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Oil Issue briefing .com/sustainability How we operate

pre-appraisal stage through to the About BP in BP recognizes that we operational stage and beyond – reflecting Based in , , BP Canada Energy BP’s values, responsibilities and local need to produce energy Group ULC’s activities include developing regulatory requirements. responsibly – minimizing energy from Canada’s oil sands, located in With increasing oil and gas supply and north eastern Alberta; exploring for oil in impacts to people, gradually moderating demand growth over offshore areas such as the Arctic and eastern communities and the time, combined with increasing energy Canada; and integrated supply and trading competition and climate challenges, BP’s activities across various energy commodities environment. strategy includes a shift to gas and in . advantaged oil in the upstream. Innovative The energy we produce helps to provide heat, and ongoing environmental and cost More information light and mobility in a changing world. performance improvements in oil sands are bp.com/canada creating opportunities for investment. Across BP’s operations, established practices bp.com/sustainability support the management of potential environmental and social impacts from the

The need for Canada’s oil sands

scenarios to give us flexibility in our BP believes Canada’s oil sands offer significant BP aims to provide approach, rather than pursuing a single benefits, including: reliable energy, view of the future. • a high-quality, plentiful resource responsibly produced. We carefully reviewed the decision to invest • a politically stable operating environment in Canada’s oil sands, as we do for all major • a strong governance and regulatory regime investments, taking into consideration factors We expect the world demand for energy to • a comprehensive climate policy. increase by around 30% between 2015 and including commercial viability, impacts on the 2035 – largely driven by rising incomes in landscape, (GHG) emissions, Canada’s oil sands play a part in our strategy emerging economies. The extent of this water use and local communities. We to deliver energy to the world by targeting increase is being curbed by faster gains in regularly review the commercial viability of basins and prospects with the greatest energy efficiency, as there is greater attention our oil sands developments against the potential to create value, while exercising due around the world on using energy more current and forecast economic environment. care for the impacts associated with it, and sustainably. minimizing risks. The global energy landscape is changing. The energy mix is shifting, driven by technological improvements and environmental concerns. Fast growing emerging markets are overtaking traditional centres of demand. The energy transition underway poses a significant challenge – how to meet the world’s growing demand for energy while also reducing carbon emissions. That raises important choices and opportunities for BP and our . We are evolving our strategy – allowing us to be competitive in a time when prices, policy, technology and customer preferences are changing. Our strategy anticipates a range of

2 BP Oil sands issue briefing About the oil sands

Canada’s oil sands are Steam assisted gravity drainage the third-largest known reserves in the world, after and 300m .

Canada’s resources Production well Steam injection well About half of the world’s total that are open to private sector investment are Steam Oil sands layer contained in Canada’s oil sands. An estimated 166 billion lie buried in and rock 100 – 500m formations, mainly in northern Alberta. 5m Bitumen The oil sands are a natural mixture of sand, water, and bitumen. They are found at varying depths and in some cases are directly exposed to the surface. There are two 500 – 1,000m methods of extracting this resource – recovery and surface . Due to the depth at which our oil sands resources are located, BP and our partners use, or plan to use, in situ Sunrise Pike Phase 1 was granted regulatory approval technology called steam assisted gravity The Sunrise project is a 50/50 joint venture in November 2014. for the first drainage (SAGD). between BP and Husky. Husky operates the phase of development is currently paused Sunrise leases, and BP operates the Toledo until the conditions are right for both parties SAGD involves pumping steam into the in Ohio in the US, where some of the to support moving forward. sand reservoir through a horizontal well to heat Sunrise bitumen is processed. the oil, which is then extracted through a Terre de Grace second, lower horizontal well. Sunrise is estimated to have more than BP operates and has a 75% interest, three billion barrels of recoverable bitumen alongside Value Creation Inc., in the Terre Our projects resources. The first phase of development de Grace oil sands leases, located BP is involved in three oil sands lease areas in has a capacity of approximately 60,000 barrels approximately 60 kilometres northwest Alberta: Sunrise, Pike and Terre de Grace. per day. It began producing oil in 2015, and of Fort McMurray, Alberta in the western is currently producing approximately 36,000 part of the Athabasca region. BP requires oil sands projects, like all of its barrels per day. investments, to be commercially viable over BP has conducted several summer and the life of the project. In light of changing global Pike winter work programmes, consisting of oil prices, some of our oil sands opportunities BP has a 50% non-operated interest in the Pike environmental field studies, seismic remain under evaluation while we continue to leases with Devon as our joint venture partner exploration, delineation drilling and monitor and assess emerging technologies and operator. Pike is in the southern Athabasca reclamation work. Terre de Grace is under and economic conditions to inform the best oil sands region and is approximately appraisal for future development. manner and timing of development. 25 kilometres southeast of Conklin, Alberta.

Lease area BP’s interests Operator Status Sunrise 50% owner Husky Phase 1: Energy Oil production began in 2015. Future development phases have been identified.

Pike 50% owner Devon Phase 1: Energy Granted regulatory approval. Engineering is currently paused.

Terre de 75% owner, alongside BP These leases are currently under Grace Value Creation Inc., appraisal. which has a 25% interest.

3 BP Oil sands issue briefing Responsible management and oversight

The regulatory environment We recognize the need Canada’s Oil Sands in Alberta to be responsible in the Alliance Oil sands developments are subject to way that oil sands rigorous requirements and monitoring set BP is a founding member of Canada’s Oil out by regulatory agencies in the Sands Innovation Alliance (COSIA), an projects are managed. of Alberta and by the Canadian federal initiative comprised of oil sands producers. government. These cover environmental The alliance aims to enable responsible and As with all of our assets, whether we are the impact assessments, stakeholder consultation, sustainable growth of Canada’s oil sands operator or not, we work with our joint venture operational practices and resource while delivering accelerated improvement partners to confirm our oil sands projects are management. The industry in Canada in environmental performance through managed and monitored effectively. is collaborative, the regulatory framework collaborative action and innovation. In addition to the day-to-day oversight by is progressive, and we are supporting The creation of COSIA builds on work done operators, the assets are managed through government and industry initiatives to manage by the industry, as well as research and contractual joint venture processes, which the cumulative impacts of oil sands development organizations, over many include governance committees with developments. years. By taking a collaborative approach, representation from BP and our partners. Regulatory agencies engage a range of COSIA will focus on the most pressing These committees establish business plans, stakeholders, including local communities, oil sands environmental challenges, approve investment decisions and monitor aboriginal groups and industry organizations specifically water, land, greenhouse gases performance, including adherence to such as the Canadian Association of and mine tailings; and aims to accelerate regulatory requirements. The project operator Producers, during the development of new the discovery and development of is required to provide timely reporting on regulations, in an effort to ensure that they are environmental technologies. various financial, operational, environmental appropriate and deliver the right outcomes. and safety metrics. All of these are BP actively monitors and contributes to Since 2012 the alliance companies have benchmarked against BP’s performance regulatory discussions. shared over 930 distinct technologies and expectations. . One of the COSIA technology The provincial government of Alberta has projects BP is supporting, for example, is a BP representatives on the governance announced a set of new energy and climate cell that captures carbon dioxide from committees are also responsible for confirming change policies, including a phase-out of -fired processing units while that project direction and activities are -fired power generation, limits to generating electricity. See cosia.ca. consistent with BP’s investment requirements emissions on oil sands, sector-specific and code of conduct. The partners have performance standards and economy-wide established joint processes to monitor areas pricing from carbon emissions. Consultation including: is under way with industry and other • health, safety and environmental issues stakeholders on the specifics of these policies • stakeholder relations and their implementation, and BP – along with our peers – has engaged in this process. • project quality and execution • the status of regulatory approvals The governments of Canada and Alberta are working together to continuously improve the • subsurface understanding and uncertainty comprehensive system of environmental • facility design and project execution monitoring in the oil sands and understanding • product transportation of the long-term cumulative effects of oil sands • technology. development. As part of this plan, the Alberta Environmental Monitoring and Science division provides related information such as assessments of environmental monitoring and available data on its website. See environmentalmonitoring.alberta.ca and osip.alberta.ca for more information.

4 BP Oil sands issue briefing Managing our environmental impacts

BP and our partners in oil sands projects work to address potential impacts on the landscape, and water use.

Impact on the landscape The use of in situ technology results in less land disturbance than mining as the operations have a smaller physical footprint and do not require tailings ponds. Alongside our partners, we work to promote the regeneration of habitats after the completion of our activities. In 2016 at Terre de Grace, we planted approximately 11,000 trees, completed aerial and ground assessments for vegetation and landscape, and undertook weed control activities following earlier resource appraisal work. This activity will help restore the landscape following the exploration programme. If the decision is taken in the future to proceed with the design of a first project at Terre de Grace, BP will assess potential impacts of lease work by identifying and recording environmental, social and new high efficiency boiler options along Technology economic constraints. The results will with lower carbon fuel alternatives. We also BP is working to incorporate existing guide the placement of future facilities and aim to reduce energy use at well sites technologies and research new technologies infrastructure, such as and pipelines, through the use of insulated tubing and and techniques. We are doing this in and will help determine how we can minimize electric submersible pumps. We encourage three ways: impacts in the area. our partners to use the best available energy efficient technologies in the design of plant 1 Company-specific initiatives:by playing Greenhouse gas emissions and field facilities. to BP’s strengths with initiatives focusing on carbon management, reservoir A focus area for oil sands operations using Water SAGD is the emissions of greenhouse gases management, SAGD enhancement, (GHGs) from steam generation. Water supply and management are key and energy and water efficiency. elements in planning a SAGD project. Improvements in technology present an 2 Joint venture collaboration: by working opportunity to reduce these emissions. Working with our partners, BP is committed with our partners on emissions reduction, to maintaining a high level of water In ‘well-to-wheels’ studies – which measure water treatment technologies and conservation and our oil sands projects are GHG emissions from producing the oil (well) improving data modelling so that less designed to meet or exceed regulatory through to combustion (wheels), crude exploratory drilling is required. requirements. At Sunrise the water used to produced from oil sands applying SAGD 3 make steam is primarily recycled from the Industry associations: by progressing oil technology is around 8% more GHG intensive wells. Where additional water is required, this sands technology through collaborative than the average crude refined in the US. is recycled from other operators in the area or industry bodies such as AACI (a consortium We are working with our partners to meet drawn from deep underground aquifers that including the Alberta Innovates and industry the comprehensive and rigorous GHG are not suitable for consumption. Any members) and Canada’s Oil Sands regulatory requirements and to find ways water that cannot be recycled is injected into Innovation Alliance (COSIA). For example, to reduce emissions. a deep disposal well, isolated from drinking COSIA is investigating ways to reduce We are working to deliver improvements water aquifers. energy use and associated GHG emissions through heat integration and recovery through the development of innovative techniques in our processing facilities. These technologies for in situ and mining allow us to use energy that would otherwise operations, including using algae to convert be lost into the atmosphere. We are exploring carbon dioxide into biofuel and biomass products. For more information about ongoing research aimed at priority issues, visit cosia.ca/focus-areas.

5 BP Oil sands issue briefing Oil sands Issue briefing 5

Managing community impacts Our oil sands projects, whether operated by BP or one of our partners, are being developed in consultation with local communities.

Building relationships with local communities BP recognizes that some aboriginal communities living near Alberta’s oil sands region are concerned about the potential impacts of oil sands developments. We engage with local communities, including neighbouring and Métis, on activities relating to the Terre de Grace lease. We work to maintain relationships through regular meetings, field site visits – including those by our board committee for sustainability issues – and support for community events. In 2015 these meetings were few, in light of our limited activities on the Terre de Grace lease. We track stakeholders’ interests, issues and concerns in our stakeholder commitments register. The register logs feedback on how issues are addressed and resolved, as well as tracking any commitments made.

Community engagement Our partners in the Sunrise and Pike projects have their own established strategies and processes to achieve meaningful engagement with local communities. Both Husky and Devon provide stakeholders with opportunities to consult and share their concernsManaging and priorities, whichimpacts the operators on local communities can address during planning and throughout the lifeOur of theoil sandsproject. projects, Community engagement For example, Husky has a stakeholderOur partners in the Sunrise and Pike projects whether operated by BP have their own established strategies and managementor one of strategy our partners, that outlines processes tools andto achieve meaningful engagement with local communities. Both Husky and accountabilitiesare being developedto achieve transparentin Devon and provide stakeholders with opportunities consultation with local to consult and share their concerns and meaningful consultation. This plan priorities, which the operators can address encompassescommunities. aboriginal communities,during planninglocal and throughout the life of the project. government,Building relationships provincial withand federal For example, Husky has a stakeholder regulators,local communities regional stakeholder groups,management strategy that outlines tools and BP recognizes that some aboriginal accountabilities to achieve transparent and employees,communities unions living near and Alberta’s others. oil sands Themeaningful consultation. This plan frameworkregion are provides concerned about a thestructure potential to identifyencompasses aboriginal communities, local impacts of oil sands developments. government, provincial and federal regulators, and engage stakeholders. regional stakeholder groups, employees, We engage with local communities, including unions and others. The framework provides a Huskyneighbouring also First has Nations an and established Métis, on structure to identify and engage stakeholders. activities relating to the Terre de Grace leases. commitmentsWe work to maintain register relationships to capture through concerns,Husky also has an established commitments regular meetings, field site visits – including register to capture concerns, track responses, track responses,those by our board committeeand implement for sustainability mitigation and implement mitigation commitments to commitmentsissues – and support to stakeholder for community events. issues. stakeholder issues. During community engagements, we discuss current lease holdings and reclamation activities. As ongoing dialogue with community partners continues and as the project pace evolves, so does our interaction. We track stakeholders’ interests, issues and concerns in our stakeholder commitments register. The register records feedback on how issues are addressed and resolved, as well as tracking any commitments made.

6 BP Oil sands issue briefing BP’s corporate reporting suite includes information on our sustainability and financial performance, as well as our global energy and technology projections. We also publish issue briefings on oil sands and unconventional gas development.

Sustainability Oil sands issue Unconventional Annual Report and Report 2016 briefing gas issue briefing Form 20-F 2016

Details of our sustainability Information on our approach Details of our approach to Details of our financial performance with additional to developing energy from managing the potential and operating performance information online. Canada’s oil sands. impacts of hydraulic in print and online. bp.com/sustainability bp.com/oilsands fracturing and unconventional bp.com/annualreport gas development. bp.com/unconventionalgas

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