Unconventional Gas Issue Briefing

Unconventional gas and hydraulic fracturing Issue briefing bp.com/sustainability How we operate

BP participates in a number of joint venture The energy we produce helps to provide heat, At BP, we recognize operations to extract unconventional gas. light and mobility in a changing world. that we need to produce Some of these are under our direct operational Across BP’s operations, established practices control, while others are not. We seek to work energy responsibly – support the management of potential with companies that share our commitment to minimizing impacts to environmental and social impacts from the ethical, safe and sustainable working practices. pre-appraisal stage through to the operational Our code of conduct states that we will seek to people, communities stage and beyond – reflecting BP’s values, communicate our expectations clearly to our responsibilities and local regulatory business partners, agreeing contractual and the environment. requirements. obligations where applicable. See bp.com/sustainability

BP and unconventional gas

Natural gas has an What is unconventional gas? What is hydraulic fracturing? Conventional natural gas comes from Hydraulic fracturing (sometimes referred increasingly important role permeable reservoirs, typically composed to as ‘fracking’) is the process of pumping in supplying lower carbon of sandstone or limestone, where extraction water, mixed with a small proportion of sand is relatively straightforward because the and chemicals, underground at a sufficient fuel to meet the world’s gas generally flows freely. In contrast, pressure to cause the rock to break or growing energy needs. unconventional gas is situated in rocks with fracture. This helps to release natural gas extremely low permeability, which makes that would otherwise not be accessible. extracting it much more difficult. New This process has been applied since the Natural gas is a vital lower carbon energy technologies and enhanced applications of late 1940s when Standard Oil of Indiana source. It produces about half as much existing techniques are making it possible for (later Amoco), now part of BP, developed greenhouse gas (GHG) emissions as coal BP to extract these unconventional natural the technique and performed some of the when burned to generate power and it can gas resources safely, responsibly and first fracture treatments in the Hugoton field serve as a back-up for intermittent renewable economically. The combination of horizontal in Kansas. energy sources. In the US, the growing use wells and hydraulic fracturing has been key to of shale gas has had a significant impact on unlocking unconventional gas reserves in the carbon dioxide (CO ) emissions, which have 2 US and elsewhere. fallen back to 1990s levels. We expect that natural gas is likely to meet around 25% of total global energy demand Hydraulic fracturing process by 2035. Shale gas is expected to contribute around a quarter of total gas production by 2035. Water tankers Recovered water is Wastewater is recovered Storage tanks We are working to responsibly develop and stored in lined pits for treatment, reuse and/or tanks or disposal produce natural gas from unconventional resources including shale gas, tight gas and Fracturing ﬂuid is coalbed methane. We have unconventional pumped into the gas operations in five states in the US and well head will be producing gas in Oman from 2017.

Water table

Fissure Well is isolated with pipe and cement

Shale Well

5,000-10,000ft below Gas ﬂows along well the water table from fractures

2 BP Unconventional gas and hydraulic fracturing issue briefing Managing methane and other greenhouse gas emissions

Methane emissions can occur along the gas We are working to supply chain – that includes flaring and venting, minimize GHG emissions to leaks from equipment in gas production through to the delivery of gas to customers. and other air pollutants We are working with Imperial College London at our operating sites. through the Oil and Gas Climate Initiative to compare GHG and air emissions across different gas and coal supply chains to identify the most effective ways to reduce GHG emissions. Our What about greenhouse gas own life cycle analysis of the liquefied natural emissions (GHG) and air pollution gas from our Tangguh plant in Indonesia shows associated with unconventional that the GHG emissions from that gas are at least 50% lower than coal. gas development? How does BP aim to minimize We have also incorporated measures to reduce The sources of emissions during emissions at sites? emissions into the design of our Khazzan project, unconventional production are similar to We aim to minimize air and GHG emissions by including using the gas we produce to power the those from conventional production and using responsible practices and controls at our central processing facility, which will also provide include flared and vented hydrocarbon gas, operating sites. US regulations require us to take electricity to power well-site equipment. fugitive hydrocarbon gas (leaks from the following actions in our Lower 48 operations: equipment), and the normal air emissions How reliable is data on methane from use of natural gas as a fuel. • Apply green completions – this process emissions? captures natural gas that would otherwise Air emissions during drilling and hydraulic We are working to build a more reliable and be flared or vented during the completion fracturing operations can result from engines complete picture of methane – one that provides and commissioning of wells. powering the equipment. These emissions a set of global data categorized by different types occur for the relatively short time required • Control emissions from hydrocarbon liquid of gas fields and operations. to drill and fracture a well. GHG emissions storage vessels. For example, through the Climate and Clean Air during these operations are mostly carbon • Conduct leak detection and repair of Coalition’s Oil and Gas Methane Partnership, we dioxide emissions from fuel combustion. production equipment – we use a range are deepening our industry’s understanding of Once the well has been hydraulically of techniques, including infrared cameras, the core sources that account for the bulk of fractured, the liquids pumped into the well to detect gas leaks. methane emissions in upstream operations. This must flow back out of the well. This process • Implement maintenance programmes to will help to inform actions we can take to reduce is known as the completion stage. During minimize emissions from compressor seals. emissions. this stage, some gas may be flared or vented All this activity builds on the work we have until there is adequate volume and pressure • Use lower-sulphur fuels in the engines of our carried out over the past 15 years to estimate so that the gas can be separated and sold. At drilling rigs and hydraulic stimulation methane emissions from our own operations. our US sites during the completion stage, we equipment – this reduces sulphur dioxide We calculate that our methane intensity – that is, are required through regulation to capture or emissions. methane emissions as a percentage of marketed flare the gas. • Replace pneumatic equipment with lower gas production – is around 0.2%. emissions or no-emissions alternatives. For Do methane emissions from gas example, at our San Juan operations, we use In 2015 and 2016 we conducted detailed production outweigh the climate solar energy to power equipment and that has assessments in many of our upstream benefits of gas over coal and oil? led to a reduction in methane emissions and operations to fine tune our estimates. As this the recovery of gas that would otherwise be work progresses, we will continue to refine our Minimizing methane emissions from gas data on methane emissions and intensity. production is essential to maximize the role vented. of gas in a lower carbon world. We also reduce transportation emissions Methane has a strong warming effect on the by automating some operations – meaning climate – trapping substantially more heat that fewer site visits are required – and by transporting chemicals in dry rather than liquid than CO2. But it has a relatively short lifetime in the atmosphere because it breaks down form, taking up less space on trucks. more rapidly once it’s released. The global And, we reduce methane emissions in other warming potential of methane is at least ways, depending on local circumstances. For

84 times greater than CO2 over a 20-year example, at our Khazzan site in Oman we have period. That potential decreases to around built a central processing facility that reduces 25 times greater when calculated over a the need for processing equipment at each 100-year period – the timeframe most individual well site, which can be additional governments and companies use to assess sources of methane emissions in gas its impact. production.

3 BP Unconventional gas and hydraulic fracturing issue briefing Managing water and other fluids

Hydraulic fracturing uses Water and unconventional water and other fluids, gas development which need to be Disposal Sourcing sourced, managed and • Treatment/reuse • Surface water disposed of appropriately. • Evaporation ponds (e.g. municipal, lakes, rivers) • Underground injection • Ground water • Reuse of fracturing water • Produced water Can natural gas and drilling fluids enter underground water sources due to the fracturing process? Water BP wells and facilities are designed, constructed, operated and decommissioned to prevent natural gas and hydraulic fracturing fluids entering underground aquifers, including Storage Transportation drinking water sources. We install multiple • Surface pits • Pipeline layers of steel into the natural gas well and • Water tanks • Trucks cement these above and below any freshwater • Direct use (no storage) aquifers. We test the integrity of our wells before commencing fracturing and again when work at the well reaches completion. Naturally-occurring methane is often found Are the chemicals used in the Where does the water and close to the surface and within drinking water fracturing process hazardous? hydraulic fracturing fluid used in aquifers. We conduct baseline sampling of Water and sand constitute on average 99.5% the fracturing process go? drinking water wells closest to new drilling of the injection material used in hydraulic locations to measure the presence of A portion of the fluid used in hydraulic fracturing. They are mixed with chemicals to naturally-occurring methane in shallow drinking fracturing returns to the surface during create the fracturing material that is pumped water aquifers. production, while the remainder stays underground at sufficient pressure to fracture underground. The main method of handling the rock; sand is then used to prop the Doesn’t fracturing use a lot water that flows back from the well is to fractures open. of water? re-inject it into underground formations that are A typical shale gas well requires several The chemicals used in this process help to thousands of feet beneath and isolated from million cubic metres (m3) of water for drilling reduce friction and control bacterial growth in drinking water aquifers. the well. They are mixed in a variety of ways and hydraulic fracturing. The volume of fresh When underground re-injection is not viable, depending on the operational needs of each water withdrawn by our unconventional gas we explore other options including treatment 3 fracturing operation. Some of the chemicals, operations was 1.3 million m in 2016, which of the water to applicable regulatory standards. when used in certain concentrations, are represents 0.5% of the group total. We are In cases where re-injection or treatment is not classified as hazardous by the relevant testing a number of water-saving innovations, practicable, we use evaporation ponds to allow regulatory authorities. BP works with service using new technologies that could make it the water to naturally evaporate. possible for us to treat water used in providers to minimize their use where possible. fracturing for re-use in our operations. We are We list the chemicals we use in the fracturing also looking at ways to reduce freshwater process in material safety data sheets at Water use across the life cycle use. One option we are pursuing is treating each site. We think it is important to consider water saline water for use in fracturing activities. BP supports transparency regarding the use across the entire life cycle of these At our Khazzan operation in Oman, we treat substances used in hydraulic fracturing. In the resources from production through to wastewater from our sewage treatment plant US, we take part in a number of voluntary converting the resources into energy. and reuse it for irrigation, road construction disclosure efforts and submit data on Natural gas-fired power plants use and dust suppression, reducing freshwater chemicals used at our hydraulically fractured significantly less water per unit of energy demands in an area of water scarcity. wells, to the extent allowed by our suppliers, produced when compared with coal who own the chemical formulas, at We also support university research and plants. For example, a report by the US fracfocus.org or other state-designated Department of Energy found that natural industry developments to identify new water websites. In Oman, our suppliers use similar treatment technologies. For example, we gas-fired combined-cycle gas turbines chemicals, but there is no mechanism for use about half as much water as coal-fired have invested in a water treatment company sharing this information with the public. that manufactures desalinization and brine plants. Massachusetts Institute of management systems. Development of Technology also found that the water these technologies will help us to deliver low intensity of shale gas ranks among the impact solutions, in terms of water utilization. lowest of all fuel sources.

4 BP Unconventional gas and hydraulic fracturing issue briefing Managing our environmental and social impacts

We consider the potential How can unconventional gas A number of our major operating sites are extraction affect the local working to improve local and national impacts of our operations representation in their workforce. In Oman, community? for example, BP is working to build local skills on the local environment, The development of unconventional resources through a technician development programme. society and economy. has moved energy companies into new and A total of 85 Omani technicians are currently often more densely populated areas. enrolled in the programme that includes health, safety and environmental technical skills Potential impacts include increased traffic, training at a dedicated training centre in Muscat. noise, dust, light and air pollution, visual The programme also includes on-the-job Does hydraulic fracturing cause impacts, disruption of wildlife and habitat, and training at other operators’ oil and gas sites in earth tremors? increased pressure on the local infrastructure. Oman, as well as BP sites in the UK and US. Hydraulic fracturing creates very small earth These impacts can vary depending on the tremors that are rarely felt at the surface. stage of the operation. For example, the drilling We believe that people living near oil and gas Before conducting work, BP assesses the and preparation of wells for production, which operations, and the general public, should have potential risk of such induced seismicity includes the process of hydraulic fracturing, information about our activities. In the US resulting from our operations – for example, typically lasts two to three months. This is we support and implement the American by identifying natural faults in the local area. when drilling takes place and water and Petroleum Institute’s recommendations on This analysis informs our development plans equipment are delivered to the site. The how companies should engage with the for drilling and hydraulic fracturing activity and production phase, which may last several communities where they operate. decades, has minimal surface impact. we design our operations to mitigate this risk. One way we engage with our local community Oil and gas production generates large How does BP engage with is through community advisory panels. For amounts of water which are typically injected communities about these impacts? example, we work with the Durango Citizen back into the ground, either to enhance oil Advisory Panel, in La Plata County in Colorado, recovery or to dispose of the water. In certain In the early stages of our projects, we assess which meets regularly to discuss issues of situations, the underground injection of water the potential impacts of our operations on the interest to the local community and BP. local communities and seek to manage them may pose a risk of induced seismicity. The What about the noise from the design, construction and operation of throughout the life of our operations. We are injection disposal wells in the US are highly committed to: drilling and the traffic from regulated in the states where we operate. • Providing timely and transparent information the trucks? BP also verifies compliance at all third party about our activities to the public. Drilling and truck traffic can raise concerns over reinjection facilities before we send our • Identifying and responding to concerns noise and disturbance to the local community. produced water for reinjection. We apply they raise. BP seeks to design facilities and plan road, best practices, reviewing and updating our pipeline and well pad locations to limit approaches to reflect lessons learned across • Offering employment opportunities for disturbances and mitigate noise and other the industry to minimize the risk of induced local people. impacts from drilling and truck traffic. To reduce seismicity. • Training our workforce to maintain positive the impacts from traffic, we aim to apply dust There has been an increase in seismic activity relationships with local communities. suppression techniques, install pipelines to in areas near our operations in the US states transfer water where practical, and minimize • Seeking to reduce our impact on the ground the number of kilometres driven. We work with of Oklahoma and Texas. In recent years, through appropriate equipment design and scientists, regulators and industry have come communities to manage traffic movements location and management of our work whenever possible. together to implement a number of measures patterns. to mitigate the risk of induced seismicity, including resource and data sharing to empower US states to adopt best practices. Many US states have also updated their rules and guidelines for injection well permitting. In areas prone to induced seismicity, BP assesses the potential risks resulting from wastewater disposal to inform our plans and operations. Experts from academic institutions, industry associations and state and national regulatory agencies continue to study the issue of seismicity, and we monitor these developments for applicability to our operations.

5 BP Unconventional gas and hydraulic fracturing issue briefing Managing our environmental and social impacts (continued)

Is it safe to work at a drilling site? operators and contractors to promote safety, health and environmental improvement in We have issued guidance throughout BP US onshore oil and gas operations. We are on how to drill and maintain wells to high, working to apply the lessons learned from this consistent standards. We assess health programme in our exploration and production hazards, such as noise, chemical and silica operations globally. dust exposure. We also implement hearing and respiratory protection for our workforce How does BP protect the animals where this is needed. and plants that live close to the We take road safety very seriously. Drivers are operations? required to undergo assessments and need to We work to avoid impacts to sensitive habitats be trained, licensed and medically fit to operate and threatened species. If such impacts a vehicle. We limit the number of hours they are unavoidable, we seek to minimize and can work, and in some circumstances we mitigate them. perform pre-trip risk assessments and develop journey management plans to minimize any We monitor the impact of new gas exposure to potential hazards. development and our operations on species. For example, in the San Juan Basin we monitor In Oman we track every journey using a vehicle potential impacts on the population levels and monitoring system that gauges speed, braking movement patterns of species such as bald patterns, distances driven, seat belt use and eagles and deer. This allows us to better rest periods taken. Drivers are then provided schedule our activities and reduce any impacts. with safety scores and feedback on how to improve. To minimize land use and reduce the number of well pads, we use techniques such as We conduct spot checks on all contracted drilling multiple wells from a single site. We vehicles and regularly assess our contractors’ also use construction practices that minimize safety controls. the physical footprint of the operations, and we We helped pioneer the US National Service, carry out field studies in areas such as planting Transmission, Exploration and Production techniques and topsoil storage and reuse to Safety Network, which brings together help us restore the land after construction.

6 BP Unconventional gas and hydraulic fracturing 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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