Oil Issue briefing .com/sustainability Oil sands Issue briefing

How we operate BP recognizes that we need to produce energy responsibly – minimizing impacts to people, communities and the environment.

We operate in almost 80 countries, and our About BP in systems of governance, management and Based in , , BP Canada operation are designed to help us conduct Energy Group ULC focuses on developing our business while respecting safety, energy from Canada’s oil sands, located in environmental, social and financial northeastern Alberta. Tapping into our vast considerations. experience in producing oil and gas from Across BP’s operations, established reservoirs in challenging environments, BP in practices support the management of Canada is also pursuing offshore potential environmental and social impacts opportunities in frontier areas such as the from the pre-appraisal stage through to the Arctic and Nova Scotia. Our integrated operational stage and beyond – reflecting supply and trading business spans the BP’s values, responsibilities and local country and makes BP one of the top oil and regulatory requirements. marketers and traders in Canada. BP’s operating management system integrates BP requirements on health, safety, security, social, environment and operational reliability, as well as maintenance, contractor relations, compliance and organizational learning into a common system.

For more information For more information bp.com/aboutbp bp.com/canada bp.com/oms

Cover image The Sunrise processing facilities in Alberta, Canada The BP Annual Report and Form 20-F may be downloaded from bp.com/annualreport. No material in this document forms any part of those documents. No part of this document constitutes, or shall be taken to constitute, an invitation or inducement to invest in BP p.l.c. or any other entity and must not be relied upon in any way in connection with any investment decisions. BP p.l.c. is the parent company of the BP group of companies. Unless otherwise stated, the text does not distinguish between the activities and operations of the parent company and those of its subsidiaries. Oil sands Issue briefing 1

The need for Canada’s oil sands The world’s population is projected to increase by 1.6 billion from 2013 to 2035, with real income likely to more than double over the same period.

We expect world demand for energy to Canada’s resources increase by as much as 37%1 between 2013 Canada’s oil sands are the third-largest BP has a long track record of operating, and 2035, with nearly 96% of the growth to proven crude oil reserve in the world, after developing and managing giant oil fields. occur in non-OECD countries. and . About half of In Canada, our oil sands opportunities, The energy challenge facing the world’s total that are open to which collectively represent billions of policymakers and our is how to private sector investment are contained in of recoverable resources, fit very the global economy and address concerns Canada’s oil sands. much into that giant field category. about while reducing the Mainly located in the of Alberta, amount of carbon dioxide and other the oil sands are a natural mixture of , Stephen Willis greenhouse gases being emitted. This water, and bitumen. They are found at Regional President challenge is global and complex, involving varying depths and in some cases are many difficult energy decisions. It links directly exposed to the surface. There are BP Canada geopolitical concerns with environmental two methods of extracting this resource – in trends and the energy needs of people situ recovery and surface . everywhere. A key method of recovery is We believe a diverse mix of and steam assisted gravity drainage (SAGD), Our projects technologies can enhance national and which involves pumping steam into the BP is involved in three oil sands lease areas, global energy security while supporting the reservoir through a horizontal well to heat all of which are located in Alberta. Sunrise transition to a lower-carbon economy. and make the bitumen fluid. The bitumen Phase 1 (Sunrise), operated by Husky Canada’s oil sands play a key part in our and water mix then flows underground to a Energy, started up in 2014 and we expect strategy to deliver energy to the world by second, lower horizontal well from where it first oil to be recovered in the first quarter of targeting basins and prospects with the is then extracted to the surface (see diagram 2015. Pike Phase 1 (Pike), operated by greatest potential to create value. on page 4). , was granted regulatory In BP’s portfolio of oil sands assets, in approval by the Alberta authorities in Industry has been situ technology will be used. This production November 2014. Terre de Grace, which is technique limits surface land disturbance, BP-operated, is currently under appraisal for extracting oil from does not require tailings ponds and aligns to development. our strengths, particularly to our expertise BP requires oil sands projects, like all of Canada’s oil sands with wells and improving large-scale its investments, to be commercially viable since 19 67. reservoir performance. over the life of the project. We currently expect the break-even price for oil from Canada’s oil sands to be within the range we require from other types of crude oil Steam assisted gravity investments. drainage diagram 1 BP Energy Outlook 2035 See page 4

Lease area BP’s interests Operator Status

Sunrise 50% owner Phase 1: Started up in late 2014.

Pike 50% owner Devon Phase 1: Granted regulatory approval by the regulator in November 2014. continues on the design of the Pike Phase 1 facilities. Future phases: Appraisal activities continue to evaluate the potential of the remainder of the lease.

Terre de Grace 75% owner, in BP This lease is currently under appraisal. partnership with Value Creation Inc. Oil sands Issue briefing 2

Our investment in oil sands BP is involved in three oil sands lease areas in Alberta – Sunrise, Pike and Terre de Grace.

Environmental baseline studies are being conducted at Pike in such areas as vegetation, wetlands, wildlife, air and water.

Sunrise Terre de Grace BP and Husky have two 50/50 partnerships BP operates and has a 75% interest in where Husky operates the Sunrise leases in the Terre de Grace oil sands leases, located northeastern Alberta, Canada and BP approximately 60 kilometres northwest of operates the Toledo refinery in Ohio, the US. Fort McMurray, Alberta in the western part This project is expected to produce of the Athabasca region. Value Creation Inc. approximately 60,000 barrels per day (bpd) is our partner in this property. of bitumen from the first phase of BP has conducted both summer and development, with first oil expected in the winter work programmes, which consist of first quarter of 2015. Sunrise is estimated to environmental field studies, ongoing have more than three billion barrels of reclamation work and, in the winter, bitumen resources. delineation drilling and seismic exploration. BP continues to evaluate this data along with Pike industry advancements in subsurface and BP has a 50% non-operated interest in the surface technologies to help determine the Pike leases as part of BP’s joint venture with direction and pace of progress for the Terre Devon. Pike is in the southern Athabasca oil de Grace development. sands region and is approximately 25 kilometres southeast of Conklin, Alberta. Regulatory approval for Pike Phase 1 was granted by the Alberta regulator in November 2014. Engineering activities are underway to design and plan the construction of the first phase of development. Appraisal activities are ongoing to evaluate the remainder of the lease. Oil sands Issue briefing 3

Responsible management and oversight We recognize the need to be responsible in the way that oil sands projects are managed.

We carefully reviewed the decision to invest in Canada’s oil sands, as we do for all major Environmental performance alliance From the very beginning, Husky investments, taking into consideration seconded employees from BP into our environmental, social and financial factors. BP is a member of Canada’s Oil Sands organization. These staff bring specific As with all of our assets, whether operator Alliance (COSIA), an initiative technical expertise to assist on Sunrise or not, we monitor the delivery of these made up of oil sands producers. and a reciprocal arrangement is also in projects and the mitigation of risk. The alliance aims to enable responsible place in the Toledo refinery, which is In addition to the day-to-day oversight by and sustainable growth of Canada’s oil sands part of our joint venture. This partnership operators, the assets are managed through while delivering accelerated improvement in has proven to be beneficial to governance committees, with representation environmental performance through both companies. from BP and our partners. These collaborative action and innovation. committees check that the projects are The creation of COSIA builds on work John Myer proceeding in line with the direction set by done by the industry, as well as research and Vice President, Oil Sands the partners. The project operator is required development organizations, over the past Husky Energy to provide timely reporting on various few years. By taking a collaborative financial, operational, environmental and approach, COSIA will focus on the most safety metrics. All of these are benchmarked pressing oil sands environmental challenges, against BP’s performance expectations. specifically water, land, greenhouse gases BP representatives on the governance and tailings; and aims to accelerate the committees are also responsible for discovery and development of environmental confirming that project direction and technologies. activities are consistent with BP’s Since 2012, the alliance companies have investment requirements and code of shared almost 800 distinct technologies and conduct. . One of the technology projects The partners have technical exchanges BP is supporting, for example, is examining to monitor areas such as: how to increase the efficiency of steam • Health, safety and environmental issues. production for bitumen recovery and reduce • Project quality and execution. the volume of wastewater that cannot be • The status of regulatory approvals. recycled. cosia.ca • Subsurface understanding and Site work being conducted at uncertainty. BP’s Terre de Grace lease. • Facility design and project execution. • Product transportation. The governments of Canada and • Technology. Alberta are working together to develop a more comprehensive The regulatory environment in Alberta system of environmental monitoring Oil sands developments are subject to in the oil sands, to help improve comprehensive and rigorous requirements understanding of the long-term as set out by regulatory agencies in the cumulative effects of oil sands province of Alberta and by the Canadian development. As part of this plan, federal government. These cover they have developed a joint Canada- environmental impact assessments, Alberta oil sands environmental stakeholder consultation and resource monitoring information portal. management. The industry in Canada is Alberta also has a public information collaborative, the regulatory framework is portal about water, air and progressive, and we are supporting biodiversity issues. government and industry initiatives to look at the cumulative impacts of oil sands developments. Regulatory agencies engage a range of For more information: stakeholders, including industry jointoilsandsmonitoring.ca, organizations such as the Canadian aemera.org and osip.alberta.ca Association of Producers, during the development of new regulations, in an effort to ensure that they are credible, appropriate and deliver the right outcomes. BP actively monitors emerging regulatory issues to enable us to be appropriately involved. Oil sands Issue briefing 4

Impact on the landscape BP and our partners in oil sands projects plan to use production techniques that reduce land disturbance and create a smaller physical footprint.

Water Steam assisted gravity drainage Water supply and management are key elements in planning a SAGD project. At Sunrise, we draw the water used to make steam primarily from underground aquifers and from non-potable water recycled from other operators. In planning our SAGD projects, BP is committed to maintaining a high level of water conservation. Our oil sands projects are being designed to meet or exceed regulatory requirements.

Technology BP is working to incorporate existing technologies and research new technologies and techniques to make further improvements. We are doing this in three Regulation requires completion of Well-to-wheels’ studies measure GHG ways: environmental impact assessments and emissions from producing the oil (well) management of identified issues. These through to combustion (wheels). A 2014 1. Company-specific initiatives: by playing regulations apply throughout the project life study by the independent energy consultant to BP’s strengths with initiatives cycle through project design, use of IHS Cambridge Energy Research focusing on carbon management, constraints mapping, comprehensive Associates® Inc. found that crude produced reservoir management, SAGD planning of activities, and ongoing from Canada’s oil sands by applying the enhancement, and energy and water reclamation of disturbances. SAGD technology used in BP’s projects is efficiency. Throughout our exploratory work at the around 8% more GHG intensive than the 2. Joint venture collaboration: by working Terre de Grace lease area we have promoted average crude refined in the US. with our partners on emissions the regeneration of habitat at sites where we We are working with our partners to reduction, water treatment technologies have completed our activity. This included reduce emissions. For example, we plan to and improving data modelling so that planting around 53,000 trees in 2014. develop further improvements through less exploratory drilling is required. Once a decision has been made by BP additional heat integration and recovery and its partners to proceed with the design techniques. 3. Industry associations: by progressing oil of a first project at Terre de Grace, we will We also aim to reduce our energy use at sands technology through collaborative assess the impacts of lease work by well sites, for example through insulating the industry bodies such as the Petroleum identifying and recording environmental, portion of the steam pipe where it first Technology Alliance of Canada, AACI (a social and economic constraints. The results enters the ground and before it reaches the consortium including the Alberta Energy will guide the placement of future facilities, oil sands. The use of solvents and other Research Institute, Alberta Research such as and pipelines, and will help additives can help the oil flow more Council and industry members) and determine how we can minimize impacts in effectively, which also reduces energy use Canada’s Oil Sands Innovation Alliance. the area. and emissions. The province of Alberta has a well- We are funding a heavy oil research understood and proven regulatory process facility at the University of Surrey in for the submission and approval of in situ oil to examine heavy oil chemistry and recovery sands projects. Project applications are processes. One of the key research areas is subject to strict regulatory scrutiny and are aimed at improving rates for thermal governed by laws such as the Alberta recovery methods such as SAGD. Environmental Protection and Enhancement Act, the Water Act, the Public Lands Act and the Oil Sands Conservation Act.

Greenhouse gas emissions A key concern around oil sands operations using SAGD is the amount of (GHG) emissions produced from steam generation. Oil sands Issue briefing 5

Managing community impacts Our oil sands projects, whether BP-operated or not, are being developed in consultation with affected local communities.

Building relationships with local communities We began building relationships with aboriginal communities in the oil sands region in 2010, the year we took an ownership stake in, and operatorship of, Terre de Grace leases. We encourage communities to provide feedback on our activities relating to the Terre de Grace project. We engage with local communities through update meetings, field site visits and through supporting local community events. We track stakeholders’ interests, issues and concerns in our stakeholder commitments register. The register logs Pike feedback on how issues are addressed and Our partner in the Pike project, Devon, has a resolved, as well as tracking any long history of operations in the area and is commitments made. This register will committed to engaging and consulting enable information to be shared and will aboriginal communities that could be highlight key tasks and follow-ups for action. potentially affected by the proposed project. BP recognizes that some aboriginal Meaningful consultation will enable Devon to communities living near Alberta’s oil sands understand the issues and concerns of the region, including First Nation and Métis, are aboriginal communities and will allow Devon concerned about the potential impacts of oil to address concerns identified during the sands development. BP is supportive of planning of the Pike project. ongoing dialogue between government, Devon also provides stakeholders with industry and all affected stakeholders, the opportunity to participate throughout the including aboriginal communities. consultation process. Community engagement Sunrise Our partner in Sunrise, Husky Energy, has consulted with aboriginal communities and other stakeholders since the early planning stages and will continue to do so throughout the life of the project. Husky has a stakeholder management strategy that outlines tools and accountabilities to achieve transparent and meaningful consultation. This plan encompasses aboriginal communities, local government, provincial and federal regulators, regional stakeholder groups, employees, unions and others. The framework provides a structure to identify and engage stakeholders. Husky also has an established commitments register to capture concerns, track responses, and implement mitigation commitments to stakeholder issues. Reports and publications This report is part of BP’s corporate reporting suite. We also report on our sustainability performance, and our financial and operating performance.

Sustainability Report Strategic Report Annual Report and Read the Sustainability Read a summary of our Form 20-F Report 2014 in print or read financial and operating Read details of our additional information performance in BP financial and operating online. Strategic Report 2014 in performance in BP bp.com/sustainability print or online. Annual Report and Form bp.com/summaryreview 20-F 2014 in print or online bp.com/annualreport

Unconventional gas and Statistical Review of issue World Energy 2015 briefing The BP Statistical Review of Read about BP’s approach to World Energy 2014 reports on unconventional gas and key global energy trends. hydraulic fracturing. bp.com/statisticalreview bp.com/unconventionalgas

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