Sustainability Review beyond petroleum® 2009

02 Group chief executive’s review 05 How we operate 06 BP in fi gures bp.com/sustainability

Operating at the energy frontiers How a revitalized BP is driving innovative, effi cient and responsible operations

Meeting the energy demands Oil Natural gas Wind Solar Biofuels Effi ciency of today and tomorrow BP Sustainability Review 2009 BP Sustainability Review 2009 This is BP Reports and publications

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BP is progressive, responsible, innovative To meet growing world demand, BP is US and Canada and performance driven. committed to: Precision IR • Exploring, developing and producing Toll-free +1 888 301 2505 Progressive more fossil fuel resources. Fax +1 804 327 7549 We believe in the principle of mutual • Manufacturing, processing and delivering [email protected] advantage and build productive better and more advanced products. relationships with each other, • Enabling the transition to a our partners and our customers. UK and Rest of World lower-carbon future. BP Distribution Services Tel: +44 (0)870 241 3269 Responsible We aim to do this while operating safely, Fax: +44 (0)870 240 5753 We are committed to the safety and reliably and in compliance with the law. [email protected] development of our people and the In Exploration and Production our communities and societies in which strategy is to invest to grow production by we operate. We aim for no accidents, strengthening our portfolio of leadership no harm to people and no damage positions in the world’s most prolifi c Annual Review Annual Report and Accounts to the environment. hydrocarbon basins, enabled by the Read a summary of our fi nancial and Read details of our fi nancial and operating development and application of technology operating performance in BP Annual performance in BP Annual Report and Innovative and strong relationships based on mutual Review 2009 in print or online. Accounts 2009 in print or online. We push boundaries today and create advantage. We intend to sustainably drive www.bp.com/annualreview www.bp.com/annualreport tomorrow’s breakthroughs through our cost and capital effi ciency in accessing, people and technology. fi nding, developing and producing resources, enabled by deep technical capability and a Contact details Performance driven culture of continuous improvement. Your feedback is important to us. We deliver on our promises through In Refi ning and Marketing our You can email the Sustainability continuous improvement and safe, strategic focus is on enhancing portfolio Reporting team at reliable operations. quality, integrating activities across value [email protected] These values guide us in the conduct of our chains and performance effi ciency. We expect to continue building our business or send us your feedback online at business. In all our business we expect our www.bp.com/sustainabilityfeedback people to meet high ethical standards and to around advantaged assets in material and signifi cant energy markets while improving act in accordance with our code of conduct. You can also telephone the safety and reliability of our operations. +44 (0)20 7496 4000 In Alternative Energy we have focused our investments in the areas where or write to: we believe we can create the greatest Sustainability Report competitive advantage. We have substantial BP p.l.c. businesses in wind and solar power and are 1 St James’s Square, developing advanced biofuels and clean London SW1Y 4PD, energy technologies such as hydrogen UK. Financial and Operating Information Statistical Review of World Energy power and carbon capture and storage. BP Financial and Operating Information Published in June each year, BP Statistical Looking ahead 2005-2009 includes fi ve-year fi nancial Review of World Energy reports on key and operating data. global energy trends. Cautionary statement We intend to play a central role in meeting BP Sustainability Review 2009 and www.bp.com/sustainability contain certain forward-looking the world’s continued need for hydrocarbons. www.bp.com/fi nancialandreporting www.bp.com/statisticalreview statements concerning the businesses, operations and strategy of BP. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and We are creating long-term options for the depend on circumstances that will or may occur in the future. Actual results may differ from future in new energy technology and those expressed in such statements depending on a variety of factors including future levels low-carbon energy businesses. We are also of industry product supply; demand and pricing; operational problems; general economic conditions; political stability and economic growth in relevant areas of the world; changes in enhancing our capabilities in natural gas, laws and governmental regulations; regulatory action; exchange rate fl uctuations; development which is likely to be a vital source of relatively and use of new technology; changes in public expectations and other changes in business clean energy during the transition to a conditions; the actions of competitors; natural disasters and adverse weather conditions; wars and acts of terrorism or sabotage; and other factors discussed elsewhere in this document lower-carbon economy and beyond. External reporting frameworks Acknowledgements Paper and at www.bp.com/riskmanagement. Material is used within this document to describe issues Design sasdesign.co.uk This Sustainability Review is printed on FSC-certifi ed for voluntary sustainability reporting that are considered to have the potential to signifi cantly Typesetting Orb Solutions, London An introduction to Ernst & Young’s assurance process Revive Pure White Uncoated. This paper has been affect sustainability performance in the view of the company and/or are expected to be Printing Beacon Press using its ® We have reviewed the contents of BP Sustainability Review 2009 to provide assurance independently certifi ed according to the rules of important in the eyes of internal or external stakeholders. Material for the purposes of this environmental print technology. The electricity on the information reported. This work included testing relevant management information, the Forest Stewardship Council (FSC) and was document should not, therefore, be read as equating to any use of the word in other BP p.l.c. was generated from renewable sources and interviewing BP management and reviewing external media sources. Our conclusions, manufactured at a mill that holds ISO 14001 reporting or fi lings. approximately 90% of the waste associated which can be found on page 34, have been prepared against the main principles of the accreditation. The inks used are all vegetable oil based. BP Annual Report and Accounts 2009, BP Annual Report on Form 20-F 2009 and with this product will be recycled. AA1000 Assurance Standard (2008). Several of our specifi c observations have also been BP Annual Review 2009 may be downloaded from www.bp.com/annualreport. No material Photography Stuart Conway, Richard Davies, included on relevant pages of this Sustainability Review. in this Sustainability Review forms any part of those documents. No part of this Review Simon Kreitem, Ian McGregor, Marc Morrison, or www.bp.com/sustainability constitutes, or shall be taken to constitute, an invitation or Specifi c observation from Ernst & Young Chris Moyse, David Shepherd and Aaron Tait. inducement to invest in BP p.l.c. or any other entity and must not be relied upon in any way BP has highlighted ‘energy challenges’ but could also describe the issues that stakeholders in connection with any investment decisions. consider to be emerging sustainability trends. This could include, for example, water Cert no. SGS-COC-0620 BP p.l.c. is the parent company of the BP group of companies. Unless otherwise management and reputational risks associated with supplier working practices, and how stated, the text does not distinguish between the activities and operations of the parent this may impact on the business. company and those of its subsidiaries. © BP p.l.c. 2010 37 BP Sustainability Review 2009 What’s inside?

Canadian oil sands At BP we defi ne sustainability Leveraging our technical expertise to deliver a as the capacity to endure as major energy resource responsibly. a group: by renewing assets; See page creating and delivering better 12 products and services that meet the evolving needs of society; attracting successive generations BP and climate change Aiming to be part of the solution – through of employees; contributing to a effi cient operations and products, low-carbon sustainable environment; and energy and advocacy. retaining the trust and support of See page our customers, shareholders and the 14 communities in which we operate.

Tangguh and Full sustainability reporting sustainability bp.com/sustainability Delivering value to BP and the local community with the start-up of our Our website plays an integral part of our sustainability liquefi ed natural gas reporting, covering a wider set of issues and reporting project in Indonesia. on them in more depth. The website includes detailed information about our environmental and safety See page performance, as well as case studies that demonstrate 32 our sustainability efforts in action.

02 Group chief executive’s review 04 BP in 2009 05 How we operate 06 BP in fi gures 08 Diverse and affordable energy 16 Low-carbon energy 20 Safe and responsible energy 26 People energy 30 Local energy 34 Independent assurance statement 35 Our approach to reporting 36 Our online resources 37 Reports and publications

Cover images Top left Truck with seismic exploration technology, Oman. Top right Harvesting at Tropical BioEnergia, Brazil. Bottom left Community project at Tangguh, Indonesia. Bottom right Safety checking at Bulwer refi nery, Australia. 1 BP Sustainability Review 2009 Group chief executive’s review

What role will an oil and gas of the world’s great oilfi elds. We see this company have in the decades as the beginning of a long-term relationship to come? that will be instrumental in helping Iraq to According to International Energy Agency rebuild its economy after years of war and (IEA) projections, the world could potentially sanctions. The investment in Rumaila will consume around 40% more energy in support Iraq in achieving its ambition of 2030 than we consume today – requiring becoming a major player in global oil markets investment of at least $1 trillion every year in once again and will catalyse training and Diverse, energy infrastructure. In meeting this demand development opportunities for the many sustainably, there will need to be changes thousands of Iraqis working in Rumaila. in the energy mix. We will need more innovative low-carbon energy and we need to use all How do you respond to people’s forms of energy more effi ciently. The share concerns about BP and Canadian of energy derived from renewable sources oil sands? will certainly increase in the future, and Our Sunrise joint venture in the Canadian and effi cient carbon capture technology could be deployed oil sands will make a signifi cant contribution at scale. However, the IEA anticipates fossil to energy security for North America. The fuels still being the dominant source of energy project will be using steam assisted gravity Tony Hayward Group Chief Executive in 2030, even in a scenario in which major drainage, which is close to conventional April 2010 carbon emissions are tightly constrained reservoir engineering. We plan to use our over the next two decades. technology capabilities to achieve a high Highlights In other words, the energy companies level of energy effi ciency and minimize the • Improved fi nancial performance. of the future will need to supply a diverse greenhouse gas emissions associated with • Progress on safe and reliable operations. energy mix. The mix will be more than oil this form of oil sands production. We won’t • People agenda essential to BP’s transformation. and gas – but hydrocarbons will still be a be pursuing Canadian oil sands mining major part of it. projects. And, as with all new projects, we follow an established environmental So, what is BP doing to meet future and social practice, which includes water Tony Hayward, BP’s group chief executive, energy demand for oil and gas? management, land use and community discusses sustainability-related issues, Our analysis indicates the world has enough relations. including some frequently raised by those proved reserves to last for about 40 years who read BP’s reports on environmental for oil and 60 years for gas, at today’s How do you view the outcome of and social performance. consumption rates. There is also a lot more the 2009 Copenhagen conference oil and gas to fi nd – but it requires working on climate change? Energy is high on the public agenda. at the industry’s frontiers and continuing to The Copenhagen conference had some very What are the priorities for its future? innovate in our technology and processes, important outcomes even though a formal Reliable and affordable supplies of as indeed BP has done through its 100- global treaty was not agreed. For the fi rst hydrocarbon energy were taken for granted year history. Our progress in deepwater time since the climate debate began in through much of the 20th century as they exploration is a good example. Last year earnest some 20 years ago, the vast majority laid the foundation for the world’s economic we made the Tiber discovery more than of the world’s countries are aligned and progress. They will be just as fundamental 10 kilometres beneath the Gulf of Mexico. heading in the same direction. Most in the future, particularly to meet rising That’s further below sea level than the top importantly, China and the US are on board demand in emerging economies such as of Mount Everest is above it. That oil is in and politically committed to a negotiating China and India. What’s different today a geological layer, the lower tertiary, which process with a timetable and an agreed is that energy has become a complex we are only now starting to map and goal. Meanwhile, on the ground, many challenge, with strategic, economic and understand. We are also pioneering new governments are acting to set emissions environmental dimensions. technologies – such as digital imaging of targets and companies like BP are Energy security, climate change and reservoirs and advanced drilling techniques responding with investments in energy the energy needed to support economic – to access gas that is locked in dense rock effi ciency and low-carbon energy. For a development and jobs will keep energy high formations. We’re also getting more oil long time, BP has advocated a proactive on the public and political agenda for some and gas out of mature fi elds. The average approach to climate change and supported considerable time. I believe the main ways recovery rate from a reservoir is about 35%, action to curb carbon emissions. However, to meet the world’s future energy challenges but in our Prudhoe Bay development in governments also need to lead and create are through diversity, by accessing the Alaska we now expect to recover around ways of reducing emissions that are fair, widest range of energy sources; competition, 60% of the oil as a result of our enhanced consistent and effective. We want to see a by bringing out the best ways of fi nding, oil recovery processes. price put on carbon emissions, which treats producing and distributing energy; and all carbon as equal whether from the tailpipe effi ciency, by making the most of each How signifi cant is BP’s deal in Iraq? or smokestack. The best way to achieve this, unit of energy. Our deal to increase production from we believe, is through market mechanisms the Rumaila fi eld is signifi cant in several that encourage the most effi cient ways to ways. It gives us a great opportunity to work cut emissions. with the people of Iraq and our partner China National Petroleum Company to develop one 2 Revitalizing BP Tony Hayward discusses priorities, results and continuous improvement with employees at BP’s International Centre for Business and Technology, Sunbury, UK.

What is BP specifi cally doing to rollout extended to 70 sites by the end of Does BP need to operate according address climate change in its plans 2009, including all our operated refi neries to internal standards or follow for meeting the world’s future and petrochemicals plants. This means external benchmarks on energy needs? implementation is 80% complete. I’m proud sustainability-related issues? For BP, supporting the transition to that our injury rates have come down around Both, depending on the issue in question. a low-carbon economy has several 75% in the past decade. However, we still We are responsible for our operations and dimensions. We are improving energy have work to do and I deeply regret the two we are accountable for setting and observing effi ciency in BP’s own operations through deaths we suffered in operations at BP sites consistent and high standards within them. close performance monitoring as well as last year. My deep sympathies are also with Our code of conduct, for example, provides developing more effi cient fuels and the families of those 16 colleagues who died clear expectations on behaviour and lubricants. We are promoting natural gas in a helicopter accident on their way back compliance. However, on wider issues as a key part of the energy future – gas is from North Sea assignments in April 2009. where our infl uence extends into society easily the cleanest burning fossil fuel, as well We are closely following the work being more generally, we support relevant external as being effi cient, versatile and abundantly done by investigators and the helicopter standards. In particular, we support the UN available. We are also including a cost of industry to enable lessons to be learned. Global Compact, which sets out a series of carbon in investment appraisals for all new principles for corporate responsibility. My major projects to allow informed investment Does BP have the right capabilities goal is that BP should not only be a leader in in fossil fuels and encourage development among its people to meet the what we do – by achieving excellent fi nancial of the technology needed to reduce their challenges of the future? and operational results – but also in how carbon footprint. And fi nally, we are investing Our people agenda has been a key aspect of we do it, because the ‘how’ is central to in our low-carbon businesses. Since 2005 BP’s transformation over the past few years. building the trust and accountability needed we have invested around $4 billion in I think our improved performance is a good for long-term success. We have emerged Alternative Energy, with our activity focused indication that we do have the right people from 2009 in great shape and with a on advanced biofuels, our wind business in in the right places with the right skills. We renewed confi dence and determination the US, solar power, and carbon capture have developed a new leadership framework to realize our potential both in the short and storage. ensuring we value and deepen specialist and the long term. expertise. We have put in place extensive What progress has BP made on programmes to build the professional skills Speeches by Tony Hayward safety during 2009? of our people, with a particular focus on bp.com/speeches Safety is fundamental to our success as a operations. And we’re fostering a culture company and 2009 was important because of operational excellence and continuous of the progress we made in implementing improvement across all our activities. our operating management system (OMS). I am also absolutely committed to making The OMS contains rigorous and tested BP a real meritocracy that refl ects the processes for reducing risks and driving communities it works in and genuinely continuous improvement. I see it as the practises diversity and inclusion. I want this foundation for a safe, responsible and to be a place where everyone can fulfi l their high-performing BP. Having been initially potential. That is good for the individuals but introduced at eight sites in 2008, the OMS it is also good for business.

3 BP Sustainability Review 2009 BP in 2009

These highlights refl ect the ramp-up and start-up 6 July 26 October of major new projects, including the fi rst full year The Tangguh liquefi ed natural BP announces that it is to join gas project in Indonesia ships Jordan’s state-owned National of production from the Thunder Horse fi eld in the its fi rst cargo, to Gwangyang, Petroleum Company to exploit US. We increased both the Solomon availability South Korea. the onshore Risha concession, and throughputs in our refi neries while maintaining an area of about 7,000 square kilometres. strong safety performance. We also gained access to new resource opportunities in Iraq, Egypt, 3 November Indonesia, Jordan, the Gulf of Mexico and onshore BP and China National Petroleum Corporation sign a contract US, and focused our alternative energy business with Iraq’s state-owned in four key areas. South Oil Company to expand production from the super-giant Rumaila oilfi eld near Basra in southern Iraq. 15 January 14 April Former German Chancellor In the US, BP’s wind energy Gerhard Schroeder agrees to join business and Dominion the restructured TNK-BP board. announce full operation of the 13 July Midwest’s largest wind farm, BP Azerbaijan signs a 18 February in Benton County, Indiana. memorandum of understanding BP and Verenium form a with the State Oil Company of cellulosic ethanol joint venture 30 April Azerbaijan Republic to explore to deliver advanced biofuels from At Texas City, the Solomon and develop a deepwater block energy grasses, in one of the refi nery availability – which in the Azerbaijan sector of the fi rst commercial-scale facilities measures the readiness of our Caspian Sea. of its kind in the US. refi neries to refi ne crude oil into fuels – exceeds 90% this month, 2 September 18 February for the fi rst time in four years. BP announces a giant oil Former chief executive of discovery in the deepwater 27 November TNK-BP Robert Dudley is US Gulf of Mexico. The Tiber Lord Mandelson, the UK appointed to the board of well is the deepest oil and gas Secretary of State for Business, BP p.l.c., with oversight of discovery well ever drilled. Innovation and Skills, praises our activities in the Americas the cutting-edge development and Asia. and demonstration facility at BP’s Saltend site, near Hull. 21 February The joint venture between BP At Spain’s Castellón Refi nery, and DuPont will focus on the a new 20,000-barrels-per-day commercialization of advanced coker unit became operational, biofuel technology. ensuring the refi nery is well placed to take advantage of 30 November Spain’s growing diesel market. Through its joint venture with 25 June local conventional gas producer BP selects Carl-Henric Svanberg, VICO, BP signs a contract with chief executive offi cer of the the government of Indonesia to Swedish telecommunications explore and develop coalbed company Ericsson, to succeed 1 October methane resources. Peter Sutherland as chairman. BP Exploration (Angola) and Sonangol announce their 18 December 26 June third 2009 oil discovery in BP’s chemical production centre BP agrees to sell its ground fuels the southern portion of ultra- in Geel, Belgium, completes its marketing business in Greece to deepwater Block 31, Angola. implementation of the group- Hellenic Petroleum, in a strategic This is the 19th discovery wide operating management move to focus on its automotive, made by BP in Block 31. system. All our operated industrial and marine lubricants refi neries and petrochemicals businesses in the country. plants are now using this system to deliver safe, responsible and reliable operating activities.

4 BP Sustainability Review 2009 How we operate

Our systems of governance and management delivery of safe, responsible and reliable operating activity, and group standards, are designed to help us conduct our business which set out processes for other major responsibly, particularly with regard to areas such as investment decisions or environmental, social and fi nancial issues. fraud and misconduct reporting. The GCE’s senior team – known These systems refl ect our support for globally as the executive team – is supported by recognized standards on safety, human rights sub-committees to be responsible for and and security. monitor specifi c group risks. These include the group operations risk committee, the group fi nancial risk committee and the group people committee. The GCE also conducts Governance The board maintains fi ve permanent regular performance reviews with the BP operates globally according to a system of committees that are composed entirely business segments and key functions to internal control that extends from corporate of non-executives. They include the audit monitor performance and the management governance policies at board level to detailed committee, the remuneration committee of risk and to intervene if necessary. processes that are applied in our operations. and the safety, ethics and environment assurance committee (SEEAC). Monitoring People management the GCE’s identifi cation and management The board People management is based on of the group’s risks – both fi nancial and The board is responsible for the direction performance objectives through which non-fi nancial – is conducted through the and oversight of BP p.l.c. on behalf of individuals are accountable for delivering board and its committees. shareholders; it is accountable to them, specifi c elements of the group plan within SEEAC monitors non-fi nancial risk, as owners, for all aspects of BP’s business. agreed boundaries. which includes regular reviews of information The board sets the tone from the top, and Clear lines of communication exist and reports from the safety and operations has established a set of board governance for the provision of relevant information to function. It also acts for the board in working principles, which delegate management help ensure all people are clear on what is with the Independent Expert to review authority to the group chief executive expected of them and are up to date with the progress made in implementing the (GCE) within defi ned limits. These include the latest context in which to do their job. recommendations of the BP US Refi neries a requirement that the GCE will not engage Employees can raise concerns with line Independent Safety Review Panel. in any activity without regard to health, managers, human resources, legal or safety and environmental consequence. On compliance teams or through OpenTalk, 1 January 2010, the board was composed of Managing the business an independent confi dential helpline. the chairman, eight non-executive directors BP utilizes a comprehensive set of and fi ve executive directors. management systems, organizational Human rights structures, processes, standards and BP is committed to respecting human rights behaviours to conduct our business and in line with our support for the Universal deliver returns for shareholders. This Declaration of Human Rights. system of internal control is maintained Our approach refl ects human rights by the GCE. principles, as relevant, in the processes that govern our business activity. BP’s Control environment code of conduct, for example, states our BP’s code of conduct and values demonstrate commitment to fair employment and equal our commitment to integrity, ethical values employment opportunity. It also expresses and legal compliance. Additionally, our our commitment to engage in open and commitment to competence is through transparent dialogue with communities. having the right people with the right skills Additionally we also make a very explicit doing the right thing supported by our statement against the use of child labour SEEAC board site visit leadership framework. and forced or compulsory labour. SEEAC members on the The GCE has established an operating Eastern Trough Area style that sets direction for the company and Project platform in the North Sea. places continual emphasis on our priorities of How we operate – in detail safety, people and performance. Delegation bp.com/howweoperate of authority, designed to make sure employees understand what is expected of them, is integral to this control environment.

Risk management Group risks – the signifi cant risks that could affect the achievement of our objectives – have responses designed to deal with them in the most appropriate way. These include our operating management system for

5 BP Sustainability Review 2009 BP in fi gures

Five-year data, trends and interpretations

For the year ended 31 December 2005 2006 2007 2008 2009 Safety a Fatalities – employees 1 0 3 2 0 Fatalities – contractors 26 7 4 3 18 Days away from work cases – workforce 305 188 167 175 134 Days away from work case frequency b (DAWFCF) – workforce 0.110 0.085 0.075 0.080 0.069 Recordable injuries – workforce 1,471 1,067 1,060 951 665 Recordable injury frequencyb (RIF) – workforce 0.53 0.48 0.48 0.43 0.34 Hours worked – employees (million hours) 242 207 204 195 174 Hours worked – contractors (million hours) 313 236 241 245 216 Number of oil spills – loss of primary containment c 541 417 340 335 234 Volume of oil spilled (million litres) 4.4 2.2 1.0 3.4 1.2 Volume of oil unrecovered (million litres) 1.2 0.4 0.3 0.9 0.2

Environmentala d Direct carbon dioxide (CO2) (million tonnes (Mte)) 73.2 59.3 59.2 57.0 60.4 e Indirect carbon dioxide (CO2) (Mte) 13.9 10.1 10.7 9.2 9.6 Direct methane d (Mte) 0.23 0.24 0.20 0.21 0.22 d Direct greenhouse gas (GHG) emissions (MteCO2 equivalent (CO2e)) 78.0 64.4 63.5 61.4 65.0 Flaring (E&P) (thousand tonnes (kte) of hydrocarbons) 1,514 1,241 1,124 1,718 2,149 f Customer emissions (MteCO2) 570 539 521 530 554 Environmental and safety fi nes ($ million) 56.0 2.5 22.5 1.1 66.6 Environmental expenditure ($ million) 2,914 4,026 3,293 2,520 2,483

People a g Number of employees – groupi 96,200 97,000 98,100h 92,000 80,300i Number of group leadersi 606 625 624 583 492 Women in group leadershipi (%) 17 17 16 14 14 People from UK and US racial minorities in group leadershipi (%) 5 5 5 6 6 People from beyond the UK and US in group leadershipi (%) 20 20 19 19 21 OpenTalk cases 634 1,064 973 925 874 Dismissals for non-compliance and unethical behaviour j 478 642 944 765 524 Benefi ts to employees – including wages, salaries, share-based payments, benefi ts and pensions ($ million) 10,746 10,643k 11,511k 12,280 12,216 Contracts terminated or not renewed due to non-compliance or unethical behaviour 77 69 48 22 30

Performance Total hydrocarbons produced (thousand barrels of oil equivalent (mboe) per day) 4,014 3,926 3,818 3,838 3,998 Reserves replacement ratiol (%) 100 113 112 121 129 Total refi nery throughputs (thousand barrels per day (mb/d)) 2,399 2,198 2,127 2,155 2,287 Total petrochemicals production m (thousand tonnes (kte)) 14,076 14,064 14,028 12,518 12,391 Replacement cost profi tn ($ million) 20,168 22,222 18,370 25,593 13,955 Taxes to governments – comprising income taxes and o production taxes paid ($ million) 13,057 19,235 14,919 22,239 10,309 Dividends paid to shareholders ($ million) 7,359 7,686 8,106 10,342 10,483 Contribution to communities ($ million) 95.5 106.7 135.8 125.6 106.8

a Quantitative performance indicators have been chosen, with external input, to refl ect the most g Employees are defi ned as individuals who have a contract of employment with a BP group entity. important sustainability issues for BP. Data is reported here only from operations under BP h 2007 data corrected from 97,600 to 98,100. operational control, except for GHG emissions. We use consistent processes that seek to i As at 31 December. provide acceptable estimates to enable year-to-year comparisons. j Misconduct-related dismissals of employees and contractors (other than those in the retail b DAFWCF and RIF are the annual frequency per 200,000 hours worked. businesses including those for minor or immaterial incidents) fell by 32% in 2009 compared c Oil spills are defi ned as any liquid hydrocarbon release of more than or equal to one barrel with 2008. This change is driven most signifi cantly by the 43% decrease in Refi ning and (159 litres, equivalent to 42 US gallons). Marketing employee and contractor dismissals, primarily the result of improvements in US d Direct GHG emissions are the physical emissions from operations. Emissions represent all refi ning operations. consolidated entities and BP’s share of equity-accounted entities except TNK-BP. k A minor amendment has been made to the comparative fi gures for 2006 and 2007 to include e Indirect GHG emissions are a consequence of the import by operations of steam, electricity and some employee costs that had previously been incorrectly excluded. heat from third-party sources. Emissions represent all consolidated entities and BP’s share of l Combined basis of subsidiaries and equity-accounted entities, excluding acquisitions equity-accounted entities except TNK-BP. and disposals. f Estimate rebased in 2009. All years now based on BP’s total reported production of natural gas, m Petrochemicals production reported within Refi ning and Marketing. natural gas liquids and refi nery throughputs. 6 Safety Personal safety – recordable injury frequencyp Overseen by group operations risk committee (per 200,000 hours worked) Many of BP’s key safety metrics showed improvement in 2009. Our workforce BP workforce 2.5 injury rates for days away from work frequency, recordable injury frequency and American Petroleum Institute US benchmark Oil and gas producers’ global benchmark the number of oil spills were signifi cantly lower in 2009 than the previous year. 2.0 Tragically, 16 lives were lost when a third-party-operated helicopter crashed in the North Sea; and there were also two fatalities at sites operated by BP in Azerbaijan 1.5 and Alaska. BP annually benchmarks safety performance indicators against its peers. 1.0 Safety data bp.com/safetydata 0.5

05 06 07 08 09

Environmental Normalized greenhouse gas emissionsq r s Overseen by group operations risk committee (indexed to 2001) Improved utilization at our US refi neries has resulted in an improvement in our Exploration and Production 130 GHG intensity over 2008. Since 2001 refi ning and petrochemicals has shown an Refining 120 improvement in GHG intensity. The increase in exploration and production GHG Petrochemicals intensity in 2009 is mainly due to the start-up of our Tangguh liquefi ed natural gas Innovene 110 project, which also resulted in the increase in fl aring. Performance on air, water and 100 waste management are reported for each of our major operating sites where it is 90 most relevant. 80 Environmental performance 70 bp.com/environmentalperformance 60 01 02 03 04 05 06 07 08 09

People Employee satisfactiont Overseen by group people committee, global diversity council We conduct an annual employee survey to monitor employee attitudes and identify 100 areas for improvement. Our 2009 survey, completed by more than 33,000 employees, showed a clear year-on-year improvement in employee satisfaction and support 90 65% for BP’s strategic direction. The overall employee satisfaction index showed a 6% employee 80 increase to 65%. This was mainly driven by signifi cant improvements in the level of satisfaction trust and respect for BP management and the belief that BP is well managed. Areas highlighted for improvement included recognizing individuals for a job well done and 70 encouraging them to contribute ideas. 60 Our people bp.com/ourpeople 04 05 06 07 08 09

Performance Supermajor oil production Overseen by executive team, group fi nancial risk committee, resources (barrels of oil equivalent, as reported in company disclosures, indexed to 2001) commitments meeting BP Chevron 136 Volatile oil prices and a challenging economic environment were the dominating ExxonMobil Total 128 factors for 2009. Replacement cost profi t for the year totalled $14.0 billion. In 2009 Shell BP delivered solid production growth of more than 4% and, on a combined basis 120 of subsidiaries and equity-accounted entities, added 1.9 billion barrels of new oil and 112 gas to its reserve base, a replacement ratio of 129%, excluding acquisitions and divestments. 2009 was BP’s 17th consecutive year of reported reserves replacement 104 of more than 100%. 96

Financial performance 88 bp.com/annualreport 01 02 03 04 05 06 07 08 09 n Replacement cost profi t refl ects the replacement cost of supplies. The replacement cost profi t p Workforce refers to employees and contractors. q for the year is arrived at by excluding from profi t inventory holding gains and losses and their Chart based on direct GHG emissions, in tonnes of CO2 equivalents, per thousand barrels of oil associated tax effect. Inventory holding gains and losses represent the difference between the equivalent for Exploration and Production, per utilized equivalent distillation capacity (UEDC) for cost of sales calculated using the average cost to BP of supplies incurred during the year and the refi ning and per thousand tonnes for petrochemicals. cost of sales calculated on the fi rst-in fi rst-out method, including any changes in provisions where r Measures utilize the GHG emissions from businesses that account for over 85% of the group the net realizable value of inventory is lower than its cost. Inventory holding gains and losses, for total reported direct GHG emissions. It relates to oil- and gas- related activity for Exploration and this purpose, are calculated for all inventories except for those that are held as a part of a trading Production, all refi neries and all petrochemicals assets. position and certain other temporary inventory positions. BP uses this measure to assist investors s In 2009, we re-based the Exploration and Production measure to include emissions from our in assessing BP’s performance from period to period. Replacement cost profi t for the group is a natural gas liquids processing businesses. non-GAAP measure. t The People Assurance Survey, conducted in 2004 and 2006, used a census methodology and o Comparative fi gures have been restated to include amounts previously reported as production targeted the entire BP employee population. Based on the same set of questions, the Pulse Plus and manufacturing expenses amounting to $2,549 million for 2008, $1,652 million for 2007, Survey, in 2008 and 2009, adopted a sample-based approach, which achieved a representative $1,545 million for 2006 and $1,062 million for 2005, which we believe are more appropriately view of BP. classifi ed as production taxes. There was no effect on the group profi t or the group balance sheet. 7 BP Sustainability Review 2009 1 Diverse and affordable energy

How can we meet current and future energy demand sustainably?

BP believes that a diverse energy mix including fossil fuels and renewables, produced and used effi ciently, is best able to meet demand affordably at the same time as providing security of supply and addressing the issue of climate change.

Images 1 L iquefi ed petroleum gas refi nery, Egypt. 2 Seismic imaging vibrator trucks, Libya. 3 Improving performance and production through technology. 4 The Trans-Alaska Pipeline.

Energy challenges bp.com/energychallenges

2 4

3 There are three distinct Energy challenges that envisages major carbon emissions a challenges arising from the The energy market of the future will be constraints over the next two decades . shaped by the strength of demand and the However policy unfolds, substantial world’s growing demand for availability of supply, as well as by the way investment will be required to provide the energy. First, how to provide the industry and policy-makers respond energy of the future. The IEA estimates the energy reliably in a world where to the challenges of energy security, total investment needed to meet energy environmental sustainability and enabling demand will be at least $1 trillion per year b there is a mismatch between economic development. on average over two decades . where energy is produced and where it is consumed. Second, Long-term energy demand Security, sustainability and Global energy demand is set to grow in the economic development how to meet this demand in future. The International Energy Agency In balancing supply and demand, energy a way that is environmentally (IEA) anticipates growth of 40% in energy providers and policy-makers need to ensure sustainable, and avoids consumption by 2030 if current trends are that countries can count on dependable continued or 20% in a scenario where supplies. Energy security is a major strategic damaging climate change. emissions are sharply constraineda. challenge as most oil and gas resources are Third, how to meet this demand In the short term, demand has been located in a small number of countries, with in a way that is affordable and affected by the global economic downturn. 10 countries controlling 80% of global oil BP Statistical Review of World Energy June reserves and three possessing over half the enables economic development. 2009 reported that overall growth in energy world’s natural gas. So, the three challenges are demand in 2008 was only 1.4%, the Policy-makers and energy providers security, sustainability and slowest growth since 2001. At the same also need to manage the environmental time the geographical pattern of demand impacts of energy production and affordability. is shifting, with energy consumption in consumption. Fossil fuel emissions have Tony Hayward, highly industrialized economies having been contributed to a large increase in the levels Group Chief Executive overtaken by that of developing countries. of greenhouse gases in the atmosphere from China alone accounted for nearly three- pre-industrial times. Prompted by the risk quarters of the world’s growth in energy of climate change and rising temperatures, use in 2008. governments are introducing measures to limit emissions. Other environmental Long-term energy supply considerations include air quality, physical BP’s analysis indicates that plentiful energy and ecological impacts and demands on resources exist to meet growing global water and other resources. The future demand. Proved reserves offer enough oil energy mix will need to be provided to last for around 40 years and enough gas within these constraints, as directed by for around 60 years at today’s consumption governments or companies acting voluntarily. rates, in addition to abundant coal and Economic development and an substantial renewable resources such as improved quality of life rely on energy that is sunlight, wind and biomass. accessible and affordable to those who need Proved reserves of fossil fuels have it. The scale of the expected demand for risen in the past 20 years as a result of fuel, power and heat worldwide, particularly new discoveries and new technologies that in large industrializing economies such as unlock previously inaccessible oil and gas. China, India, Brazil and Russia, makes this In its World Energy Outlook 2009, a signifi cant challenge. a the IEA anticipates fossil fuels still being World Energy Outlook 2009. © OECD/IEA 2009, pages 622-623: ‘Reference Scenario, World’. dominant in 2030, even in a scenario b World Energy Outlook 2009. © OECD/IEA 2009, page 43.

Global energy demand by type Primary energy consumption by region (billion tonnes of oil equivalent) (million tonnes of oil equivalent)

Other renewables 20 South and Central America Europe and Eurasia 12,000 Biomass and waste Middle East and Africa North America Coal Asia Pacific Hydroelectricity 10,000 Nuclear energy 16 Natural gas Oil 8,000 12

6,000

8 4,000

4 2,000

1990 2007 2015 2030 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: World Energy Outlook 2009. © OECD/IEA Source: BP Statistical Review of World Energy June 2009. 2009, page 622: ‘Reference Scenario, World’; and pages 196-197; as adapted by BP. 9 Meeting the energy challenge Working at the frontiers Our technological and project management BP believes the challenges of energy can BP works at the geographical and capabilities are now being called on by be met through a broad and diverse mix of technological frontiers of the energy industry. governments and national oil companies as fuels and technologies, produced and used We have decades of experience of using they encounter new challenges in producing effi ciently; innovation in technology and cutting-edge skills and technology to their resources. Our frontier skills are being partnerships at the frontiers of the industry; undertake complex oil and gas projects applied in new contexts such as our and a clear policy framework that promotes in many of the world’s most technically businesses in Azerbaijan and our exploration market competition and addresses challenging and hostile environments, such activity in Libya. In Iraq we are partnering climate change. as the Arctic and ultra deepwater. Recent with China National Petroleum Company innovations include new technologies to and Iraq’s South Oil Company in a major BP’s diverse energy mix increase recovery from mature oil fi elds investment programme designed to nearly Our increasingly diverse energy portfolio and advanced seismic techniques that triple production from the super-giant refl ects the world’s need to source energy create highly detailed images of reservoir Rumaila fi eld. from many different types of resources, formations miles below the surface. One which vary in their local availability and of our recent fi nds, the Tiber fi eld in the cost, carbon intensity and contributions Gulf of Mexico, was made by drilling a to energy security. well 31,000 feet into the earth in water Fossil fuels will continue to play a 4,000 feet deep. major part in meeting the energy challenges, providing a continuing role for BP’s core business. Beyond traditional forms of oil and gas, we have projects to produce hard-to-reach hydrocarbons, such as tight gas locked in dense rock formations, and Canadian oil sands. Deepwater exploration We see an increasing role for natural gas as a key part of a lower-carbon future, BP has substantial deepwater assets around the world, including the Gulf of Mexico, using technology available today. BP invests Angola and Brazil (pending closure). In these world-class hydrocarbon basins, a layer in fi nding and producing gas around the of salt covers much of the potential oil and gas resource. This layer of salt distorts the world, including onshore projects in the US seismic image, preventing conventional techniques from giving a clear picture of what and Canada, offshore developments in the is underneath. Therefore, risk of unsuccessful and costly exploration and development UK and Egypt, and plants to make liquefi ed activities increases. natural gas in Trinidad & Tobago and To get a clearer view, BP has developed technologies such as wide azimuth Indonesia. Gas accounted for 37% of our towed streamer (WATS). The technique uses multiple sound sources to generate total production in 2009. richer data, thus improving the seismic image beneath the salt. This enables us to We believe renewable and alternative discover reservoirs previously obscured, so we can place wells in the best locations energy will make up an increasing share of to maximize recovery and effi ciency. the mix and we have therefore invested around $4 billion since 2005 in low-carbon technologies with the potential to become material businesses for BP. The key thrusts 4PVSDF
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WFTTFM consumption, effi ciency is going to become more important. In BP we require all our businesses to pursue energy effi ciency and we also help our customers achieve greater effi ciency, for example through the use of advanced fuels such as BP Ultimate and lubricants such as Castrol’s Edge that improve fuel economy.

Low-carbon energy Read about our alternative energy business on pages 16-19.

How WATS works A standard 3D seismic vessel with receivers incorporated into towed streamers collects the data, using sound sources mounted from boats positioned to one side, at the front and tail of the streamers.

10 Policy priorities Energy pathways A supportive policy framework is essential Our approach to investment, technology and if the industry is to develop an energy mix policy is informed by looking at the future in capable of meeting the challenges. In terms of pathways to achieving the optimal particular, we believe competitive markets energy mix. In looking at these pathways we offer the best framework for fi nding, seek to identify forms of energy that can be producing and distributing energy, by effi cient, cost effective and material in the encouraging effi ciency and innovation. short, medium and long term at the same More competition could be key to time as limiting greenhouse gas emissions unlocking the energy resources that the and providing energy security. world needs. Opening up oil and gas fi elds to In transport, we believe that making a range of potential competitors encourages car engines much more effi cient, using the most effi cient solutions, often involving hybrid technologies and fuelling vehicles partnerships that provide new combinations with advanced biofuels, offers the quickest of skills, as our joint venture in Iraq is showing. and most effective pathway to a secure, The climate change challenge lower-carbon future in the short to medium demands a clear, predictable way forward, term. Electric vehicles will have a part to with policy-makers creating a supportive play, though currently they rely on fossil- environment for innovation. BP has been fuel-generated power and are limited by Enhanced oil recovery – boosting calling for action on this issue for over a battery costs and technology. yields from ageing fi elds decade, preferably by creating a price for In power and heat, we believe an carbon through market mechanisms as well effective pathway would create a level Some of our most important technology as promoting effi ciency and new investment playing fi eld for all mature technologies and programmes are those that help us extract in low-carbon technologies. fuels – including coal, gas, oil and nuclear – more oil and gas from mature fi elds – known In these areas, policy action is an as well as providing transitional support as enhanced oil recovery (EOR). This is urgent priority. Without a credible and for emerging low-carbon energy. Progress signifi cant because increasing recovery rates enduring framework, it will be diffi cult for can also be made through the use of smart over a range of large projects by a few per industry to invest in maintaining and grids and improved delivery networks, along cent can add millions of barrels to total enhancing our energy supply. with greater end-use energy effi ciency from yields. One recent breakthrough came about much more effi cient buildings and high- because we challenged the conventional performance equipment and insulation. wisdom that using water with low salt levels Our evolving business therefore – as opposed to high ones – to sweep refl ects our view that the overall pathway to reservoirs would damage rocks and impede a lower-carbon future will be characterised recovery. In fact, our trial at the Endicott by an inclusive energy mix; open energy fi elds in Alaska proved the opposite was true as low salinity waterfl ooding using our markets in which carbon is priced; effi ciency; TM and the targeted application of technology. LoSal EOR process increased recovery by 20%. We also use a technology known as Bright WaterTM a, which uses tiny particles that expand like popcorn to block well-swept areas of a reservoir and divert water to parts where there is more oil to be recovered. a Bright Water is a trademark of Nalco Company.

A quiet revolution – the strategic role of gas

Natural gas is strategically important because it is a substantial resource as well as being the fossil fuel that releases the least carbon dioxide. When burned to create electricity, it produces about half the emissions caused by conventional coal generation, per kilowatt hour. Other advantages of gas-fi red power are the relatively low building costs of plants and the ease with which their output can be fl exed up and down, for example to complement wind-generated power. Recent highlights of our gas business include the start-up of a new gas platform off Trinidad & Tobago, producing up to 600 million standard cubic feet of gas per day and the departure of the fi rst cargo of liquefi ed natural gas from BP’s Tangguh project in Indonesia, bound for South Korea. Technological developments for producing unconventional gas in rock formations – whose geology makes production particularly diffi cult – have made more gas available. Advanced techniques in hydraulic fracturing and horizontal drilling, as opposed to traditional vertical drilling, have brought these resources within commercial reach. For instance, one fi eld where these techniques were pioneered – the Barnett Shale in Texas – has almost singlehandedly turned around the production of natural gas in the US. Perfecting these technologies in an integrated manner has led to other shale plays including BP interests in Oklahoma, Arkansas and Texas. This can also be signifi cant for the rest of the world as these new technologies have only just begun to be applied to unconventional gas resources elsewhere. BP Sustainability Review 2009 Diverse and affordable energy

Canadian oil sands BP group chief executive Tony Hayward discusses the main issues raised by the group’s interests in the Canadian oil sands.

BP’s interests in oil sands projects include a 50% share in the Sunrise oil sands fi eld in Alberta, Canada, operated by Husky Energy, which has estimated resources in excess of three billion barrels. BP’s oil sands portfolio also includes interests in the Kirby lease and the Terre de Grace block. Oil sands projects have raised BP estimates that, assuming a rapid How is the oil excavated? concerns because of issues including expansion in biofuels, there will only be Is opencast mining used? their greenhouse gas (GHG) emissions, gradual growth in demand for oil – primarily BP is pursuing oil sands resources that can their impacts on land, water and local from developing countries. The key issue be developed through drilling, rather than communities and their commercial viability. will be replacing oil supply from the decline opencast mining. We’ll be using in situ Sunrise is being managed in a manner of today’s mature production as well as steam assisted gravity drainage (SAGD), consistent with BP’s environmental meeting new demand. We believe that the a technology that plays to our strengths in requirements for new projects, which require oil industry will be required to bring 50 to reservoir management and drilling, as well a thorough review of the environmental 60 million barrels of oil per day of new as providing scope to apply our capabilities issues and opportunities associated with any production on stream by 2030 – double in technology to increase effi ciency. investment. Furthermore, commencing in the level of output from the entire Middle 2011, BP Canada will be publishing an annual East today. Aren’t the GHGs for this production sustainability report. Oil sands also represent a signifi cant method two to three times higher and stable source of oil supply to enhance than for other crude oils? Why is BP developing the Canadian energy security and diversity, particularly We believe that, to compare projects on oil sands? for North America. a consistent basis, one should look at the BP has a clear strategy to invest to grow GHG emissions for the full life cycle of exploration and production profi tably through Has BP properly examined the the fuel product. Recent ‘well-to-wheels’ a portfolio of leadership positions in the commercial risks of oil sands studiesc have compared the GHG emissions world’s most prolifi c hydrocarbon basins. projects? for a range of fuel products, from production Canada’s oil sands more than qualify, being All of BP’s projects have to be evaluated through to consumption. They found the life second only to Saudi Arabia in terms of against various assumptions of oil price cycle emissions for oil sands-based products proven reserves. BP creates value through and changes in the regulatory and fi scal to be 5-15% higher than those from the the application of technology and capability environments in the countries in which BP average crude oils consumed in the US. to drive performance and operating is operating. New BP investments with We expect that the in situ diluent bitumen effi ciency. Also, through BP’s Midwest US material carbon emissions are required to from Sunrise will be in this range. refi neries there is a distinctive opportunity include a cost of carbon that can realistically to create a balanced portfolio of upstream be expected over the life of the project, But aren’t GHG emissions diffi cult production and downstream conversion, currently $40 per tonne of CO2 for projects to reduce in oil sands projects? which will allow BP to participate in the in industrialized countries. This acts as an In fact, oil sands projects vary a lot in their margin across the whole value chain. incentive to promote energy effi ciency in the emissions profi les and there is much scope engineering design as well as ensuring that for improvement. Some producers upgrade Does the world need oil from the projects will remain commercially robust as the bitumen before refi ning it, which oil sands? carbon is priced either through regulation involves two major processing steps and the We estimate that demand for energy will rise or legislation. emissions associated with them. Instead of signifi cantly in the future. The International Current estimates indicate that the Energy Agency has indicated that, even if average break-even price for Canadian oil GHG emissions are tightly constrained, fossil sands projects range somewhere between fuels will still be the dominant source of $45 and $70 per barrel.b BP’s current view of a World Energy Outlook 2009. ©OECD/IEA 2009, pages 622-623: energy in 2030 and that the world will require oil prices assumes a range of $60 to $90 per ‘Reference Scenario, World’. b Wood Mackenzie, ‘The cost of Canada’s oil sands: the calm after a wide range of hydrocarbons within a barrel out to 2015 and requires all projects to the storm?’, 2009. balanced and sustainable energy mix.a We offer an acceptable rate of return at $60 per c Jacobs Consultancy, ‘Life Cycle Assessment Comparison for believe there is enough supply to meet that barrel. All investments in Canadian oil sands North America and Imported Crude’, 2009; IHS Cambridge Energy Research Associates, ‘Growth in the Canadian Oil demand affordably, through conventional and will be required to meet these basic criteria. Sands: Finding the New Balance’, 2009; Canadian Association unconventional resources such as oil sands. of Petroleum Producers, 2009.

12 upgrading, for BP projects we will be looking required infrastructure. That said, BP is already reclaimed areas used in the appraisal at different approaches, including using a participating in industry-wide initiatives to stages of the project – and has received single processing method in which the progress CCS – we are already deploying certifi cations of the reclamation as required bitumen is blended with a diluent such as CCS at a gas production project in Algeria under Alberta law. condensate, to reduce its viscosity before – and the layout of the fi rst phase of Sunrise piping it to BP’s Midwest refi neries. We’re has been designed in such a way that will Aren’t you riding roughshod over confi dent that we can cut emissions further allow for CCS retrofi t in the future. the interests of local people? still through new applications of technology. We have a record of conducting operations In the past decade, the best-in-class steam Doesn’t oil sands production involve worldwide in a way that benefi ts local oil ratio – the amount of steam required to a huge volume of water? communities – from Indonesia to Trinidad produce each barrel of oil – has been SAGD operations do require a lot of water. and Angola to Azerbaijan. We will be reduced from six to nearly two. The Sunrise project is being designed so following the same principles in Alberta, Together with our joint venture that more than 90% of the water required where consultation is also a matter of partners, we continue to develop and test for steam generation will be continuously regulation. Husky has been consulting improvements in SAGD technology, and we recycled. Water that cannot be recycled will aboriginal communities and other local will incorporate technologies and operating be disposed of in deep underground aquifers people as far as 100 kilometres away, since practices that will improve the project’s for permanent storage, and replaced by the early project planning stages through energy use and GHG emissions. BP has water from non-potable underground face-to-face meetings, community-based particular strengths in improving large- aquifers. It is planned that no water from advisory committees and other means. scale reservoir performance, in reservoir the Athabasca River or its tributaries will be Bilateral agreements, which outline how management and wells technologies, used for operations nor will any process Husky and aboriginal communities involved and it is these skills that we will bring waste water be discharged into it. in the project work together, have been put to our projects. Examples where our in place and are periodically reviewed. As the technological expertise could be applied Won’t this cause long-term damage project proceeds, Husky will be working to include 4D seismic interpretation to to the landscape? facilitate business and economic benefi ts support steam chamber management In situ drilling, unlike opencast mining, does for local and aboriginal groups. and down-hole injection control to improve not create a large physical footprint or involve steam placement. tailings ponds of liquid residues. Steps will be taken to minimize impacts on the ecosystem, BP and oil sands Are you planning to use carbon animal corridors and sensitive areas. bp.com/oilsands capture and storage (CCS)? Reclamation work will be undertaken as the Specifi c observation from Ernst & Young We recognize that CCS could be a longer- project progresses in line with the Alberta BP has acknowledged stakeholder concerns about the oil term mitigation opportunity at Sunrise and government’s requirements to return the sands projects in Canada. These include energy intensity, other in situ projects, but the economics are affected area to a land capability equivalent to impacts on water, land rights, biodiversity and production costs. We discussed and saw evidence that BP has entered currently challenging and there is a lack of its condition before development. Husky has into dialogue in an effort to be responsive, including correspondence with institutional investors and NGOs.

Steam assisted gravity drainage Full life cycle GHG emissions (gCO2e/MJ gasoline, by different crude oil source (under Eighty per cent of oil sands resources are at depths too deep to be mined so they current production techniques) for fuel consumed in the US) have to be extracted using technologies such as steam assisted gravity drainage. A horizontal well is located near the bottom of the reservoir. Steam, produced using Saudi natural gas, is injected into a second horizontal well located approximately fi ve metres above and parallel to the producer. The steam heats the bitumen allowing it to fl ow Venezuela along the condensed steam to the lower well for production. Iraq Producing well Steam injection well

Mexico

US Gulf Coast

Canadian oil sands (in situ – diluent bitumen)*

Nigeria

Canadian oil sands 100 – 500m Bitumen Steam (mining – upgraded bitumen)

California Thermal

Canadian oil sands (in situ – upgraded bitumen)

0 20 40 60 80 100 120 GHG emissions from gasoline consumption GHG emissions from production and refining 800m * Sunrise proposal: SAGD bitumen mixed with diluent Source: Canadian Association of Petroleum Producers, based on Jacobs Consultancy, ‘Life Cycle Assessment Comparison for North America and Imported Crudes’, June 2009

13 BP Sustainability Review 2009 BP believes both governments and industry Transitional incentives Diverse and affordable energy need to play their parts in achieving such a While carbon pricing systems develop, goal: governments by setting an appropriate other transitional incentives, in the form policy framework and companies by of government support and regulation, investing within that framework to deliver are sometimes required to stimulate the a sustainable energy mix. The scale of necessary investment in energy effi ciency, Climate change change required can only be achieved innovation and the deployment of emerging through policy-makers acting to provide low-carbon fuels and power. Climate change is a major a clear, stable framework for investment. global issue – one which Climate change: Copenhagen Carbon pricing and beyond justifi es precautionary action In particular, we support a price for carbon, Public debate and governmental policy in pursuit of a long-term goal on the basis that there will continue to be development concerning climate change along with a programme of great uncertainty in planning and making intensifi ed in the run-up to the UN summit investments in low-carbon solutions, until in Copenhagen in December 2009. At the action to deliver it. consumers and producers recognize and conference, although no new legally binding pay a carbon price. We believe this price global treaty was agreed, we believe should treat all carbon equally, whether important progress was made. The it comes out of a smokestack or a tailpipe. participants, including the US and China, We believe carbon pricing will make noted an accord that stated that deep energy conservation more attractive and cuts in emissions are required to hold the alternative energy more cost competitive. increase in global temperature below 2°C It will allow informed investment in fossil and committed developed countries to fuels while encouraging investment in provide signifi cant additional funding for the technology necessary to reduce the measures to help address climate change carbon they produce. In our view, carbon in developing countries. It also created pricing is most effective when achieved a framework for developed countries to through ‘cap-and-trade’ systems in which commit to quantifi ed emissions targets, emissions are capped and participants and for developing countries to identify trade emissions allowances. mitigating actions. By the end of January 2010, 55 countries had submitted pledges to cut or limit greenhouse gas emissions, or to undertake mitigating actions. According to the United Nations Framework Convention on Climate Change, these countries account for 78% of global emissions from energy use. 1 2 2 Consistent with this, several countries in which BP operates – including the US, the UK and China – have introduced measures to improve energy effi ciency or cut emissions. The EU, for example, has a ‘20-20-20’ target for 2020 – to cut greenhouse gas emissions by 20%, to increase energy effi ciency by 20% and to increase the share of renewables in the energy mix to 20%. As well as being active in solar energy and biofuels in Europe, BP has many European operations that are covered by the EU’s Emissions Trading 33 Scheme, under which emissions from heavy industry are capped and participants trade emissions allowances. 4 4 BP’s programme of action Assessing carbon costs We are acting to address the issue of climate We build carbon pricing into our change by making our operations more business planning. energy effi cient and by creating products We factor a carbon cost into our investment that help lower customers’ carbon footprints. appraisals and the engineering design of new We play our part in the debate over future projects. New BP investments with material priorities by speaking out in favour of more carbon emissions are required to include robust policies that would provide a stable a cost of carbon that can realistically be framework for long-term investment in expected over the life of the project,

a sustainable energy mix. currently $40 per tonne of CO2 for projects in industrialized countries. This is used as a 1 Effi cient operations basis for assessing the economic value of We maintain our decade-long efforts to the investment, and for optimizing the way manage greenhouse gas emissions from the project is engineered. This helps to keep our operations. our investments competitive not only in We seek to increase energy effi ciency today’s world but in a future where carbon across BP by requiring our operations to has a more robust price. incorporate energy use in their business 5 5 plans and implement technologies and Advocacy and outreach systems to improve it. We participate in the policy debate, calling Each year since 2002, we have for policy action to put a price on carbon and estimated the reduction in our reported stimulate renewable and low-carbon energy. annual emissions due to effi ciency projects. We support policy action to address climate These projects include reductions in fl aring change at international and national levels. and venting, as well as energy effi ciency For example, we signed the Copenhagen projects, such as process optimization and Communiqué, a declaration by businesses waste heat recovery. By the end of 2009, calling for “a long term ambitious, robust the running total of these reductions was and equitable global deal on climate change.” 7.9 million tonnes. We take steps to make customers aware 2 of energy issues and ways they can use Effi cient fuels and lubricants energy more effi ciently. Our website, for We work in partnership with vehicle and example, features the BP Energy Lab, equipment manufacturers to improve the which includes facts on energy use, a overall effi ciency of use of our fuel and quiz, a children’s game and a calculator lubricant products. that customers can use to estimate their We strive to produce our hydrocarbons energy use and carbon footprint. as effi ciently as possible, and work in partnership with vehicle and equipment 6 Research programmes manufacturers to improve the effi ciency of We fund and participate in a wide variety of fuels and lubricants. We have a relationship research programmes on climate change and with Ford that covers several areas. low-carbon options for the future. For example, Ford’s ECOnetic models – BP-supported research includes the Carbon including the Fiesta, Focus and Mondeo – Mitigation Initiative at Princeton University, are engineered with specially formulated, which developed the well-known wedges advanced Castrol lubricants, which improve approach to quantify potential emissions fuel effi ciency and therefore reduce carbon reductions from different technologies. Images dioxide emissions. We also work with the Chinese Academy 1 Fowler Ridge wind farm, Indiana, US. of Sciences on the Clean Energy – Facing 2 International summit. 3 Low-carbon energy the Future programme and are a founding 3 Mumbai, India. 4 Working together on energy policy. We are building a focused portfolio of member of the interdisciplinary Energy 5 B P Ultimate fuel available at a BP Connect material renewable and low-carbon Initiative at MIT. We support a number service station. energy businesses. of non-governmental, public interest policy We are focusing our low-carbon energy research organizations and think tanks portfolio in four key areas, based on their including the World Resources Institute, potential to achieve scale and become major the Centre for Clean Air Policy and the contributors to the performance of the BP Forum for the Future. group and to greenhouse gas mitigation. Our biofuels business is concentrating on BP and climate change advanced, sustainable options that offer bp.com/climatechange signifi cant life cycle greenhouse gas savings. Our wind power business has substantial growth potential, particularly in the US. We market solar photovoltaic systems to consumers and companies worldwide. We are also developing plans for pioneering power plants with carbon capture and storage.

15 BP Sustainability Review 2009 1 Low-carbon energy

What is BP doing to provide low-carbon energy?

We aim to play a leading role in the growing low-carbon energy sector, developing large-scale businesses that compete with traditional forms of power and fuel. Our focus is on four key businesses: biofuels, wind, solar and carbon capture and storage. 23

Images 1 B P solar panels on roof of Wal-Mart, Glendora, California, US. 2 Carbon capture and storage, In Salah, Algeria. 3 C edar Creek I wind farm, Colorado, US. 4 T ropical BioEnergia biofuels joint venture, Brazil.

Low-carbon energy bp.com/lowcarbonenergy

4X We have invested around $4 billion in our Our US gross wind capacity includes Our solar module sales were 203MW in low-carbon businesses since 2005 and are interests in operating wind farms in Fowler 2009, primarily in markets such as Germany on track with our commitment we made Ridge, Indiana, the largest wind farm in and the US where uptake is encouraged by then to invest $8 billion in alternative energy the US Midwest (600MW); Cedar Creek I, policy-makers. We are also participating in by 2015. This represents a signifi cant level of Colorado (300MW); and two projects in emerging solar markets such as China, Italy investment to date compared with our peers. Texas (more than 200MW). We have and several countries in the Middle East. BP Alternative Energy’s CEO, Katrina also moved into full commercial operation We can provide customers with Landis, said: “We’ve reviewed more than of phase one of the Titan facility in South complete solutions including system design, 20 technologies, some of which may well Dakota, which has the potential to grow to procurement, development and fi nancing, become signifi cant in the future. At present, more than 5,000MW and be the biggest as well as monitoring, operations and however, we anticipate that our focus on four wind farm worldwide. maintenance, using third-party providers key areas represents the best way forward in where appropriate. In the US, for example, terms of developing a viable, scalable, and Solar BP Solar Home Solutions® systems are sustainable alternative energy source.” available through Home Depot household Solar power has immense potential. Many of our low-carbon businesses supply stores. Our customers range from According to the International Energy involve partnerships with specialist individual roof owners through to utility Agency, installed solar photovoltaic capacity companies whose technical expertise scale investors. increased from 8 gigawatts (GW) in 2007 complements our reach and capabilities We have an increasing number to 13GW in 2008. This is projected to rise in areas such as project management. of large-scale projects for commercial to 200GW by 2030, with two-thirds of it customers, such as a 32MW installation at installed in OECD countries.a Brookhaven National Laboratory on Long Wind BP has been providing solar power Island, US, and a rooftop array at Munich Our wind power business enables us to for more than 35 years and shipped its airport, developed with Lufthansa Airlines. compete in a fast growing, increasingly 10 millionth module in 2009. The business competitive market. Wind energy is growing is constantly evolving and today our focus Innovation at around 30% each year and wind farms is on increasing our competitiveness and Innovation is also necessary for solar power accounted for 36% of all new power our share in residential, commercial and to become cost competitive with fossil generating capacity installed in the US the emerging utility customer markets. fuels. BP’s newly developed process for in 2009. We have been rationalizing our growing silicon, Mono2TM, has been shown BP is focusing its wind power manufacturing activities, by shifting to to convert 18% of sunlight energy into business onshore in the US where both low-cost joint venture and supply partners power – a relatively high effi ciency level the physical climate and public policy favour to reduce unit costs and improve compared with many mono crystalline cells. wind technology. Since 2005 we have built competitiveness. Manufacturing and module We also support a range of research and our wind power business in the US from assembly have been phased out in the US development projects, including an zero to a gross generating capacity of more and Spain. agreement with SolarEdge to explore than 1,200 megawatts (MW), enough to The long-term nature of BP’s solar a solar harvesting system that uses provide electricity for a city the size of business provides customers with the electronics to maximize energy generation. Washington DC. We have a further assurance that they can be supported

1,000MW of capacity in an advanced through the life of the system, typically a World Energy Outlook 2009. ©OECD/IEA 2009, page 101. stage of development. around 25 years.

Gross wind capacity Investment in alternative energy (megawatts)

1,500 Growth in wind Our gross operational 1,237MW wind capacity Around in 2009 increased to 1,237MW, 1,250 predominantly in the US, where there is $4 an attractive growth environment for wind power generation. billion 1,000 invested to date

750

Since 2005, BP has invested around 500 $1 billion per year in low-carbon energy. This brings our total investment since launching Alternative Energy in 2005 to around $4 billion – well on our way 250 to reaching our commitment to invest $8 billion by 2015.

05 06 07 08 09

17 Carbon capture and storage, Our portfolio Biofuels and hydrogen power We have three of the world’s most advanced Biofuels is a natural sector for BP. Along CCS projects in our portfolio – two of which We have been playing a leading role in with our understanding of the transport involve plans to use CCS to create hydrogen, carbon capture and storage (CCS), which fuels business, conversion technologies from which low-carbon electricity can be can capture most of the CO emissions and delivering projects at scale, we have 2 generated. At our joint-venture project at the from a power plant or major industrial partnered with organizations with bioscience In Salah gas fi eld in Algeria, we have been project by capturing the CO and storing and agricultural expertise. As a result we are 2 capturing, injecting and storing up to one it underground. This technology can also able to provide a major new source of lower- million tonnes of CO per year since 2004. be used in conjunction with plants that 2 carbon fuel. In Abu Dhabi, we are working with manufacture hydrogen from fossil fuel BP is working to produce biofuels Masdar – the Abu Dhabi Future Energy feedstock to provide industrial scale, that are low cost, low carbon, sustainable Company – on plans for a 400MW natural- low-carbon electricity. and scalable. Biofuels vary in their impacts gas-based hydrogen power plant designed to CCS is recognized for its potential to on the local environment and their effect capture up to 1.7 million tonnes of CO each de-carbonize economies at scale, featuring, 2 on greenhouse gas levels. We focus on year, injecting it into a producing oilfi eld to for example, in all of the International Energy feedstocks that are not needed for food and maintain pressure and improve the proportion Agency’s carbon abatement scenarios. It can that create biofuels with net greenhouse of oil reserves that can be recovered. be applied at power plants, upstream energy gas emissions that are signifi cantly lower In California, we are working with projects and industrial plants such as cement than those of conventional fuels. The most Rio Tinto on plans for a 250MW power plant and steel factories. sustainable have emissions that are only that is being designed to use petroleum Scaling up CCS presents challenges around a tenth of conventional gasoline or coke supplemented with coal, as needed, including cost, engineering and regulation. diesel. Producing biofuels also reduces to create hydrogen and CO . The hydrogen We are addressing these challenges in our 2 dependence on imported oil and provides gas – around two to four million tonnes projects, while our wider experience of CCS jobs and markets for farming communities. per year – would be used to fuel a power includes membership of the CO Capture We have committed more than 2 station and the CO would be transported Project in which companies and government 2 $1.5 billion to biofuels operations and by pipeline to nearby oil reservoirs and be departments are examining how to lower research since 2006. We use feedstocks used for enhanced oil recovery. costs and assure the safety of CCS. with high yields and high energy content, converting them to fuels through a sugar fermentation process that can also create co-products used for purposes such as Carbon capture and storage electricity generation, fertilizer and Carbon capture Enhanced oil recovery animal feed. Hydrogen power station Gasification Sugar cane ethanol Low-carbon We believe sugar cane ethanol is the most How it works electricity CCS involves capturing attractive biofuel widely available today, with

CO2 before or after a net greenhouse gas emissions that are up to H fossil fuel is burned, ² 90% lower than conventional gasoline. For CO and storing it more than ² this reason we have taken a 50% stake in a one kilometre down in Oil a suitable geological Gas 2km Brazil sugar cane ethanol venture, Tropical storage formation. BioEnergia S.A. Tropical employs a closed loop system – in which by-products are used to generate electricity and to serve as fertilizer – thus further reducing its greenhouse gas emissions.

Understanding what’s underground via satellite

Satellites high above the earth’s surface are improving our understanding of what

happens to CO2 stored deep below it, thanks to a novel application by BP and its technology partners. Permanent scatterer interferometry, originally developed by the defence industry, uses phase changes occurring between a series of radar images to identify

tiny surface movements. These provide a guide to how CO2 behaves deep below ground. Used in association with monitoring wells, it provides a cost-effective way to show how effectively the gas is being stored. The application was developed by BP staff in Algeria, the UK and the US, working with leading academics in the US and Italy and contractors in Canada and

Japan to adapt the technology. It has already been used to track CO2 at the In Salah

site in the Algerian Sahara where we are storing up to one million tonnes of CO2 per year. Cellulosic ethanol Wheat ethanol to improve contractual arrangements for The biofuels sector is on the verge of a major In Europe one of the most sustainable sustainable biofuel supply chain practices, breakthrough in which fuels will be made ways to create ethanol is from excess including verifi cation. from grasses and other fi brous or cellulosic wheat of the grade used for animal feed. crops that are not used for food but provide This produces a concentrated form of feed Researching future biofuels high volumes of energy from small areas of as well as biofuel. We will be using locally- We invest in biofuels research because land. Through our Vercipia venture in Florida, sourced feed-grade wheat at a plant in Hull, we believe there is scope for many more we are planning to build one of the fi rst UK, which we are building with our partners advanced, sustainable products. We are commercial scale cellulosic ethanol plants DuPont and British Sugar, an ABF subsidiary. collaborating with Martek Biosciences in the US. Corporation on a potential step-change Blending biofuels responsibly technology using microbes to create Biobutanol As well as our biofuel production businesses biodiesel through sugar fermentation, As well as using high-energy biomass we also blend bio-components produced by as an alternative to conventional methods resources, another way for biofuels to other operators into fuel for markets where that use vegetable oils. In the US, we are progress is through advances in processes policies require that gasoline and diesel sold investing $500 million over 10 years into and the chemistry of the fuel molecules into to motorists include a proportion of biofuel. the Energy Biosciences Institute (EBI), which the raw materials are converted. We seek biofuel suppliers who are the world’s fi rst research centre solely Biobutanol represents a step forward from best able to meet a range of general and dedicated to applying biotechnology to ethanol as it provides greater fuel economy feedstock-specifi c sustainability legal energy. The EBI is a collaboration between and can be blended into fuel in higher requirements. In jurisdictions where legal BP, the Lawrence Berkeley National concentrations, thereby providing greater standards for sustainability are being Laboratory and the Universities of greenhouse gas reductions. At BP, we are established and implemented, we will California and Illinois. developing biobutanol with our partners seek to require the inclusion of contractual DuPont, building a technology demonstration sustainability clauses. BP provides training plant in Hull, UK, scheduled to begin on sustainability purchase practices and operating in 2010. actively participates in industry discussions

Biofuels and sustainability Biofuels process

Sustainable Advanced Advanced fuel Biofuels have raised several sustainability concerns at local and global levels. Here is how feedstock conversion molecules we see some of the key issues.

Sugar Bioethanol The food chain cane We believe the world currently has suffi cient land to meet demand for food, animal feed and biofuels. However, to maintain this, more biofuel production needs to come from surplus or non-food crops. These include perennial energy grasses that achieve high Sugar yields and so require less land to produce each gallon of fuel than crops such as corn. Grains fermentation Biobutanol We have a business developing a plant to create such fuels in the US.

Greenhouse gas levels Energy Biodiesel As well as absorbing carbon as they grow, biofuels emit carbon when burned and lead to grasses other emissions through their processing and cultivation, for example through the carbon needed to make fertilizer and the carbon released when land is ploughed. Planting biofuel crops can also cause other farming to move elsewhere, triggering more emissions. The sustainable feedstock is fermented using advanced Each biofuel operation therefore has its own greenhouse gas balance and these vary conversion processes to create low-carbon fuel molecules. considerably. Some conventional biofuels have poor balances, for example when intensive farming methods are used, while advanced biofuels can have very positive effects. We estimate that sugarcane produced in our Brazilian business emits up to 90% less CO2 than gasoline, partly as a result of using co-products of the cane to power the refi nery and as fertilizer.

Tropical forests and ecosystems As the UN’s Food and Agriculture Organization has shown, the main causes of deforestation are not biofuels but subsistence farming and activities such as large-scale ranching. However, to help ensure biofuel production is not ecologically damaging, we support proposals such as those put forward in Brazil under which biofuel cultivation is restricted to certain areas and ecosystems such as the Amazon rainforest are off-limits.

Getting biofuels right bp.com/gettingbiofuelsright

19 BP Sustainability Review 2009 1 Safe and responsible energy

What is BP doing to ensure its operations are safe, reliable and compliant?

Our goal of ‘no accidents, no harm to people and no damage to the environment’ is fundamental to BP’s activities. We work to achieve this through consistent management 2 3 processes, ongoing training programmes, rigorous risk management and a culture of continuous improvement. Images 1 O perations at Tangguh, Indonesia. 2 Photographing fl ora for identifi cation, BTC pipeline, Turkey. 3 Drill site, Oklahoma, US. 4 Safety in practice at Tangguh, Indonesia.

BP and safety bp.com/safety

Managing our impact bp.com/environmentalmanagement

4 North Sea helicopter accident Safety, people and performance Systematic approach to safe and The accident in the North Sea occurred Safety, people and performance are BP’s on 1 April when a Super Puma helicopter, environmentally responsible top priorities. operated by Bond Offshore Helicopters operations Our commitment to safe and reliable bringing BP contractors back from the Miller operations starts with the group chief oilfi eld to Aberdeen, came down in the sea BP’s operating management system executive and leadership: a commitment about 35 miles north east of Peterhead. All (OMS) provides a single framework for all that fi lters down through the organization 14 passengers and two crew lost their lives. BP operations to follow, covering all areas and is regularly communicated to all staff. This accident had a profound impact from process safety, to personal health, All fatalities, other major incidents on BP’s and Bond’s workforces, as well as to environmental performance. and many that had the potential to become the wider UK offshore oil and gas industry Providing an integrated and consistent major incidents are discussed by the group and related aviation services. In the way of working, the OMS helps ensure that operations risk committee, chaired by the aftermath, BP reached out to the wider a rigorous approach to safe operations group chief executive. We undertake community, offering support to families and continues to be taken. Its principles and incident investigations with the aim of ensuring that counsellors were available for processes are designed to simplify the learning as much as possible and taking all our Aberdeen-based staff. organization, improve productivity, enable action to prevent recurrence. BP immediately suspended passenger consistent execution and focus BP on We constantly seek to improve our operations with Bond and carried out a performance. personal, process and transportation safety review of Bond’s management systems, By the end of 2009, the OMS had performance through the use of established conducted by an international team been rolled out to 70 operations across the processes, ongoing capability development comprised of experts within and external to business, including all our operated refi neries and knowledge sharing with other BP. The UK Air Accident Investigation Branch and petrochemicals plants. organizations. (AAIB) of the Department of Transport, as of March 2010, had not yet issued a fi nal report Personal safety and health OMS certainly helps us but initial fi ndings were that the accident had Creating a safe and healthy working been caused by a failure in the helicopter’s prioritize better. And it brings environment is essential for our success. gearbox. Following the AAIB investigation, Since 1999, injury rates and spills have much more consistency in the helicopter manufacturer, Eurocopter, reduced by approximately 75%. language, making it easier and the European Aviation Safety Agency In 2009, however, there were two issued directives requiring more frequent to collaborate and share fatalities at sites operated by BP: one, when inspections and certain modifi cations of a rig worker was lost overboard during drilling information. There’s no doubt such gearboxes. BP resumed operations operations in Azerbaijan and a second, in that our assets are working with the company in May 2009. a crush injury on a well pad in Alaska, and together more effectively 16 fatalities resulting from the loss of a third-party-operated helicopter en route from thanks to OMS. a BP-operated platform in the North Sea. Damian Stead, We deeply regret the loss of these lives. Operations support lead

Workforce fatalities OMS implementation

Aviation related 35 Development phase Road related 10-year fatalities Pilot phase Non-transport related This graph, including Completed implementation employee and contractor Planned implementation 30 fatalities, demonstrates the impact of signifi cant incidents.

25 80% operations in scope implemented

20

15

10

5

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2007 2008 2009 2010

21 Process safety BP US Refi neries Independent Safety Review Panel Process safety involves applying good design principles, engineering and operating In 2007, L Duane Wilson, a member of the BP US Refi neries Independent Safety Review Panel and maintenance practices to manage our (Panel), was appointed as the Independent Expert to monitor progress in implementing the Panel’s operations safely. recommendations. Mr Wilson regularly briefs SEEAC, and his third annual report was submitted in We integrate process safety March 2010. requirements within our group-wide operating management system and monitor Comment and summary from Sir William Castell, Chairman of SEEAC the need to incorporate any future process The board accepted Mr Wilson’s report and welcomed his continued insights, analysis and challenges. It is Mr Wilson’s view that the board, executive and refi ning management all continue to demonstrate safety standards within our HSE & Operations strong commitment to delivering the Panel’s recommendations and that substantial resources have been Integrity Report. This report, the key source deployed in this regard. Mr Wilson, whose focus is BP’s fi ve US refi neries, identifi ed in his annual report of management information relating to safety areas of notable progress as well as matters requiring additional attention. These are summarized below: and operations in BP, is prepared quarterly for the executive-level group operations Process Safety Leadership (Tone at the Top) – Both the board and management continued to reinforce risk committee. important messages regarding process safety and devoted signifi cant time to process safety Our safety and operations audit improvement efforts. team assesses our businesses against BP’s relevant standards and requirements. A full Operating Management System (OMS) – BP’s OMS incorporates an integrated and comprehensive process safety management system. All fi ve US refi neries have now transitioned to OMS. cycle of audits, covering 94 BP operations, took place within the 2007-09 period. Control of work (CoW) – US Refi ning implemented the CoW standard in 2009 through one of its We have taken action to close out our most extensive programmes ever. This required extensive training and, in many cases, entirely six-point plan, launched in 2006 to address new approaches to evaluating and planning maintenance. immediate priorities for improving process safety and operational risk management at Process safety knowledge and expertise – BP continued to make signifi cant progress in delivering its our operations worldwide, following the programmes to strengthen process safety capability at all levels. incident at Texas City in 2005 involving a fi re, explosion, fatalities and injuries. In Performance indicators – The US refi neries adopted a common set of leading and lagging process March 2009, a US District Court accepted safety indicators that are reported monthly to line management and quarterly to executive management and the board. BP’s criminal plea agreement with the US Department of Justice in relation to the Safer shelters – The US refi neries made progress in addressing the risk to personnel in occupied Texas incident. buildings potentially impacted by process hazards and risk ranked each such building across We participate in industry-wide the portfolio. forums on process safety. We chaired the American Petroleum Institute/American Area Electrical Classifi cation (AEC) – All fi ve US refi neries have updated their AECs, fi nalized gap National Standards Institute multi- assessments against them and made progress on a number of mitigation activities to close the stakeholder group developing a standard identifi ed gaps. for public reporting of leading and lagging Overtime – In 2009, US Refi ning took important steps resulting in reduced individual and average process safety indicators. Through this and overtime rates. However, overtime for some individuals at all US refi neries remains at a level that other bodies, we share our learning with could, under some circumstances, compromise performance. Although progress continues to be other organizations within and outside the made, addressing overtime issues, and in particular individual rates, requires more focused attention. oil and gas industry, and embed any new developments within our practices. Safety Instrumented Systems (SIS) – US Refi ning developed a portfolio-wide plan to mitigate higher-level process risks through measures such as SIS by 2016. Lower-level risks will be mitigated on a site-by-site basis. More than 40 SISs are now in service at US refi neries, but elements of the SIS life cycle management systems that are required by BP’s internal standards, including SIS documentation, training and auditing, remain to be implemented on these existing systems. US Refi ning is developing a plan to address these requirements.

Process safety culture – BP has taken a number of steps to strengthen its process safety culture, and its leaders support process safety positively and sincerely. Considerable progress is evident at all US refi neries in improving relationships between management, employees and contractors. Mr Wilson believes that there is an opportunity to encourage a more proactive and self-critical approach towards identifying and addressing process safety issues and risks. BP is pursuing this opportunity as part of an initiative to identify and establish a common cultural vision for US Refi ning.

Internal and external standards and practices – The US refi neries have inconsistently implemented some standards and practices. Having established new systems and processes, US Refi ning now needs to An operator at Texas demonstrate a higher level of systematic management across the sites, and needs a uniform system to City refi nery confi rm that equipment continues to meet applicable standards and practices after installation. These Every unit has now been areas require more focused attention. restored and the plant has adopted the OMS. Mr Wilson acknowledges that implementation of the recommendations remains a critical performance objective and that virtually all of the milestones in US Refi ning’s 2009 plans were delivered on time. Specifi c observation from Ernst & Young While signifi cant gaps have been closed, and most of the systems and processes required for continued We discussed work undertaken by the safety and operations process safety improvements have now been developed, much work remains to fully implement them. audit team to monitor compliance with standards. We Mr Wilson observes that BP must now demonstrate improved capability for systematic management of reviewed the summary results reported to management and discussed the focus on actions past due and the numbers of the systems, processes, standards and practices it has developed so it can accelerate the overall pace of approved changes to actions. The scope of audits is being implementing the recommendations. redefi ned with OMS implementation and we were told that future reporting will also highlight ‘repeat’ fi ndings.

22 Operating skills and knowledge Our safety and operations learning Safety and operational performance at a glance framework enhances the capability of our Here are highlights of our activities and performance, staff at all levels to deliver safe, reliable, responsible and effi cient operations. showing key measures for safety, the environment More than 2,700 front-line operational and building our operating capability and knowledge. leaders across our global operations have started one or more of the modules within the Operating Essentials programme which seeks to embed the BP way of operating Senior management commitment Recordable injury frequency (RIF) as defi ned by our operating management (per 200,000 hours worked) system. Our Operations Academy helps Contractors 2.0 senior operations leaders learn to manage Workforce operations in a way that eliminates defects Employees 0.34 workforce and drives continuous improvement, not only 1 00+ RIF in 2009 1.5 taking actions themselves, but empowering group leaders have participated in the front-line employees to be agents of change. Executive Operations Programme since Executive Operations sessions support the 2007, including the group chief executive, 1.0 executive team and senior business leaders his senior team and more than 30 in the development of operations capability strategic performance unit leaders. 0.5 specifi c to their role.

Transportation safety 01 0302 04 05 0607 08 09 Road, air and marine travel present some of Operating management system the most signifi cant risks people face when carrying out work in our industry. BP carries out formal safety reviews of our aviation services providers worldwide on a regular 80% Days away from work case frequency basis, as well as promoting safer driving, of our operations in scope to implement safer journeys and the use of safe vehicles. (DAFWCF) the group OMS have done so, with the (per 200,000 hours worked) All shipping vessels conducting BP activities rest scheduled for completion in 2010. Contractors 0.20 are subject to our health, safety, security and Workforce Employees environmental requirements. 0.069 DAFWCF 0.15 in 2009 Employees on safety

0.10

98% 0.05 of BP employees consider that line management is receptive to honest information about safety. 01 0302 04 05 0607 08 09

I am extremely proud of Number of oil spills (equal to one barrel or more) BP’s 2009 safety performance – it refl ects a sustained effort 1,000 across all our operations over many years. 750 234 Tony Hayward, oil spills Group Chief Executive in 2009 500

250

01 0302 04 05 0607 08 09

Safety data bp.com/safetydata

23 Managing our impact the International Union for the Conservation Ecosystem services BP operates throughout the world in of Nature (IUCN) I-IV, Ramsar and World The concept of ecosystem services locations, terrains and climates that are Heritage designations. None of our new considers the ‘services’ provided by nature tremendously diverse and frequently projects entered a protected area in 2009. – such as the provision of food, water and challenging. We aim to minimize our fi bre or support for fundamental processes environmental impact by taking a systematic Technology such as photosynthesis or nutrient cycling. and disciplined approach to operations, using Technology applied throughout our operations Some governments are beginning to use this sophisticated risk assessment techniques helps minimize the environmental impact concept to frame discussion about human that directly inform our business plans. of fi nding and producing energy. interactions with ecosystem services when We are incorporating our Our advanced seismic imagery shaping policy. environmental management systems technology, for example, delivers much A number of BP businesses have into OMS, the comprehensive operating higher quality information about the used an ecosystems service approach to management system that helps us subsurface, meaning we can drill fewer help assess potential impacts from projects set priorities for operations based on wells, onshore and offshore. To obtain and operations, typically as a regulatory assessment of the key risks, including unconventional gas – found in tight requirement. Our Cherry Point refi nery in the those related to environmental and social sandstones, fi ne-grained shale or coalbed US used an ecosystems services approach performance. We believe this integration seams – the use of extended horizontal as part of the permitting process for a will promote greater effi ciency and drilling enables us to access more of a facilities relocation project. This approach consistency across the business. reservoir from a single well, improving led BP to build a water retention pond and Our major operating sites are effi ciency and minimizing impact. drainage system to compensate for the loss all certifi ed under the international At our Zhuhai 2 plant in China, we have of the natural services previously provided environmental management system developed a new way of making purifi ed by the undeveloped land. standard ISO 14001, with the exception terephthalic acid – a building block for We are working with non- of the Texas City petrochemicals plant, polyester used in clothing and plastic bottles governmental organizations and regulators which is seeking certifi cation in 2010. – which cuts the facility’s carbon footprint to pilot and test pragmatic approaches to by approximately 65% as well as lowering enable sustainable business development. Environmental challenges variable costs by an estimated 40%. In a world where a variety of energy sources Local environmental performance is necessary to meet future demand for Compliance management We report on air emissions, waste, water affordable, reliable and secure energy, we BP operates in more than 80 countries and and biodiversity at a local level, where it is recognize that some of our projects present faces diverse and sometimes very complex most relevant. We are making efforts to signifi cant environmental challenges. regulatory requirements. We are working reduce emissions to air by improving process to ensure we have robust management controls and upgrading equipment. For Sensitive areas systems in place to comply with the wide example, three of our refi neries in the US We have piloted an integrated approach to range of current and emerging environmental have invested substantially in replacing or identify potential environmental and social regulations that affect us. Climate change upgrading combustion units to reduce impacts in new projects, which are is one area where there is an increasing emissions of nitrogen oxides and sulphur intended to improve our consistency and amount of regulation. Governments continue oxides. We are seeking to improve our fresh effectiveness in mitigating such issues. to identify regulatory measures at local, water management, particularly at sites This approach also applies to projects that national and international levels. located in water-stressed areas, and try to seek access to sensitive areas, including We are making effective use of minimize our consumption by decreasing internationally designated protected areas. resources and networks to share practices. volumes, increasing recycling or reducing Our protected areas classifi cation includes leaks. We aim to reduce waste-water

Working in partnership on biodiversity

Working sensitively around fl ora and fauna is an integral part of our effort to manage environmental impacts. We work with others to manage biodiversity where relevant in new projects and in existing operations. For example, we use techniques to mitigate the potential impact of sound on marine mammals. Prior to seismic work in the Canadian Beaufort Sea, we carried out modelling of underwater noise. We use soft start procedures to enable mammals to move from areas where seismic activity is taking place and we use trained marine mammal observers on board vessels to guide this activity, with the power to halt work if necessary. In our onshore gas projects in the US, we have worked with The Nature Conservancy to develop plans to mitigate impacts on wildlife. In Alaska, the BP HSE team has stepped up monitoring of maternal polar bear dens and has started using infrared imagery to detect dens under snow so they can be avoided by workers and thus reduce the risk of accidental disturbance. Our partnership with the World Conservation Monitoring Centre gives us access to the World Database on Protected Areas, which helps ensure environmental concerns are identifi ed at a very early planning stage. production at source and closely monitor our Direct greenhouse gas emissionsa waste-water treatment facilities, replacing (million tonnes of carbon dioxide equivalent) our plant-with new technology, as needed, to maintain performance. We continue to 100 improve the segregation, handling and storage of wastes. Where waste-disposal 65Mte infrastructure is limited, we engage with in 2009 90 governments and waste contractors to try to improve facilities. 80 Greenhouse gas emissions

We track our greenhouse gas emissions at 70 a group-wide level. Each year since 2002, we have estimated the reduction in our reported annual greenhouse gas emissions 60 due to effi ciency projects. These projects include reductions in fl aring and venting, as well as energy effi ciency projects, such 2004 2005 2006 2007 2008 2009 as process optimization and waste-heat a We report greenhouse gas emissions, and emission reductions, recovery. By the end of 2009, the running on a CO2-equivalent basis including CO2 and methane. This represents all consolidated entities and BP’s share of equity- total of these reductions was 7.9 million accounted entities except TNK-BP. tonnes (Mte). However, the sustainable reductions for 2009 have been more than offset by Specifi c observation from Ernst & Young Innovation at the Kwinana refi nery Our review of BP’s stakeholder engagement processes additional emissions from increased showed continued interest in TNK-BP’s HSE performance. At Kwinana, Australia’s largest refi nery, we operational activity. As such, we are TNK-BP reported greenhouse gas emissions for the fi rst have introduced new techniques to reduce reporting 65.0Mte of greenhouse gas time in 2009 and referenced the assistance that BP provided in developing the calculation methodology. BP’s online our environmental impact, while minimizing emissions for the year 2009, which is reporting references this data but consideration should be our safety risk. Kwinana’s tank turnaround 3.6Mte higher than the 61.4Mte reported given to including BP’s equity share of TNK-BP emissions team, working with cleaning contractor within aggregated greenhouse gas data. for 2008. Increased throughput from our Veolia, has devised an effective cleaning US refi neries, the start-up of our Tangguh procedure for crude oil tanks. We spray light liquefi ed natural gas project in Indonesia and crude into the tank to dissolve sludge, which increased production from our deepwater is then processed in the refi nery’s crude production platforms in the Gulf of Mexico units. With this method, we signifi cantly account for much of this increase. reduce the need for staff to enter the tanks to clean them manually – a potentially Environmental performance dangerous task. Also, BP’s refi nery has bp.com/environmentalperformance reduced its dependency on town water to about 10% of that of the mid-1990s by utilizing the Kwinana Water Recycling Plant, a joint project with Australia’s Water Corporation and neighbouring industries. This has freed up nearly 2 gigalitres – or 800 Olympic-size swimming pools – of potable water for public use per year.

Minimizing our impacts in a new natural gas project

BP Canada’s Noel project, a natural gas development in north-east British Columbia, aims to minimize environmental impact and benefi t the local economy. Using solar and hydro-generated power, we estimate the project’s greenhouse gas emissions to be 80% lower than a conventional development. We’ve lessened the impact on the landscape by using horizontal drilling, which requires only 20% of wells compared to developments using vertical wells. We supply water for well operations via water pits, fi lled with runoff when water is abundant or supplied from shallow water wells during the remainder of the year. This has reduced the need to truck in water, reduced traffi c and minimized the impact on local community water resources. Working with local service providers, we enhance local economic and employment opportunities. To enable local contractors to compete, we separate contracting opportunities into small packages. The Noel project received the Best Practice Award at the 2009 World Gas Conference for its work on reducing surface footprint and CO2 emissions in a tight gas development. BP Sustainability Review 2009 1 People energy

How does BP inspire its people to deliver great performance?

We aim to get the right people in the right roles, accessing deep specialist skills and promoting excellent performance. We are carrying out focused recruitment, aligning rewards more closely with performance and investing in training and development. 23 We are also taking practical steps to ensure BP is a diverse and inclusive company where everyone can achieve their potential.

Images 1 Et hane storage, Steelman gas plant, Saskatchewan, Canada. 2 T he 3D seismic exploration team, Muscat, Oman. 3 F orecourt at Fanya service station, China. 4 Thunder Horse platform, Gulf of Mexico, US.

Our people bp.com/ourpeople

4 Lorum ipsum bp.com/Lorumipsum Our people Number of employeesa Diversity and inclusion People are fundamental to our progress (thousands) (% group leadership) in BP. Our performance and our safety 125 Women 25 Non-UK/US record depend on our employees’ skill and commitment. We therefore organize, manage and reward employees in ways 100 20 designed to achieve the best possible performance, today and for the long term. 75 15 Organizing our workforce

BP is organized into two business segments: 50 10 Exploration and Production, and Refi ning and Marketing, along with other businesses, including Alternative Energy. These are 25 5 sub-divided into more than 30 strategic performance units, along with specialist support functions such as human resources; 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 safety and operations; information a As at 31 December. technology and services; and fi nance. Responsibility for people starts at the top. The group chief executive and the executive team make up the group people committee, which takes overall responsibility for policy decisions relating to employees. Our career acceleration programmes (CAPs) Policy governing the reward of executive BP strives for a streamlined, support the rapid development of people directors is established by the remuneration effi cient organization. Recent transformation who have the highest potential and are committee of the board. Policy for all other programmes have eliminated duplication and expected to achieve senior and group employees is established by the group unnecessary layers of management, while leadership positions. We place CAPs people committee. bringing on board people to fi ll specifi c gaps members in stretching roles, enabling them in capability. This process, along with retail to build potential, demonstrate performance Developing our leaders staff reductions, resulted in a decrease of and accelerate their progress. We believe that strong leadership and high around 11,700 employees in 2009, taking BP carries out annual talent and performance depend on having a simple the total number of employees to succession reviews to examine business and consistent view of what leadership around 80,300. capabilities and put plans in place to deal means throughout our varied businesses. We have reviewed and reshaped our with any gaps. The reviews identify people We therefore adhere to a single, common group leadership to ensure we have the right with the potential to rise into senior positions leadership framework, with a clear and people in the right roles. As a result, we and create development plans for these key focused set of expectations. Leaders in BP reduced the total number of people at our individuals. These reviews are designed to are called on to value expertise, energize group leadership level by 16% during 2009. ensure there is equal opportunity for all to people, act decisively and deliver results. advance on merit. We run a series of development Building a sustainable talent pipeline programmes called Managing Essentials BP recruits graduates from a wide range of Performance management and to help our line managers apply the technical disciplines as well as experienced rewarding people leadership framework in their own teams. individuals from the energy industry and BP strives for a performance-driven culture, These programmes cover management beyond. Despite the challenging economic with a clear alignment between team foundations, effective teamworking, climate in 2009, we maintained our graduate performance, individual performance and improving personal performance and recruitment levels, employing around the bonuses that are received. effective performance conversations. 470 new graduates within a total of some Under our performance management More than 12,000 employees in 41 countries 6,500 newly hired employees, excluding approach, each BP business has a plan have undertaken Managing Essentials retail staff. designed to accomplish elements of the programmes since its launch in 2007. Graduate development remains a group’s overall strategy. Objectives and We use internal and external strategic priority. For example, Exploration milestones for each individual are then set in evaluation processes to tailor the and Production’s Challenge programme accordance with the team plan. In addition to development plans for BP’s group leaders. keeps graduates in roles long enough to help base pay, employees are rewarded according Managers, peers and team members review their personal development and maximize to how well they perform against specifi c leaders’ performance, using a 360° feedback their contribution to the business. Emphasis objectives that must be clearly linked to the tool, identifying their top three relative is placed on leadership behaviours as well as goals of the team as a whole. strengths and weaknesses. technical competence. There is direct alignment between In partnership with institutions the goals of BP set by the board, the goals such as MIT, Duke University and Cornell of our key businesses and the performance University, we run development programmes contracts of our executive leadership. specifi cally designed to build excellence in As part of a standard approach, executives’ important functional areas – operations, performance is evaluated against their fi nance and human resource management. performance contract. We believe our reward packages strike the appropriate balance between rewarding individual performance and refl ecting group performance. Remuneration for executives is delivered in cash and BP equity. 27 Vocational training Greater Plutonio project, Angola. BP Angola provides vocational training at all levels to develop the skills of the local workforce.

Growing energy skills diversity plans tailored to each strategic their importance in achieving business As part of our effort to develop deep performance unit (SPU), and support results. Positively Ethnic is a UK-based specialist skills, BP uses a variety of methods for affi nity groups for networking and group for ethnic minority employees. to help employees at all levels develop their sharing experiences. capabilities, ranging from major global Each SPU diversity plan includes Listening to our employees programmes and facilities to tailored specifi c targets, which are included in We conduct an annual employee survey knowledge-sharing initiatives. leaders’ performance contracts from 2010 to monitor employee attitudes and identify At the global level, we have set up a onwards. Mandatory training in diversity areas for improvement. Our 2009 survey, state-of-the-art learning centre for Exploration and inclusion for the 6,000 senior leaders completed by around 33,000 employees, and Production employees in Houston, US. in BP also begins in 2010. showed a clear year-on-year improvement The centre, with high-defi nition conferencing BP encourages the formation of in employee satisfaction and support for suites and broadcasting facilities, covers affi nity groups by which particular sub-sets BP’s strategic direction. The overall employee all aspects of upstream work, from basic of employees can network and exchange satisfaction index showed a 6% increase to drilling techniques to advanced seismic experiences. These include the BP Women’s 65%, while 93% of participants said they felt imaging and real time digital management International Network; the BP Pride group for ‘personally committed’ to supporting BP’s of production. We have also created a the lesbian, gay, bisexual and transgender priorities of safety, people and performance. training and development programme for community; and the US-based BP Asian, There were particularly encouraging scores our refi ning engineers covering all relevant African-American and Latino networks. for internal communications, awareness and competencies, from hazard recognition and The UK-based Global Reach group brings understanding, commitment and confi dence. fuels blending to fi nancial skills and effi ciency together Exploration and Production Areas highlighted for improvement included improvement. Designed to ensure consistent employees from outside the US and the listening to employees, encouraging people development across our engineering teams, UK, while Gray Matters in the US brings to contribute ideas and recognizing jobs the programme is already in use at four of together older workers to demonstrate well done. BP’s fi ve US refi neries. We use more targeted knowledge- The BP Women’s International sharing approaches as well. In 2009, we relocated fi ve highly qualifi ed engineers from Network the Trinidad & Tobago business to Azerbaijan, The BP Women’s International Network a business which is growing fast and in need (BPWIN), formed in 2009, provides a global of help in training engineers in offshore forum for women to discuss important drilling techniques. issues and learn from each other through informal contacts as well as events such as Creating an engaging and inclusive webcasts. Built upon local women’s groups environment that existed in several regions, this global We are committed to creating a work network is intended to encourage women environment where diversity and inclusion to stay with BP and fi nd the best ways to are valued and where everyone is treated fulfi l their career goals. Men also actively fairly, with dignity and respect, and without participate in these events. discrimination. We believe people perform BPWIN is currently chaired by at their best when they are valued as Katrina Landis, group vice president of unique individuals and their views are BP’s alternative energy business, and has taken into account. a steering committee that includes women We actively embed diversity and from across BP. Its website and resources inclusion across the organization through our are freely available within BP. global diversity council, the establishment of Compliance and ethics Asking questions and raising concerns OpenTalk cases BP’s reputation, and therefore its future, BP expects employees to abide by the code depends on every BP employee, everywhere, of conduct and to ask questions or report any concerns they have about safety, Location withheld 1,500 every day, taking personal responsibility for Asia, India and Australasia ethical and compliant business conduct. It is environmental performance, employment- Europe related matters or other possible breaches Africa, Middle East, a fundamental BP commitment to comply Russia and the Caspian 1,250 with all applicable legal requirements and of the code of conduct. While employees The Americas adhere to high ethical standards. are encouraged to ask questions or raise concerns with line managers, human 1,000 Code of conduct resources, legal or compliance teams, BP Our code of conduct sets out standards for also maintains OpenTalk, an independent confi dential helpline. In the US, staff can also the way we behave, covering a range of issues 750 from our ban on paying facilitation payments contact our independent US offi ce of the to looking after company assets. The code is ombudsman and the Independent Monitor about helping BP people to ‘do the right thing’ who scrutinizes BP’s market trading activity. 500 in a complex business environment. Individuals can contact OpenTalk The code of conduct covers a range anytime, using a multilingual telephone line of issues and is organized into fi ve key areas: or via fax, email or letter, 24 hours a day, 250 health, safety, security and the environment; seven days a week. Any employee who in employees; business partners; governments good faith seeks advice, raises concern or 05 06 07 08 09 and communities; and company assets and reports misconduct is following our code of fi nancial integrity. conduct and BP will not tolerate retaliation against that employee. In 2009, 874 cases were raised Code of conduct through OpenTalk, compared with 925 in Compliance in trading – US update 2008. The most common issues raised in 2009 related to employment matters such In response to manipulation of the price of as alleged failure to provide fair treatment, propane trading by BP traders in February equal opportunity and a respectful, 2004, BP America Inc entered into a deferred harassment-free workplace. prosecution agreement (DPA) with the US Health, Governments safety, security Department of Justice (DOJ) in October and communities and environment Managing and certifying compliance 2007. The DPA runs for three years provided and ethics BP America complies with its terms. In We have an annual compliance certifi cation addition, BP Products North America Inc Code entered into a consent order with the US of process in which all senior level leaders are Company asked to submit a certifi cate stating that Commodity Futures Trading Commission assets and conduct Employees they personally understand and adhere to (CFTC). Under the terms of the DPA and integrity the code of conduct and have discussed the the consent order, an independent Trading code and OpenTalk with their teams. Leaders Monitor was appointed by the DOJ and the are also required to report any breaches of CFTC. The Monitor continues to review Business partners the code that occurred in their teams. This BP’s progress in implementing a trading process rolls up the management line to the compliance programme and to provide group chief executive, who signs a certifi cate regular reports to the US authorities. In for the whole group and reports to the December 2009, the Monitor advised that board’s safety, ethics and environment BP continues to comply with the consent assurance committee. order and is making every effort to stay in We periodically review our code of this status. In the fourth quarter of 2010, conduct to ensure it continues to meet the US government will determine whether our stakeholders’ expectations and our suffi cient progress has been made under own high standards of care. We identifi ed the DPA before making any decisions about a number of ways to enhance and update whether to exercise its unilateral authority our code during the most recent review to extend it. completed in late 2009. For example, BP is committed to working with we clarifi ed the corporate gifts and the Monitor to ensure that the compliance entertainment policy to improve controls programme is fully embedded in its trading in key risk areas. We expect the code activities and that this continues beyond the update to be fi nalized and communicated term of the agreement. to our employees in 2010.

29 BP Sustainability Review 2009 1 Local energy

How does BP contribute to the communities where it works?

We aim to make a positive difference in the places where we operate by using our skills and resources to do business in a way that benefi ts both local populations and BP.

Images 1 P rocess engineers inspecting equipment at the Bulwer refi nery, Australia. 2 T rainee technicians in Angola. 3 C arbon Challenge workshop, Orpington, Kent, UK. 4 S olar panels at the Sri Aurobindo internal settlement, Pondicherry, India.

BP and local communities bp.com/developmentandcommunity

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4 As a business that invests in more than Supporting education and other Sharing technical expertise with 80 countries worldwide, BP has an impact community needs local governments on many local communities and economies. In many communities, we deploy our skills, We use our expertise and global reach We strive to make that impact a positive one resources and infl uence to invest in ways where relevant to support governments by running our operations responsibly and that are relevant to local interests and needs. in their efforts to develop their economies by investing in the community in ways that We work closely with local authorities, sustainably. As well as country-specifi c benefi t both local people and BP. The key community groups and others in delivering projects, these include more general test for any community investment is that it such programmes. These range from initiatives such as helping to start and should create a meaningful and sustainable developing mathematics and science skills continuing to be active in the Extractive impact – one that is relevant to local needs, among Louisiana college and university Industries Transparency Initiative, which aligned with BP’s business and undertaken students, to health education to helping supports creating a standardized process in partnership with local organizations. people to cut the malaria rate near our plant for transparent reporting of company Our community investments perform in Indonesia. payments and government revenues three major roles: building business skills from oil, gas and mining. to facilitate economic participation in BP’s Focus on education business; supporting education and other Education is a critical driver of progress and Focus on energy and economics community needs; and sharing technical opportunity in developing and developed We support a project in Azerbaijan to expertise with local governments. countries alike. Our investments in learning improve the technical quality of the range from providing science resources economic advice provided to policy- Building business skills for UK classrooms to support for China’s makers – the Advisory Programme for We run a range of programmes to develop Tsinghua University in building strengths Macroeconomic Management and local supply chains and build the skills of in management education. In 2009 we ran Institutional Reforms. As part of this project, businesses in places where we work, from a competition challenging German students we are funding an expert group from the Azerbaijan and Indonesia to Trinidad & to cut greenhouse gas emissions at their Center for Social and Economic Research, Tobago. These range from fi nancing to schools. In Angola we have created and an EU-based think tank, to provide technical sharing global standards and practice in areas fi nanced a post-graduate degree in law assistance to the Azerbaijan Ministry of such as health and safety. This benefi ts BP related to oil and gas, working with the Economic Development on macroeconomic by enabling us to source goods and services government, state oil company and analysis, economic planning and policy locally at the same time as benefi ting local academia. The intention is to build greater formulation. In Trinidad & Tobago we have companies by empowering them to reach local understanding of contractual rights advised the government on its strategy for the standards needed to supply ourselves issues and other complex legal subjects. energy effi ciency and renewable energy. and other clients. Drawing on our group-level analysis and experience worldwide, we have suggested Focus on Trinidad & Tobago a pathway approach that would phase Taking this approach in Trinidad & Tobago in effi ciency measures and a variety of has led to the creation of a new local industry alternative energy sources over time. in fabricating offshore gas platforms. Up to the early 2000s, oil and gas platforms used off Trinidad & Tobago were made elsewhere. In the past decade, however, BP has formed ventures to handle design and construction, employing and training local people. The fi rst Contribution to communities by region ($ million) platform to be largely locally constructed, Rest of Europe 160 Cannonball, went into service in 2005. It has UK been followed by three ‘clones’ using the Rest of World same design pattern. On the most recent US platform, Savonette, Trinidad nationals were responsible for 98% of all the hours spent in fabrication. 120

80

Specifi c observation from Ernst & Young BP previously reported anticipated community investment of at least $500 million every fi ve years, most recently during 40 the period ending 2008. Although spending has continued at a similar level, the majority is in developed countries, with almost half in the US. BP could report the criteria used for choosing projects and whether it has a long-term commitment to a specifi ed level of spend.

2005 2006 2007 2008 2009

31 BP Sustainability Review 2009 Our Tangguh gas production project based Building business skills Local energy at Bintuni Bay, in the Papua Barat province We support the Bird’s Head Business of Indonesia, is a major project designed Empowerment Programme, which enables not only to create value for BP but to make local companies to acquire the skills needed 1 a signifi cant contribution to the sustainable to compete for work with BP and other development of the local community. potential customers. This includes arranging Tangguh and The project, which started production mentoring and running workshops on topics in 2009, is extracting, liquefying and such as preparing tender documents and sustainability exporting natural gas from beneath Bintuni contractual processes. In 2009 alone, more Bay on the western part of Papua. A share than 350 people were trained and more Delivering value to BP and the of the government’s post-tax revenues than 20 local fi rms passed tenders, either local community with the start- from the project, according to Indonesian from BP, contractors for Tangguh, other up of our liquefi ed natural gas laws governing the distribution of oil- and companies or local government. gas-related income, should be directed to project in Indonesia. the local Papua Barat province. Supporting community needs The Bintuni Bay area is remote, relying We have acted in areas such as health, on a traditional economy, largely centred on education and livelihoods, creating an fi shing and small-scale agriculture. When BP integrated social programme that contains a started planning its plant in early 2000, local variety of projects. Our Tangguh community villages had no clean water collection systems health unit, for instance, carries out and education provision was limited. immunization and trains local residents in In such surroundings, the challenge is areas such as reproductive health and to promote sustainable development through personal hygiene. The drop in malaria the lifetime of the operation to enable the prevalence from 23% in 2000 to less community’s long-term independence. than 1% in 2009 is just one indication We have therefore launched a range of the success of our efforts. Educational of programmes that involve the community investment has embraced books, and encourage local government to assume classrooms, teacher training and greater leadership and responsibility. management training. In some villages, These are designed to drive improvements homes and community facilities have been in health, education, business and other built and rainwater harvesting systems set aspects of the community’s life. up. Villagers have been assisted to create better livelihoods in activities such as fi shing and farming through training and equipment.

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Images Sharing expertise Independent review 1 T angguh LNG, with Chinese tanker In terms of assisting governments to Tangguh’s progress has been monitored awaiting shipment to Fujian, China. advance sustainable development, we for several years by an expert Tangguh 2 Monitoring in the main control room, Tangguh LNG. support projects to build skills and capacity Independent Advisory Panel, chaired until 3 Contractors assess electrical work, among local government offi cials in the 2009 by former US senator George Mitchell. Tangguh LNG. region. This includes technical assistance In its 2009 report, the panel said Tangguh 4 Community relations offi cers walking in budget topics and training in accounting had brought tangible benefi ts to the area to the resettled Saengga village. 5 Elementary students at a renovated and asset management. and was optimistic that the project could school part-funded by BP, in Otoweri. Security for the Tangguh project is continue to deliver them. However, it added: 6 Dispensary at a clinic supported by a provided through an integrated community- BP-funded health foundation, in Babo. based security programme, which involves ...in order to accomplish this 7 A model of Tanah Merah village, built with public consultation. locally recruited security guards backed objective, and to avoid effects . up by the local police. The military are that would be disruptive to the not involved except in extraordinary circumstances. Guards and police are social, cultural, environmental, trained in standards and practices consistent and economic structure of the with the Voluntary Principles on Security region, BP must remain vigilant, and Human Rights – an initiative agreed between governments, NGOs and the fl exible, and patient for the extractive industry. duration of the operating phase as it implements Tangguh’s social Minimizing our environmental impact In an area rich in biodiversity, featuring and economic programmes. mangrove swamps, dolphins and sea turtles, care has been taken to minimize the environmental footprint of the project. For Operating responsibly example, no roads have been built to the site in Tangguh and the route followed by tankers has been bp.com/sustainabilityintangguh lengthened to avoid an important marine nature reserve.

33 BP Sustainability Review 2009 Independent assurance statement to BP management

BP’s Sustainability Report 2009 (the Report), which includes this Materiality Sustainability Review and www.bp.com/sustainability, has been Has BP provided a balanced representation of material issues concerning prepared by the management of BP p.l.c., who are responsible for the BP’s sustainability performance? collection and presentation of information within it. Our responsibility, in • With the exception of the subject areas listed below, we are not aware accordance with BP management’s instructions, is to carry out a limited of any material aspects concerning BP’s sustainability performance assurance engagement on the Report and to include specifi c observations which have been excluded from the Report. from our work in relevant sections of the Report. We do not accept or • We consider that BP could have covered the following subject areas assume any responsibility for any other purpose or to any other person in more depth in the Report: or organization. Any reliance any such third party may place on the • Infl uencing the performance of business partners in relation to Report is entirely at its own risk. sustainability issues. • Disclosure of future environmental performance targets. What we did to form our conclusions • Nothing has come to our attention that causes us to believe that Our assurance engagement has been planned and performed in accordance BP management has not applied its processes for determining with ISAE3000a and to meet the requirements of a Type 2 assurance material issues to be included in the Report. engagement as defi ned by AA1000AS (2008)b. The AA1000AS (2008) assurance principles of Inclusivity, Materiality and Responsiveness have Responsiveness been used as criteria against which to evaluate the Report. How has BP responded to stakeholder concerns? • With the exception of the issues highlighted in relation to Materiality, In order to form our conclusions we undertook the steps outlined below: we are not aware of any additional issues of stakeholder interest that 1. Interviewed a selection of BP executives and senior managers to are not currently included in the Report’s scope and content. understand the current status of safety, social, ethical and environmental • We are not aware of any matters that would lead us to conclude that activities, and progress made during the reporting period. BP has not applied the responsiveness principle. 2. Reviewed BP’s approach to stakeholder engagement through interviews with employees at group and local level, and reviewing selected Completeness and accuracy of performance information associated documentation. How complete and accurate is the HSE, community investment, leadership 3. Reviewed a selection of external media reports and conducted a diversity data and ethics dismissals data in the Report? high-level benchmarking exercise of the material issues and areas • With the exception of TNK-BP’s GHG emissions, we are not aware of performance covered in the environmental and social reports of of any material reporting units that have been excluded from the BP’s peers, to test the coverage of topics within the Report. group-wide data relating HSE, community investment, leadership 4. Reviewed selected group level documents relating to safety, social, diversity data and ethics dismissals data. ethical and environmental aspects of BP’s performance, to understand • Nothing has come to our attention that causes us to believe that the progress made across the organisation and test the coverage of topics data relating to the above topics has not been collated properly from within the Report. group-wide systems. 5. Reviewed information or explanation about the Report’s data, statements • We are not aware of any errors that would materially affect the data and assertions regarding BP’s sustainability performance. as presented in the Report. 6. Reviewed health, safety and environment, community investment, leadership diversity and ethics dismissals data samples and processes How plausible are the statements and claims within the Report? to test whether they have been collected, consolidated and reported • We have reviewed information or explanation on the statements on appropriately at group level. BP’s sustainability activities presented in the Report and we are not 7. Reviewed BP’s processes for determining material issues to be included aware of any misstatements in the assertions made. in the Report. Observations and areas for improvement Level of assurance Our observations and areas for improvement will be raised in a report to BP Our evidence gathering procedures have been designed to obtain a limited management. Selected observations regarding progress made and areas level of assurance (as set out in ISAE3000) on which to base our conclusions. for improvement can be found in appropriate sections of the Report and The extent of evidence gathering procedures performed is less than that of a in our online statement at www.bp.com/sustainabilityobservations. These reasonable assurance engagement (such as a fi nancial audit) and therefore observations do not affect our conclusions on the Report set out above. a lower level of assurance is provided. Our independence The limitations of our review As auditors to BP p.l.c., Ernst & Young are required to comply with With the exception of selected telephone interviews, our work was limited to the independence requirements set out in the Institute of Chartered group level activities. We did not visit any of BP’s businesses. Therefore, our Accountants in England & Wales (ICAEW) Guide to Professional Ethics. conclusions are based on our discussions with BP management, our review Ernst & Young’s independence policies, which address and in certain places of selected media and the review of documents provided to us by BP. exceed the requirements of the ICAEW, apply to the fi rm, partners and professional staff. These policies prohibit any fi nancial interests in our clients Our conclusions that would or might be seen to impair independence. Each year, partners Based on the scope of our review our conclusions are outlined below: and staff are required to confi rm their compliance with the fi rm’s policies. We confi rm annually to BP whether there have been any events including Inclusivity the provision of prohibited services that could impair our independence or Has BP been engaging with stakeholders across the business to develop objectivity. There were no such events or services in 2009. its approach to sustainability? • We are not aware of any key stakeholder groups which have been Our assurance team excluded from dialogue. Our assurance team has been drawn from our global environment and • We are not aware of any matters that would lead us to conclude that sustainability network, which undertakes similar engagements to this BP has not applied the inclusivity principle in developing its approach with a number of signifi cant UK and international businesses. to sustainability. a International Federation of the Accountants’ International Standard for Assurance Engagements Other Than Audits or Reviews of Historical Financial Information (ISAE3000). b AA1000AS (2008) – The second edition of the AA1000 assurance standard from the Institute Ernst & Young LLP, London of Social and Ethical Accountability. 15 April 2010 34 BP Sustainability Review 2009 Our approach to reporting

BP’s sustainability reporting – in print and Accuracy the venture. Where appropriate, we also seek online formats – is aimed at all readers with We aim to ensure that the information we to provide an overview on activities where an interest in BP’s social, environmental publish is accurate, complete and material we have only joint control over entities along and safety performance. and therefore contributes to building trust and with other partners and where we have In this Sustainability Review, we credibility with key stakeholders. To achieve signifi cant infl uence. provide our position and strategy around this, we have an established internal process the following key sustainability topics of for verifying our non-fi nancial management Frameworks and guidelines relevance to BP and the industry: information. Additionally, we engage We continue to report against the Global professional auditors, who combine the Reporting Initiative’s (GRI) G3 sustainability • Diverse and affordable energy – strengths of fi nancial auditing experience reporting guidelines to an A+ level. For responding to today’s energy challenges, with technical competency in environmental the fi fth year, we map the indicators to including climate change. and social standards. the International Petroleum Industry • Low-carbon energy – focusing on four key Environmental Conservation Association businesses in this arena. Scope (IPIECA)/American Petroleum Institute Oil • Safe and responsible energy – improving BP Sustainability Review 2009 and and Gas Industry Guidance on Voluntary our safety performance, and managing www.bp.com/sustainability concentrate on Sustainability Reporting. We are actively our environmental and social impacts. performance and activities from 1 January supporting and involved in the development • People energy – making sure we have to 31 December 2009. In addition to our of a GRI Oil and Gas Sector Supplement, the right people in the right roles. group sustainability reporting, our non- as well as supporting in the revision of the • Local energy – operating in a way that fi nancial performance communications IPIECA voluntary reporting guidance. A full benefi ts both local communities and BP. include country- and site-level reports. table showing how we address the GRI We aim to report on all aspects of our and IPIECA guidelines, including information Our website, bp.com/sustainability, examines business, including our share of joint ventures on those indicators where we have not these core topics in more depth, as well where the venturers have direct ownership reported, is available at www.bp.com/gri. as reporting on a wider set of issues. interest in, and jointly control, the assets of The website includes detailed information about our social, environmental and safety performance in 2009, along with case studies that demonstrate our sustainability efforts in action. Our approach to reporting Issues covered We primarily report on subjects that have Identifying the issues BP’s sustainability reporting arisen from our materiality process, as well as from stakeholder research and input. Stakeholder expectations We weigh BP’s internal group risk approach against an assessment of the key external Policymakers, NGOs, investors, employees, BP-related issues to generate a materiality thought-leaders Sustainability Review matrix that prioritizes issues. Everything and others considered having potential group risk and – BP’s strategy and positions – Summary of performance high external awareness is included in our sustainability reporting. We also carry out annual audience research to assess the impact of our Material issues previous report and identify areas for Issues considered having improvement or new content areas for high external awareness consideration. This includes conducting and potential group impact surveys, interviews, website analysis and workshops in the UK, the US and Europe bp.com/sustainability with different stakeholders. We have also – BP’s strategy and positions commissioned detailed benchmarking – Overview of non-fi nancial from consultancies SustainAbility and policies Sustainability reporting – Environmental, safety and TwoTomorrows. frameworks social performance Global and industry – Case studies reporting guidance

35 BP Sustainability Review 2009 Our online resources

BP communicates its non- fi nancial commitments and performance at group, country and site levels online, as well as providing interactive tools for its website visitors.

Group reporting Our website, www.bp.com/sustainability, is an integral part of our group sustainability reporting, covering a wide set of issues and reporting on them in more depth. The website also includes detailed information about our environmental and safety performance, as well as case studies that demonstrate our sustainability efforts in action. BP Sustainability Review 2009 is available in pdf format in English, Mandarin Chinese and Russian. www.bp.com/sustainabilityreview2009 Sustainability mapping tool Country and site reporting Our sustainability mapping tool provides We publish country reports on our information about our management of emissions operations in Angola, Australia, Azerbaijan, to air, water use and waste-water discharges, Georgia, Germany, New Zealand, Southern and waste, and about protected areas and Africa, Trinidad & Tobago and Turkey. biodiversity, at our major operating sites. You We also maintain a library of site reports can also easily navigate to local case studies, for more than 30 of our major operations. country sustainability reports and site reports. www.bp.com/countrysustainabilityreports www.bp.com/sustainabilitymappingtool www.bp.com/sitereports

HSE charting tool Our HSE charting tool allows you to fi lter and analyse information on the group’s greenhouse gas emissions, health, safety and environmental performance. Data for the past decade is available, and can be viewed or downloaded in a variety of chart formats.

www.bp.com/hsechartingtool

BP Energy Lab The BP Energy Lab helps people learn how to be more energy effi cient. The BP Energy Calculator can help assess your energy consumption and related carbon footprint, and the energy quiz and facts show how to save energy at home, at work and at play.

www.bp.com/energylab

36 BP Sustainability Review 2009 BP Sustainability Review 2009 This is BP Reports and publications

You can order BP’s printed publications, Our main brands Our values Our strategy free of charge, from:

BP is progressive, responsible, innovative To meet growing world demand, BP is US and Canada and performance driven. committed to: Precision IR • Exploring, developing and producing Toll-free +1 888 301 2505 Progressive more fossil fuel resources. Fax +1 804 327 7549 We believe in the principle of mutual • Manufacturing, processing and delivering [email protected] advantage and build productive better and more advanced products. relationships with each other, • Enabling the transition to a our partners and our customers. UK and Rest of World lower-carbon future. BP Distribution Services Tel: +44 (0)870 241 3269 Responsible We aim to do this while operating safely, Fax: +44 (0)870 240 5753 We are committed to the safety and reliably and in compliance with the law. [email protected] development of our people and the In Exploration and Production our communities and societies in which strategy is to invest to grow production by we operate. We aim for no accidents, strengthening our portfolio of leadership no harm to people and no damage positions in the world’s most prolifi c Annual Review Annual Report and Accounts to the environment. hydrocarbon basins, enabled by the Read a summary of our fi nancial and Read details of our fi nancial and operating development and application of technology operating performance in BP Annual performance in BP Annual Report and Innovative and strong relationships based on mutual Review 2009 in print or online. Accounts 2009 in print or online. We push boundaries today and create advantage. We intend to sustainably drive www.bp.com/annualreview www.bp.com/annualreport tomorrow’s breakthroughs through our cost and capital effi ciency in accessing, people and technology. fi nding, developing and producing resources, enabled by deep technical capability and a Contact details Performance driven culture of continuous improvement. Your feedback is important to us. We deliver on our promises through In Refi ning and Marketing our You can email the Sustainability continuous improvement and safe, strategic focus is on enhancing portfolio Reporting team at reliable operations. quality, integrating activities across value [email protected] These values guide us in the conduct of our chains and performance effi ciency. We expect to continue building our business or send us your feedback online at business. In all our business we expect our www.bp.com/sustainabilityfeedback people to meet high ethical standards and to around advantaged assets in material and signifi cant energy markets while improving act in accordance with our code of conduct. You can also telephone the safety and reliability of our operations. +44 (0)20 7496 4000 In Alternative Energy we have focused our investments in the areas where or write to: we believe we can create the greatest Sustainability Report competitive advantage. We have substantial BP p.l.c. businesses in wind and solar power and are 1 St James’s Square, developing advanced biofuels and clean London SW1Y 4PD, energy technologies such as hydrogen UK. Financial and Operating Information Statistical Review of World Energy power and carbon capture and storage. BP Financial and Operating Information Published in June each year, BP Statistical Looking ahead 2005-2009 includes fi ve-year fi nancial Review of World Energy reports on key and operating data. global energy trends. Cautionary statement We intend to play a central role in meeting BP Sustainability Review 2009 and www.bp.com/sustainability contain certain forward-looking the world’s continued need for hydrocarbons. www.bp.com/fi nancialandreporting www.bp.com/statisticalreview statements concerning the businesses, operations and strategy of BP. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and We are creating long-term options for the depend on circumstances that will or may occur in the future. Actual results may differ from future in new energy technology and those expressed in such statements depending on a variety of factors including future levels low-carbon energy businesses. We are also of industry product supply; demand and pricing; operational problems; general economic conditions; political stability and economic growth in relevant areas of the world; changes in enhancing our capabilities in natural gas, laws and governmental regulations; regulatory action; exchange rate fl uctuations; development which is likely to be a vital source of relatively and use of new technology; changes in public expectations and other changes in business clean energy during the transition to a conditions; the actions of competitors; natural disasters and adverse weather conditions; wars and acts of terrorism or sabotage; and other factors discussed elsewhere in this document lower-carbon economy and beyond. External reporting frameworks Acknowledgements Paper and at www.bp.com/riskmanagement. Material is used within this document to describe issues Design sasdesign.co.uk This Sustainability Review is printed on FSC-certifi ed for voluntary sustainability reporting that are considered to have the potential to signifi cantly Typesetting Orb Solutions, London An introduction to Ernst & Young’s assurance process Revive Pure White Uncoated. This paper has been affect sustainability performance in the view of the company and/or are expected to be Printing Beacon Press using its ® We have reviewed the contents of BP Sustainability Review 2009 to provide assurance independently certifi ed according to the rules of important in the eyes of internal or external stakeholders. Material for the purposes of this environmental print technology. The electricity on the information reported. This work included testing relevant management information, the Forest Stewardship Council (FSC) and was document should not, therefore, be read as equating to any use of the word in other BP p.l.c. was generated from renewable sources and interviewing BP management and reviewing external media sources. Our conclusions, manufactured at a mill that holds ISO 14001 reporting or fi lings. approximately 90% of the waste associated which can be found on page 34, have been prepared against the main principles of the accreditation. The inks used are all vegetable oil based. BP Annual Report and Accounts 2009, BP Annual Report on Form 20-F 2009 and with this product will be recycled. AA1000 Assurance Standard (2008). Several of our specifi c observations have also been BP Annual Review 2009 may be downloaded from www.bp.com/annualreport. No material Photography Stuart Conway, Richard Davies, included on relevant pages of this Sustainability Review. in this Sustainability Review forms any part of those documents. No part of this Review Simon Kreitem, Ian McGregor, Marc Morrison, or www.bp.com/sustainability constitutes, or shall be taken to constitute, an invitation or Specifi c observation from Ernst & Young Chris Moyse, David Shepherd and Aaron Tait. inducement to invest in BP p.l.c. or any other entity and must not be relied upon in any way BP has highlighted ‘energy challenges’ but could also describe the issues that stakeholders in connection with any investment decisions. consider to be emerging sustainability trends. This could include, for example, water Cert no. SGS-COC-0620 BP p.l.c. is the parent company of the BP group of companies. Unless otherwise management and reputational risks associated with supplier working practices, and how stated, the text does not distinguish between the activities and operations of the parent this may impact on the business. company and those of its subsidiaries. © BP p.l.c. 2010 37 Sustainability Review beyond petroleum® 2009

02 Group chief executive’s review 05 How we operate 06 BP in fi gures bp.com/sustainability

Operating at the energy frontiers How a revitalized BP is driving innovative, effi cient and responsible operations

Meeting the energy demands Oil Natural gas Wind Solar Biofuels Effi ciency of today and tomorrow