performance of the group was strong.
Safety
In April 2010, following a well blowout in the Gulf of Mexico, an explosion
and fire occurred on the semi-submersible rig Deepwater Horizon, resulting
in the tragic loss of 11 lives and a major oil spill. There were three other
contractor fatalities during 2010. We deeply regret the loss of these lives
and the impact from the oil spill. (See Gulf of Mexico oil spill on page 34 for
more information on the Deepwater Horizon accident.)
Our priority remains to have safe, reliable and compliant operations
worldwide. We have set up a more powerful safety and operational risk
function. As an immediate step, we have reinforced the link between
safety performance and reward in the fourth quarter of 2010. Other
programmes are now under way, including a review of contractor
management and a fresh look at how we manage risk systematically
across BP.
We also continued to embed our OMS within the group, with all of
our operating sites transitioning to the system by the end of February 2011.
Recordable injury frequency (RIF, a measure of the number of
reported injuries per 200,000 hours worked) was 0.61 in 2010, compared
with 0.34 in 2009 and 0.43 in 2008. The increase in 2010 was significantly
impacted by the number of incidents arising in the response effort for the
Gulf of Mexico oil spill, which resulted in significantly higher personal safety
incident rates than for other BP operations.
The number of oil spills greater than one barrel was 261 in 2010
compared with 234 in 2009 and 335 in 2008. The volume spilled was
dominated by the Gulf of Mexico incident. See Oil spill and loss of
containment in Safety on page 68.
Our greenhouse gas (GHG) emissions a were 64.9Mte in 2010,
compared with 65.0Mte in 2009. We have not included any emissions from
the Gulf of Mexico incident and the response effort due to our reluctance
to report data that has such a high degree of uncertainty.
People
During 2010, we continued to focus on increasing the level of specialist
skills and expertise across the workforce. The exceptional response to the
oil spill was a reassuring example of the capabilities and commitment of
our staff.
The total number of non-retail staff was broadly stable in 2010,
adjusting for staff reductions associated with asset disposals. Total
non-retail recruitment was around 8,000. This was offset by around 7,700
staff leaving the company plus a further 2,300 staff leaving associated with
asset disposals. The total number of employees (including retail staff) was
79,700 at the end of 2010.
a See footnote a in Environment on page 72.
b See Exploration and Production – proved reserves replacement on page 42 for more detailed
information on reserves replacement for subsidiaries and equity-accounted entities.
c Refining availability represents Solomon Associates’ operational availability, which is defined as
the percentage of the year that a unit is available for processing after subtracting the annualized
time lost due to turnaround activity and all planned mechanical, process and regulatory
maintenance downtime.
Business review
Operating and financial performance
Our results in 2010 were greatly impacted by the charge recorded for
the Gulf of Mexico oil spill incident. Steps were taken to strengthen the
balance sheet, including a programme of asset disposals, with very
good progress made. Cash and cash equivalents at the end of 2010 was
$18.6 billion and the net debt ratio was 21%.
Notable achievements in 2010 include:
Exploration and Production
• Replacing more than 100% of our proved reserves, excluding
acquisitions and disposals, on a combined basis of subsidiaries and
equity-accounted entities b .
• Taking final investment decisions on 15 projects, with an expected total
BP net capital investment of $20 billion.
• Increasing production for the Rumaila field in Southern Iraq by more
than 10% above the rate initially agreed between the Rumaila
Operating Organization partners and the Iraqi Ministry of Oil in
December 2009. This significant milestone means that BP and its
partners became eligible for service fees from the first quarter of 2011.
• Accessing new resources across the globe – in Azerbaijan, China,
the Gulf of Mexico, Indonesia, onshore North America and the UK.
• Making the Hodoa discovery in Egypt, the first Oligocene deepwater
discovery in the West Nile Delta.
• TNK-BP increasing its production by 2.5% in 2010 compared with 2009.
• Securing agreements to dispose of almost $22 billion of non-core
assets in line with our plans following the Gulf of Mexico oil spill.
Refining and Marketing
• Improving overall financial performance delivery, primarily driven by
strong operational performance across all of our businesses, the
continuation of our programme to deliver further efficiencies and a
more favourable refining environment.
• Achieving a Solomon refining availability c of 95.0%, which is an increase
of 1.4 percentage points compared with 2009.
• Achieving record volumes in petrochemicals and strong lubricants
performance.
• Making significant progress in the Whiting refinery modernization
project.
• Starting commercial production at our new joint venture acetyls plant
in Nanjing, China.
• Castrol’s sponsorship of the 2010 FIFA World Cup in South Africa.
• Successfully exiting from our convenience retail business in France.
• Completing the divestment of several packages of non-strategic
terminals and pipelines in the US East of Rockies and West Coast.
• Selling our 15% interest in Ethylene Malaysia Sdn Bhd (EMSB) and
60% interest in Polyethylene Malaysia Sdn Bhd (PEMSB) to Petronas.
BP Annual Report and Form 20-F 2010 21
Business review