bp sustainability review 2012

7/30/2019 BP Sustainability Review 2012

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Building a stronger,

saer BP

Sustainability Review 2012bp.com/sustainability

http://www.bp.com/sustainability




HSE charting tool Filter and analyse data on BP’s health,saety and environmental perormance.

Sustainability mapping tool Browse our mapping tool to nd outhow we are addressing sustainabilityissues locally.

Reporting standards We apply the Global ReportingInitiatives G3.1 guidelines to anA+ level and use IPIECA guidance.

Front cover

BP’s global deepwaterwell-capping and toolingpackage can be deployedin a matter o days toanywhere in the world inthe event o a deepwaterwell blowout.See page 12.

Building a stronger,

safer BP

SustainabilityReview 2012bp.com/sustainability

Covered online

C o n c e r n

t o

s t a k e h o l d e r s

Signicance to BP strategy

Not reported Included in theprint reportand online

About our report

In this Sustainability Review,we look at the impacts o ourbusiness on the environment,

the societies and the economieswhere we operate. We providean update on the Gul oMexico and how we areworking to enhance saety andrisk management and earnback trust.

Identiying issues to report

The scale o BP’s operations

means that we manage a largenumber o sustainability issues.Our materiality process helpsus to determine which issuesare the most relevant in ourreporting. We plot each identiedissue on our materiality matrix,and we develop our reporting onthe issues that we believe havethe highest level o importanceor our stakeholders and the

greatest potential impact on BP’sability to deliver its strategy.

This process is not an exact

science and we exercisejudgement in choosing what toreport on. We take account oexternal developments andexamine issues in their widercontext. We also ask people bothwithin and outside the companyto review the issues.

In 2012, issues alling within thehigher priority category includedemployee and contractor saety,

climate change, the geopoliticalcontext and drilling in deepwaterenvironments.

Find out more online

Our website,bp.com/sustainability ,includes detailed inormationabout our environmental,

social and saety perormancethrough additional data,commentary and casestudies.





Contents

BP Sustainability Review 2012

Contents

2 At a glanceWhat we do as a business and our keyperormance indicators.

4 Letter rom our group chie executiveBob Dudley reviews the actions being taken tomake BP a stronger, saer company.

6 How BP is changingOur programme initiated in response to the

Gul o Mexico accident in 2010.

7 Update on the Gul o MexicoRestoring the environment and economy inthe region.

10 The energy utureMeeting growing demand or energy whileaddressing issues such as climate change.

18 Our people and valuesBuilding the capability o our people, with a codeo conduct that is based on our values.

22 How we operateOur governance ramework, how we managerisk and our operating management system.

28 SaetyManaging saety and operational risk, includingmeasures to prevent accidents and oil spills.

34 EnvironmentInormation on greenhouse gas emissions,oil spills to the environment, water, waste,biodiversity and working in the Arctic.

40 SocietyOur socio-economic impacts, including nancialtransparency, working with host societies andcommunities, and human rights.

45 Our approach to reportingEngaging with stakeholders to develop the report– what we heard and how we are responding.

48 BP in guresData on our saety, environment, people andperormance, 2008-2012.

Overview

Focus areas

Our reporting and perormance data



At a glance


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Loss o primarycontainmenta

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Recordable injuryrequencya

Who we areWe aim to create value orshareholders by helping tomeet growing demand or

energy in a responsible way.Our activities also generate jobs, investment,inrastructure and revenues or governmentsand local communities. We operate in over80 countries.

Our priorities are to enhance saety andrisk management, earn back trust and growvalue. We strive to be a saety leader in ourindustry, a world-class operator, a responsiblecorporate citizen and a good employer.

We are working to build a stronger, saerBP that plays to its distinctive strengths andcapabilities: exploration, operations in deepwater, the managing o giant elds and gasvalue chains, and our downstream business.Innovative technology and strong relationshipswith governments, partners and communitiesaround the world underpin our activities.

This measures the number o reported

work-related incidents that result in a

atality or injury (apart rom minor rst aid

cases) per 200,000 hours worked.

This includes unplanned or uncontrolled

releases, excluding non-hazardous

releases, such as water rom a tank,

vessel, pipe, railcar or equipment used orcontainment or transer.

We report the number o spills o

hydrocarbons greater than or equal to one

barrel (159 litres, 42 US gallons). Weinclude spills that were contained, as well

as those that reached land or water.

We track our perormanceagainst nancial and non-nancialmeasures. We believe that thenon-nancial measures shownhave a useul role to play as leadingindicators o uture perormance.The symbol indicates thosemeasures that are refected in theannual bonus element o executivedirectors’ remuneration.

$1.0bninvested in alternativeenergy in 2012

$20.4bnoperating cash fow

55%

o hours workedin 2012 were bycontractors

85,700employees

Upstream

Our Upstream segment manages its exploration, development and production activitiesthrough global unctions with specialist areas o expertise.

Group perormance

First, we acquire exploration rights,then we search or hydrocarbonsbeneath the earth’s surace.

Once we have ound hydrocarbons,we work to bring them to the surace.

Our business model

Finding oil and gas

Developing and extractingoil and gas

BP at a glance

Our keyperormanceindicators

a This represents reported incidents occurring within BP’s operational HSSE reporting boundary.

That boundary includes BP’s own operated acilities and cert ain other locations or situations.

For more inormation on our businessmodel see bp.com/businessmodel

For the ull list o keyperormance indicatorssee bp.com/annualreport

http://www.bp.com/businessmodel

http://www.bp.com/annualreport


http://www.bp.com/businessmodel



At a glance


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Greenhouse gas emissions (million tonnes o CO2 equivalent)

Diversity and inclusionb (%)

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Group priorities engagement (%)

We report greenhouse gas emissions on a

CO2-equivalent basis, including CO2 and

methane. This represents all consolidated

entities and BP’s share o equity-accounted entities, except TNK-BP.

Each year we record the percentage o

women and individuals rom countries

other than the UK and the US among BP’s

group leaders.

We measure how engaged our

employees are with our strategic priorities

o saety, trust and value. This measure isderived rom 12 questions about

employee perceptions o BP.

7.2m tonnesbiouels – total sugar cane crushcapacity in Brazil per annum

1,558MWc

net wind generation capacity

We develop and invest in biouelsand wind. BP’s low-carbonbusinesses and investments inuture options are operated throughour Alternative Energy business.

c Excludes 32MW o capacity in the

Netherlands which is managed by our

Downstream segment.

Downstream

Our Downstream segment operates hydrocarbon value chains covering three mainbusinesses – uels, lubricants and petrochemicals.

We move hydrocarbons usingpipelines, ships, trucks and trainsand we capture value across thesupply chain.

We rene, process and blendhydrocarbons to make uels,lubricants and petrochemicals.

Transporting and trading oil and gas

Marketing uels and products

Manuacturing uels and products

Investing in renewable energy

We supply our customers with uel ortransportation, energy or heat and light, lubricantsto keep engines moving and the petrochemicalsrequired to make a variety o everyday items.

bRelates to BP employees.

Fuels

Lubricants

Petrochemicals

International oil andgas markets

Biouels



Letter rom our group chie executive


4

Whenever I visit a BP site, I am struck by the widerange o people involved in, and aected by, whatwe do. From employees, partners and suppliers togovernments, investors and those who live next toone o our acilities – everyone has high expectationso this company. We must ull those expectations,and meet our range o responsibilities, as we workto create a stronger, saer BP.

Our responsibilities include helping to address theworld’s growing need or energy. Some 100 yearsago society consumed energy at a rate o aroundtwo million tonnes o oil equivalent a day. Todaythe gure is closer to 32 million and we expectthat could rise to as much as 45 million by 2030,

i current trends continue.Behind these big numbers you nd a story ohuman progress. Reliable and aordable sourceso energy can help to improve many things, romliving standards to lie expectancy. Around theworld, a growing supply o energy is helping to litpeople out o poverty and increase opportunity.

From saety comes trustBP has an important contribution to make tothe changing world I have just described. But wecan only play our part i we start rom the solidoundation o sae and reliable operations.Following the Deepwater Horizon incident,our employees have worked systematically toenhance saety and risk management. And we

have turned the insights gained into new oil spillresponse plans and technologies, which we areadopting within BP and sharing with others.

As someone who has worked in the oil and gasindustry or more than 30 years, I know that riskcan never be entirely eliminated. But it can bemanaged eectively, and in increasinglysophisticated ways. The events o 2010 were atragic reminder that trust can take years to earnand just moments to lose. I am determined thiscompany will earn back and keep people’s trust.

We continue to meet our commitments to thepeople o the Gul states in the US. In 2012 wemade the nal payment into the $20-billion trustund, o which $9.5 billion has been distributed

to date. We continued to support environmentalresearch, and provided unding or the localtourism industry, with many areas having recordyears in 2012. We reached settlements with theDepartment o Justice and the Securities andExchange Commission, and are working withthe Environmental Protection Agency to resolvesuspension and debarment issues. As I write,legal proceedings are ongoing in New Orleans.

The Gul o Mexico is very important to BP. Ourcommitment to the restoration o aected areasand long-term investment in the regionwill continue.

Working around the worldWherever we operate around the world, BP keepsworking to develop strong relationships withgovernments and local communities. Thesocio-economic development, environment andother issues covered in this review are importantto BP and to me personally. They are essential indetermining whether people trust BP to operatein their area.

2012 marked a signicant change to ourrelationships in Russia when we agreed to sell our50% shareholding in TNK-BP to Rosnet, and takeour holding in Rosnet to 19.75%. On completion,the transaction will enable us to maintain a

strong position in the world’s largest oil and gasproducing country. We aim to share our expertisewith the Rosnet team as they work to transormthe company’s asset base, managementprocesses and corporate governance.

I would like to refect, with great sadness, on theterrible events that took place at the In Amenasjoint venture acility in Algeria in January 2013.Our thoughts are with the amilies and riends othose who lost their lives in the attack. We areworking with government agencies and others todetermine what can be learned rom this shockingincident.

Making choices or BPWe have made many changes to what we do andhow we do it, turning lessons learned into action.We have reorganized and reocused. The sale o$38 billion o assets is helping us to reducecomplexity and risk, and concentrate investmenton our areas o distinctive strength. And we haveset a new direction or the company based on aclear strategy.

Our aim is to keep building a BP that is wellmatched to the world’s evolving energy needs.Collaboration and systematic rigour will beincreasingly important as we tackle the toughtechnical, environmental and social challengesahead in areas such as deep water, giant eldsand unconventional gas. In unconventional gas,or example, hydraulic racturing can provide a sae

and secure source o energy i undertaken in theright way.

Along with providing much needed energy today,BP is helping to address longer-term issues relatedto energy use. For example, we apply a carbonprice to some o our new projects, and requireexisting operations to consider and implementcost-eective eciency measures. We inormdebate by conducting analysis and supportingresearch. We invest in biouels and wind becausewe think they can play an important role in thediverse energy mix required.

Our aim is to keep buildinga BP that is well matchedto the world’s evolvingenergy needs.

Bob DudleyGroup Chie Executive






Our strategy and sustainability

BP’s objective is to create value orshareholders and supplies o energy orthe world in a sae and responsible way.

We strive to be a saety leader in our industry,a world-class operator, a responsible corporatecitizen and a good employer. We are workingto enhance saety and risk management, earnback trust and grow value.

Keeping a relentless ocus on saety is a toppriority or us. Rigorous management o risk

helps to protect the people at the rontline,the places in which we operate and the valuewe create. We understand that operating inpolitically complex regions and technicallydemanding geographies, such as deep waterand oil sands, requires particular sensitivity tolocal environments. We continue to enhanceour systems, processes and standards,including how we manage the risks that canbe created by the actions o our contractorsand the operators o joint ventures in whichwe participate.

We can only operate i we maintain the trusto people inside and outside the company.We must earn people’s trust by being air andresponsible in everything we do. We monitorour perormance closely and aim to report ina transparent way. We believe good

communication and open dialogue are vital i weare to meet the expectations o our employees,customers, shareholders and the localcommunities in which we operate.

We are working to become a simpler business,with a clear ocus on what we do best. Ourdistinctive capabilities include exploration,operations in deep water, managing giant eldsand gas value chains, and our world-classdownstream business – underpinned bytechnology and relationships. Strong nancialperormance is vital because it enables us tomake the investments necessary to producethe energy that society requires, as well asto reward and maintain the support o ourshareholders.

By supplying energy, we support economicdevelopment and help to improve quality olie or millions o people. Our activities alsogenerate jobs, investment, inrastructureand revenues or governments and localcommunities. Our portolio includes lower-carbon options with the potential to make asignicant contribution, now and in the uture.

Inorming the big decisionsJust as BP is taking important decisions about itsstrategic priorities, so the wider world must makechoices about uture energy supply and use. Howshould a growing demand or energy be balancedwith the need to address rising greenhouse gasemissions? Is there the necessary political will toset a universal price or carbon? Will the research,development and deployment o importantlower-carbon energy technologies be givenadequate support? These and other questionsmust be considered as governments, business,non-governmental organizations and the publicwork together to set the right direction.

There are no easy answers and there is unlikely tobe agreement on all sides on every point, but it isessential that our debates and decisions are basedon a deep understanding o the issues involved,not sentiment. This is why, or example, BP isunding the Energy Sustainability Challenge, aconsortium o academics that is analysing thecomplex relationships between energy and naturalresources. Energy literacy is the key to making theright choices or the uture.

Moving orwardI believe a stronger and saer BP can make a vitalcontribution to growth and progress as the worlddevelops over the coming decades. There isplenty to do, as we work on our priorities o

enhancing saety and risk management, earningback trust and creating value. We intend to playa positive role in shaping the long-term uture oenergy. This Sustainability Review is part o awider commitment to engage with the world onwhat we do and how we do it. We aspire tocommunicate openly about our responsibilities,our actions and our perspectives on global energyissues as we move orward.

Bob Dudley

Group Chie Executive20 March 2013

Thunder Horse rig, Gul o Mexico, US.



6 How BP is changing


We have been implementing a wide-ranging programme to enhance saety and riskmanagement and earn back trust ollowing the Gul o Mexico accident in 2010.Here we report on progress to date.

How BP is changing

Saety and operational riskOur saety and operational risk (S&OR) unction is well established. S&ORsets our company-wide requirements or saety and operational riskmanagement and works alongside our businesses to strengthen andscrutinize their eorts towards greater conormance with our operatingmanagement system (OMS). To support this, S&OR is working to ensureour operating leaders are not only capable, but have a deep commitmentto ostering a strong saety culture. We continue to see examples o riskbeing mitigated as we improve our understanding and capabilities in themanagement o risk.

bp.com/saety

Risk managementWe have continued to embed enhancements to the clarity, simplicity andconsistency o the way we manage and report risks – rom our rontlineoperations to the board. In 2012, we ormed a new group risk team to holda view o the group’s risks, coordinate reporting activities o these risks, andmaintain BP’s overarching risk management system.

bp.com/riskmanagement

Upstream restructuringWe reshaped our Upstream business in 2010 with the aim o ostering thelong-term development o global teams by building specialist expertise and tocontinuously improve our management o risk. Signicant progress has beenmade over the past two years and we announced the appointment o a new

segment chie executive in 2012 to lead this business.

bp.com/saerdrilling

Values and behavioursOur values o saety, respect, excellence, courage and one team, refectthe qualities and behaviours that distinguish BP at its best. Our values areexplicitly linked to our code o conduct and we are urther embedding theminto our group-wide systems and processes, including our recruitment,promotion and development assessments.

bp.com/ourvalues

Contractor managementThe ndings o the best practice review o contractors that we conductedin 2011 are inorming our approach and, as a priority, we are identiyingand reviewing contracts that involve potentially high-consequence activities.We are seeking to deliver enhanced conormance with the aspects oour OMS that relate to working with contractors. Gaps in conormanceare identied and prioritized, with improvement plans built into the annualoperating plans o our businesses.

bp.com/workingwithcontractors

Individual perormance and reward

We have improved alignment between employee perormance andreward with our values and we have identied ‘saety’ and ‘taking along-term perspective’ as key indicators o individual perormance. Inannual perormance conversations, sta are asked to set priorities on theircontribution to saety, compliance and risk management. BP’s overallgroup perormance is used in determining individuals’ bonuses.

bp.com/ourpeople

TechnologyWe implemented a new common technology management practice toincrease the impact o technology, developed a new ramework or technicalcareer development, and rereshed our programme or technical advisorswho contribute expertise to our businesses. We have seven cross-businessscience networks, with around 500 members, which are investing in

29 research projects.

bp.com/technology

Non-operated joint venturesWe piloted a drat group policy in 2012 intended to promote consistency inidentiying, characterizing and reporting BP’s exposure rom new and existingnon-operated joint ventures and in how the management o that exposure isdocumented. We expect to issue the policy, which covers saety andoperational risk, as well as bribery and corruption risk, in 2013.

bp.com/ourjointventurepartners

http://www.bp.com/safety

http://www.bp.com/riskmanagement

http://www.bp.com/saferdrilling

http://www.bp.com/ourvalues

http://www.bp.com/workingwithcontractors

http://www.bp.com/ourpeople

http://www.bp.com/technology

http://www.bp.com/ourjointventurepartners

http://www.bp.com/ourjointventurepartners

http://www.bp.com/technology


http://www.bp.com/workingwithcontractors

http://www.bp.com/ourvalues

http://www.bp.com/saferdrilling

http://www.bp.com/riskmanagement




Update on the Gul o Mexico


More inormation online atbp.com/gulomexico

The Natural Resource DamageAssessment process.

Early restoration and otherconservation projects.

Updates on the investigationsand legal proceedings.

We continue to make signicant progress cleaningthe Gul shoreline and supporting economic andenvironmental recovery in aected areas. We aresupporting regional tourism and Gul seaood,and investing in the local communities througheducational programmes and enterprisedevelopment. Our goal is to provide a positive

legacy in these coastal communities.

We have ully unded the $20-billion trust weestablished in 2010 to provide assurance thatthe resources to pay claims, settlements, naturalresource damages and other costs would beavailable.

BP directly employs more than 2,300 people in theGul o Mexico and supports tens o thousands oadditional jobs in the region. We expect to investat least $4 billion a year in oil and gas developmentin the Gul o Mexico over the next 10 years.

Enhancing saetyWe took signicant steps to urther enhancesaety and risk management in our Gul o Mexicooperations in 2012, and continued to implementrecommendations rom our internal investigationinto the Deepwater Horizon accident.

Following the settlement with the US governmento all ederal criminal claims related to the Gulo Mexico, BP has agreed to appoint a processsaety monitor in the US or a term o our years.The monitor will review, evaluate, and providerecommendations or the improvement o BP’sprocess saety and risk management proceduresconcerning deepwater drilling in the Gul oMexico. For more inormation on our USsettlements or criminal and securities claims seebp.com/uslegalproceedings .

We are helping economic and environmental restoration eortsalong the Gul Coast as part o our ongoing commitment to theregion ollowing the Deepwater Horizon accident in 2010.


BP is supporting two o the region’s most vitalindustries – tourism and seaood.

In this section

$179mcommitted to Gulstates to supporttourism rom 2010to 2013.

2,300+

employed in the Gulo Mexico.

http://www.bp.com/gulfofmexico

http://www.bp.com/uslegalproceedings







Restoring the environmentIn 2012 we continued to work with state andederal trustee agencies through the NaturalResource Damage Assessment (NRDA) processto evaluate the potential or injury to wildlie andhabitat, and the recreational use o theseresources. The ederal and state trustees haveresponsibility or the process and BP is aparticipant. The study data will inorm anassessment o injury to the Gul Coast natural

resources. Detailed analysis and interpretationcontinue on the data that has been collected.

The trustees have already made some o thedata sets rom these studies available onlinewhile others are still being nalized. BP seeksto share data and inormation collected rom thecooperative NRDA studies once these havebeen approved or release by the trustees.

While the injury assessment process is stillongoing, restoration has already begun. BP hasunded several dierent types o restorationprojects. In 2012 work began on the initial set oearly restoration projects identied through anagreement BP signed with state and ederaltrustees in April 2011. The projects, expected to

cost approximately $60 million, aim to collectivelyrestore and enhance wildlie, habitats, theecosystem services provided by those habitats,and provide additional access or shing, boatingand related recreational uses.

The trustees also approved two additional projectsin December 2012, which are designed to improvenesting habitat or birds and loggerhead seaturtles. Funding comes rom the $20-billion trust.

Completing the responseIn November 2011, the US Coast Guard’sederal on-scene coordinator (FOSC) approvedthe shoreline clean-up completion plan, which

describes the rigorous process or determiningi shoreline segments can be moved out ooperational activity. By the end o 2012, the FOSChad deemed removal actions complete on 4,029miles (6,484km) o shoreline out o the 4,376miles (7,043km) that were in the area o response.Approximately 108 miles were pending nalmonitoring or inspection and a determination thatremoval actions are complete. The remaining 239miles are in monitoring and maintenance, which

will continue until the FOSC determines thatoperational removal activity is complete.

Hurricane IsaacIn August 2012, Hurricane Isaac made landall onthe Gul Coast, uncovering residual oil in someareas in Louisiana. The residual oil had beenburied when tropical storms in 2010 and 2011deposited several eet o sand. In many instances,net environmental analyses had indicated thatdeep cleaning at these sites could do more harmthan good. But once Isaac removed this sandoverburden, clean-up crews were able to cleanthe exposed residual material without the samedegree o potential environmental impact.

Supporting long-term research

BP has committed $500 million over 10 yearsto und independent scientic research throughthe Gul o Mexico Research Initiative. The goalo the initiative is to improve society’s ability tounderstand, respond to and mitigate the potentialimpacts o oil spills to marine and coastalecosystems. The BP unding will cover grantawards and administrative costs. As o the end o2012, the Gul o Mexico Research Initiative hadawarded $184 million in grants. Grant recipientsare investigating the ate o oil releases; theecological and human health aspects o spills; andthe development o new tools and technology oruture spill response, mitigation and restoration.

We are working with state and ederal trustee agencies to evaluateinjury to natural resources and are supporting long-term research intothe potential impacts o oil spills on ecosystems.

Gul o Mexico restoration

200+

initial and amended workplans developed sinceMay 2010 to assess injuryto natural resources.

$

184mawarded to und researchto better understand theGul ecosystem.

The Gul Coast accounts or about 18% o theUS’s total commercial seaood landings. Shrimpand oyster supplies are particularly heavilyconcentrated in the Gul.

Michael Taylor Deputy Commissioneror Foods, US Food and DrugAdministration

A great deal o eort was invested ater theGul spill so that we could provide an answerto one question: Is Gul seaood sae to eat?Yes, Gul seaood is sae to eat, and it is saeto eat or everyone.





Restoring the economyOur Gul Coast economic recovery eorts haveocused on paying all legitimate claims andsupporting two o the region’s most vital industries– tourism and seaood.

From 2010, BP has supported Gul Coast tourismby committing $179 million through to 2013 toAlabama, Florida, Louisiana and Mississippi orregional and national tourism campaigns aimedat attracting visitors to the Gul Coast. Another$57 million is being given to non-prot groups andgovernment entities to promote the tourism andseaood industries as part o the Plaintis’ SteeringCommittee settlement. Preliminary data rom the

National Oceanic and Atmospheric Administration(NOAA) indicates that recreational shing, whichis an important source o tourism and a signicantcontributor to the Gul economy, continued torecover in 2012, ollowing a strong year in 2011.

BP is also supporting the seaood industry acrossthe Gul region. By the end o 2012, we had paidor committed to pay $82 million to Alabama,Florida, Louisiana and Mississippi or state-ledseaood testing and marketing programmes. Thisis in addition to resolving legitimate claims madeby those in the shing and seaood processingindustry.

Although research and monitoring continues,many experts believe Gul o Mexico seaood

is making a strong recovery. Based on governmenttesting results and commercial landings inormation,Gul seaood is sae to consume and availablein numbers comparable to pre-accident levels.According to data rom NOAA, commercialseaood landings in the Gul in 2011 reachedtheir highest levels since 2000, although theresults varied by state and by species.

Claims paymentsWithin weeks o the Deepwater Horizon accident,BP began paying compensation or legitimateclaims or damages resulting rom the accident.Since May 2010, BP has paid a total o $8.2 billionto individuals and businesses through variousclaims processes, with $1.9 billion being paid in

2012. BP has paid almost $1.4 billion or claims,advances and settlements with governmententities.

Agreement with the US government

BP reached an agreement with the US governmentin November 2012 to resolve all ederal criminalclaims arising out o the Gul o Mexico incident.BP pleaded guilty to 11 elony counts o misconductor neglect o ships ocers relating to the loss o11 lives; one misdemeanour count under theClean Water Act; one misdemeanour count underthe Migratory Bird Treaty Act; and one elonycount o obstruction o Congress.

Dwayne Baraka Business Support andDevelopment Director,Business in the Community

I’d like to know more about the outcomes ospecic investments BP has made in localcommunities, so that we see whether BP’seorts have eciently maximized creation osocial and environmental value. Stakeholderswill rightly demand to know whether it hasused the restoration budget to x theproblems created by the incident. Othercompanies could learn a lot rom BP’sexperiences in the Gul o Mexico, so moredetail would be welcome.

Preliminary data rom the National Oceanic andAtmospheric Administration indicates thatrecreational shing continued to recover in 2012.

BP will pay $4 billion – including criminal nes andpayments to the National Fish & Wildlie Foundationand to the National Academy o Sciences – overa period o ve years. The court also ordered,as previously agreed with the US government,that BP serve a term o ve years’ probation.

BP has agreed to take additional actions,enorceable by the court, to urther enhance thesaety o drilling operations in the Gul o Mexico.These include BP’s risk management processes,such as third-party auditing and verication, training,and well control equipment and processes such asblowout preventers and cementing.

BP also reached a settlement with the US Securities

and Exchange Commission (SEC) in November2012, resolving the SEC’s Deepwater Horizon-related civil claims. BP has agreed to a civil penaltyo $525 million, and to an injunction prohibitingit rom violating certain US securities laws andregulations. BP made its rst payment o$175 million in December 2012.

The US Environmental Protection Agency (EPA)announced in November 2012 that it hadtemporarily suspended BP p.l.c. and other BPcompanies rom participating in or receiving newederal contracts, or renewing an expiring one.The suspension does not aect existing contractsBP has with the US government, including thoserelating to current and ongoing drilling and

production operations in the Gul o Mexico.In February 2013, the EPA issued a notice omandatory debarment to a BP group company,thus eectively preventing it rom entering intonew contracts or leases with the US government.We continue to work with the EPA to resolvesuspension and debarment issues.

Legal proceedingsThe Plaintis’ Steering Committee (PSC) acts onbehal o individual and business plaintis in themulti-district litigation proceedings pending inNew Orleans.

In April 2012, BP announced we had reacheddenitive and ully documented agreements withthe PSC to resolve the substantial majority oeligible private economic loss and medical claimsstemming rom the Deepwater Horizon accidentand oil spill. These agreements were approved bythe court in December 2012 and in January 2013,although BP is challenging a recent ruling by thecourt regarding the interpretation o certain protocolsestablished in the economic and property damagessettlement agreement.

The rst phase o a trial o liability, limitation,exoneration and ault allocation commenced inNew Orleans in February 2013.

For more inormation about ongoing legalproceedings see bp.com/uslegalproceedings





10 The energy uture


Today’s challenge is to manage and meet growing demand orsecure, aordable energy while addressing climate change andother environmental and social issues.

The energy uture

Our goals

We seek to engage withgovernments, universities andothers to address the energychallenge.

We aim to address potentialuture regulation by actoring a

carbon cost into our investmentappraisals and engineeringdesigns or new projects whereappropriate.

In our hydraulic racturingoperations, we seek to applyresponsible well design andconstruction, surace operationand fuid-handling practices.

In this sectionRegional climatemodel used to inormlandslide and soilerosion risks at theSouth CaucasusPipeline.

$1.0bninvested in biouelsand wind.

SA8000Brazilian sugar canemill certied to thelabour standardSA8000.

West Azeri rig operator, AzerbaijanOil and natural gas will play a signicant part inmeeting energy demand or decades to come.



The energy uture


Meeting the energy challenge

With population and incomes projected to rise, the global energychallenge is to manage and meet demand aordably, sustainablyand securely.

Craig MackenzieHead o Sustainability,Scottish Widows

Investment Partnership

There are two core contributions the oil andgas industry can make in the context oclimate change. By displacing coal in powergeneration, natural gas can help reduce globalcarbon emissions in the next ew decades.Longer term it’s harder to square the growthin oil and gas with action on climate change.To secure its uture in a carbon-constrainedworld, the oil and gas industry needs to givepriority to accelerating action on carboncapture and storage.

80%

More than 80%o global oil reservesare in nine countries.

36%

Expected increase inenergy demand by 2030.

a From World Energy Outlook 2012 . ©OECD/International Energy

Agency 2012, page 553. The IEA’s 450 policy scenario assumes

governments adopt commitments to limit the long-term

concentration o greenhouse gases in the atmosphere to

450 parts-per-million o CO2 equivalent.

The challengePopulation and economic growth are the maindrivers o global energy demand. The world’spopulation is projected to increase by 1.3 billionrom 2011 to 2030, with real income likely todouble over the same period. These actorswill lead to increased energy demand andconsumption. Energy and climate policies,eciency gains and a long-term structural shit inast-growing economies away rom industry andtowards less energy-intensive activities will helpto restrain any increase, but the overall trend islikely to be one o strong growth. We expectdemand or energy to increase by as much as

36% between 2011 and 2030, with nearly 93%o the growth to occur in non-OECD countries.

While energy is available to meet growingdemand, action is needed to limit carbon dioxide(CO2) and other greenhouse gases being emittedthrough ossil uel use. Burning o ossil uels canalso raise local and regional air quality issues.

Energy security represents a challenge in its ownright. More than 60% o the world’s knownreserves o natural gas are in just our countries,and more than 80% o global oil reserves arelocated in nine countries, most o which are wellaway rom the hubs o energy consumption.

Meeting growing demand or energy that issecure and sustainable will also present an

aordability challenge as the availability o easilyaccessible ossil uels slowly diminishes, withmany low-carbon resources remaining costly toproduce at scale.

We believe that governments must set a stableand enduring ramework or the private sector toinvest and or consumers to choose wisely.Governments need to provide secure access orexploration and development o energy resources;dene mutual benets or resource owners anddevelopment partners; and establish and maintainan appropriate legal and regulatory environment.

Energy eciencySaving energy through greater eciencyaddresses several issues. It helps withaordability – because less energy is needed.It helps with security – because it reducesdependence on imports. And it helps withsustainability – because it reduces emissions.Innovation can play a key role in improvingtechnology design, process and use o materials,bringing down cost and increasing eciency.In transport, or example, we believe thatecient combustion engines and power traintechnologies, combined with the use o biouels,could oer the most eective pathway to asecure, lower-carbon uture. For these reasons,we expect eciency to remain high on theagenda through to 2030.

A diverse mixWe believe that, increasingly, the global energychallenge can only be met through a diversemix o uels and technologies. A broad mix canenhance national and global energy security whilesupporting the transition to a lower-carboneconomy. This is one reason why BP’s portolioincludes oil sands, shale gas, deepwater oil andgas production, biouels and wind.

Oil and natural gasOil and natural gas are likely to play a signicantpart in meeting demand or several decades tocome. We believe these energy sources willrepresent about 53% o total energy consumption

in 2030. Even under the International EnergyAgency’s most ambitious climate policy scenario(the 450 scenarioa), oil and gas would still makeup 50% o the energy mix in 2030.

We expect oil to remain the dominant source ortransport uels, accounting or as much as 90%o demand in 2030.

Natural gas, in particular, is likely to play anincreasingly strategic role. It is a lower-carbonuel that is increasingly secure and aordable.When used in place o coal or power, it canreduce CO2

emissions by hal.

New sources o hydrocarbons are more dicultto reach, extract and process. This will require

BP, and others in our industry, to develop newtechnologies to boost recovery rom decliningelds and commercialize currently inaccessibleresources. Greater energy intensity could berequired to extract these resources, which meansoperating costs and greenhouse gas emissionsrom operations are likely to increase.

RenewablesRenewables, such as biouels and wind energy,will play a major role in addressing the challengeso energy security and climate change over thelong term. Renewables are already the astest-growing energy source, however, they arestarting rom a low base. With a ew exceptions,renewables are not yet competitive withconventional power and transportation uels.

Sucient policy support is required to helpcommercialize eective lower-carbon options andtechnologies, but renewables will ultimately needto become ree rom subsidy and be commerciallysel-sustaining.

For inormation on BP’s approachto large-scale carbon storagesee bp.com/casestudies

http://www.bp.com/casestudies

http://www.bp.com/casestudies



The energy uture


Our deepwater drilling operations and uture growth opportunities

Deepwater drilling operationsand opportunities

Countries where we operate

12

Deepwater production is a challenging rontier anda key element o our strategy.

Deepwater oil and gas

BP’s state-o-the-art acility in Houston monitorsrig operations in the Gul o Mexico, US.

Deepwater oil and gas resources are an importantpart o the energy mix. They account or around6% o global oil production, a gure that isexpected to rise to nearly 9% by 2030.

BP is integrating engineering, technology andoperations to work saely and eciently indeepwater environments. We have deepwaterdrilling operations in the Gul o Mexico, Angola,Egypt and Brazil and we are also pursuing urtherdeepwater growth opportunities in Australia,Canada, India, Indonesia, Libya, Namibia, Trinidad& Tobago, the South China Sea, the UK andUruguay.

Drilling or and producing oil and gas rom

deepwater reservoirs creates many engineeringand technical challenges. The oil and gas reservoiritsel can be as much as 35,000 eet (10,660metres) below sea level, under kilometres o hardrock, thick salt and tightly packed sands. Once oiland gas are discovered in a deepwater eld,massive production platorms and speciallydesigned systems and pipelines are required toextract and transport the oil and gas to shore.

Implementing lessons learnedrom the Gul o Mexico accidentBP has been working to centralize and standardizeour approach to drilling standards and projectsoversight with the establishment o the globalwells organization (GWO) and the global projects

organization in 2011. The GWO employs morethan 2,000 people, bringing unctional wellsexpertise into a single organization with commonglobal standards. The GWO works with our saetyand operational risk unction with a view toreducing risk in drilling.

Since July 2011, BP has implemented enhanceddrilling standards or operations in the Gul oMexico. These standards on blowout preventers,cementing and oil spill response capabilities,exceed existing regulatory requirements in theUS and strengthen oversight o contractors.

For more inormation on saer drillingsee page 32.

Mobile well cap or BP operationsWe are advancing our capability to respond topotential incidents and work with our industryto urther enhance access to equipment andtechnologies around the world. BP’s global

deepwater well-capping and tooling package isstored in Houston and can be deployed in a mattero days to anywhere in the world in the event oa deepwater well blowout. The equipment isdesigned to operate in water depths o up to10,000 eet. It includes a remotely operatedvehicles intervention system, a subsea dispersantinjection system and subsea debris removalequipment and a deepwater well cap.

We continue to work with governments,regulators and the industry to share lessonslearned rom the Deepwater Horizon accidentand how they can be applied in deepwateroperations around the world.

For more inormation on how we are

sharing lessons learned see page 27.

Monitoring saety andenvironmental issues

We have a number o technologies to help us tomonitor saety and environmental issues in ourdeepwater drilling operations.

BP Well AdvisorBP Well Advisor is a suite o tools to monitorconditions in the well. It uses real-time operationaldata to monitor saety-critical operations andequipment. It can thereore help drilling, rig andplatorm operators to make inormed and timelydecisions, enhance operational saety and integrity,and improve drilling eciency. We used BP Well

Advisor in Azerbaijan, the North Sea and Brazil in2012.

Houston monitoring centreOur Houston monitoring centre is a state-o-the-artacility that provides an additional level o assuranceto oshore teams on our operated rig operationsin the Gul o Mexico. With real-time inormationeeds, live video and constant communicationwith colleagues on the rigs, teams at the acilitymonitor data rom drilling operations 24 hoursa day. Onshore experts can escalate issues upthe chain o command oshore i they spotpotential incidents.



The energy uture


Hydraulic racturing process

Water tankersFracturing fluid is

pumped into the

well head

Water table

Well is

isolated

with cement

7,000 ft

Shale

Recovered water is

stored in lined pits

and/or tanks

Wastewater is recovered

for treatment, reuse

or disposal

Storage tanks

Fissure

Well

Gas flows along

well from fractures

By our estimates, natural gas will meet around26% o total global energy demand by 2030.Unconventional gas is situated in rocks withextremely low permeability, which makesextracting it more dicult. New technologiesare making it possible to extract unconventionalgas resources saely, responsibly and economically.BP has unconventional gas operations in the US,Algeria, Indonesia and Oman.

Hydraulic racturing (sometimes reerred to as‘racking’) is the process o pumping water, mixedwith a small proportion o sand and chemicals,underground at a high enough pressure to split therock and release natural gas that would otherwise

not be accessible.Some stakeholders have raised concerns about thepotential environmental and community impacts ohydraulic racturing. BP recognizes these concernsand seeks to apply responsible well design andconstruction, surace operation and fuid-handlingpractices to mitigate these risks.

The chemicals used in theracturing processWater and sand constitute on average 99.5%o the injection fuid. This is mixed with chemicalsto create the racturing fuid that is pumpedunderground at high pressure to racture the rockwith the sand propping the ractures open. Someo the chemicals used in the process are classied

as hazardous materials, and each chemical usedin the racturing process is listed in the materialsaety data sheets at each site, which detail saedosage limits. We submit data on chemicals usedat our hydraulically ractured wells in the US atracocus.org .

Natural gas resources play an increasingly important role in supplyinglower-carbon uel or a growing energy demand.

Unconventional gas and hydraulic racturing

26%

Natural gas will meetaround 26% o totalglobal energy demandby 2030.

BP’s gas well drilling site in Wamsutter,Wyoming, US.

Managing water and other fuidsBP wells and acilities are designed, constructedand operated to mitigate the risk that natural gasand racturing fuids enter underground aquiers,including drinking-water sources.

Large amounts o water are needed to drill andracture unconventional gas wells. This has ledto concerns being raised about water extraction,transportation and usage, particularly in areasexperiencing water shortage.

BP is trialling a number o water-saving innovationsto minimize the amount o resh water used,including new technologies that could make it

possible or us to treat water used in racturingor re-use in our operations.

Greenhouse gas emissionsQuestions have been raised about the greenhousegas emissions associated with the liecycle onatural gas development. We have inventoried andmanaged methane and hydrocarbon emissionsrom our US onshore natural gas operations ormore than a decade. The methane emissions thatwe estimate rom our operated US onshore naturalgas assets are about a third o the level estimatedby the US Environmental Protection Agency ormethane emissions rom the US onshore naturalgas production segment.

To minimize greenhouse gas emissions at our sites,

we use natural gas or electricity instead o morecarbon-intensive conventional uel sources topower operations at sites where these energysources are readily available and aordable.

Seismic activityHydraulic racturing creates microseismic events, butthe magnitude o these is generally too small to bedetected at the surace. In rare cases, when existingaults are activated, hydraulic racturing could induceseismicity equivalent to the vibrations o trucks. Weevaluate industry-recommended guidance oravoiding induced seismicity and we apply thesepractices to our operations as appropriate.

Community impacts

The development o unconventional resourcesis moving energy companies into new and otenmore populated areas. Increased trac, noise,dust, light and air pollution, visual impacts,disruption o wildlie and habitat, and increasedpressure on the local inrastructure, are some othe potential impacts.

In the early stages o our projects, we assess thepotential impacts o our operations on the localcommunities. We engage with those communitiesthroughout the liecycle o our operations. Weprovide inormation about our activities to thepublic, and we identiy and respond to concerns.We also try to maximize our local hiring.

http://www.fracfocus.org/

http://www.fracfocus.org/



The energy uture


Surface wellheads

Producing well

Steam injection well

100-500mSteamBitumen

Steam zone

of influence

800m

14

Canada’s oil sands have the third-largest crudeoil reserves in the world, ater Saudi Arabia andVenezuela. Mainly located in the province oAlberta, the oil sands are a natural mixtureo sand, water, clay and bitumen. They are oundat varying depths and in some cases are directlyexposed at the surace.

Our oil sands projectsBP is involved in three oil sands lease areas, all owhich are located in Alberta. The Sunrise EnergyProject, which is currently under construction, isoperated by Husky Energy and production isexpected in 2014. The Pike and Terre de Gracelease areas are currently under appraisal or

development. The operator or Pike is DevonEnergy and we are the operator o Terre de Grace.

Responsible management andoversightOil sands developments are subject tocomprehensive requirements as set out byregulatory agencies in Alberta and includerequirements or environmental impactassessment, stakeholder consultation andresource management.

The projects are managed through governancecommittees, with representation rom BP andour partners. The committees meet quarterly toassess whether the projects are proceeding in line

with the direction set by their members. Wherethe operator is not BP, the operator is required toprovide timely reporting on various nancial,operational, environmental and saety metrics,all o which are benchmarked against BPperormance expectations.

We are a member o Canada’s Oil SandsInnovation Alliance, an alliance o oil sandsproducers ocused on improving environmentalperormance in the country’s oil sands.

With our partners, BP is working to extractthis vast resource responsibly and transparently.

Oil sands

BP employees visiting the Terre de Grace lease inAlberta, Canada.

Steam-assisted gravity drainage

Impact on the landscapeIn our oil sands projects, whether operator or not,BP plans to use in situ drilling technology calledsteam-assisted gravity drainage (SAGD). Thisproduction technique, which involves pumpingsteam into the reservoir through a horizontal wellto heat and make the bitumen fuid, reduces landdisturbance. In situ processes create a smallerphysical ootprint and, unlike mining, do not requiretailings ponds.

Greenhouse gas emissionsA key concern around oil sands operations that useSAGD is the amount o greenhouse gas (GHG)

emissions produced rom steam generation andprocessing. BP has a technology plan and we areworking with our partners to enhance processesor to create new ones to reduce GHG emissions.

The projects in which BP invests intend to usehigh-eciency steam generation systems andequipment congurations to reduce energy usage.Carbon capture and storage is also being evaluatedas a long-term mitigation opportunity.

WaterOil sands development is water intensive. Watersupply and management are key elements inplanning a SAGD project. We plan to draw thewater used to make steam primarily romunderground aquiers and, where possible,

non-potable water will be used. Access to watersources, use o water and disposal o wastewaterare all heavily regulated in Alberta. Each o the oilsands projects in which we are participating isbeing designed to meet or exceed regulatoryrequirements.

Local communitiesConsultation with local communities isundamental to the way BP does business andit is built into our operating management system.It is also a key component o the Canadiangovernment’s regulatory approval process. In 2012BP continued consulting and building relationshipswith aboriginal groups in the area surrounding ourTerre de Grace lease.

Our partner in, and operator o, the Sunrise EnergyProject, Husky Energy, consults with aboriginalcommunities and other stakeholders and willcontinue to do so throughout the lie o the project.Husky has a stakeholder management strategythat outlines tools and accountabilities to achievetransparent and meaningul consultation.

Devon Energy, our partner in the Pike project,has a long history o operations in the area andhas well-established systems that provide clearinormation on the projects. Devon Energyprovides stakeholders with the opportunityto participate throughout the process.



The energy uture


Renewable energy is the astest growingsegment o the global energy industry, with BP’sorecasts showing around 7.6% growth each yearbetween 2011 and 2030. To support this growth,we believe appropriate government policy andtransitional incentives are necessary to encourageproduction while lowering costs.

BP is investing in biouels and wind as well as innew technologies that could create new optionsor growth. In total, we invested $1 billion in ouralternative energy businesses in 2012, bringingour total investment since 2005 to $7.6 billionand moving us closer to early ullment o thecommitment we made to invest $8 billion by 2015.

BiouelsWe are investing in biouels that we deem to beaordable, low carbon, sustainable and scalable.Our three sugar cane ethanol mills in Brazil hada crushing capacity o 7.2 million tonnes o sugarcane in 2012, and we are working towardssignicantly expanding this business.

At our Tropical sugar cane operations in Edéia,Goiás state, we are increasing production capacityand planting more sugar cane. The expansion,which is due or completion by early 2015, isexpected to double Tropical’s ethanol processingcapacity and create around 7,650 direct andindirect jobs. Our biouels joint venture in the UK,Vivergo Fuels, began production in 2012.

Our Tropical operation was one o the rst suchoperations in the world to be certied underSA8000, the international standard or socialaccountability. We are working towards SA8000at our other two operations in the country.

Advanced biouels developmentIn 2012 we cancelled plans to build a commercial-scale cellulosic ethanol plant in Florida andreocused our cellulosic strategy on research,development and technology licensing. At ourbiouels research acility in San Diego, Caliornia,our researchers are working to develop moreadvanced biouels or the uture. Some o their keydiscoveries are now moving towards commercialproduction. During the London 2012 Olympic and

Paralympic Games we provided three cutting-edge biouels – cellulosic ethanol, biobutanol andsugar-to-diesel – in demonstration quantities,blended with BP Ultimate , at pumps that servedthe ocial games feet. There was no need orany modication o the vehicles’ engines.

Certiying that biouels are sustainableAs well as producing our own biouels, BPpurchases and blends signicant quantities obiocomponents produced by other operators intouels or markets, including the US and Europe,where policies require that gasoline and diesel soldto motorists include a proportion o biouels.

By 2030 we estimate renewable energy is likely to meet around6% o total global energy demand.

Alternative energy

Marcos Fava Neves Proessor, School oEconomics and Business,University o São Paulo

The ood versus uel debate has come at amoment when several actors are workingtogether to aect supply and demand orgrains, but science is showing that the debateabout ethanol and ood is not the mostrelevant debate. Agriculture can answer thedemand or ood, uel, plastics and severalother types o products that require armland.It just needs more investment and innovationrom companies like BP to increaseproductivity and improve logistics, especiallyin South America and Arica where there isavailable land. Biouels are important toproduce empowerment or armers, toprotect the environment and to spread wealthand income in poor and emerging economies.

For purchased biouels, BP aims to comply withall biouel sustainability legal requirements incountries where such regulations are in place.Elsewhere, we encourage our suppliers to meetvoluntary sustainability standards, such as thoserom the Roundtable or Sustainable Palm Oil.

BP is a member o the board o Bonsucro.The Bonsucro standard certies the sustainableproduction o sugar cane and the scheme includescriteria that addresses the impact on humanrights and the environment. Our Tropical biouelsoperation in Brazil achieved Bonsucro certicationin 2012, and we are working to achieveBonsucro certication at all our sugar cane mills

in the country.

WindBP has built up one o the leading windbusinesses in the US. We have 16 wind arms innine states and completed construction o newwind arms in 2012 in three states – Kansas,Pennsylvania and Hawaii. Together, our windarms have the capacity to generate enoughelectricity to power 780,000 American homes.

Wind arms can bring tangible economic benetsto rural communities. So ar, BP’s wind projectshave created more than 4,200 construction jobsand around 200 permanent jobs. Our windprojects also support local economies throughroyalty payments to landowners and tax payments

to local authorities.

Wind energy policy in the USTechnological advances spurred by policy supportand private investment have helped to bring downthe costs o wind electricity productionsignicantly in recent years.

The production tax credit or wind projects in theUS has helped to uel this boom, creating a wholenew supply chain and encouraging companies toinnovate. BP believes that the recent extensiono this tax credit was necessary to underpin thecontinued development o the US wind industry,and supports a structured expiration o this credit.

Emerging business and ventures

BP is partnering with technology start-ups andventure capital rms with a goal o speeding upbreakthrough innovations in areas o strategicimportance to our company.

These ventures span a range o specializedinnovations and technologies, each with thepotential to provide new business options or toenhance BP’s existing oil and gas operations. Forexample, we have invested in Skyonic, a companywhose innovative carbon-capture technology canbe retrotted onto power plants and otherindustrial acilities.



The energy uture


16

The situationAccording to the Intergovernmental Panel onClimate Change (IPCC), warming o the climatesystem is happening, and it is in large part theresult o an increase in greenhouse gas emissionsand their concentrations in the atmosphere. TheIPCC believes that warming o the climate is likelyto lead to extreme weather events becomingmore requent and unpredictable. Results rommodels assessed by the IPCC suggest that tostand a reasonable chance o limiting warming tono more than 2˚C, global carbon dioxide (CO2)emissions need to peak beore 2020 and be cutby between 50-85% by 2050.

The challengeBP projects that with known and probable policyand technology developments, global CO2

emissions rom ossil uels may be 26% higherin 2030 than they were in 2011, partly as aconsequence o coal use in rapidly growingeconomies. These are projections o what wethink is likely to happen, not what we would liketo see.

More aggressive, but still plausible, energy policyand technology deployment could lead to slowergrowth in CO2 emissions than expected, withgreenhouse gas (GHG) emissions rom energy usealling ater 2020 – but probably not enough to limitwarming to no more than 2˚C. The International

Energy Agency has acknowledged that its 450scenario (see page 11), which would put the worldon a lower-carbon trajectory, looks increasinglyunlikely.

There are several reasons why achievingsubstantial and rapid GHG emissions reductionswill be challenging. Some potentially importantlower-carbon technologies – including electricvehicles and carbon capture and storage – still acesignicant technology, logistical, inrastructure andcost challenges.

Concerns about nuclear power have grown inmany countries ollowing the Fukushima disasterin Japan. And worries about the cost o renewabletechnologies have led some governments to

reduce their levels o support. In the meantime,the GHG intensity o oil and gas extraction andproduction looks likely to increase, with the movetowards resources that are harder to access.

The scale o the challenge is such that it can onlybe met through governments acting to provide aclear stable ramework or the private sector toinvest and or consumers to choose wisely.

Global economic challenges have reduced theocus o some governments on climate policy,at least in the short term. But the commitment byboth developed and developing countries at theUN’s most recent climate change conerence in

Doha to negotiate an agreement by 2015 thatrequires action rom all countries by 2020,suggests that an emphasis on carbon policymay return.

Our view on the policy prioritiesWe believe that the most eective way toencourage companies to nd, produce anddistribute diverse orms o energy sustainablyis to oster the use o markets that are openand competitive, and in which carbon has a price.

Our view is that putting a price on carbon – onethat applies economy-wide and treats all carbonequally, whether it comes out o an industrial

smokestack or a car exhaust – will make energyeciency and conservation more attractive tobusinesses and individuals, and help lower-carbonenergy sources become more cost competitivewithin the energy mix. While a global price wouldbe most economically ecient, regional andnational approaches are a necessary rst step,provided temporary nancial relie is given todomestic industrial sectors that are trade exposed.

We also support:

• Energy efciency – policies that emphasizeeciency in production and energy use asreducing the amount o energy used can havea material impact on GHG emissions.

• Lower-carbon technologies – transitional

support or high-potential energy technologies,such as biouels and wind energy, to incentivizetheir development and accelerate theirdeployment.

• Technology research and innovation –policies that prioritize and acilitate researchand development to provide low-carbonoptions or the uture.

Sharing BP’s experience o carbontrading programmes with ChinaChina has decided to start carbon trading pilotprogrammes in seven provinces and cities.We have worked alongside other companies,non-governmental organizations, and Chinese

central and provincial authorities to shareinormation and lessons learned rom our ownexperience o carbon trading, including BP’sinternal trading scheme and direct participationin the EU Emissions Trading Scheme, as wellas national trading schemes.

Addressing the global challenge o climate change will require theeorts o governments, industry and individuals.

Climate change

A: Over the past 15 years we’ve had theopportunity to try a number o approachesto managing carbon risk, so we have a loto experience o what works and whatdoesn’t. We’re convinced the mosteective approach is to assess and thenmirror internally the direction we thinkgovernment policy to limit carbon is likelyto go. We do this by analysing theprobable shape o uture carbon policy,and then implementing a basket oactions, each aimed at a dierent risk oropportunity. For example, we require ourlarge new projects to apply a carbon price

as part o their investment appraisalprocess.

Paul Jeeriss, Head o Policy, BP

Q: What is BP doing to managecarbon risk?

Our Tangguh liqueed natural gas operation inIndonesia uses combined heat and power,recovering the waste heat and using it in steamgenerators to produce power.



The energy uture


Assessing carbon riskBP Energy Outlook 2030 looks at uture global andregional patterns o energy demand and supplyand summarizes BP’s view o what the energyworld might look like in the uture. This analysis,along with other BP-sponsored assessmentssuch as the Energy Sustainability Challenge, andexternal assessments such as the IEA’s World

Energy Outlook , helps us to decide whatresources we will seek to develop and where, andwhat technologies we will need to develop themsaely and eciently.

Lower-carbon energy development

We see natural gas as a key part o the lower-carbon economy. It is a plentiul resource thatreleases less carbon dioxide (CO2) than other ossiluels when burned, and the technologies neededto produce and use it are widely available today.We are playing a major role in the growth onatural gas with production in the US, Trinidad &Tobago, Indonesia, Algeria, Oman and Egypt. Weare developing important supply chains to Europe,as well as to China and India, two countries thatcould make up more than hal o global energydemand growth by 2030.

We continue to invest strategically in alternativeenergy, with $1 billion invested in 2012.

Our internal carbon price

We actor a carbon cost into our investmentappraisals and engineering designs or newprojects where appropriate. We do this in orderto assess, and protect the value o, our newinvestments under uture scenarios in which thecost o carbon emissions is higher than it is today.We require larger projects, and those or whichemissions costs would be a material part o theproject, to apply a standard carbon cost to theprojected GHG emissions over the lie o theproject. The standard cost is based on ourestimate o the carbon price that might realisticallybe expected in particular parts o the world.In industrialized countries, this standard costassumption is currently $40 per tonne o CO2 equivalent.

Eciency in our operationsWe seek to increase energy eciency across BPby requiring our existing operations to incorporateenergy use considerations in their business plansand to assess, prioritize and implementtechnologies and systems to improve energyusage. For example, our Tangguh liqueed naturalgas operation in Indonesia uses combined heatand power in the liqueaction plant that turns gasinto liquid or tanker transport to markets. Seepage 37 or more inormation on energy eciencyat Tangguh.

Ecient uels and engine oilsWe work in partnership with vehicle andequipment manuacturers to improve the overalleciency o use o our uels and engine oils.For example, Ford’s ECOnetic cars – includingthe Focus and Mondeo models – are engineeredwith specially ormulated advanced Castrol engineoils, which improve uel eciency and reduceCO2 emissions.

Technology and policy researchThrough in-house research and in partnership withleading academics, we are deepening ourunderstanding o uture energy trends and climate

change. For example, we invest in the UK EnergyTechnologies Institute and we support energy andclimate policy research at universities includingOxord, Princeton, Tsinghua, Berkeley, Illinois,Harvard, MIT and Tuts.

Education and outreachWe engage with governments, universities andother organizations on issues relating to climatechange. In 2012, we attended the Rio+20 UnitedNations Conerence on Sustainable Developmentand signed the Carbon Price Challenge

Communiqué that calls or a price on carbon.

We used our role as the ocial oil and gas partnero the London 2012 Olympic and ParalympicGames to help raise public awareness o

lower-carbon mobility options.

Climate change adaptationWe are taking steps to prepare or the potentialphysical impacts o climate change on our existingand uture operations. We are working closelywith Imperial College in the UK to developspecialized climate models that help us to betterunderstand and predict possible impacts resultingrom the changing climate.

Projects implementing our environmental andsocial practices (see page 35), which are part oour operating management system, are requiredto assess the potential impacts to the project romthe changing climate and manage any identiedsignicant potential impacts. Where climate

change impacts are identied as a risk or aproject, our engineers seek to address themin the project design like any other physical andecological hazard. We periodically review andadjust existing design criteria and engineeringtechnology practices. For example, a regionalclimate model was used in 2012 to inormdecisions on the depth o cover required or rivercrossings or the South Caucasus Pipeline andto review any risks associated with landslides.

We regularly update and improve our climateimpact modelling tools and make them availableto both new projects and existing operations.

At BP, we are taking steps to understand and address carbonand climate risk.

Our programme o action to managecarbon and climate risk

A: BP has been working with ImperialCollege on climate change impacts ornearly 10 years now. Our process beganby looking at the literature on the subjectand on the impact o climate change onspecic acilities. We developed in-housecapability including regional climatemodelling. Finally, and perhaps mostimportantly, a mechanism wasestablished within BP whereby major

new projects have to screen or climatechange impacts. This is a requirement,something integrated into the companyand its processes.

Ral Toumi,Proessor o Atmospheric Physics,Imperial College

Q: What is BP doing to adapt toclimate change?

More inormation online atbp.com/energyuture

Our approach to sustainability andbiouels.

Unconventional gas development andhydraulic racturing.

How BP is taking steps to prepareor the potential physical impacts oclimate change.

http://www.bp.com/energyfuture




18 Our people and values


We value diversity o people and thought, and we aim to make surethat everyone at BP is treated with respect and dignity. How webehave as a company refects our values.

Our people and values

Our goals

We will strive to urther embedour values in all we do.

We aim or 25% o our groupleaders to be women by 2020.

We expect our graduate intake

rom outside the UK and US tobe 40% in 2013.

In this section

$500mAround $500m invested inemployee training andcapability building.

91%more graduates recruited in2012 than in 2009.

11,270new employees hired,outside our retail operations,in 2012.

BP TT Atlantic, Trinidad & TobagoNorman Christie, Regional President,visiting a production area at BP TT Atlanticin Trinidad & Tobago.





6 1

23

5

4

7

3. Asia 16,400

1. Europe 31,600

7. Russia 300

5. Middle East,

North Africa 5,500

4. South and Central

America 5,800

6. Sub-Saharan Africa 2,300

2. US and Canada 23,800

BP employees by region We employ nearly 86,000 people in more than 70countries. We aim to have a good understandingo our uture demand or people and where theywill come rom. Building our employees’ capabilityis a priority, as is rewarding them in a way thataligns with our goals. We ocus on ensuring thesaety o our employees, engaging with them, andincreasing the diversity o our workorce so that itrefects the societies in which we operate.

Engaging with our peopleWe conduct an annual survey o our employees tomonitor employee engagement and identiy areaswhere we can improve. The 2012 results showlevels o engagement are up across all levels and

business areas. Saety scores remain strongalthough there is more work or us to do incontinuing to embed our operating managementsystem as the way BP operates so people ullyunderstand what it means or them.

We also measure how engaged our employeesare with our strategic priorities o saety, trust andvalue. The group priorities engagement measureis derived rom 12 questions about employeeperceptions o BP as a company and how it ismanaged in terms o leadership and standards.Aggregate results or these questions showeda 4% improvement on 2011 to 71%.

Alongside engagement, a new indicator oemployee and workplace satisaction was

introduced in 2012, replacing the previousemployee satisaction index (ESI). The aggregatescore or employee and workplace satisaction in2012 was 71%. For comparison, the ESI, basedon a narrower set o measures, rose by 4% to66%.

Diversity and inclusionWe work to attract, motivate, develop and retainthe best talent rom the diversity the world oers– our ability to be competitive and to thrive globallydepends on it.

In 2012 we launched a ramework to set out ourambition and drive urther progress in diversityand inclusion. As part o this we are creating anetwork o diversity and inclusion champions whowill help implement this work across the company.

BP has set goals or gender representation inleadership positions. Our goal is or 25% ogroup leaders and 30% o senior level leaders tobe women by 2020. We are currently working onmeaningul goals or minority representation.

At the end o 2012, 17% o our group leaderswere emale and 22% came rom countries otherthan the UK and the US. When we started trackingthis in 2000, these percentages were 9% and

14% respectively.

We supported the work o Lord Davies and hisreport on ‘Women on Boards.’ We have set a goalto increase the number o women on the boardby two by the end o 2013. In 2012 the chairmanjoined the 30% Club, a group o chairmen whohave voluntarily committed to bring more womenonto UK corporate boards.

Rewarding perormanceBP employees are rewarded not just or what theydeliver, but also or how they have demonstratedbehaviour that refects our values. As part otheir individual perormance review, employeesset priorities on their contribution to saety,compliance and risk management; what theywill deliver or the near and long term and howthey will do their job.

Bonuses are awarded based equally on threecriteria – the perormance o the BP group overall,the perormance o the immediate part o thecompany where the employee works, and theperormance o the individual.

BP’s perormance depends on an engaged, talented workorce,which is diverse and rewarded on merit.

Managing our people

Q: How will you achieve your goal o 25%emale group leaders and 30% emalesenior level leaders by 2020?

Strategy Diversity and inclusion is an explicit part o our core values and strategic planningprocesses.

Leadership Leaders are accountable or leading diversity and inclusion, and represent thediversity o the organization.

Capability We are all responsible or growing, developing and retaining our diversetalent pool.

Culture Our working culture enables dierent generational, cultural and personality stylesto fourish.

Improvement Consistent reporting mechanisms track progress toward diversity goals and inormour decision making.

Diversity and inclusion ambitionPlanned outcome by 2016

A: I recognize and acknowledge that this isan ambitious goal, but we are optimisticthat this can be achieved and have therm commitment rom all our executives.This is underpinned by sophisticatedmonitoring o the senior level leadereeder pool, which has high-qualityemerging talent. We are also workingon detailed plans at all levels in thecompany. We have started introducingsustainable ways o managing supportstructures through our diversity andinclusion ramework and quarterly reviewswith the group people committee, chairedby our group chie executive.

Helmut Schuster,Group Human Resources Director, BP





20

We aim to recruit the best people, develop the talents o ourworkorce and provide opportunities or ongoing proessionaldevelopment.

Building capability

The energy sector relies heavily on the availabilityo highly skilled people rom diverse backgrounds.Our industry is not only in competition with theenergy sector, but also with many other industriesand increasingly with the services sector. It is apriority or BP to attract, develop and retain thebest people. Our approach is to build the rightcapability within BP, and support this with targetedexternal recruitment to complement the skills andexperience o our existing employees.

Structured recruitmentSince 2009, we have hired extensively ollowingconsiderable investment in building capabilityacross the company and developing our saety

and operational risk unction. On average we haverecruited 9,800 people a year (excluding retail sta)over the past our years. We are now working toachieve more o a balance between external hiringo proessionals or leadership skills and buildingtalent rom within.

In line with our approach to build the talent pipelineor the uture, our graduate intake has increasedby 91% since 2009. In the UK alone, in 2012, wereceived more than 7,000 applications or 244places on our graduate programme. For our utureleaders programme, which ocuses on recruitingengineers with a second degree who have somework experience and are multilingual, we receivedmore than 4,000 applications or 40 places.

Talent managementWe provide world-class education opportunitiesor our people, partnering with 19 academiesand institutes that deliver technical learning anddevelopment. We encourage all employees totake at least ve training days a year.

We use succession planning to help us deployour people eectively and obtain a betterunderstanding o the talent coming through.Every year the group chie executive reviewsall senior succession plans, which are madeacross the company.

While ormal reviews are undertaken annually,discussions regarding talent, developmentand promotions happen across BP throughoutthe year.

Exported expertiseOur expatriate employees distribute critical skillsacross locations and help to develop and nurturetalent in growing markets around the world. In2012, there were more than 2,800 BP peopleon international assignments.

Our values

Saety

Respect

Excellence

Courage

One Team

To deliver sustained high perormance, werecognize that we need to treat ‘how’ we dobusiness as importantly as ‘what’ we do. Ourvalues are a core part o the ‘how.’ We areworking to bring them to lie in our people’sday-to-day behaviour.

Our values were set out by BP’s leadershipteam in 2011 and are now being embeddedinto our group-wide systems and processes,including our recruitment, remuneration,promotion and development assessments.

We have a network o ‘change agents’ acrossthe company who support team leaders in

rolling out our values. These employeesvolunteer to act as advocates, encouraging theircolleagues to talk about values through inormalconversations, workshops and team meetings.

Our internal award programmes recognizeemployees who have displayed exceptionalbehaviour that refects BP’s values. OurHelios awards recognize teams while Team BPrecognizes individual employees. We alsoencourage other inormal methods oembedding our values across the company.

Developing new leadersWe oer leadership development programmestailored or employees moving into management,including those directing complex unctions withinthe company. By the end o 2012, these had beenattended by employees rom 74 countries in 10dierent languages.

Throughout a BP employee’s career there areassessments or his or her recruitment into asenior level or group leader role. The purposeo these assessments is to provide a source oobjective data that can help rate the capabilityo emerging leaders.

BP provides employees with opportunities orproessional development that build leadershipand technical capabilities.

9,800people recruited a yearon average over the pastour years.





OpenTalk cases (by code chapter)

1,500

1,125

750

375

20122008 2009 2010 2011

Our assets and

financial integrity

Governments and communities Our business partners

Operating safely,

responsibly and reliably

Our people

BP’s code o conduct outlines our commitment to highethical standards and compliance with applicable lawswherever we operate.

Our code o conduct

Our code o conduct is based on our values andclaries the ethics and compliance expectationsor everyone who works at BP. The code includessections on operating saely, responsibly andreliably; our people; our business partners; thegovernments and communities we work with;and our assets and nancial integrity.

The code takes into account key points romBP’s internal standards related to anti-bribery andcorruption, anti-money laundering, competitionand anti-trust law, and trade sanctions.

Who the code applies toOur code applies to every employee and ocer

in every BP wholly owned entity. In joint venturesand entities over which BP does not have overallcontrol, the code outlines our expectations toinfuence our partners to ollow similar principles.

We seek to work with contractors who operateunder principles that are similar to those in ourcode. Where easible, we seek a contractualcommitment rom such contractors to complyand work in line with our code. Where we havethe right to do so, we will consider terminatingcontracts where a contractor has not compliedwith their obligations, or not renewing a contractwhere a contractor has acted in a manner that isnot consistent with our values or our code.

Certiying to the code

Each year, BP engages our employees in codeo conduct certication. This is mandatory orsenior leaders up to the group chie executive andis also open to all other employees. Participantscommit to comply with the code and to createan environment where people can condentlyraise concerns.

Dismissals o employees andcontractors

In 2012, our businesses reported 424 dismissalsor non-compliance or unethical behaviour,compared with 529 in 2011. This excludesdismissals o sta employed at our retail servicestation sites or incidents such as thets o smallamounts o money. In 2012, our businessesreported that six suppliers’ contracts were eitherterminated or not renewed, compared to 14 in2011. A new reporting process to capture thisinormation is being put in place or 2013.

Speaking up

BP is committed to providing an open environmentwhere our employees, contractors and others withwhom we come into contact, are comortablespeaking up whenever they have a question aboutour code o conduct or think that it, or legalrequirements, may have been violated.

Employees are encouraged to discuss theirquestions or concerns with their supervisor, theirlocal ethics and compliance leader, legal, humanresources, the ethics and compliance team orBP’s helpline, OpenTalk.

In 2012, 1,295 cases were raised through

OpenTalk, with the most common issues relatingto the people section o the code. This compareswith 796 cases in 2011. The increase in cases wasdue in large part to two actors: the acquisition oadditional biouels operations in Brazil and anisolated incident in Malaysia which resulted in 104cases. Additionally, there were increases acrossthe business around the world.

We actively promote, via our values and code oconduct, the responsibility o everyone employedby BP to ask questions, raise concerns or reportany suspected or potential breach o the code orthe law.

Ethics monitor

Following the settlement with the US government

o all ederal criminal claims related to the Gulo Mexico, BP has agreed to appoint an ethicsmonitor in the US or a term o our years toreview and provide recommendations or theimprovement o BP’s code o conduct and itsimplementation and enorcement. For inormationon US legal proceedings see page 9.

More inormation online atbp.com/ourpeople

How we bring our code o conduct tolie or employees.

Case studies on how we develop ourpeople’s capabilities and leadership.

Our new programme to deliverimproved diversity and inclusion.

Code o conduct trainingin the eld

We want all our people to understand our codeo conduct and why it is relevant or their work.Code o conduct training or eld workers inour biouels business in Brazil was particularlychallenging and we needed to apply ourprogrammes to workers with varying levelso education and literacy who were widelydispersed across three rural locations, 200kilometres apart. To meet this challenge wedeveloped a short, interactive play to explainthe code o conduct using local actors andreerences. The actors toured the work sites,perorming the play to more than 1,800workers.

Giovanna Ditscheiner, a member o the ethicsand compliance team or our biouels businessin Brazil, said: “We wanted to make our codeo conduct come alive or our colleagues sothey could learn critical inormation in aninormative and engaging way.”





22 How we operate


BP’s objective is to create value or its stakeholders and supplieso energy or the world in a sae and responsible way.

How we operate

Our goals

We strive to be a saety leaderin our industry, a world-classoperator, a responsiblecorporate citizen and agood employer.

We expect all our contractors

and their employees to act in away that is consistent with ourcode o conduct.

We are committed to meetingour obligations to the countriesand communities in which wedo business.

In this section

Enhancements made todrive consistency andclarity in how risks arereported and understoodthroughout BP.

Investors brieed onissues such as BP Energy

Outlook 2030, oil sandsand our progress onsaety enhancements.

More than 200 workshops

on lessons learned romthe Deepwater Horizonaccident held in nearly30 countries over thepast two years.

Discoverer Luanda drillship, AngolaBP Angola technicians leaving the work site onthe Discoverer Luanda.



How we operate


O p t i m

i z a t i on

O r

g a n

i z a

t i o n

R e s u

l t s

L e a d

e r s h

i pR

i s k

P r o

c e d u

r e s

A s s e t s

P r i v i l e g e t o

BP

P e r forma n c e

P e o p

l

e

P lan t

P r o c e

s s

o p e r a t e

Conormance to OMS is a dynamic process

designed to continuously improve our groupstandards and drive perormance improvements.Our standards and practices, assessments,actions and activities are guided by and livewithin our OMS.

What is it?Our OMS integrates BP requirements on health,saety, security, the environment, socialresponsibility and operational reliability, as well asrelated issues, such as maintenance, contractorrelations and organizational learning, into acommon management system. It provides us withone systematic and controlled holistic approach orhow businesses are managed.

How does it work?Integrated into the OMS are guiding principles andrequirements or sae, reliable and compliantoperations. It addresses eight ‘elements ooperating’, under the areas o people, plant,process, and perormance.

Each operating unction or unit has an OMS whichdescribes how it addresses specic operating risksand delivers its operating activities. Businessneeds, applicable legal and regulatoryrequirements and group-wide BP requirementsare translated into practical plans to reduce riskand deliver strong, sustainable perormance.

Driving conormance and continuousimprovementOur OMS was introduced in 2008. All o ouroperations, with the exception o those recentlyacquired, are applying our OMS to govern their BPoperations and are working to achieve ongoingconormance with its requirements.

Operations undertake an annual assessment,checking their perormance against each o therequirements set out in their OMS. Resulting plansput in place by local operations to close any gapsand identiy improvements are prioritized with theaim o continually driving reductions in the level orisk at the sites. Conducting assessments on anannual basis is a means to identiy opportunitiesor continuous improvement. We update and

enhance our group requirements within OMS asneeded to refect these, as well as the company’spriorities and experience. For example, we havebeen updating our procedures around oil spillpreparedness and response, crisis and continuityplanning and learning rom incidents.

Our environmental and socialpracticesThe principles and standards o OMS aresupported by our environmental and socialpractices. These set out how our major projectsidentiy and manage environmental and socialissues. For more inormation on these practices,and what they apply to, see page 35.

BP’s operating management system (OMS) provides the basis ormanaging our operations in a systematic way.

Our operating management system


Sharing inormation on BP’s global deepwaterwell-capping and tooling package in the Gul oMexico, US.

John Sieg Group Head o Operations,Saety and Operational

Risk, BP

Our OMS is designed to drive a rigorous andholistic approach to saety, risk managementand operational integrity. It providesconsiderable detail describing what weexpect, and what good perormance lookslike, yet it is built around a handul o simpleoperating principles and concepts. Mostimportantly, OMS is designed to help leadersocus on the ew things that are mostimportant when delivering sae, compliantand reliable operations. I’ve seen great thingshappen when leaders use the simplicity oOMS to clariy and establish their operating

priorities and expectations. The principles oOMS are undamental to how we deliver saeoperations at BP.



24 How we operate


BP’s management o sustainability risks and issues

E x t er n

al s t ak eh ol d er s

BP board

Direction and oversight o BP on behal o the shareholders or all aspects o BP’s business. Comprised o the chairman, our executive and

10 non-executive directors.

Saety, ethics and environment assurance committee Gul o Mexico committee

Reviews BP’s processes to identiy and mitigate signicant non-

nancial risks and receives assurances that they are appropriate in

design and eective in implementation.

Oversees the Gul Coast Restoration Organization and various other

matters related to the Deepwater Horizon incident.

Executive team

Supports the group chie executive in his accountability to the board or BP’s overall business, including sustainability perormance. Comprised

o the group chie executive and the heads o businesses and certain unctions including saety and operational risk.

Group operations risk committee Group ethics and compliance committee Group people committee

Reviews company saety and

risk management.

Provides inormation and assurance on the

ethics and compliance programme.

Has overall responsibility or policy

decisions relating to employees.

Group unctions Local operations

Functions, such as saety and operational risk, dene and support

implementation o group-wide standards.

Specialists and line management identiy risks and implement our

group-wide operating management system and other standards.

Managing risk rom operations tothe boardOur risk management system ocuses on threelevels o activity:

• Day-to-day risk identication and managementoccurs in the group’s operations and unctions,with the approach varying according to thetypes o risks aced. The aim is to addresseach dierent type o risk as well as we can– promoting sae, compliant and reliableoperations.

• Periodic review o risks and risk managementplans happens at the business and unctional

levels. Risk management activities areassessed and any urther improvementsare planned.

• Oversight and governance occurs at board,executive and unction levels to help ostereective group-wide oversight, businessplanning and resource allocation, interventionand knowledge sharing.

In 2012, we ormed a new group risk team to holda view o the group’s risks, coordinate reportingactivities o these risks, and maintain BP’soverarching risk management system.

For risk actors that could have an adverseeect on our business see BP Annual Report

and Form 20-F 2012 at bp.com/annualreport

The board

BP’s board governance principles delegatemanagement authority to the group chieexecutive within dened limits. These include arequirement that the group chie executive willnot engage in any activity without regard to health,saety and environmental consequence.

The board reviews key group risks and how theyare managed as part o its planning process.On 1 January 2013 the board was composedo the chairman, our executive directors and10 non-executive directors. BP recognizes theimportance o diversity, including gender, at alllevels o the company, including the board.

The board delegates some o its oversight andmonitoring activities to its six committees,composed entirely o non-executive directors.

Saety, ethics and environment assurance

committeeThe saety, ethics and environment assurancecommittee (SEEAC) monitors the managemento non-nancial risk.

In 2012, the committee received specic reportson the company’s management o risks inshipping, wells, pipelines, explosion or releaseat acilities containing hydrocarbons, contractormanagement and non-operated joint ventures.

The committee reviewed these risks, and their

management and mitigation, in detail with therelevant executive management.

BP’s risk management system is designed to help ensure that risksare identied, understood and managed so that we can deliver saeand strong operations.

Corporate governance and risk management

Paul Anderson (second rom let), chair o thesaety, ethics and environment assurance

committee, and BP Chairman Carl-Henric Svanberg(second rom right) on a board visit to BP’s NorthAmerica Gas operations in east Texas, US.





How we operate


Deploying saety and operational risk proessionals in local operations

Expertise in

saety and

operationalrisk

Competency,

capability

and saetyleadership

Audit Deployed

S&OR

proessionals

Local

operations

E x p e r t i s e

a n d a

s s u r a n c e

O p er a t i on al d e

l i v er y

Central saety and operational risk unction Business line

Independent saety and operational

risk expertise, supporting and auditing

business implementation o our operating

management system and practices.

Delivery o sae, reliable

and compliant operations.

When a atality in the workorce occurs thecommittee reviews the incident beore reportingback to the board. The committee also reviewsspecic incidents to understand the causes andactions being taken to help prevent recurrence.

In 2012, members o SEEAC looked at risks in,and environmental issues arising in connectionwith, hydraulic racturing operations during a visitto our operations in East Texas. They also visitedupstream operations in the Gul o Mexico,Houston and Angola. In the Downstream, visitswere made to the company’s paraxylenemanuacturing acility at the Texas City reneryin the US and our Hemel Hempstead oil storage

terminal in the UK.The committee is also continuing to monitorBP’s global implementation o the measuresrecommended in BP’s investigation ater theDeepwater Horizon accident (the Bly Report).In June 2012, BP announced the engagemento Mr Carl Sandlin to report independently to theboard on the implementation o the Bly Reportrecommendations and on process saetyobservations in the Upstream.

In May 2012, Mr Duane Wilson was engaged bySEEAC in a new role as process saety expert orthe Downstream business. He had previouslybeen appointed by the board in 2007 as anindependent expert providing an objective

assessment o BP’s progress in implementingthe recommendations o the BP US ReneriesIndependent Saety Review Panel and thisappointment came to an end in May 2012. In thisnew role he is working with management on aworldwide basis to continue to embed processsaety culture and lessons across the segment.He will meet with SEEAC at least twice a year.

See page 32 or more inormation on these roles.

SEEAC also meets with BP’s group ethics andcompliance ocer several times a year to discusssignicant ethics and compliance matters.

Gul o Mexico committeeThe Gul o Mexico committee provides non-executive oversight o the Gul Coast Restoration

Organization and various other matters related tothe Deepwater Horizon incident, includingsupporting eorts to rebuild trust in BP.

In 2012, the committee undertook various tasksincluding the oversight o legal matters. Theseincluded settlements with the Plaintis’ SteeringCommittee, and resolutions with the Departmento Justice and the Securities and ExchangeCommission. The committee has also overseenthe company’s strategy or resolving claims notcovered by the above settlements; its eortsto mitigate and monitor the eects o the spill;and actions to restore the group’s reputation,particularly in the US.

Managing operational riskOur saety and operational risk (S&OR) unctionsupports the business in delivering sae, reliableand compliant operations across the business.S&OR:

• Sets clear requirements.

• Maintains an independent viewo operating risk.

• Provides deep technical support to theoperating businesses.

• Intervenes and escalates as appropriate tocause corrective action.

S&OR consists o a central team and teamsdeployed in BP’s businesses. All teams reportto the group chie executive via the head oS&OR, independently o the business line. S&ORincludes some o BP’s top engineers and saetyspecialists, several o whom have prior experiencein industries where major hazards have to bemanaged, including the military, nuclear energyand space exploration.

Central teamThe central S&OR team serves as the custodiano group requirements and runs S&OR audit andcapability programmes. Along with deployedS&OR teams, they have the right to intervenewhere necessary, but the aim is that all BPoperations manage their risks eectively, so

that intervention is not needed.

Deployed expertsS&OR has a deployed section that worksalongside the business line to provide a view orisk that is independent o the line, including sites’

operating conduct and areas such as capability,leadership and culture in operating businessesand projects. Its members help the businessesapply our standards by providing tools andguidance to support conormance to ouroperating management system, and providean overview o how operational risks are beingmanaged, business by business.

Business line accountabilities

Operating businesses remain accountable ordelivering sae, reliable and compliant operations,with S&OR acting to provide independent advice,scrutiny, challenge and, i needed, intervention.They have the responsibility to identiy andmanage risks and bring together people withthe right skills and competencies. They work incollaboration with deployed S&OR subjectspecialists and are also subject to independentscrutiny and assurance.

This way o working helps to build expertise andprovides deep technical support in the area osaety and operational risk, while at the sametime delivering independent assurance.



26 How we operate


Our stakeholders are the many individuals andorganizations who are aected in some way byBP’s activities, whether it is in our role as anenergy provider, an employer, or as a companythat generates revenues and helps to boostlocal economies.

EmployeesWith nearly 86,000 employees in more than70 countries, BP relies on a range o internalcommunications channels to keep our employeesinormed about the context within which theywork. We have established channels or ouremployees and contractors to raise concerns, andwe maintain regular communication with unions at

many BP sites around the world.

Shareholders and analystsWe engage with shareholders and analyststhrough our annual general meeting and otherevents. We communicate via roadshows,webcasts and one-to-one meetings. In 2012, thisincluded a presentation on BP Energy Outlook

2030 , and briengs on oil sands and our progressagainst saety enhancements.

Governments and regulatorsWe engage with governments on many ronts,rom consulting on environmental regulationand revenue transparency to collaborating oncommunity or entrepreneurial initiatives. Our

code o conduct requires that our employees andcontractors are honest and responsive in anyinteractions they have with governments. In manycountries where we operate, lobbying activity isstrictly regulated.

Our industryBP is working through business and industrygroups to help establish standards and addresscomplex energy challenges. For example, weare a member o the American Petroleum Instituteand the global oil and gas association orenvironmental and social issues IPIECA, and weare also a member o industry partnerships onspecic issues such as deepwater drilling. Theseinclude the International Association o Oil & Gas

Producers’ Well Expert Committee and the JointIndustry Project on Oil Spill Response.

ContractorsLike our industry peers, BP rarely works inisolation. Sae and responsible operations rely onthe capability and perormance o our contractors.To this end, we set operational standards throughlegally binding agreements and we help to buildcapability through training and dialogue.

Engaging with a wide range o stakeholders helps BPto make responsible decisions.

Our stakeholders

86,000Nearly 86,000 employees inmore than 70 countries.

A BP senior executive talks to investors at abrieng held in October 2012.

Local communitiesWe depend on our relationships with communities.This is important or all our activities, but particularlyor major new projects, where our presence maybring about changes in the local area, such as jobs,capacity building or local suppliers and support orcommunity development, but also increased roadtrac, changes in land use and landscapes,increased demand or resh water and varyinglevels o in-migration.

For examples o communityengagement at our sites seebp.com/sustainabilitymappingtool

Non-governmental organizationsFor our new projects, we oten consult withrelevant local and international NGOs, whomay provide specialized expertise on managingimpacts. We also engage with NGOs at a grouplevel. In 2012, we discussed biodiversity, climatechange and energy policy, revenue transparency,human rights and operating in sensitive areas inthese meetings.

CustomersAbout 125,000 consumers in more than 15countries participated in our global trackingresearch programmes in 2012, answeringquestions ranging rom how they rate BP on

customer satisaction in relation to its competitorsto the degree to which they recognize our brandand use our products.

Our joint venture partnersWe seek to work with companies that share ourcommitment to ethical, sae and sustainableworking practices. However, we do not controlhow our co-venturers and their employeesapproach these issues.

Typically, our level o infuence or control over ajoint venture is linked to the size o our nancialstake compared to other participants. In somejoint ventures we act as the operator. Ouroperating management system (OMS) provides

that where we are the operator, and where legaland contractual arrangements allow, OMSapplies to the operations o that joint venture.

In other cases, one o our joint venture partnersmay be the designated operator, or the operatormay be an incorporated joint venture companyowned by BP and other companies. In thosecases our OMS does not apply as themanagement system to be used by theoperator, but is available to our businesses asa reerence point or their engagement withoperators and co-venturers.

http://www.bp.com/sustainabilitymappingtool

http://www.bp.com/sustainabilitymappingtool



How we operate


Sharing lessons learned

= Countries where

BP operates= Countries where

we are sharing ourlessons learned

Key

BP is committed to sharing what we have learned rom theDeepwater Horizon response to advance the capabilities and practicesthat enhance saety in our company and the deepwater industry.

More inormation online atbp.com/sharinglessonslearned

How we are working with industry andregulators to share lessons learned andexperience rom the Deepwater Horizonresponse.

Global and regional industry initiatives.

Inormation on our global deepwaterwell-capping and tooling package.

Our experience has been built across the keycapability areas o prevention and drilling saety,well capping and containment, relie wells, spillresponse, and crisis management.

We have been presenting at industry and regulatorconerences around the globe to share knowledgeon the learnings and the technology we havedeveloped. We have conducted more than 200briengs and presentations or industry,government and other groups in the past twoyears in nearly 30 countries.

In addition, we are collaborating with others inindustry to advance global deepwater capabilities.Here are some examples.

Mexico

Technology licence agreement We are starting to implement a technology licence

agreement with PEMEX or BP to share technicalinormation we used to build our global deepwaterwell-capping equipment with the national oilcompany o Mexico, as it considers building andmaintaining its own system.

Australia

Australian Petroleum Production andExploration Association

BP and other member companies are workingto establish an industry-wide well capping ‘rstresponse’ solution in Australia.

Gul o Mexico

The Center or Oshore Saety The Center or Oshore Saety was establishedby the American Petroleum Institute in March2011 with a mission to promote the highest

level o saety in the deepwater Gul o Mexico.BP’s regional president is a member o thecenter’s board.

North Sea

Oil Spill Prevention and Response Group On behal o this group, BP managed thedevelopment o a well cap that can be used inthe North Sea and is now available to industry

through Oil Spill Response Limited.

http://www.bp.com/sharinglessonslearned




Saety


28

We operate in a high-hazard industry so saety is a priorityor us. We continue working to embed saety and operationalrisk management into the heart o the company.

Our goals

We develop deep capabilityand a sae operating cultureacross all levels o BP.

We continue to embed ouroperating management systemas the way BP operates.

We conduct sel andindependent assurance thatconrms our conduct ooperating.

In this section

Developing our leadersthrough programmessuch as our OperationsAcademy and Leading

in the Field.

Data on our occupationalhealth and saety andprocess saetyperormance.

Independent assessmentsbeing put in place inrelation to BP’s processsaety perormance.

Gul o Mexico, USA ast-response re ghtingunit practises oshore.

Saety



Saety


While we maintain our ocus on processes andpractices, we also place great emphasis on howour workorce applies them, thereby working tostrengthen saety culture and workorce capability.

Leadership and cultureBP’s senior management sets clear expectationsdesigned to help operational leaders to excel assaety leaders. Saety is one o our ve values,embedding the behaviours and culture that guideus to act in a certain way. Additionally, our code oconduct claries the basic rules our people mustollow including expectations or operating saely,responsibly and reliably.

Our Operations Academy was established toenhance the existing saety and operationscapability o BP’s operations leaders. OurLeading in the Field programme aims to enhancemanagers’ leadership skills and help themunderstand the challenges acing their employees.

Organization and competenceHaving the right people with the right capabilityand experience in saety-critical roles is essential.This applies to contractors as well as to BPemployees. Targeted programmes are reinorcingour values and building leadership capacity toembed our OMS and achieve consistently sae,compliant and reliable operations.

We are seeking to develop deeper technical

expertise in-house in the critical disciplines ohealth, saety, engineering and operations. As parto this we have ocused on bringing in expertiserom other high-hazard environments with 29% oexternal hires into our saety and operational risk(S&OR) unction in 2012 bringing experienceo working in these industries. We are alsostrengthening capability and consolidating ourcompetence management programme. Ourapproach is being tested in a number o jobcategories – such as oshore installationmanagers and well site leaders.

Results, checks and balancesWe place strong emphasis on checks andbalances to make sure our operations are running

as they should. Internal and external perormancereporting is part o this. Sites carry out sel-verication, supported by deployed S&ORproessionals. Results are reviewed by operationalline management and the central S&OR teamand are used to acilitate targeted guidance andsupport to operating locations, as needed.

Deployed S&OR teams sit side by side withthe business and are in a unique positionto observe day-to-day operation and riskmanagement processes, providing an inormedview o operating perormance and the qualityo perormance improvement cycle activity.

The central S&OR audit team conducts audits omany o our operations, typically visiting sites ona three-year cycle, with higher-hazard acilitiesaudited on a risk-prioritized requency. Theyconduct approximately 60 audits per yearacross BP.

Learning rom incidentsWhere incidents do occur, enhanced reporting,investigation and learning practices are usedto improve our ability to learn rom them. Weissue ‘learning alerts’ to communicate relevantinormation about saety issues that have ariseninside or outside the company which couldhighlight potentially unsae working conditions

or practices. These alerts include specicrequirements or recommendations or ouroperations to implement where applicable, whichmay help prevent a similar incident recurring.

Rewarding saetySaety is an integral part o how BP employeesare assessed and rewarded. We measureemployees’ perormance based both on whatthey deliver and how they deliver it, balancing nearand long-term perormance goals, specic saetyobjectives and behavioural expectations set withoperating leaders.

Saety is at the heart o everything we do, driven by our leadershipand applied through our operating management system (OMS).

Saety training on a ast response crat in theNorth Sea.

Testing our saety procedures during a re drill onthe Na Kika rig in the Gul o Mexico, US.

Managing saety



30 Saety


Severe vehicle accident rate(per one million kilometres driven)

0.2

20122008 2009 2010 2011

0.1

1.0

0.8

0.2

0.6

0.4

Recordable injury frequency

(per 200,000 hours worked)

20122008 2009

a API and OGP 2012 data reports are not available until May 2013.

2010 2011

Employees

0.35 0.23 0.25 0.31 0.26

Contractors

0.50 0.43 0.84 0.41 0.43

Workforce

American Petroleum Institute US benchmark.a

International Association of Oil & Gas Producers benchmark. a

Days away from work case frequency

(per 200,000 hours worked)

0.3

0.2

0.1

20122008 2009 2010 2011

Employees

0.064 0.069 0.086 0.101 0.078

Contractors

0.092 0.069 0.264 0.080 0.074

Workforce

American Petroleum Institute US benchmark.a

International Association of Oil & Gas Producers benchmark.a

In 2012, BP reported our workorce atalities.These were a road-related atality in Scotland, aall rom a roo in India, an incident at a compressorstation in the US and a tractor accident in ourbiouels business in Brazil. Additionally, the armedattack on our joint venture gas acility in Algeriain January 2013 resulted in our BP atalities. We

deeply regret the loss o these lives.We track both recordable injuries and the daysaway rom work case requency, as these areindustry-standard measures to help gauge howwe are managing our operations to prevent harmto our workorce.

Health and wellnessBP’s group-wide operating management systemprovides requirements that our operations mustollow with the objective o preventing harm tothe health o employees, contractors, visitors andmembers o local communities who may live orwork near our operating sites.

We work to reduce exposure to occupational

health risks, which may include inectiousdiseases, atigue or stress and other health issues.We identiy and prioritize health hazards, and in2012, the top ve health and hygiene-relatedissues were noise, manual handling, ood hygiene,atigue, and tness or task. In identiying andassessing risks, we maintain programmes tomitigate them.

Transportation saetyAll modes o transportation involve inherent risks.Some o the greater risks to our workorce, and inour industry, relate to transportation o our peopleand products. Our workorce aces a number oon-the-job hazards on a daily basis and drivingsaety remains a high priority or us.

The majority o kilometres are driven by ourDownstream business. In 2012 we establisheda new driving saety group to support thedevelopment and implementation o ourdownstream driving saety programmes. Wealso introduced a new saety practice or ourdownstream operations that incorporates ways tomanage driving risks based on experience, lessonsand operating management system guidance.

We rely on a variety o metrics to monitor ourdriving saety perormance. We track our severevehicle accident rate (SVAR) which includesaccidents that result in death, injury, a spill, avehicle rollover or serious or disabling vehicledamage per one million kilometres driven.

In 2012 our SVAR was 0.13.

We also track our total vehicle accident rate, whichis the sum o all on-road and o-road motor vehicleaccidents per one million kilometres driven. Thisgure includes any vehicle accident – whether ithas resulted in injury or only vehicle damage.In 2012 the total number o reported accidentswas 998.

Our work relies upon the saety o our peopleand preventing harm to our workorce.

Operators unloading LPG on site at Zhuhai inChina.

Personal health and saety



Saety


Following the Deepwater Horizon incident,BP conducted an in-depth review o contractormanagement practices, with the aim odocumenting and learning rom best practicethroughout BP and across a number o sectorsand industries that use contractors in potentiallyhigh-consequence activities. As a result o thisreview, we are ocusing on developing deeper,longer-term, quality relationships with selectedcontractors. For example in our global projectsorganization, we have put in place globalagreements with seven suppliers or plantinspection and surveillance services, coveringthe work previously undertaken by more than60 suppliers.

We also identied the need to clearly deneresponsibilities and decision rights at every stageo each process – and to ocus on the operationalactivities needed to make contractor relationshipswork, such as training, monitoring and auditing. In2012 we continued to implement changes in howwe work with contractors. We are identiyingcontracts involving potentially higher-consequenceactivities across the group and we are introducinga higher level o oversight to these contractsas a priority.

Clear and specic contractsWe have governance boards or upstreamcontracts that review and endorse supplier

strategies and the award o contracts that could

involve potentially high-consequence activities.The boards bring together expertise rom thebusiness line, our supply chain unction, andour saety and operational risk unction.

We are improving the clarity and consistencyo our communications with our contractors.This starts with contracts which set out clearand specic expectations o our contractorsand we are reviewing contracts and consideringopportunities to standardize the language andcontent. We incorporate local supplier clausesinto our contracts with strategic suppliers to helpensure that they are working with local supplierswhere appropriate or necessary.

Sel-verication, assurance and auditWe expect our contractors to work systematicallyaccording to their own saety managementsystem. We also expect that contract companieswill sel-veriy that they are ollowing andapplying their own saety management systems.We undertake saety, technical and qualitypre-contract award audits or new contractorsinvolved in potentially high-consequence activities.To better assess contractor perormance we areincorporating process saety and quality keyperormance metrics into contracts or potentiallyhigh-consequence work.

A: My role involves strengthening howwe manage these types o risks. I havetravelled extensively to listen to whatpeople throughout BP who work withcontractors, as well as contractorsthemselves, had to say. I have beenencouraged to nd out what wasgoing well and what can be improved.It is important to identiy activities that

could have potentially high consequence.Such activities warrant our greatestscrutiny, including where third-partycontractors are involved. I think thatadvances in our risk managementtechniques are making a positivedierence in where and how bestpractice techniques in contractormanagement are being applied.

David Campbell, Project Director,Contractor Management, BP

Q: What is BP doing to manage risksassociated with the use ocontractors?

Our ability to be a sae and responsible operator depends in part onthe capability and perormance o our contractors.

In 2012, 55% o the 402 million hours worked byBP were carried out by contractors.

Managing our contractors



32 Saety


We produce and transport uels and chemicalswhich involves handling and converting largevolumes o highly fammable and toxicsubstances. Process saety reers to theramework we have or managing the integrityo hazardous operating systems and processesto prevent accidents and oil spills.

Tracking process saety perormanceTo track our progress in process saetymanagement we use leading indicators that ocuson the strength o controls to prevent incidents.These include inspections and tests o equipmentcritical to process saety. We also measure laggingindicators that record events that have already

happened – such as oil spills and other losseso primary containment.

We track the number o process saety eventsoccurring across our downstream process plantsand upstream acilities, including unplanned oruncontrolled releases o materials causing harmto a member o the workorce or costly damageto equipment, or exceeding threshold quantities.

Tier 1 process saety events are those with thegreatest consequence. There were 43 tier 1process saety events reported in BP in 2012,compared with 74 in 2011. We are reporting tier 2process saety events, which are losses o primarycontainment o lesser consequence, externally orthe rst time this year. In 2012, 154 tier 2 events

were reported.

Loss o primary containmentWe monitor the integrity o our operations, tanks,vessels and pipelines used to produce, processand transport oil, hydrocarbons and other energy– with the aim o preventing the loss o materialrom its primary containment. Accordingly, wetrack loss o primary containment which includesunplanned or uncontrolled releases rom a tank,vessel, pipe, railcar or equipment used orcontainment or transer within our operationalboundary, excluding non-hazardous releasessuch as water.

Saer drillingOur global wells organization (GWO) now employsmore than 2,000 people, bringing unctional wellsexpertise into a single organization with commonglobal practices. We have committed toestablishing a global wells institute and haveinvested in state-o-the art simulator acilities tosupport practical learning and testing, which willbe made available to all deepwater rig teams,including our contractors.

Competence testing is a vital part o saeoperating. We have developed a competencyassurance programme to enhance drillingcompetency or key operational and leadershippositions.

We work to prevent, mitigate and ensure our preparednessto respond to accidents and spills across our operations.

Preventing accidents and oil spills

Independent advice

Independent advisors are being put in place inrelation to BP’s process saety perormance inour upstream and downstream activities.

UpstreamThe board appointed Mr Carl Sandlin to providethe saety, ethics, and environment assurancecommittee (SEEAC) o the board with anobjective and independent assessment o BP’sglobal progress in implementing the Bly Reportrecommendations and on process saetyobservations in the Upstream. See opposite.

Downstream

SEEAC appointed Mr Duane Wilson as aprocess saety expert and assigned himto work, in a global capacity, with theDownstream business. This recognized theextensive experience acquired during hisyears as independent expert providing anobjective assessment o BP’s progress inimplementing the recommendations o theBP US Reneries Independent SaetyReview Panel. See page 33.

Process saety monitor

Gul o Mexico

Following the settlement with the USgovernment o all ederal criminal claimsrelated to the Gul o Mexico, BP has agreed toappoint a process saety monitor in the US ora term o our years. The monitor will review,evaluate, and provide recommendations orthe improvement o BP’s process saety andrisk management procedures concerningdeepwater drilling in the Gul o Mexico.See page 9.

Implementing the Bly ReportWe continue to work on implementing the 26recommendations made by the Bly Report – ourinternal investigation into the Deepwater Horizonincident. The investigation was led by BP’s heado saety and operational risk, Mark Bly, and drewupon the expertise o more than 50 technical andother specialists rom within BP and the industry.Published in September 2010, the resulting BlyReport concluded that no single cause wasresponsible or the accident. It made 26recommendations aimed at urther reducingrisk across BP’s global drilling activities.

BP accepted the recommendations o the Bly

Report and is implementing them across itsworldwide drilling operations. At the end o2012, 14 o the 26 recommendations hadbeen completed.

Independent verifcation o progressIn June 2012, the board appointed Mr Carl Sandlinto provide the saety, ethics and environmentassurance committee (SEEAC) o the board withan objective and independent assessment o BP’sglobal progress in implementing the Bly Reportrecommendations and on process saetyobservations in the Upstream. Mr Sandlin willalso on occasion be asked to provide his viewsto the board on other matters related to, but notspecically within the scope o the Bly Reportrecommendations, or example, his views on

organizational eectiveness or culture o theglobal wells organization and process saetyobservations. He has direct access to the chairo SEEAC and will report to the committee inperson at least twice a year.

Mr Sandlin’s role is to review evidence o theactions being taken and to provide assurance tothe board, via SEEAC, that the deliverables andcorresponding recommendations have been closed.To be in a position to do this, Mr Sandlin plans tovisit all the regions where we have signicantdrilling operations, including certain rigs andother work sites.

He has access to all levels o our GWO, includingwell site leaders and senior management. He

continues his review o the Bly Reportdeliverables’ implementation, including reviewingtechnical practices and other related documents.

Capping and containmentCapping and containment, including the ability toboth cap the well and collect oil that has escaped,plays a pivotal role in being prepared to respond toany potential incident. We continue to advance ourcapability to respond to potential incidents andwork with industry to urther enhance access toequipment and technologies around the world.

For more inormation on our deepwaterwell-capping and tool package see page 12.



Saety


Loss of primary containment

(number of incidents)

800

400

200

20122008 2009 2010 2011

600

Saety in the Downstream businessIn our acilities across the Downstream businesswe ocus on the sae storage, handling andprocessing o hydrocarbons through the systematicmanagement o associated operating risks.In seeking to manage these risks, BP takesmeasures to:

• Prevent loss o hydrocarbon containmentthrough well-designed, maintained andoperated equipment.

• Reduce the likelihood o any hydrocarbonreleases and the possibility o ignition that mayoccur by controlling ignition sources.

• Provide sae locations, emergency proceduresand other mitigation measures in the event o arelease, re or explosion.

Some examples o specic risk reduction workacross our rening and petrochemicals portolio in2012 include:

• Installation o additional saety instrumentationand equipment to reduce the likelihood o risksoccurring.

• Continuing work to improve the saety o siteoccupied buildings. We have a major

programme under way to install saety sheltersor personnel; to move people urther awayrom hydrocarbon-containing equipment; andto reduce the number o vehicles on site. Forexample, during 2012 a building hardeningprogramme was completed at our Toledorenery in the US, and at our Bulwer renery inAustralia we constructed new oces to moveemployees away rom higher risk processingareas. The business also continues to train anddrill personnel to respond to emergencies.

• Work to reduce explosion and toxic risksthrough inventory reduction by, or example,reducing ethylene and propylene rerigerants inour petrochemical plants.

A: At BP we apply the American PetroleumInstitute approach to our reporting. Bothleading and lagging indicators areimportant in helping us to analyse trendsin our process saety perormance, butleading indicators are oten moreoperation specic and more challenging tointerpret at group level, or compare withindustry peers. We thereore report theseinternally to help inorm businesssegments and operations and to providea more granular view o process saetyperormance within the business.

Hazel O’Leary, Manager HSSE Management

and Perormance, Saety andOperational Risk, BP

Q: Why does BP not report leadingprocess saety metrics externally?

New process saety expert or our

Downstream businessMr Duane Wilson’s ve-year board appointmentas independent expert to provide an objectiveassessment o BP’s progress in implementingthe recommendations o the BP US ReneriesIndependent Saety Review Panel came to anend in May 2012. Recognizing the extensiveexperience he has acquired during his years asindependent expert and ollowing the end o histerm, SEEAC appointed him as a process saety

expert and assigned him to work, in a globalcapacity, with the Downstream business.

Mr Wilson continues to have requent and directaccess not only to the board, but also to BPemployees rom the most senior executivesdown to the shop foor. Mr Wilson visits acilities,conducts interviews, and reviews relevantdocuments, such as audit and incident reports,to ulll his duties. Additionally, Mr Wilson is anex ocio member o the Downstream segmentoperations risk committee and regularly attendsits meetings with the senior executives o thebusiness.

More inormation online atbp.com/saety

Filter and analyse data on BP’s healthand saety perormance using thecharting tool.

See progress against therecommendations made rom ourinternal investigation o the DeepwaterHorizon accident.

Find inormation on product stewardshipand how we communicate the potentialhealth, saety and environmentalimpacts o products.

BP’s well-capping and tool package is designedto operate in water depths o up to 10,000 eetand includes a remotely operated vehiclesintervention system.





34 Environment


Environment

Our goals

We identiy environmentalimpacts and seek to avoid orminimize them.

Our sites establish annualobjectives to improveenvironmental perormance.

We put plans in place toreduce environmental risksassociated with our projectsand operations.

In this section

Strengthening ourapproach to oil spillpreparedness andresponse.

Increasing energyeciency at our LNGplant in Indonesia whilemanaging faring and airemissions.

State-o-the-arttechnologies developedby our petrochemicalsbusiness are helping toreduce environmentalimpact.

Wellsville, New York, USWe have constructed a wetland treatmentsystem on the site o a renery that closed in1958 ater a major re (see page 37).

BP is working to manage environmentalimpacts wherever we do business.



Environment


We annually review our management o materialissues such as greenhouse gas, water, andsensitive and protected areas. We seek to identiyemerging risks and assess methods to reducethem across the company. For example, waterscarcity is a potential risk or many o ouroperations, and we are working to developtools and processes or our local businesses touse to address this issue.

Liecycle approachOur operating management system (OMS) isdesigned to drive continuous improvement inenvironmental and social perormance as part oits role as our group-wide ramework or a rigorous

approach to saety, risk management andoperational integrity (see page 23). It integratesrequirements on environment and socialresponsibility, as well as on health, saety andsecurity, into a common management system.

Our OMS helps our operations around theworld to assess and manage their environmentaland social impacts. This includes conducting anannual OMS assessment to identiy risks andimpacts, and then putting in place action plansto manage them.

The principles and standards o OMS aresupported by our environmental and socialpractices. These set out how our major projectsidentiy and manage environmental and social

impacts. They also apply to projects that involvenew access, projects that could aect aninternational protected area and some BPacquisition negotiations.

In the early planning stages, these projectscomplete a screening process. Results are usedto identiy the most signicant environmental andsocial impacts associated with the project, with arequirement to identiy mitigation measures andimplement these in project design, constructionand operations. From April 2010 to the end o

2012, 88 projects had completed the screeningprocess, and used outputs o the process toimplement measures to reduce impact.

Our projects can have a liespan o severaldecades. All o our major operating sites, with theexception o recently acquired operations, arerequired to be certied to the environmentalmanagment standard ISO 14001, and publish anexternally veried environmental standard. Eachyear businesses conduct an OMS review o theirenvironmental perormance and set localimprovement targets. These local targets caninclude measures such as faring reduction,pollution prevention, or reducing impact on

biodiversity. Impacts on the environment varyrom site to site, and according to the nature oeach operation. We consider environmentalsensitivities in determining which issues requirethe greatest ocus or impact reduction.

Complying with regulationsWith operations in more than 80 countries, BPaces diverse and complex environmental lawsand regulations within international, national,regional and local jurisdictions.

We manage applicable legal and regulatory health,saety, security and environmental (HSSE)requirements through our OMS, which includesrequirements on HSSE compliance managementsystems. We strive to continuously improve

perormance by enhancing OMS and by sharinggood practices via our networks.

Across the company, we have deployed andcontinue to strengthen tools, systems andcapabilities or managing HSSE compliancewith applicable regulations.

Where regulations are already in place ourbusinesses strive to comply ully with them at alltimes. Where regulations are under development,BP may seek to participate in the regulatoryprocess while preparing or compliance with thelikely regulations.

Throughout the liecycle o our projects and operations,we aim to manage environmental impacts and addressany related impacts on local communities.

Managing our impact

A: Operations set environmental targets ata local level, based on an assessmento their most signicant environmentalaspects. Annual plans are developedto meet these targets, and theenvironment teams review progressannually with local management. Forexample, in my prior role as theenvironment director or Alaska,we set out to improve our solid waste

handling, with the aim o reducing theamount o waste sent to landll. In 2011we set up an additional solid wastecollection site which means that we arenow consolidating waste rom across theeld, allowing or better handling orecyclables.

Karen Wuesteneld, Environment Director, BP

Q: How does BP set targets orenvironmental perormance?


ISO 14001 applies

Our environmental and social practices apply

New access

projects and

some acquisition

negotiations

Major projects

and projects aecting

an international

protected area

Operations Decommissioning

Managing environmental and social impacts

88projects with screeningprocess completedto identiy environmentaland social impacts sinceApril 2010.



36

Environmental perormance

Environment


Greenhouse gas emissions(Mte CO2 equivalent)

65.5

2011

A c q u i s i t i o n s

D i v e s t m e n t s

M e t h o d o l o g y

c h a n g e s

O p e r a t i o n a l

c h a n g e s

R e a l s u s t a i n a b l e

r e d u c t i o n s

2012

63.5

59.5

57.5

61.5

59.8

61.8

0.8

-0.4

-1.5

-0.7

-0.2

Number of oil spills

400

200

100

20122008 2009 2010 2011

300

Oil spills to water Contained oil spillsOil spills to land

At a group level, we report on key environmentalissues such as energy use, greenhouse gasemissions, faring, waste and water, providinginormation about the global context and how wemanage the issue in our operations – as well asperormance data and analysis.

bp.com/environmentalperormance

We work in diverse environments around theworld, each o which can have specic types oenvironmental sensitivities. At a site close topopulations, or example, the most immediateconcern may be air quality, whereas a remote

desert site may need to give greater considerationto water management issues. To take account osite-to-site dierences, we manage and report onour perormance or most o our environmentalissues at a local level, where they are mostrelevant.

bp.com/mappingtool

Oil spills and the environmentIn 2012, the amount o oil remaining in theenvironment ater recovery operations increasedslightly to 320 thousand litres rom 280 thousandlitres in 2011. The number o oil spills to theenvironment that were over one barrel (159 litres)or more, remained the same as in 2011 at 102.

bp.com/chartingtool

We have used lessons learned rom ourDeepwater Horizon oil spill response to strengthenour approach to preparedness and responseplanning. In July 2012, new group requirementsor oil spill preparedness and response planning,and or crisis management were issued, withtimerames established or required conormanceby the businesses. To acilitate understanding othese new requirements, workshops have beenconducted with more than 600 sta rom 45countries, ranging rom senior leaders to on-siteoil spill response teams.

We urther developed our oil spill modellingsystems and capabilities in 2012. Improvingexisting modelling tools, conducting sta trainingin our regions and enhancing the environmentaland socio-economic data required in the modelshave all helped to better dene dierent oil spillscenarios and to plan or responding to them.Modelling or two deepwater drilling operations,Salamat and North Uist, indicated that internationalprotected areas could potentially be aected romthe worst case oil spill scenario. As a result,additional mitigations were put in place to tryto reduce this risk.

Understanding the environmental and socio-economic sensitivities can help inorm responseplanning. Across our operating regions, we aredeveloping enhanced, high resolution sensitivitymaps aided by the use o technologies such asremote sensing satellites. In 2012 we used highresolution satellite imagery to enhance sensitivitymaps o coastlines in Brazil and Arica.

The use o oil spill dispersants as a response toolor major oil spills in the deep-sea environmentcontinued to be a ocus area in 2012. We continueto gain a greater understanding o dispersants andtheir use through scientic research programmes.

bp.com/sharinglessonslearned

Greenhouse gas emissionsBP aims to manage its operational GHG emissionsthrough operational energy eciency, reductionsin faring and venting, and by actoring a carboncost into our investment appraisals and theengineering design o new projects. Our directGHG emissions were 59.8 million tonnes (Mte) in2012, compared with 61.8 Mte in 2011, adecrease o 2.0 Mte versus 2011.

The net eect o acquisitions and divestments isa decrease o 0.7 Mte, primarily the result o thesale o upstream assets as part o our divestmentprogramme. Operational changes led to a

decrease o 0.7 Mte, principally due to temporaryreductions in activity at some o our upstreamsites and one o our major US reneries and lowermileage by our shipping vessels.

Improvements made by our businesses tocalculate their emissions more accurately resultedin a net decrease o 0.4 Mte. Actions taken by ourbusinesses to sustainably reduce their emissionsamounted to a reduction o 0.2 Mte. We havebeen measuring such sustainable reductions in ouroperational GHG emissions every year since 2002,and the running total by the end o 2012 wasapproximately 8.5 million tonnes.

Greenhouse gas emissions targetBP established an absolute GHG emissions target

in 1998. Initially this led to the implementation o alarge number o cost-eective emission reductioninitiatives and actions. In 2008, we concluded thatan enterprise-wide GHG emissions target was nolonger practical or useul in driving emissionsreduction at the plant and operational level.Instead, we decided that a local approach to GHGemissions management was more practical andwe have since ocused our eorts on energyeciency and reducing faring and venting whereit is relevant or local business management. Weapply a carbon price in investment decisions anddesign or new projects where appropriate. Formore inormation see page 17.

We report our environmental impactsat both group and site levels.

59.8Mte

direct greenhouse gasemissions.

http://www.bp.com/environmentalperformance

http://www.bp.com/mappingtool

http://www.bp.com/chartingtool



http://www.bp.com/chartingtool

http://www.bp.com/mappingtool

http://www.bp.com/environmentalperformance



Environment


Energy eciencyWe seek to increase energy eciency across BPby implementing technologies to improve energyusage. For example, our Tangguh liqueed naturalgas operation in Indonesia uses combined heatand power in the liqueaction plant that turns gasinto liquid or tanker transport to markets. Thisrecovers the waste heat and uses it in steamgenerators to produce power, as well as usingthe remaining low-grade heat or the operation’sheating requirements. At the plant we alsoidentied the root causes o faring and have putin place a continuous improvement programmeto manage this.

Water managementBP uses water in its drilling, hydraulic racturingand oil sands operations. At our rening andpetrochemical acilities, water is used or cooling,steam and manuacturing processes. Water is alsoused in our biouels business or supplementaryirrigation and the rening o biouel energy crops.

Based on the IPIECA Global Water Tool, around40% o BP’s operations are located in areas wherethe availability o resh water is consideredstressed or scarce. Our operations are required toidentiy environmental and social impacts andassess potential opportunities to manage thoseimpacts, including any resulting rom our waterwithdrawal or discharges. We are reviewing

opportunities that may exist to improveeciencies in water management within ouroperations. This includes evaluating potentialuture investments in new technologies that havean eect on how we use water in our processesand how we treat wastewaters.

We commissioned Harvard University in the USto conduct research in 2012 on the allocation anduse o water in Jordan, the United Arab Emirates,Iraq and Oman. This will be ollowed through in2013 and 2014 with more detailed research inthree or our o these countries. This will equip BPwith peer-reviewed science as a basis or planningwater needs or oil and gas developments in theMiddle East.

More inormation online atbp.com/environment

Perormance data on energy use,faring, greenhouse gas emissions,ozone-depleting substances, emissionsaecting air quality, waste and water.

How we are laying the oundations orlarge-scale carbon capture and storage.

Science and technology in environmentalprotection.

Developing a moreecient PTA plant

State-o-the-art technologies developed andlicensed by our petrochemicals business are

helping to increase energy eciency andreduce environmental impact. An example isour latest-generation puried terephthalic acid(PTA) technology, which will be deployed atBP’s joint venture Zhuhai No. 3 PTA unit inChina, as well as or a licensee in India.Based on internal estimates, this technologyhas 75% lower water discharge, 65% lowergreenhouse gas emissions and 95% lowersolids waste generation. At 1.25 Mte/yr, thistechnology represents the largest single trainPTA in the world, yet due to its design, requiresthe least amount o land compared withcompeting PTA technologies.

An environmental engineer takes a watersample rom a bore near BP’s Kwinanarenery in Australia.

Environmental remediationWhere possible, we work with stakeholders toenable the productive use o assets that havebeen decommissioned. We work to ndapproaches that will have wider environmentaland social benets. For example, we haveconstructed a wetland treatment system inWellsville, New York, on the site o a renerywhich closed in 1958 ater a major re. Thewetland system is designed to remove anyresidual contaminants rom the groundwaterthat passes beneath the site and to preventcontaminants rom migrating into the nearbyGenesee River. A walking trail with educational

signage was introduced to the wetland area.Students rom Alred State College have accessto the system to study the regenerated area.

Waste managementAt many o our operating sites, we generatehazardous and non-hazardous waste. At thesesites, we manage our waste through ourlocal operating management systems. Theimprovements made to the way we manage ourwaste include implementing new minimizationand recycling initiatives. For example, we piloteda waste recycling initiative at our retail sites inAustralia in 2012, as part o our commitment tothe Australian Packaging Covenant. We are alsoenhancing both hazardous and non-hazardous solid

waste practices. For example, we are increasingrecycling by improving our waste-handling acilitiesin Alaska.

We develop plans or compliance with allapplicable legislation and seek to minimize anypotential impacts. We are continually evaluatingways to improve our perormance in this area.

http://www.bp.com/environment




38 Environment


BP operates in diverse environments around theworld, rom desert to deep sea. Some o theseareas are particularly sensitive because they arehome to protected or endangered species; otherscontain an ecosystem with outstanding biologicalor geographical value; or sometimes the landscapeis ragile or unique.

Many o the world’s most sensitive areas, bothenvironmentally and socially, have been giveninternational protected status. Our internationalprotected areas classication includes areasdesignated as protected by the International Unionor the Conservation o Nature (IUCN) (categoriesI-IV), Ramsar and World Heritage sites, as well as

areas proposed or international protected status.When evaluating whether a project may accessor potentially aect an international protected area,we apply our environmental and social practices(see page 35). These require screening againsta range o environmental and social indicators, todetermine potential impacts o project activitieson international protected areas.

Since 2002 we have reported on our operations inprotected areas including IUCN-designated areasI-VI. In 2012, no new projects sought permissionor entry into an international protected area.

Biodiversity and ecosystem servicesThe screening process or projects implementingour environmental and social practices includesbiodiversity, and covers protected areas,environmentally sensitive areas (which includeimportant biodiversity areas recognized byinternational environmental non-governmentalorganizations), and globally threatened speciesand their habitats.

Where potential impacts are identied, we takesteps to assess and manage these risks, includingconsulting with relevant experts and agencies, andmanage the potential impacts using a mitigationhierarchy. Then, depending on the impacts, wecompile a wildlie or biodiversity management planto implement measures to avoid or mitigateimpacts on biodiversity.

We also recognize that our operations aredependent on ecosystem services. Ecosystemsprovide many services to humans, including basicneeds, such as water and ood, and essentialservices, such as pollination, climate regulation,water and air purication, and protection romnatural hazards such as foods. Managing thesedependences is thereore important to along-term, sustainable business. Both ourdependence on, and the use o ecosystemservices by local communities, is included inproject screening.

We engaged a global conservation organization,Fauna & Flora International (FFI), to review ourbiodiversity and ecosystem services practicesand procedures in 2012. With FFI, we conductedinternal workshops, one-to-one interviews withkey personnel across BP, and external marketanalysis o emerging biodiversity and ecosystemservices issues.

Following this engagement, we are reviewing ourstrategic approach to biodiversity and ecosystemservices to help us understand the types o risksand opportunities that these present and how wecan best manage these across BP.

Marine environmentsBP has activities in many deep sea basins andthe BP exploration portolio has a strong ocus ondeep water. As part o the implementation olessons rom the Deepwater Horizon accident,we have developed procedures to help useectively identiy, understand, and managemarine environmental risks. This has includedthe development and implementation o astandardized approach to characterize the marineenvironment and to monitor the potentialenvironmental impacts o our activities. Usingcommon protocols will also allow or thecomparison o data among basins.

BP is a member o the World Ocean Council, aninternational, cross-sector alliance or industry

leadership and collaboration. As part o thisalliance, we are working to urther ourunderstanding o sustainable practices in marineenvironments and develop approaches to resourcemanagement and planning that balance the needso industry, recreation and conservation.

To urther develop our capabilities in oceanographyand marine science, in 2012 we continued to holdcourses at the Woods Hole OceanographicInstitute in Massachusetts, US. The two-weekintensive course, which has been delivered to35 employees since it started in 2011, coversthe physical, chemical and biological aspects ooceanography, and aims to increase understandingand application o the marine science discipline.

We take steps to understand and manage the potential impactso our operations on environmentally sensitive areas.

Biodiversity and sensitive areas

The South Caucasus PipelineExpansion project in Azerbaijanand Georgia

We have conducted environmental and socialimpact assessments in 2012 or the SouthCaucasus Pipeline Expansion project, whichwill take gas rom the BP-operated Shah Denizgas eld in the Azerbaijan sector o the CaspianSea, approximately 90km southwest o Baku,

to the Georgian border with Turkey.

This ollowed environmental and socialscreenings conducted in 2011. The plannedroute or the pipeline and a acility site includedpart o the Gobustan Cultural Reserve, aUNESCO World Heritage Site. Upon screening,several heritage sites were ound includingpotential burial mounds, traces o a medievalroad and a potential medieval settlement.Following the screening, the new pipelineconguration was designed to avoid goingthrough the buer zone.



Environment


BP’s Northstar acility on the North Slopeo Alaska, Prudhoe Bay, US.

BP began working in Alaska in 1959. Today weoperate 15 oil elds on Alaska’s North Slope andwe are one o the largest licence holders in theCanadian Beauort Sea, although there are noplans to start drilling activity there or severalyears. In the uture, BP could explore additionalupstream oil and gas opportunities in the Arctic– provided we have assessed and developed plansto manage associated risks and we are able toobtain the necessary licences to operate.

CollaborationWe recognize that the Arctic oshore environmenthas specic challenges that must be overcome toensure proper oil spill response capability and we

continue to carry out research into drilling and oilspill response in periods o adverse weather,limited visibility, ice, and cold water settings.BP has conducted Arctic oil spill research anddevelopment since the 1970s. In 1983 and 1984,BP and its partners completed oil-in-ice researchthat set the oundation or subsequent oil spillresponse research.

We participate in a number o Arctic researchprogrammes alongside our industry peers. Forexample, we are a member o the InternationalAssociation o Oil & Gas Producers’ joint industryprogrammes on Arctic oil spill responsetechnology, oil in ice and Arctic operationalstandards. We also participate in Barents 2020,

an industry working group on standards orArctic operations.

Working with local communitiesMost Arctic communities continue to dependon sensitive Arctic natural environments or theirsubsistence and cultural heritage. We work withthese local communities and others to understand

and manage the potential local impacts rom ourwork. Our emphasis is on open and transparentdialogue, based on sound science and knowledgesharing. We also look or opportunities or localcommunities to share in the long-term economicbenets o our presence.

We have worked with the North Slope Boroughand the Alaska Eskimo Whaling Commission toincorporate local knowledge into our mitigationplans or potential impacts to the local communityand subsistence whaling activities.

Restoring and rehabilitating theenvironment

BP manages more than 90 restoration andrehabilitation sites on the tundra plain o Alaska’sNorth Slope. About hal o the sites are abandonedexploration sites, where our rehabilitationprocedures include removing gravel and re-establishing tundra vegetation. On sites where thetundra has been disturbed in other ways – orexample, due to necessary trenching or duringo-road travel – we re-contour the disturbedground and aim to re-establish tundra vegetation.

In recent years we have developed two newmethods or establishing tundra vegetation. Oneinvolves seeding with a native grass-like sedge, amethod developed through collaboration betweenBP, the University o Alaska and Sea Grant, anextension service o the US government. Another

method involves tundra sodding, in which wemove blocks o tundra sod rom sites slated ordevelopment to restoration sites. Sodding in thisway appears to restore tundra to something closeto its natural state within two to three years. Themethod was rst suggested by Inupiaq elder,Charles Hopson, who has used tundra sod toinsulate ice cellars.

The environmental sensitivities o the Arctic regioncreate some unique challenges or oil and gas companies.

Working in the Arctic

A: BP is working with the industry toresearch oil spill response in the Arctic.We are a member o various joint industryprogrammes that are looking into oilspill response, rom oil detection to oilspill response techniques, to theenvironmental impacts o oil spills. Whilesome o these programmes are in earlystages, we expect these projects to bringadvances in oil spill response in the Arcticregion. These advances could, orexample, include improving the capabilityo detecting oil under ice and modellingthe movement o oil under ice.

Tony Parkin,

Oil Spill Planning Advisor, BP Alaska

Q: What is BP doing to improve itscapability to respond to oil spills inthe Arctic?

Charles HopsonInupiaq elder

I’ve worked with BP on ways to move andplace tundra sod. Together we’ve taken an

old Inupiaq traditional practice and put it to anew use, with plant scientists and localpeople side by side xing damaged tundra. Ayear or two ater it’s put on the ground, mostpeople can’t even tell that the site had beendisturbed.



40 Society


Society

We care deeply about how we bring energy to the world. To BP, workingresponsibly means seeking to have positive impacts on the areas wherewe operate by managing our activities and impacts in a systematic way.

Our goals

We seek to avoid or mitigateany negative socio-economicimpacts o our operations andprojects.

We aim to build open andconstructive relationships with

our stakeholders.

We strive to respect humanrights and avoid complicityin abuses.

In this section

200companies participating insupplier development

programmes in Azerbaijansince 2007.

$90.6minvested in communityprogrammes in 2012.

Human rights policy andactions developed orimplementation rom2013.

Sugar cane-based biouels operation,Edéia, BrazilBy avoiding manual harvesting whereverpossible, we have improved workingconditions or employees. For acase study on respecting workorcerights in Brazil see bp.com/society

http://www.bp.com/society




Society


We want countries and communities to benet rom our presence,and this is set out in our code o conduct and our values.

Managing our impact on society

At the start o new projects, we assess what theshort and long-term impacts o our activities mightbe. Projects that are subject to our environmentaland social practices (see page 35) are required tocarry out an early screening to evaluate thepotential environmental and socio-economicsensitivities in the area, and how our activitiesmight aect them.

Screenings assess a number o actors includingthe needs o indigenous people, human rightsimplications, security, community needs,workorce welare and local employment, thecultural heritage o the area, and the physical andeconomic aspects o involuntary resettlement.

We began work in 2012 to integrate detailedsocio-economic actors into the standardizedmethodology BP businesses use to assess therisk o potential uture incidents such as spills andsecurity incidents. By the end o 2013, the riskmethodology is expected to include moreinormation about the socio-economic implicationso potential incidents in addition to possible health,saety, environmental, reputational and businessimpacts.

Socio-economic impactsWe understand that the way our industrymanages its socio-economic impacts hasconsequences or people’s health, wellbeing,

culture and livelihoods.

Potential social-economic impacts rom oil and gas companies

Process Saety Advisor, Faralian Poerdjono,talking to BP contractors at our liqueed naturalgas plant in Tangguh, Indonesia.

For more potential positive and negativeimpacts rom oil and gas companies, as wellas examples o what BP is doing to mitigatepotential risks, see bp.com/society

Potentialpositive impacts

Potentialnegative impacts

What is BP doing tomitigate potential risks

Indigenouspeople

There could beeconomic benets,including employmentopportunities.

Indigenous people couldbe excluded romopportunities to share inthe economic benetso a project or operation.

In Australia, our commitmentto Aboriginal and Torres StraitIslander communities is setout in our ReconciliationAction Plan, which aims toormalize some o the workwe have been doing to createsustainable employment

opportunities.

Building thecapacity o localbusinesses andindustries

The company couldpromote opportunitiesor local businesses tolearn how to developthe processes andcapabilities needed toenter into relationshipswith them, or todevelop businesses inother sectors.

The company couldignore local businesses’products and servicesand decide not to sharetechnical skills.

In Indonesia, we are helpinglocal businesses build theircapacity in the Bird’s Headregion o Papua.

In Azerbaijan, Trinidad &Tobago and Angola, we havelong-standing local contentdevelopment strategies.

Communityconsultation andengagement

People living near tosites or planned sitescould be given airopportunity to express

any concerns and to ndout how they might beaected.

The concerns ocommunities aroundsites or planned sitescould be ignored.

Our operations and projectsdevelop their relationshipswith local stakeholders andaddress concerns that they

receive rom communities.In Indonesia and Azerbaijan,independent advisory panelshelp BP to recognize andaddress our impact on localcommunities and broadersociety.

Social investment Social investment couldbe designed inconsultation withcommunity members tomeet real needs and tohave long-termbenecial outcomes.

Social investment couldbe planned andexecuted in a way thatdoes not address realneeds or views or doesnot have long-termbenecial outcomes.

BP contributes to socialinvestment and communitydevelopment programmesin consultation with localcommunities near manyo our operations.





42 Society


We believe that host societies and localcommunities should share in the value that ouractivities create. BP’s projects and operationshave the potential to benet local communities

by creating jobs, supporting communitydevelopment initiatives, generating tax revenuesand providing opportunities or local suppliers.

When managed properly, our presence in a region hasthe potential to contribute to local and national economies.

Host societies and localcommunities

Financial transparencyThe taxes that BP pays are a signicant part oBP’s economic contribution to the countries inwhich we operate. We believe that tax systemsshould balance the generation o tax revenueswith the encouragement o business investmentthrough simple and ecient systems designedto allow competitiveness, while maintainingtransparency and good governance in business

and government.

In 2012, BP paid $15 billion in corporate incomeand production taxes. BP also bears other taxessuch as import and export taxes, employers’ taxes,withholding taxes and indirect taxes. In addition,BP collects and then pays to governments VATand sales taxes and withholding taxes, which intotal are greater than taxes borne by BP.

Extractive Industries Transparency InitiativeAs a ounding member o the EITI, and an alternatemember o the initiative’s board, BP works withgovernments, NGOs and international agencies onincreasing the transparency o revenue fows.

We have actively supported governments’ eortstowards EITI certication in the countries wherewe operate. Most recently, we have worked withthe US administration ater it decided to join theinitiative and in Azerbaijan we played an active rolein the EITI process as a member o the localmulti-stakeholder steering group.

Dodd-Frank legislation and EU DirectivesTransparency issues have been high on the

international agenda ollowing the US Dodd-Franklegislation passed by US congress in July 2010and the publication o drat European Accountingand Transparency Directives in October 2011.

The Securities and Exchange Commissionadopted the nal rules in respect o the Dodd-Frank legislation regarding resource paymentsdisclosure in August 2012. BP is preparing tocomply with these disclosure requirements, withthe rst disclosures being due in May 2014. It isexpected that the EU Directives will be enactedduring the rst hal o 2013.

BP’s direct economic contribution in 2012

Direct economic value generated

$391 billionRevenue plus interest and dividend receipts, royalty income and proceeds o sales assets a

Shared value

Operating costsEmployee

benefts andwagesb

Payments tothe providers

o capital

Payments togovernments

Socialinvestmentc

Including materials,services and

acilities

Costs oemployees’salaries and

benets

Includes nancecosts and

dividends paid

Income taxesand production

taxes paid

Revenue andcapital expenditure

supportingcommunitiesaround BP’soperations

$329 billion $13 billion $7 billion $15 billion $0.09 billion

Economic value retained$27 billion

(o which $24 billion has been invested in capital expenditure and acquisitions)

a. Cash proceeds or xed asset and business disposals.

b. Includes pension and other post-employment benet costs.

c. Excludes social bonuses paid by BP to governments, capitalized as part o licence acquisition costs. Excludes expenditure related to the

Deepwater Horizon incident.

Myanmar sanctionsBP is ollowing with interest how theinternational community suspended itsMyanmar sanctions regime in 2012. We havetaken action to better understand theexpectations and risks connected with anybusiness activity in the country. Together withother businesses we participated in a UK Trade& Investment delegation that met governmentand elected representatives, non-governmentalorganizations, media, embassies andinternational organizations. We did not invest inMyanmar in 2012.

BP is working with schoolchildren in Istanbul,Turkey, to raise awareness o road saety.



Society


Local workorceA number o our major operating sites areworking to improve representation rom theirhost community in their workorce.

In Alaska our workorce includes 2,300employees. Since 2007, we have providedinternships or 125 University o Alaska studentsand extended ull-time oers to more than140 students.

Developing local suppliersIn a number o locations we run programmes tobuild the skills o businesses and to develop thelocal supply chain. These programmes aim to

empower local companies to reach the standardsneeded to supply BP and other organizations.For example, we provide training and shareinormation about required standards in areas suchas health and saety. At the same time BP benetsrom the local sourcing o goods and services.

AzerbaijanBP’s Enterprise Development and TrainingProgramme (EDTP) in Azerbaijan is designed tosupport local companies’ eorts to achieveinternational standards, enhance theircompetitiveness in supplying the oil and gassector o Azerbaijan and increase the use o localsuppliers by BP’s contractors. The EDTP hasappraised more than 1,000 companies since its

inception in 2007 and more than 200 companieshave participated in its supplier developmentprogrammes. The programme has assisted localcompanies in securing contracts with localcompanies and institutions valued in excess o$268 million, o which more than $182 million arewith BP in Azerbaijan. Additionally, EDTP clientshave hired more than 1,000 new employees.

IraqBP leads a consortium o oil companies toincrease production rom the Rumaila oileld inIraq. The consortium has brieed local supplierson contracting processes, supplier selection,payments and tax, and avoiding corruption.

IndonesiaIn the Bird’s Head region o Papua, Indonesia, weare providing one-to-one business consultancy andtechnical assistance to local businesses throughthe tender process.

Community investmentWe aim to support development programmes thatcreate a meaningul and sustainable impact – onethat is relevant to local needs and aligned withBP’s business. We work with local authorities,community groups and specialists to deliverthese community programmes. Our communityinvestment alls into several categories.

Enterprise developmentWe help small and medium enterprises (SMEs) tosupport new or emerging sectors, such as tourismor agribusiness. For example, in some countries,we help local banks and business associations sothat they are in a position to provide loans to local

entrepreneurs and provide capital or SME loansand micronance. This can benet potentialsuppliers to BP and the energy industry, aswell as companies in other sectors.

EducationWe oten contribute to education initiatives inthe regions where we operate. In Angola, wepartnered with the Angolan Association or VisuallyImpaired and Partially Sighted War Victims in theAlpha-braille project. The project trains instructorswho then go out into communities to pass on theirbraille skills to visually impaired war veterans andchildren.

Access to energyIn several locations we have helped communities

to access or conserve energy. In Georgia, we arepartnering with USAID to provide an Energy Busthat travels around the country promoting energyecient technologies and renewable energy. InAngola, we are supporting the provision o solarpower or the school, clinic and water pumpingsystem in Paranhos, a village near Luanda.

Community programmes on healthAs well as mitigating the impact o our ownactivities on health, we work to improve healthconditions in some locations. For example, inEgypt, teams working on our West Nile Deltaproject sent three medical convoys to theMotobas area. The convoys provided reeeye care services to communities bordering

the site. In total, the convoys examined around2,000 people, provided almost 700 pairs o glassesand conducted more than 500 eye operations.

Direct spend on communityprogrammesIn 2012, our direct spending on communityprogrammes was $90.6 million, which includedcontributions o $31.7 million in the US, $16.3million in the UK, $2.3 million in other Europeancountries and $40.3 million in the rest o the world,including disaster relie.

Lobbying and advocacyBP engages with governments on many rontsand we aim to maintain dialogue with all relevantgovernment agencies, ministries and regulatorydepartments at every stage o our presence in acountry. Our code o conduct requires that ouremployees and contractors are honest andresponsive in interactions they have withgovernment agencies or regulators. We engagein policy debate on topics such as revenuetransparency, human rights and security, carbonpricing and on government support to stimulatebusinesses to bring emerging low-carbon uelsto market.

Anti-bribery and corruption

We operate in some o the world’s highest riskcountries, as measured by TransparencyInternational’s Corruption Perceptions Index. Ourcode o conduct requires that we do not engagein bribery or corruption in any orm and ourgroup-wide anti-bribery and corruption standardapplies to all BP employees and contractors. Weundertake an anti-corruption due diligence processto help us systematically identiy and manage anypotential corruption risk associated with thirdparties. Anyone who has a question or concernabout an ethical matter can contact OpenTalk,a helpline operated by an independent company(see page 21).

Fuelling London 2012

As the ocial oil and gas partner o the London2012 Olympic and Paralympic Games, weuelled the ocial games feet and we usedthe games to provide solutions or a lower-carbon uture by showcasing a range oexisting and emerging technologies and uels.With our arts, cultural and educational partners,we created programmes or young people andsupported the Cultural Olympiad which tookplace across the UK.



44 Society


Many o these potential impacts are related tohuman rights and are relevant to BP, in our roleas a major employer, purchaser o goods andservices, investor and energy provider.

BP supports the Universal Declaration o HumanRights, which lays out the rights to which allhuman beings are entitled. We commit torespecting all internationally recognized humanrights, such as those set out in the InternationalBill o Human Rights and the International LabourOrganization’s Declaration on FundamentalPrinciples and Rights at Work.

BP’s code o conduct contains statements thatrelate directly to human rights, such as our stance

on the rights and dignity o communities.

We are a signatory to two voluntary agreementswith implications or specic aspects o humanrights: the UN Global Compact, which includesprinciples on protecting internationally proclaimedhuman rights, and the Voluntary Principles onSecurity and Human Rights, which dene goodpractice or security operations in the extractiveindustry.

To view examples o potential human rightschallenges and how BP is mitigating theserisks see bp.com/humanrights

The UN Guiding Principles on Business and

Human RightsThe United Nations Guiding Principles outlinespecic responsibilities or businesses in relationto human rights. BP is committed to workingtowards aligning our processes with the GuidingPrinciples.

In 2011, we used external consultants to carry outa comparison between our current policies andpractices and the expectations in the GuidingPrinciples. In 2012, we used the ndings to createan action plan designed to achieve closeralignment with the Guiding Principles over anumber o years. Planned actions include:

• Developing and implementing human rightstraining, prioritizing specic businesses and

unctions.

• Developing guidance on integrating humanrights into impact assessments and communitygrievance processes.

• Embedding human rights requirementsinto our procurement and supply chainmanagement processes.

In 2012, we developed BP’s human rights policy,and we expect to launch it in 2013. The policyapplies to every BP employee.

Human rights in the supply chainManaging human rights issues has implicationsor the way we manage our supply chains. Weexpect our suppliers and contractors to actconsistently with our code o conduct, whichoutlines our requirements that no orced or childlabour will be used. Non-conormance with thismay ultimately result in termination o contract.

Working with othersWe have contributed to the work o oil and gasindustry organization IPIECA’s human rightstaskorce, which works on human rights issuesand develops good practice guidance orcompanies in our industry.

Security and human rightsSince 2000, BP and other companies rom ourindustry have worked alongside non-governmentalorganizations and the US and UK governments onthe Voluntary Principles on Security and HumanRights. The Voluntary Principles provide aramework or companies to assess whetherhuman rights issues are likely to arise as a resulto security activities within local operations andto ensure that appropriate precautionary stepsare taken.

BP is also participating with several other VoluntaryPrinciples member companies to developmeasurable key perormance indicators orVoluntary Principles implementation.

We report on our progress in relation to securityand human rights issues in an annual report to theVoluntary Principles plenary. We have chosen tomake our report public.

In 2012, using BP’s Voluntary Principles humanrights guidelines, we conducted internal assurancereviews in Georgia and Azerbaijan. In Georgia,we suggested using a BP tool or security riskassessments, implementing periodic surveyson perceptions o communities about security,and conducting a new employment and trainingmanagement audit o the private securitycompany. In Azerbaijan, we proposed ormalprotocols to use horse patrols and werecommended better processes or employee

background checks to help ensure the protectiono their rights when questioned by the authorities.

More inormation online atbp.com/society

BP’s human rights policy.

Equality in the supply chain inTrinidad & Tobago.

BP’s annual report to the VoluntaryPrinciples plenary.

Our operations can bring about major changes to societies andcommunities, which can have signicant impacts – both positiveand negative – on people’s lives.

Human rights

A: It’s usual to have at least 10 years’experience in law enorcement or themilitary. In my case I was in theColombian navy or 20 years. I retired withthe rank o commander, then spent twoyears as vice president o security in aninternational cargo airline, and thenbecame security manager or BPColombia beore I moved to work as aregional security advisor. Experience inthe private and public sectors has proveduseul in my role today where I work withboth private and state security providers.We help to train private providers andinclude clauses on human rights in ourcontracts with them. Where state securityis provided, we encourage our businessesto communicate their security policies tothe host government and, in some cases,we support human rights training.

Juan Roman,Regional Security Advisor, BP

Q: What experience does a BP securityadvisor need?

In Trinidad & Tobago we have developed a policythat sets expectations or our supplierson employee conditions and saety.

http://www.bp.com/humanrights






Our approach to reporting


What we heard How we are responding

Energy uture

Explain what BP is doing toprepare or a 6°C world and howthe company will climate-prooits projects.

We report on our projections or energy demand and supply to2030. We have also included examples o our regional climatemodel.

See pages 11 and 17 andbp.com/energyuture

Social impact

More ully explain your managemento human rights issues.

We include examples o the potential human rights challengesthat could be encountered in the oil and gas industry andexamples o BP’s approach to mitigating these risks.

Seebp.com/humanrights

Gul o Mexico

Continue publishing independentpeer-reviewed research andextend this to include economicimpacts.

We provide links to environmental studies and studies to monitorand test the saety o seaood. We have also included statisticsrom tourism agencies that show occupancy rates.

Seebp.com/gulomexico

Environment

Include environmental targetsand perormance.

We outline our approach to setting targets via our operatingmanagement system and describe why we do not set group-level targets or greenhouse gas emissions.

See page 36 and bp.com/environment

Input rom our stakeholders is a key part o our reporting process,because it helps us to identiy and report on sustainability topicsthat really matter.

Our approach to reporting

Scope o reportingThis Sustainability Review and bp.com/

sustainability concentrate on perormance andactivities rom 1 January to 31 December 2012.In addition to our group sustainability reporting,we publish country reports. We also maintain alibrary o site reports or more than 30 o our majoroperations. We aim to report on all aspects o ourbusiness, including joint ventures where we arethe operator. Where appropriate, we also seekto provide an overview o joint venture activitieswhere we are not the operator, but where wehave signicant infuence on our partners.

Input rom external stakeholdersWe made decisions about which topics to coverin BP Sustainability Review 2012 and on thesustainability section o our website by talking withexternal stakeholders and by reviewing the year’sdevelopments with our own internal subjectmatter experts. We also regularly monitor mediacoverage o our company and our industry.

Beore our report is published, BP’s senior leadersreview the content to ensure there are nosignicant omissions, and we validate the contentwith our external assurance provider, Ernst &Young, whose remit includes commenting on theprominence given to each topic and identiyingany gaps.

In preparing to publish our 2012 report,we surveyed more than 300 sustainabilitystakeholders or their views on our sustainabilityreporting; met with socially responsible investors;and engaged with stakeholders rom more than40 non-governmental organizations, academicinstitutions and other types o organizations,including:

BSR

Center or CorporateCitizenship at BostonCollege

Environmental LawInstitute

European Bank orReconstruction andDevelopment

Forum or the Future

HSBC

International Chambero Commerce UK

Jaguar Land Rover

Khazar University

Oxord PolicyManagement

Pact

ShareAction (ormerlyFairPensions)

TransparencyInternational UK

USAID

Many o these conversations took place inone-to-one meetings held in London, WashingtonDC and New York. We also held a one-daysustainability roundtable discussion in Baku,Azerbaijan, ocusing on diverse viewpoints roma strategically signicant market or BP.

For more on what we heard andhow we are responding please see

bp.com/aboutourreporting

Stakeholders discuss their views on BP’ssustainability reporting in Baku, Azerbaijan.





http://www.bp.com/sustainbility


http://www.bp.com/aboutourreporting

http://www.bp.com/aboutourreporting









46 Xxxx


Independent assurance statement


Independentassurance statement

The BP Sustainability Review 2012 (the Report)has been prepared by the management o BPp.l.c., who are responsible or the collection andpresentation o inormation within it. Ourresponsibility, in accordance with BPmanagement’s instructions, is to carry out alimited assurance engagement on the Report.We do not accept or assume any responsibilityor any other purpose or to any other person ororganisation. Any reliance any such third partymay place on the Report is entirely at its own risk.

What we did to orm our conclusionsOur assurance engagement has been plannedand perormed in accordance with ISAE30001 and to meet the requirements o a Type 2assurance engagement as dened by AA1000AS(2008).2 The AA1000AS (2008) assuranceprinciples o Inclusivity, Materiality andResponsiveness have been used as criteriaagainst which to evaluate the Report.

In order to orm our conclusions we undertookthe steps outlined below:

1. Interviewed a selection o BP executives andsenior managers to understand the currentstatus o saety, social, ethical andenvironmental activities, and progress madeduring the reporting period.

2. Reviewed selected group level documents

relating to saety, social, ethical andenvironmental aspects o BP’s perormanceto understand progress made across theorganisation and test the coverage o topicswithin the Report.

3. Reviewed BP’s approach to stakeholderengagement through interviews withemployees with responsibility or managingengagement activities at group and localbusinesses, and reviewed selected associateddocumentation.

4. Carried out the ollowing activities to reviewhealth, saety and environment (HSE) andcommunity investment data samples andprocesses:

a. Reviewed disaggregated HSE datareported by a sample o ve businessesto assess whether the data had beencollected, consolidated and reportedaccurately.

b. Reviewed and challenged supportingevidence rom the sample o businesses.

c. Tested whether HSE data had beencollected, consolidated and reportedappropriately at group level.

d. Reviewed community investment data atgroup level.

5. Reviewed BP’s processes or determiningmaterial issues to be included in the Report.

6. Reviewed the coverage o material issueswithin the Report against the key issues raisedby BP’s stakeholder engagement activities,material issues and areas o perormancecovered in external media reports andsustainability reports o BP’s peers, as wellas and the topics discussed by BP’s SEEAC.

7. Reviewed inormation or explanations aboutselected data, statements and assertions

regarding BP’s sustainability perormance.Level o assuranceOur evidence gathering procedures weredesigned to obtain a limited level o assurance(as set out in ISAE3000) on which to base ourconclusions. The extent o evidence gatheringprocedures perormed is less than that o areasonable assurance engagement (such as anancial audit) and thereore a lower level oassurance is provided.

The limitations o our reviewOur work did not include physical inspections oany o BP’s operating assets.

Our conclusions

Based on the scope o our review our conclusionsare outlined below:

Inclusivity

Has BP been engaging with stakeholders acrossthe business to develop its response tosustainability issues?

• Weare not aware o any key stakeholdergroups that have been excluded romdialogue.

• We are not aware o any matters that wouldlead us to conclude that BP has not appliedthe inclusivity principle in developing itsresponse to sustainability issues.

Materiality

Has BP provided a balanced representation omaterial issues concerning BP’s sustainabilityperormance?

• Wearenot aware o any material aspectsconcerning BP’s sustainability perormancewhich have been excluded rom the Report.

• Nothing has come to our attention that causesus to believe that BP management has notapplied its processes or determining materialissues to be included in the Report.

Responsiveness

Has BP responded to stakeholder concerns?

• Wearenot aware o any matters that wouldlead us to conclude that BP has not applied theresponsiveness principle in considering thematters to be reported.

Completeness and accuracy o perormance inormationHow complete and accurate is the HSE andcommunity investment data in the Report?

• Withthe exception o the limitations identiedin the Report on the inside back cover, we are

not aware o any material reporting units thathave been excluded rom the group-wide datarelating to HSE and community investmentdata.

• Nothing has come to our attention that causesus to believe that the data relating to the abovetopics has not been collated properly romgroup-wide systems.

• We are not aware o any errors that wouldmaterially aect the data as presented in theReport.

How plausible are the statements and claimswithin the Report?

• We have reviewed inormation or explanationon selected statements on BP’s sustainabilityactivities presented in the Report and we arenot aware o any misstatements in theassertions made.

Global Reporting InitiativeDoes the Report meet the requirements o theA+ application level o the GRI G3.1 Guidelines?

• Basedonourreview,includingconsideration o the Report, BP’s sustainability web contentand elements o the BP Annual Report andForm 20-F 2012 , nothing has come to ourattention that causes us to believe that BP’sreporting has not applied the GRI G3.1Guidelines to a level consistent with the A+application level.

1 International Federation o the Accountants’ International Standard or Assurance Engagements Other Than Audits or Reviews o Historical Financial Inormation (ISAE3000).2 The 2008 edition o AccountAbility’s AA1000 assurance standard.

46



Xxxx


Independent assurance statement


Our independenceAs auditors to BP p.l.c., Ernst & Young arerequired to comply with the requirements set outin the Auditing Practices Board’s (APB) EthicalStandards or Auditors. Ernst & Young’sindependence policies apply to the rm, partnersand proessional sta. These policies prohibit anynancial interests in our clients that would ormight be seen to impair independence. Each year,partners and sta are required to conrm theircompliance with the rm’s policies.

We conrm annually to BP whether there have

been any events including the provision oprohibited services that could impair ourindependence or objectivity. There were no suchevents or services in 2012.

Our assurance teamOur assurance team has been drawn rom ourglobal Climate Change and Sustainability ServicesPractice, which undertakes engagements similarto this with a number o signicant UK andinternational businesses. The work has been ledand reviewed by a Lead Sustainability AssurancePractitioner.

Ernst & Young LLP, London

20 March 2013

Observations and areasor improvementOur observations and areas or improvementwill be raised in a report to BP management.Selected observations are provided below.These observations do not aect our conclusionson the Report set out above.

• Stakeholderscontinuetorequestmoredetail

on BP’s contribution to a low-carbon uture,including its renewable energy strategy.The Sustainability Review sets out BP’salternative energy investment to date withinthe context o ‘the energy uture’. However,

the contribution that these wind and biouelsassets currently make to a low-carbon utureis less clear. For example, a more completepicture could be provided by comparingreported operational GHG emissions withan estimation o ‘avoided’ CO2 emissions.

• BP has highlighted its renewed ocus ondiversity, with a new ramework andassociated goals or emale representation inleadership positions. During our interviewswe discussed the challenges or BP indelivering against these goals and whetherinterim milestones should be set. BP hasintroduced additional structures to support

delivery and the reported increase in emaleleaders in the last three years shows thatprogress is being made. However, the actthat the same level o representation was rstachieved in 2005 demonstrates the dicultyin sustaining this improvement.

• BP participates in a diverse range o jointventures. BP acknowledges the importanceo risks associated with non-operated jointventures and the report highlights the pilot oa new group policy in this area. However, itdoes not explain how material theserelationships are or BP, which account or animportant part o BP’s portolio and overallvalue chain.

• We reviewed BP’s GHG perormance. BPexplains that existing operations are requiredto incorporate energy use considerations intobusiness planning but has also acknowledgedthat uture upstream developments are likelyto have higher CO2 emissions. Interest in thesteps that oil and gas companies are taking toreduce the intensity o emissions remainshigh. BP will need to continue providing aclear explanation o this relative perormancein the context o ongoing changes to thebusiness structure.

• For the second year, BP has reported on itsdirect economic contribution, including taxespaid and social investment spend. Whilst thisprovides a useul summary, stakeholders areincreasingly looking or detailed perormanceinormation and BP should consider providinga more detailed breakdown or certainelements o this contribution, or example aregional split o spend with local suppliers.

• BP maintains a wide programme ostakeholder engagement. This takes placeboth during the course o running thebusiness and specically in relation tosustainability reporting. This Report has moreexplicitly addressed how BP is responding tosome o the specic concerns that have beenraised during this engagement process, orexample in relation to the socio-economicimpacts o the oil and gas industry.



4848 BP in gures


For the year ended 31 December

Saety 2008 2009 2010 2011 2012

Fatalities – employees 2 0 0 1 1

Fatalities – contractors 3 18 14 1 3

Days away rom work cases – workorce 175 134 408 168 152

Days away rom work case requency b (DAFWCF) – workorce 0.092 0.069 0.193 0.090 0.076

Recordable injuries – workorce 951 665 1,284 677 710

Recordable injury requencyb (RIF) – workorce 0.43 0.34 0.61 0.36 0.35

Hours worked – employees (million hours) 195 174 168 165 182

Hours worked – contractors (million hours) 245 216 255 209 220

Losses o primary containmentc (number) 658 537 418 361 292

Tier 1 process saety eventsd (number) – – 74 74 43

Oil spills (>–1 barrel)c 335 234 261 228 204Volume o oil spilled (million litres) 3.4 1.2 1.7e 0.6 0.8

Saety and environmental nes ($ million) 1.1 66.6 52.5 77.4 22.4

Environment 2008 2009 2010 2011 2012

Number o oil spills – to land and waterc 170 122 142 102 102

Volume o oil unrecovered (million litres) 0.9 0.2 0.8e 0.3 0.3

Direct carbon dioxide (CO2) (million tonnes (Mte)) 57.0 60.4 60.2g 57.7 56.4

Direct methane (Mte) 0.21 0.22 0.22g 0.20 0.17

Direct greenhouse gas (GHG) (Mte CO2 equivalent (CO2e)) 61.4 65.0 64.9g 61.8 59.8

Indirect carbon dioxide (CO2)h (Mte) 9.2 9.6 10g 9.0 8.4

Customer emissionsi (MteCO2) 530 554 573 539 517

Flaring (Upstream) (thousand tonnes (kte) o hydrocarbons) 1,718 2,149 1,671g 1,835 1,548

Environmental expenditurej ($ million)k 2,520 2,483 18,400j 8,520 7,219

People l 2008 2009 2010 2011 2012

Number o employees – groupm 92,000 80,300 79,700 83,400 85,700

Number o employees – group leadershipm 583 492 482 516 546

Women in group leadershipm (%) 14 14 14 15 17

Women at management levelm (%) 22 23 24 25 25

People rom UK and US racial minorities in group leadership l (%) 6 6 7 6 6

People rom beyond the UK and US in group leadership l (%) 19 21 19 19 22

Employee turnover n (%) 15 15 15 14 13

OpenTalk cases 927 874 742 796 1,295

Dismissals or non-compliance and unethical behaviour 765 524 552 529 424

Benets to employees – including wages, salaries, share-based payments, benets andpensions ($ million)o

12,280 12,216 11,773 12,327 13,117

Contracts terminated or not renewed due to non-compliance or unethical behaviour 22 30 14 14 6

Perormance 2008 2009 2010 2011 2012

Total hydrocarbons produced (thousand barrels o oil equivalent (mboe) per day) 3,838 3,998 3,822 3,454 3,331

Reserves replacement ratiop (%) 121 129 106 103 77

Total renery throughputs (thousand barrels per day (mb/d)) 2,155 2,287 2,426 2,352 2,354

Total petrochemicals productionq (thousand tonnes (kte)) 12,835 12,660 15,594 14,866 14,727

Replacement cost prot (loss)r ($ million) 25,593 13,955 (4,914) 23,900 11,993

Taxes to governments – comprising income taxes and production taxes paid ($ million) 19,690 10,309 12,071 16,339 15,033

Dividends paid to shareholders ($ million) 10,342 10,483 2,627 4,072 5,294

Contribution to communitiesa ($ million) 125.6 106.8 115.2 103.7 90.6

Data on our saety, environment, people and perormancerom 2008 to 2012.a

BP in fgures



Cautionary statementBP Sustainability Review 2012 and bp.com/sustainability contain

certain orward-looking statements with respect to the nancial

condition, results o operations and businesses o BP and certain

o the plans and objectives o BP with respect to these items. In

particular, among other statements, BP’s outlook on global energy

trends to 2030 and beyond, are orward looking in nature. By their

nature, orward-looking statements involve risks and uncertainties

because they relate to events and depend on circumstances that

will or may occur in the uture. Actual results may dier rom those

expressed in such statements depending on a variety o actors,

including uture levels o industry product supply; demand and

pricing; operational problems; general economic conditions; political

stability and economic growth in relevant areas o the world; OPEC

quota restrictions; changes in laws and governmental regulations;

regulatory action; exchange rate fuctuations; development and

use o new technology; changes in public expectations and other

changes in business conditions; the actions o competitors;

natural disasters and adverse weather conditions; wars and acts

o terrorism or sabotage; and other actors discussed elsewhere

in this document and under ‘Risk actors’ in our Annual Report

and Form 20-F 2012 as led with the US Securities and Exchange

Commission (SEC). Material is used within this document to

describe issues or voluntary sustainability reporting that are

considered to have the potential to signicantly aect sustainability

perormance in the view o the company and/or are expected to be

important in the eyes o internal or external stakeholders. Material

or the purposes o this document should not, thereore, be read as

equating to any use o the word in other BP p.l.c. reporting or lings.

BP Annual Report andForm 20-F 2012 andBP Summary Review

2012 may be downloaded rom bp.com/annualreport . No materia

in this Sustainability Review orms any part o those documents

No part o this Sustainability Review or bp.com/sustainability

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 o the BP group o

companies. Unless otherwise stated, the text does not distinguis

between the activities and operations o the parent company and

those o its subsidiaries.

Notes to fgures

a Quantitative perormance indicators have been chosen,

with external input, to refect the most important sustainability

issues or BP. Data is reported here only rom operations

under BP operational control, except or GHG emissions.

We use consistent processes that seek to provide acceptable

estimates to enable year-to-year comparisons.

b DAFWCF and RIF are the annual requency per 200,000 hours

worked.

c Oil spills are dened as any liquid hydrocarbon release

o more than or equal to one barrel (159 litres, equivalent

to 42 US gallons).

d Tier 1 process saety events reer to losses o primary

containment, rom a process, o greatest consequence –

causing harm to a member o the workorce or costly damage

to equipment, or exceeding dened quantities. This is asdened by the American Petroleum Institute process saety

indicator pyramid.

This year we are also disclosing tier 2 process saety events

or the rst time. These can be ound on page 32.

e This data does not include the oil spill volume rom the

Deepwater Horizon incident. The US government and third

parties have announced various estimates o the fow rate

or total volume o oil spilled rom the Deepwater Horizon

incident. The multi-district litigation proceedings pending in

New Orleans will address the amount o oil spilled. See BP

Annual Report and Form 20-F 2012 page 238 or inormation

about the volume used to determine our estimated liabilities.

Direct GHG emissions are the physical emissions rom

operations. Emissions represent all consolidated entities and

BP’s share o equity-accounted entities except TNK-BP.

g In 2010, we did not report on GHG emissions or faring

associated with the incident or response. We have since

estimated the gross CO2 equivalent emissions rom

response activities to be approximately 481,000 tonnes.

We have estimated the gas fared during the response to

be approximately 56,000 tonnes. We have not restated our

2010 numbers since our practice is only to restate historical

emissions or material inaccuracies.

h Indirect GHG emissions are a consequence o the import

by operations o steam, electricity and heat rom third-party

sources. Emissions represent all consolidated entities and

BP’s share o equity-accounted entities except TNK-BP.i Based on BP’s total reported production o natural gas, natural

gas liquids and renery throughputs.

j Includes $1,753 million environmental expenditure costs

relating to the Gul o Mexico oil spill.

k Minor amendments have been made to 2011.

l Employees are dened as individuals who have a contract o

employment with a BP group entity.

m Employee gures as at 31 December.

n These gures relate to non-retail employees only. In 2012

voluntary turnover (resignations and retirements) was 5%.

o Minor amendments have been made to comparative periods

2010-2011.

p Combined basis o subsidiaries and equity-accounted entities

excluding acquisitions and disposals.

q Petrochemicals production reported within Downstream.

Minor amendments have been made to comparative periods

r Replacement cost prot or loss refects the replacement cos

o supplies. The replacement cost prot or loss or the year i

arrived at by excluding rom prot inventory holding gains and

losses and their associated tax eect. Inventory holding gain

and losses represent the dierence between the cost o sale

calculated using the average cost to BP o supplies acquired

during the year and the cost o sales calculated on the rst-in

rst-out method, ater adjusting or any changes in provisions

where the net realizable value o the inventory is lower thanits cost. Inventory holding gains and losses, or this purpose,

are calculated or all inventories except or those that are held

as a part o a trading position and certain other temporary

inventory positions. Replacement cost prot or the group is

non-GAAP measure.












Annual Report andForm 20-F 2012Details o our nancialand operating perormancein print or online.

Publishes March.bp.com/annualreport

Summary Review 2012A summary o our nancialand operating perormancein print or online.Publishes March.

bp.com/summaryreview

Energy Outlook 2030Projections or world energymarkets, considering thepotential evolution o globaleconomy, population, policy

and technology.Publishes January.bp.com/energyoutlook

Sustainability Review 2012A summary o oursustainability reporting or ndadditional inormation online.Publishes March.bp.com/sustainability

Financial and OperatingInormation 2008-2012Five-year nancial andoperating data in PDFor Excel ormat.Publishes April.bp.com/fnancialandoperating

Statistical Review oWorld Energy 2013An objective review o keyglobal energy trends.Publishes June.bp.com/statisticalreview

Buildingastronger,

saferBP

SummaryReview

2012bp.com/annualreport

BPp.l.c.2013

Buildingastronger,

saferBP

SustainabilityReview2012bp.com/sustai nability

Includedinthi sreportandonline

nn

l

e

r t n

r 2 - 2 1 2

Buildingastronger,

saferBP

AnnualReport andForm20-F2012bp.com/annualreport

BP Energy Outlook 2030January 2013

BPStatisticalReviewof WorldEnergyJune2013bp.com/statisticalreview

Reportingonkeyglobalenergytrends

1 Introduction1Groupchieexecutive’sintroduction2201Xinreview

6 Oil

6Reserves8Productionandconsumption15Prices16Refning18Trademovements

20 Naturalgas15Prices16Refning18Trademovements

20 Coal

15Prices16Refning

35 Nuclearenergy

35Consumption

36 Hydroelectricity36Consumption

38 Renewableenergy

38Otherrenewableconsumption39Biouelsproduction

40 Primaryenergy

40Consumption41Consumptionbyuel

44 Appendicies

44Approximateconversionactors44Defnitions45Moreinormation

2 BPhistoryata glance

5 Groupinformation

X FinancialperormanceX GroupincomestatementX Analysisounderlyingreplacementcostprotand

replacementcostprotbeoreinterestandtaxandreconciliationtoprotortheperiod

XXReplacementcostprot(loss)beoreinterestandtaxbybusinessandgeographicalarea

XXUnderlyingreplacementcostprotbeoreinterestandtaxbybusinessandgeographicalarea

XXNon-operatingitemsbybusinessXXNon-operatingitemsbygeographicalareaXXFairvalueaccountingeectsXXTotalonon-operatingitemsandairvalueaccounting

eectsXXGuloMexicooilspillXXSalesandotheroperatingrevenuesXXProductionandsimilartaxesXXTaxationXXDepreciation,depletionandamortizationXXGroupbalancesheetXXOperatingcapitalemployedXXProperty,plantandequipmentXXAnalysisoinventories,receivablesandpayablesXXGroupcashfowstatementXXMovementinnetdebtXXCapitalexpenditure,acquisitionsanddisposalsXXRatiosXXEmployeenumbersXXInormationorearningspershareXXBPshareholdinginormationXXBPsharedata

35 GrouphydrocarbondataXXOilandnaturalgasexplorationandproductionactivitiesXXMovementsinestimatednetprovedreservesXXGroupproductioninterests–liquidsXXGroupproductioninterests–naturalgasXXGroupproductioninterests–oilandnaturalgasXXLiqueednaturalgasprojects

65 Upstream

73 Downstream

83 TNK-BP

87 Otherbusinessesandcorporate

90 Miscellaneousterms

92 Furtherinformation

93 Reportsandpublications

FinancialandOperatingInformati on2008-2012bp.com/nancialandoperating

This document is part o BP’s corporate reporting suite. Wereport on our nancial and operating perormance, sustainabilityperormance and also on global energy trends and projections.

Acknowledgements

Design Salterbaxter

You can order BP’sprinted publications, reeo charge, rom:

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FeedbackYour eedback is important to us.You can email the corporate reportingteam at [email protected]

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