Company Quick10K Filing
BP
20-F 2019-12-31 Filed 2020-03-18
20-F 2018-12-31 Filed 2019-03-29
20-F 2017-12-31 Filed 2018-03-29
20-F 2016-12-31 Filed 2017-04-06
20-F 2015-12-31 Filed 2016-03-04
20-F 2014-12-31 Filed 2015-03-03
20-F 2013-12-31 Filed 2014-03-06
20-F 2012-12-31 Filed 2013-03-06
20-F 2011-12-31 Filed 2012-03-06
20-F 2010-12-31 Filed 2011-03-02
20-F 2009-12-31 Filed 2010-03-05

BP 20F Annual Report

Item 17 ¨ Item 18 ¨
EX-2.0 a31122019bp20fexhibit2.htm
EX-4.4 a31122019bp20fexhibit44.htm
EX-12.0 a31122019bp20-fexhibit12.htm
EX-13.0 a31122019bp20-fexhibit13.htm
EX-15.1 a31122019bp20fexhibit151.htm
EX-15.2 a31122019bp20fexhibit152.htm
EX-15.3 a31122019bp20fexhibit153.htm
EX-15.4 a31122019bp20fexhibit154.htm
EX-15.7 a31122019bp20-fexhibit157.htm
EX-15.8 a31122019bp20-fexhibit158.htm

BP Earnings 2019-12-31

Balance SheetIncome StatementCash Flow

20-F 1 a31122019bp20fdoc.htm 20-F 31.12.2019 BP 20-F Combined Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 20-F
 
 
(Mark One)
¨
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) or (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR
 
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended 31 December 2019
OR
 
¨

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR
 
¨

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 1-6262

BP p.l.c.
(Exact name of Registrant as specified in its charter)
 
England and Wales
(Jurisdiction of incorporation or organization)

1 St James’s Square, London SW1Y 4PD
United Kingdom
(Address of principal executive offices)

Dr Brian Gilvary
BP p.l.c.
1 St James’s Square, London SW1Y 4PD
United Kingdom
Tel +44 (0) 20 7496 5311
Fax +44 (0) 20 7496 4573
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)





Securities registered or to be registered pursuant to Section 12(b) of the Act
 
 
 
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
American Depositary Shares
BP
New York Stock Exchange
Ordinary Shares of 25c each
 
New York Stock Exchange*
Floating Rate Guaranteed Notes due 2020
BP/20D
New York Stock Exchange
Floating Rate Guaranteed Notes due 2021
BP/21D
New York Stock Exchange
Floating Rate Guaranteed Notes due 2022
BP/22D and
BP/22H
New York Stock Exchange
4.500% Guaranteed Notes due 2020
BP/20 and
BP/20C
New York Stock Exchange
4.742% Guaranteed Notes due 2021
BP/21A and
BP/21F
New York Stock Exchange
3.561% Guaranteed Notes due 2021
BP/21B
New York Stock Exchange
2.112% Guaranteed Notes due 2021
BP/21C and
BP/21E
New York Stock Exchange
2.500% Guaranteed Notes due 2022
BP/22B
New York Stock Exchange
2.520% Guaranteed Notes due 2022
BP/22E and BP/22F
New York Stock Exchange
3.245% Guaranteed Notes due 2022
BP/22A and BP/22G
New York Stock Exchange
3.062% Guaranteed Notes due 2022
BP/22C
New York Stock Exchange
2.750% Guaranteed Notes due 2023
BP/23 and
BP/23D
New York Stock Exchange
3.216% Guaranteed Notes due 2023
BP/23B and
BP/23C
New York Stock Exchange
3.994% Guaranteed Notes due 2023
BP/23A
New York Stock Exchange
3.535% Guaranteed Notes due 2024
BP/24A
New York Stock Exchange
3.814% Guaranteed Notes due 2024
BP/24
New York Stock Exchange
3.224% Guaranteed Notes due 2024
BP/24B and
BP/24D
New York Stock Exchange
3.790% Guaranteed Notes due 2024
BP/24C
New York Stock Exchange
3.506% Guaranteed Notes due 2025
BP/25
New York Stock Exchange
3.796% Guaranteed Notes due 2025
BP/25A
New York Stock Exchange
3.119% Guaranteed Notes due 2026
BP/26 and
BP/26A
New York Stock Exchange
3.410% Guaranteed Notes due 2026
BP/26C
New York Stock Exchange
3.017% Guaranteed Notes due 2027
BP/27 and
BP/27D
New York Stock Exchange
3.279% Guaranteed Notes due 2027
BP/27B
New York Stock Exchange
3.588% Guaranteed Notes due 2027
BP/27A and
BP/27C
New York Stock Exchange
3.723% Guaranteed Notes due 2028
BP/28
New York Stock Exchange
3.937% Guaranteed Notes due 2028
BP/28A
New York Stock Exchange
4.234% Guaranteed Notes due 2028
BP/28B
New York Stock Exchange
3.067% Guaranteed Notes due 2050
BP/50
New York Stock Exchange
3.000% Guaranteed Notes due 2050
BP/50A
New York Stock Exchange
 
*
Not for trading, but only in connection with the registration of American Depositary Shares, pursuant to the requirements of the Securities and Exchange Commission






Securities registered or to be registered pursuant to Section 12(g) of the Act.
None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.
 
 
Ordinary Shares of 25c each
21,535,839,814

Cumulative First Preference Shares of £1 each
7,232,838

Cumulative Second Preference Shares of £1 each
5,473,414

 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  x    No  ¨

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    Yes  ¨    No  x

Note—Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  x     Accelerated filer  ¨    Non-accelerated filer  ¨ Emerging growth company ¨

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ¨

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP  ¨
    
International Financial Reporting Standards as issued
by the International Accounting Standards Board  x
  
Other  ¨

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

Item 17  ¨                Item  18  ¨

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x



BP Annual Report and Form 20-F 2019


 
Our purpose is reimagining energy for people and our planet. We want to help the world reach net zero and improve people’s lives. We will aim to dramatically reduce carbon in our operations and production and grow new low carbon businesses, products and services. We will advocate for fundamental and rapid progress towards Paris and strive to be a leader in transparency. We know we don’t have all the answers and will listen to and work with others. We want to be an energy company with purpose; one that is trusted by society, valued by shareholders and motivating for everyone who works at BP. We believe we have the experience and expertise, the relationships and the reach, the skill and the will, to do this.


 
Strategic report Financial statements Chairman’s letter 2 Consolidated financial statements 131 Chief executive officer’s letter 4 of the BP group Our ambition for the energy transition 6 Notes on the financial statements 157 At a glance 8 Supplementary information on 232 oil and natural gas (unaudited) Global context 10 Our business model 14 Our strategy 16 Our investment process 19 Our strategy in action 24 Additional disclosures 297 Measuring our progress 32 Group performance 36 Shareholder information 327 Sustainability 39 Glossary 337 Upstream 50 Non-GAAP measures 344 reconciliations Downstream 56 Rosneft 61 Signatures 347 Other businesses and corporate 63 Cross-reference to Form 20-F 348 Alternative Energy 63 Information about this report 349 Section 172 statement 66 Exhibits 349 How we manage risk 68 Risk factors 70 Corporate governance Board of directors 74 Executive team 78 The leadership team 80 Introduction from the chair 82 Board activities in 2019 84 How the board has engaged with shareholders, 88 the workforce and other stakeholders Nomination and governance committee 90 Audit committee 91 Safety, environment and security 96 assurance committee Geopolitical committee 98 Chairman’s committee 99 Directors’ remuneration report 100 Remuneration committee 101 Navigating our reports Our fast read Our reporting centre Glossary provides a concise summary of the annual brings together all our key reports, including our Like any industry, ours has its own unique language. report, highlighting strategy, performance and sustainability report, as well as other reports on how For that reason, words and terms marked with  sustainability information. we see the energy market evolving in the future. are defined in the glossary on page 337. bp.com/annualreport. bp.com/reportingcentre. BP Annual Report and Form 20-F 2019 1


 
Chairman’s letter “We enter a new decade with a new company purpose: to reimagine energy for people and our planet.” Our investor proposition Growing sustainable free cash flow and distributions to shareholders over the long term. $8.3bn total dividends distributed to BP shareholders (2018 $8.1bn) 6.9% annual dividend yield ordinary share (2018 6.3%) 2 BP Annual Report and Form 20-F 2019


 
Strategic report Dear fellow shareholders, focused on evolving BP’s strategy and Our focus throughout 2020 As I write, the world is facing an portfolio to address the challenges of One of the focal points for the board in unprecedented set of challenges. The tomorrow. This focus has included 2020 will be BP’s capital markets day coronavirus pandemic (COVID-19) is ensuring the smooth transition in in September, when Bernard and his spreading rapidly, with tragic consequences leadership from Bob to Bernard, followed leadership team will lay out more detail for many people across many geographies. by regular engagement by the board with about the strategy, near-term targets and Global efforts to stop the virus are also Bernard and his new leadership team to ways to measure progress. It will be the having significant economic consequences. develop BP’s purpose and net zero moment the vision and ambition set out in And in an oil market where demand has ambition. This is a process which has February becomes much more concrete. fallen, supply has sharply increased. been supported by our dialogue with We will do this while ensuring that we investors, governments, employees maintain a strong focus on high quality and Though unprecedented, a global energy and other key stakeholders. efficient operations and on delivering the company like BP should be prepared for promises we have made to our investors such challenges. Our enduring commitments BP is now set for a future that is different My thanks to you all BP is indeed prepared. Our global to its past, but some things won’t change. In addition to thanking Bob, two other operating structure and long time- BP’s values-based culture will be maintained departing senior leaders deserve a special horizons are intended to mitigate the and further developed. BP’s purpose and mention – chief financial officer Brian effect of near-term shocks. That is how ambition reflect its culture, and together Gilvary, who has decided to step down from BP has approached shocks and volatility they position BP well to develop as an the board in June after eight years in the job, in its 110-year history, and that is how increasingly sustainable company. and Downstream chief executive Tufan we will approach this storm too. In Erginbilgic, who leaves BP at the end of particular, the past decade has given Our commitment to safe and reliable March. On behalf of the board, I extend my BP unique experience in successfully operations will remain paramount. BP’s thanks and my deep appreciation for the handling crises – and we enter this one safety performance has seen near profound contributions they each made even better prepared. continuous improvement since 2010, and during an important period for the company. we must continue to learn and improve. But in this world of change, BP itself is also We believe that the new organizational Of course, each of our employees has a changing. We enter a new decade with a structure BP set out last month will help very important role to play in BP’s progress, new company purpose: to reimagine to reinforce this commitment. and they should be recognized. On behalf energy for people and our planet. We have of the board I extend my sincere thanks to also set a new ambition: to become a net As well as our enduring commitment all our people for a job well done in 2019. zero company by 2050 or sooner, and to to safety, BP’s commitment to its help the world get to net zero. And to lead relationships and partnerships will not Today, BP’s engagement with its and deliver on both we have a new chief change, including with governments customers, suppliers, shareholders, executive officer, Bernard Looney, who around the world. BP intends to use its employees and others is wider and deeper took on the role on 5 February 2020. energy market experience, skills and than ever, but it has to further develop as technology to help countries, cities and we progress on our journey. I therefore want Evolving for an uncertain world corporations decarbonize, while at the to use this opportunity to thank you, BP This is a new direction for BP, and it is only same time building a thriving, lower shareholders, for your continued support possible because of the foundation laid by carbon energy business. and engagement during 2019, including Bob Dudley. Bob served as BP’s group through your votes at our AGM in May. Your chief executive with distinction for almost BP’s new ambition also gives us extra challenge and input have been important in a decade, and he and his team deserve reason to maintain the capital discipline our effort to set a new strategic direction. our considerable thanks for guiding BP to and focus that has served the company so I look forward to continuing our dialogue. a position of operational and financial well. We can only reimagine energy if we strength and deepened resilience. generate the cash needed to manage the balance sheet, invest in new low carbon At these times, BP’s 110-year history of businesses, and continue to pay the navigating uncertainty is also reassuring. dividend on which you, our owners, depend. Your company has anticipated and That is how we will meet our ambition. It is responded to change many times over. something that I, together with the BP Helge Lund Indeed, throughout 2019 your board has board, look forward to working on with Chairman Bernard and his executive team. 18 March 2020 BP Annual Report and Form 20-F 2019 3


 
Chief executive officer’s letter Dear fellow shareholders, Reimagining and reinventing energy Our investor proposition will remain As we publish this report, the world is In February, we announced a new unchanged as we lay out new near-term working through extraordinarily difficult purpose for BP, and a major reorganization plans later this year. This includes our times. Countries around the globe are to deliver our new ambition to be a net commitment to growing sustainable free battling the coronavirus pandemic zero company by 2050 or sooner and help cash flow and returns to shareholders (COVID-19). People’s lives are being the world get to net zero. over the long term. hugely disrupted, with tragic The current market shocks only reaffirm We will continue to maintain a strong consequences for many. The financial the need for this reimagining of energy and financial frame, including a focus on markets are reflecting the disruption and reinvention of BP. Our current upstream- deleveraging our balance sheet and our sector is particularly hard hit, not just downstream structure has served us well staying within a disciplined frame for our by a virus-related shock to demand but by for over a century, but I believe we now capital expenditure. a supply-side shock as well. need a different model for the rapidly And now, more than ever, we will focus At BP, we are taking calm and deliberate changing demands of the future. We need on managing costs, pursuing efficiencies actions for the well-being of our people an agile, highly integrated structure that is and driving waste out of the system. and the health of your company. We do more focused than ever on our core so with a robust balance sheet, strong capabilities in operations, customers, low A force for good and competitive returns liquidity and the flexibility in our portfolio carbon and innovation. The leadership team This new decade is a pivotal time for BP. and financial framework that provide us is working with the board to develop this We will continue to be an energy business, with options. structure, along with a new strategy and but a very different kind of energy business near-term targets, which we intend to in years to come. We may not get A resilient company share with you in September 2020. everything right along the way and will This resilience is a tribute to Bob Dudley’s need to listen and learn from others, not leadership over the past decade. I see huge opportunity for BP given our least you, our owners. Following the Deepwater Horizon distinctive combination of reach, accident, Bob’s steady hand has guided resources and relationships. The world will But with your continued support we BP through recovery and back to growth need to invest trillions of dollars in new expect to become leaner, faster-moving, as a safer, stronger and more disciplined energies over the next several decades. lower carbon – and more valuable. company – one that has delivered We have the skill and the will to help the Our destination is a thriving, sustainable consistently for 12 consecutive quarters world deliver a rapid energy transition. energy business in a net zero world. One on the plan we put forward in 2017. Performing while transforming that is a motivating and inspiring place to • We made an underlying profit of This may be our most wide-ranging work for our employees. That is wanted $10 billion in 2019. reorganization for more than a century, but as well as needed by society. And one • Operating cash flow was strong at I want to assure you of our commitment that is valued by you, our shareholders, as $26 billion for the year. to perform as we transform. Among many a force for good as well as a provider of • That gave us the confidence to increase significant changes, however, there will be competitive returns. our dividend, which currently stands at no change to the fundamental principles 10.5c per ordinary share. that have served us well over the last decade and which apply equally in low During 2019, two colleagues sadly lost price environments as well as high. their lives while working at BP. My heart goes out to their families and friends. We Above all, our commitment to safe and must learn from these tragedies and reliable operations remains unchanged. Bernard Looney continue to make BP safer. I believe that Safety will always be a BP core value and Chief executive officer we can build on progress that last year we believe that the new structure we are 18 March 2020 saw our lowest-ever figure for BP people introducing will further strengthen our getting hurt at work (our recordable injury safety performance. frequency measure). Profit attributable to BP shareholders $4.0bn Nearest GAAP equivalent to underlying profit. 4 BP Annual Report and Form 20-F 2019


 
Strategic report “Our destination is a thriving, sustainable energy business in a net zero world. One that is a motivating and inspiring place to work for our employees.” Our purpose is reimagining energy for people and our planet. This will frame our thinking, our activities and our interactions. Introducing a new structure, new leadership team and new ways of working. Our commitment to safe and reliable operations remains unchanged. And our investor proposition remains unchanged. BP Annual Report and Form 20-F 2019 5


 
Our ambition is to be a net zero company by 2050 or sooner and to help the world get to net zero. Our ambition for the energy transition Pursuing a strategy that is Responding to increased shareholder interest consistent with the Paris goals In 2019 the board recommended that The CA100+ resolution, which requires BP The world needs a rapid transition to net shareholders support a special resolution to respond to a number of different elements, zero and to reimagine the global energy requisitioned by Climate Action 100+ passed with more than 99% of the vote. system. This presents an opportunity for (CA100+) on climate change disclosures. These responses are contained throughout BP to provide the cleaner energy the this annual report. world wants and needs. We see opportunities in helping the The CA100+ resolution, which includes safeguards such as for commercially confidential and world decarbonize through new competitively sensitive information, is on page 337. Key terms related to this resolution response business models and creating cleaner are indicated with  and defined in the glossary on page 337. These should be reviewed with cities. We plan to provide more the following information. information on our future strategy and Element of the CA100+ resolution Related content Where near-term plans at our capital markets Strategy that the board considers in good faith Our strategy 16 day in September 2020. to be consistent with the Paris goals. For more information about how we How BP evaluates each new material capex investment Our investment process 19 believe our current strategy is consistent for consistency with the Paris goals and other outcomes with the Paris goals, see page 17. relevant to BP’s strategy. Disclosure of BP’s principal metrics and relevant Measuring our progress 17 targets or goals over the short, medium and long term, consistent with the Paris goals. Anticipated levels of investment in: Financial framework 18 (i) Oil and gas resources and reserves (ii) Other energy sources and technologies. BP’s targets to promote operational GHG reductions. Sustainability 40 Estimated carbon intensity of BP’s energy products Sustainability 40 and progress over time. Any linkage between above targets and executive pay Directors’ remuneration report 100 remuneration. 2019 annual bonus outcome 105 2020 remuneration: Policy on a page 110 6 BP Annual Report and Form 20-F 2019


 
Strategic report This is supported by 10 aims, which when taken collectively, set out a path that we believe is consistent with the Paris goals. Five aims to get BP to net zero Aim 1 is to be net zero Aim 2 is to be net zero on Aim 3 is to cut the carbon Aim 4 is to install methane Aim 5 is to increase the across our entire operations an absolute basis across intensity of the products measurement at all our proportion of investment on an absolute basis by the carbon in our upstream we sell by 50% by 2050 or existing major oil and gas we make into our non-oil 2050 or sooner. This aim oil and gas production by sooner. This is a lifecycle processing sites by 2023, and gas businesses. Over relates to Scope 1 and 2 GHG 2050 or sooner. This aim carbon intensity approach, publish the data, and then time, as investment goes up emissions. relates to Scope 3 emissions, per unit of energy. It covers drive a 50% reduction in in low and no carbon, we see and is on a BP equity share marketing sales of energy methane intensity of our it going down in oil and gas. For more on our basis excluding Rosneft. products and potentially, in operations. And we will work operational emissions, future, certain other products to influence our joint ventures see Sustainability, See Sustainability, e.g. associated with land to set their own methane page 40. page 40. carbon projects. intensity targets of 0.2%. See Sustainability, See Modernizing the page 40. whole group, page 31. Five aims to help the world get to net zero Aim 6 is to more actively Aim 7 is to incentivize our Aim 8 is to set new Aim 9 is to be recognized Aim 10 is to launch a new advocate for policies that global workforce to deliver expectations for our as an industry leader for team to create integrated support net zero, including on our aims and mobilize relationships with trade the transparency of our clean energy and mobility carbon pricing. We will them to become advocates associations around the reporting. On 12 February solutions. The team will stop corporate reputation for net zero. This will include globe. We will make the 2020, we declared our support help countries, cities and advertising campaigns and increasing the percentage case for our views on for the recommendations of corporations around the re-direct resources to promote of remuneration linked to climate change within the the Task Force on Climate- world decarbonize. well-designed climate policies. emissions reductions for associations we belong to and related Financial Disclosures In future, any corporate leadership and around we will be transparent where (TCFD). We intend to work advertising will be to push 37,000 employees. we differ. And where we can’t constructively with the TCFD for progressive climate policy; reach alignment, we will be and others – such as the See Directors’ communicate our net zero prepared to leave. Sustainability Accounting remuneration report, ambition; invite ideas; or build Standards Board – to develop page 100. See Sustainability, collaboration. We will continue good practices and standards page 49 and bp.com/ to run recruitment campaigns for transparency. tradeassociations. and advertise our products, See Sustainability, services and partnerships – page 44. although we aim for these to increasingly be low carbon. See bp.com/sustainability. BP Annual Report and Form 20-F 2019 7


 
2019 at a glance Our scale, our reach and range of activities, from exploration to refining and biofuels to solar, make us a truly global energy provider. This section gives an overview of BP’s structure, scale and performance in 2019. For details of our future structure, see pages 15 and 80. Upstream Responsible for oil and natural gas exploration, field development and production, gas and power marketing and trading activities. Replacement cost (RC) profit Underlying RC profit before interest and tax before interest and tax $4.9bn $11.2bn (2018 $14.3bn) (2018 $14.6bn) Rosneft We have a 19.75% shareholding in Rosneft, one of Russia’s largest oil and gas companies, which has both upstream and downstream operations. RC profit before Underlying RC profit interest and tax before interest and tax $2.3bn $2.4bn (2018 $2.2bn) (2018 $2.3bn) Other businesses and corporate Downstream Comprises our Alternative Energy business as Comprises the manufacturing and marketing of fuels, lubricants, and well as a number of corporate activities. petrochemicals, as well as our oil integrated supply and trading function. RC loss before Underlying RC loss RC profit before Underlying RC profit interest and tax before interest and tax interest and tax before interest and tax $(2.8)bn $(1.3)bn $6.5bn $6.4bn (2018 $(3.5)bn) (2018 $(1.6)bn) (2018 $6.9bn) (2018 $7.6bn) 8 BP Annual Report and Form 20-F 2019


 
Strategic report Scale Performance Advancing low carbon We are an integrated energy business. We Our 2019 performance has helped us We are committed to advancing a low carbon have operations in Europe, North and South deliver for our shareholders and other future. We will aim to dramatically reduce America, Australasia, Asia and Africa. stakeholders, including energy carbon in our operations and in our production, consumers worldwide. and grow new lower carbon businesses, products and services. 70,100 98 >20 employees tier 1 and 2 process safety events years in renewable businesses (2018 73,000) (2018 72) KPI 79 $4.0bn >$500m countries profit attributable to BP shareholders invested in low carbon activities in 2019 (2018 78) (2018 $9.4bn) 19,341 $10.0bn >7,50 0 million barrels of oil equivalent – underlying RC profit BP Chargemaster charging points in the UK group proved hydrocarbon reservesa (2018 $12.7bn) KPI (2018 19,945mmboe) 18,900 94.9% 13 retail sites downstream refining availability countries where Lightsource BP (2018 18,700) (2018 95.0%) KPI is active 3.8 million barrels of oil equivalent per day – group hydrocarbon productiona (2018 3.7mmboe/d) a On a combined basis of subsidiaries and equity-accounted entities. KPI See key performance indicators on page 32. BP Annual Report and Form 20-F 2019 9


 
Global context Many forces and trends are fundamentally changing the business environment, creating uncertainties and influencing the way we operate. We monitor these trends closely and explore the forces shaping the global energy transition. Megatrends BP Energy Outlook 2019 The exact pace and nature of the Our Outlook explores the forces shaping the Scenarios energy transition is unclear, but it global energy transition out to 2040 and the • Evolving transition: assumes that government is clear that the market for our key uncertainties surrounding it. The 2019 policies, technology and social preferences products is changing. Megatrends Outlook considers a range of scenarios. They continue to evolve in a manner and speed seen affecting our industry include: have some common features, such as ongoing over the recent past. • Rapid transition: envisages a more rapid economic growth and a shift towards a lower Growing global concern over transition to a lower carbon energy system, carbon fuel mix, but differ in terms of policy, climate change through a reduction in emissions stemming from technology and behavioural assumptions. greater energy efficiency, fuel switching and use Rapidly advancing digital of carbon capture, use and storage (CCUS). technology, affecting all For more information see bp.com/energyoutlook. aspects of economic activity The BP Energy Outlook 2020 will be published Increasing prosperity in the later in the year. emerging world driving Global carbon emissions economic growth (GtCO2) Changing societal expectations 50 of corporations 45 Shifting geopolitical trends as 40 trade, economies and 35 relationships change over time 30 25 Growing global concern over 20 climate change is a key driving 15 force among these trends. The 10 way the world responds to this, 5 and the resulting impact on the energy sector, is the most 0 1970 1980 1990 2000 2010 2020 2030 2040 significant uncertainty we face. Evolving transition Rapid transition Source: BP Energy Outlook 2019 10 BP Annual Report and Form 20-F 2019


 
Strategic report The transition envisaged in the 2019 Outlook The world economy continues to grow, Demand for energy is set to But carbon emissions need to fall sharply driven by increasing prosperity grow significantly • There is a growing commitment around • The global population grows by 1.7 billion, • Global energy demand increases by about the world to move to a pathway consistent reaching close to 9.2 billion people in 2040. 20-35% by 2040 in the different scenarios. with meeting the climate goals of the • The global economy more than doubles over • The vast majority of demand growth comes Paris Agreementa. the next 25 years, with twice as much from developing economies to support their • To help achieve this, the world needs to economic activity in 2040 than we see today. industry and infrastructure and allow living transition to a lower carbon energy system. • The emergence of a large and growing standards to keep improving. middle class, particularly in emerging Asia, is an increasingly important force shaping growth and energy trends. The key dimensions of the energy transition To meet the Paris goals, we believe the world must take strong action on a range of fronts. The pace at which the transition can be achieved and the precise mix of elements Improving energy efficiency, to Switching to lower or zero carbon liquid is uncertain. decouple energy demand growth and gaseous fuels, particularly in areas There are many possible pathways to meeting from growing prosperity. such as heavy transport. the Paris goals and we use different scenarios Rapid growth in renewable energy and Deploying carbon-removal technologies, to explore this uncertainty. When we evaluate other low or zero carbon energy sources. such as CCUS, at scale. the consistency of our new material capex investments with the Paris goals, we Increasing the share of electricity in Promoting natural climate solutions, consider a range of different possible final energy use and decarbonizing including the management and restoration pathways and scenarios, see page 21. power generation. of habitats, and the role of carbon credits. a Paris Agreement: (1) Article 2.1(a) of the Paris Agreement states the goal of ‘Holding the increase in the global average temperature to well below 2°C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5°C above pre-industrial levels, recognizing that this would significantly reduce the risks and impacts of climate change.’ (2) Article 4.1 of the Paris Agreement: In order to achieve the long-term temperature goal set out in Article 2, parties aim to reach global peaking of greenhouse gas emissions as soon as possible, recognizing that peaking will take longer for developing country parties, and to undertake rapid reductions thereafter in accordance with best available science, so as to achieve a balance between anthropogenic emissions by sources and removals by sinks of greenhouse gases in the second half of this century, on the basis of equity, and in the context of sustainable development and efforts to eradicate poverty. BP Annual Report and Form 20-F 2019 11


 
The changing energy mix Increased demand for energy is likely to be Primary energy consumption by fuel met over the coming decades through a Exajoules (EJ) diverse range of supplies including renewable 85% energy, oil and natural gas. 800 2040 of primary energy growth is from renewables and The energy mix is shifting as the transition to a 700 natural gas in our ‘evolving lower carbon energy system continues, with transition’ scenario renewable energy and natural gas gaining in 600 importance relative to oil and coal. 500 Scenarios • Evolving transition: renewables and natural 400 gas account for almost 85% of the growth in 300 primary energy by 2040, with their importance increasing relative to all other 200 sources of energy. • Rapid transition: renewable energy grows 100 rapidly, accounting for more than the entire increase in primary energy by 2040 – and a 0 2017 Evolving Rapid sharp contraction in the use of coal. The transition transition level of oil consumption falls, but gas Renew* Nuclear Gas continues to grow aided by increasing use Hydro Coal Oil of carbon capture, use and storage (CCUS). * Renewables includes wind, solar, geothermal, biomass and biofuels Source: BP Energy Outlook 2019 What this means for oil and gas The BP Energy Outlook 2019 considers a range Demand and supply of oil of scenarios for oil demand, with the timing of (Mb/d) the peak in demand varying from the next few 140 years to beyond 2040. Despite these differences, the scenarios 120 share two common features. First, they each suggest that oil will continue to play a 100 significant role in the global energy system in 2040, with the level of oil demand in 2040 80 ranging from around 80Mb/d to 100Mb/d. Second, significant levels of investment are 60 required for there to be sufficient supplies of oil to meet demand in 2040. 40 Similarly there is a wide range of uncertainty 20 in relation to the role of gas in the energy mix even in scenarios that achieve the Paris goals, 0 with different organizations using significantly 1970 1980 1990 2000 2010 2020 2030 2040 different assumptions. Those with a higher Evolving transition �Supply with no investments in new fields proportion of CCUS see a higher demand for Rapid transition gas, and in the outlook’s ‘rapid transition’ scenario, close to a third of natural gas in Source: BP Energy Outlook 2019 2040 is being used in conjunction with CCUS. 12 BP Annual Report and Form 20-F 2019


 
Strategic report Achieving the Paris goals – a multitude of pathways There are many different pathways to Global carbon emissions from energy use achieve the Paris goals, with substantial (GtCO2) variation in the implied energy mix. 40 The Intergovernmental Panel on Climate Change (IPCC) is the United Nations’ body 30 for assessing the science related to climate change. It is the leading source of data that 20 summarises the potential pathways to achieve the Paris goals. The IPCC compiles a database of the published results on 10 mitigation pathways from modelling teams around the world. 0 The chart shows a range of modelled pathways for carbon emissions from energy -10 and industrial use, collected by the IPCC, that meet the long-term temperature goals -20 in the Paris Agreement, together with the 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100 paths associated with two of BP’s own scenarios. The ‘rapid transition’ scenario Range of scenarios collected by the IPCC which Energy Outlook ‘evolving transition’ meet the long-term temperature goals of the IEA SDS clearly sits well within the range. Also Paris Agreement Energy Outlook ‘rapid transition’ highlighted is the ‘Sustainable Development Source: Integrated Assessment Modeling Consortium (IAMC) 1.5°C Scenario Explorer and Data hosted Scenario’ from the International Energy by International Institute for Applied Systems Analysis (IIASA), release 2.0. Scenario data has Agency (IEA SDS), which is often cited been rebased to common starting point that matches the BP Energy Outlook history for 2015. as a reference case for a scenario that is consistent with meeting the Paris goals. Global energy markets in 2019 The world economy grew at 2.4% in 2019, Oil Natural gas reflecting slower growth in both advanced and • Dated Brent crude oil prices averaged • Gas spot prices dropped in all three emerging economies, amid weakening trade $64 per barrel in 2019 – a 9% decrease key regional markets in 2019. and investment. This was below the average from 2018 levels but almost 30% above • Global consumptionc growth slowed of around 3% seen over the past 10 years. the 2015-17 average. down in 2019 compared with the Growth in advanced economies was 1.6% in • Global consumptionb increased by exceptional growth in 2018, driven by 2019 while in emerging markets was 3.5%a. 0.9 million barrels per day (mmb/d) to slower growth in both the US and China. 100.1mmb/d for the year (0.9%) – a • Total gas production growth slowed slowdown from growth rates seen in the down in 2019, with the exception of the 2020 volatility prior two years as trade tensions slowed US. Meanwhile, LNG trade increased There has been considerable market global macroeconomic growth. significantly during 2019. volatility in the first quarter, compounded • Global oil production remained flat at by the coronavirus (COVID-19). We 100.5mmb/d, with growth from non-OPEC expect the outlook for the year to remain countries offsetting supply restraint and For more information on prices and margins challenging, see pages 52 and 57. disruptions in OPEC countries. see pages 52 and 58. a World Bank Global Economic Prospects, January 2020. b IEA Oil Market Report, February 2020©. c JODI-Gas World Database, and IHS Markit: China Natural Gas Data Tables: February 2020 for China. BP Annual Report and Form 20-F 2019 13


 
Our business model We deliver a diverse range of energy products and services to people around the world. What we do New business models Investing in innovative companies across our value chain to help accelerate and commercialize new technologies, products and business models that we believe can benefit BP and global energy systems. Venturing and low carbon across the business Finding and Refining, manufacturing Delivering products generating energy and marketing and services Repowering some Using technology and of our facilities partnership to recycle and reuse our products Transport and trading • Finding additional resources and • Producing refined petroleum products and • Delivering fuels, fast electric-vehicle replenishing our development options scaling up co-processing of lower carbon charging and convenience retail services, with exploration and technology. fuels at our refineries. as well as premium and lower carbon • Developing and extracting oil and gas, and • Manufacturing and marketing lubricants lubricants. seeking to extend the life of existing fields. and petrochemicals products. • Supplying petrochemical products that • Generating renewable energy using • Developing technologies to help advance are used to make a range of products biofuels, biopower, wind and solar. the circular economy, such as BP Infinia, including clothes and building materials. which can recycle previously • Providing renewable power to industries unrecyclable plastics. and local electricity grids. More information Upstream on page 50. Downstream on page 56. Other businesses and corporate on page 63. 14 BP Annual Report and Form 20-F 2019


 
Strategic report Reinventing BP On 12 February 2020 we introduced our ambition and aims with a new structure, a new leadership team, and new ways of working. To deliver our ambition we are reinventing BP, retiring our existing model and replacing it with one that is more focused, more integrated and faces the energy transition head on. One that can deliver for the changing demands of consumers, investors and governments. Our new leadership structure is due to come into place on 1 July 2020 and is expected to be fully operational by 1 January 2021. The new leadership will focus on four core capabilities: operations, customers, low carbon and innovation. These four highly focused business groups will work with three integrators (sustainability and strategy; regions, cities and solutions; and trading and shipping) to facilitate collaboration and unlock value. And four teams will serve as enablers of business delivery. For more information see bp.com/reimagine. Business model foundations These are the things that every Partnerships and collaboration Governance and oversight energy business needs and are We aim to build enduring relationships with our Our board has a diversity of knowledge, expertise, critical foundations for what we key stakeholders, and partner with others to find and ways of thinking that help us transition our do and how we do it. innovations that can improve efficiency and deliver business, manage risks and continue to deliver low carbon solutions. value over the long term. • 20 years of collaboration with the world’s • ~42% of the company’s board are women. top universities. See page 74. Safe and reliable Talented people Technology and innovation We value the safety of our workforce and focus on We work to attract, motivate and retain the best New technologies help us produce energy safely and maintaining a safe operating culture every day. This talent the world offers and equip our people with the more efficiently. We selectively invest in areas with the culture of safety also improves the integrity and right skills for the future. Our performance and ability potential to add greatest value to our business, now and reliability of our assets. to thrive globally depend on it. in the future, including building lower carbon businesses. • 94.4% BP-operated upstream plant reliability. • 8th most desirable employer in the UK • >3,900 patents granted or pending across on LinkedIn. the BP group in 2019. See page 45. See page 47. What makes us different These are the things we believe set us Global energy trading Distinctive customer offers apart from our peers and demonstrate We combine expertise in physical supply and trading Our convenience partnerships provide customers our distinctive ways of working. and advanced analytics to deliver long-term value, with a differentiated offer that includes fresh, from wellhead to end customer. We trade a variety of high-quality food and drink, such as M&S Simply products such as crude oil, refined products, natural Food® in the UK and REWE to Go® in Germany. gas, LNG, carbon products and power. 4bn ~1,600 barrels of crude a year traded, equivalent differentiated convenience partnership sites to 20% global traded oil. across our network of around 18,900 retail sites. ‘Reduce, improve, Rosneft create’ framework partnership Our framework helps focus everyone in BP on our low Our share in Rosneft, one of Russia’s largest oil and gas carbon ambitions. It encompasses activities across producers, gives us a stake in one of the largest and the group to reduce emissions from our operations, lowest-cost hydrocarbon resource bases in the world, improve the products we offer to help customers with access to huge markets, both east and west. reduce their emissions, and create low or zero carbon businesses to deliver more energy with fewer emissions. 0.14% 19.75% methane intensity in 2019. BP’s stake in Rosneft. See page 40. See page 61. BP Annual Report and Form 20-F 2019 15


 
Our strategy We have established a track record of operational and financial delivery. This has helped create a strong Strategic foundation for us to advance our priorities low carbon agenda as we work to achieve our ambition to become a net zero company by 2050 or sooner and to help the world get to net zero. Growing Market-led Venturing and Modernizing Our strategy, which we set out in advantaged growth in the low carbon the whole group 2017, allows us to be competitive, oil and gas in Downstream across multiple flexible and resilient while also responding to a rapidly changing the Upstream fronts energy landscape, with growing Invest in oil and gas, Innovate with Pursue new Simplify our processes expectations for us to adapt to producing both with advanced products and opportunities to meet and enhance our changing demands from increasing efficiency strategic partnerships, evolving technology, productivity through stakeholders. (lower cost, higher building competitively consumer and digital solutions. margin and close to advantaged businesses policy trends. We remain committed to managing markets), with a focus that deliver profitable our portfolio for value, and investing on carbon. marketing growth with discipline in flexible and resilient options, which together See page 25. See page 27. See page 28. See page 31. support our pursuit of a strategy which we believe is consistent with the goals of the Paris Agreement. Supported Following BP’s new ambition and by our aims, set out in February 2020, we low carbon plan to announce more information on ambitions how we intend to reimagine energy and reinvent BP, while performing as we transform, at our capital markets day in September 2020. Embedded within Reducing Improving Creating our strategy is our commitment to advance emissions in our products low carbon a low carbon future. our operations businesses We plan to deliver this • Achieve zero net • Provide lower • Expand low carbon across our entire growth in operational emissions gas. and renewable business through what emissions out to 2025. • Develop more businesses. we call our ‘reduce, • Make 3.5Mte of efficient and lower • Invest $500 million in improve, create’ sustainable GHG carbon fuels, low carbon activities (RIC) framework. reductions by 2025. lubricants and each year. • Target industry leading petrochemicals. • Collaborate and invest methane intensity of • Grow lower carbon in the OGCI’s $1bn+ 0.2%. offers for customers. fund for research and technology. For more information on our RIC framework, see page 41. 16 BP Annual Report and Form 20-F 2019


 
Strategic report Pursuing a strategy that is and advocating for progressive climate policies 2. We believe that our strategy positions BP to consistent with the Paris goals to advance a low carbon future in support of the remain an attractive investment for current Paris goals. and prospective shareholders throughout the In February 2020 we set out our ambition to be energy transition, including in a world that is In 2019 examples included: a net zero company by 2050 or sooner and to meeting the Paris goals. Our strong and help the world get to net zero. This is supported • Launching a review of our climate-related trade disciplined financial framework supports the by 10 aims which, when taken collectively, set association memberships – read more on page 49. delivery of our strategy. This provides us with out a path that we believe is consistent with the Our aim going forward is to set new expectations a strong platform to deliver our purpose to Paris goals, see page 7. One specific aim relates for trade associations around the globe. reimagine energy, and work towards our new to increasing the proportion of investment in • Establishing a collaboration with DiDi to begin net zero ambition and aims. our non-oil and gas business. Over time, as building an electric-vehicle charging network in China. investment in low or no carbon activity increases, For more information on our investor • Beginning the roll out of ultra-fast chargers across we see investment in oil and gas going down. proposition and financial framework, see BP forecourts in the UK and piloting ultra-fast page 18. Since 2017, when BP reset its five-year strategy, charging at Aral forecourts in Germany, bringing we have pursued a way forward that is flexible charging time closer to the time taken to fill a tank. The role of the board and adaptable to a range of energy and market • Increasing our stake in Lightsource BP to create a The board is responsible for setting the strategy scenarios. These different scenarios are based on 50:50 joint venture. and has oversight of the overall conduct of the a range of assumptions about policy, technology • Expanding our biofuels business in Brazil by more group’s business. During 2019, the board and consumer behaviour, and supply and demand than 50% through a joint venture with Bunge to considered BP’s strategy at every board meeting. changes. We do not know what path the energy create BP Bunge Bioenergia. This took into account the wider operating transition will take, so BP’s strategy is intended to • Installing continuous methane measurement at our environment and discussed strategic themes be effective under a range of scenarios, and not a Khazzan central processing facility in Oman to help relating to BP’s purpose, including in relation to single, deterministic view of the future – in short, quickly identify new leaks and reduce time taken the segments and key functions. The impact of responsive to uncertainty. to respond. the lower carbon energy transition on the group’s • Supporting well-designed carbon pricing, such as business model was also reviewed and discussed We believe that our current strategy is consistent the Washington State cap-and-invest bill. We aim throughout 2019. As a result, the board considers with the Paris goals. This consistency has, at its to advocate more actively for policies that support that the strategy allows us to be flexible to adapt core, two key parts. And these remain relevant as net zero, including carbon pricing. to market changes and scenarios to remain we work towards our net zero ambition and aims. consistent with the Paris goals. For more information on our strategy in action, 1. We are striving to play our part in meeting the see pages 24-31. For more information on the role of the board world’s energy needs in reliable, affordable and in relation to climate governance, see page 42. lower carbon; and we intend to achieve this For the board’s activity in relation to strategy, through collaboration, technology, innovation see Corporate governance on page 84. Measuring our progress Our group-wide principal metrics and relevant targets/goals The CA100+ resolution requires us to disclose the company’s principal metrics and relevant RIC framework Reduce • Zero net growth in operational emissions out to 2025. targets or goals consistent with the Paris goals. Sustainability, page 40. • 3.5Mte sustainable emissions reductions by 2025. We consider this to cover the principal metrics • 0.2% methane intensity. used at group level to help monitor progress on delivery of our strategic consistency with Create the Paris goals – including our near-term • $500 million invested in low carbon activities annually. RIC framework. (>$500 million in 2019). • Collaborate and invest in OGCI’s $1bn+ fund for A number of these metrics and targets are research and technology. relevant to the recommendations of the Task Force on Climate-related Financial Investment process (RCM) • Profitability index. • Average operational carbon intensity. Disclosures (TCFD). Our investment process, page 22. Going forward, we are considering metrics to Greenhouse gas emissions • Scope 1 and 2 emissions. support our ambition to be a net zero company • Emissions from the carbon in our upstream oil and Sustainability, page 40. by 2050 or sooner, and to help the world get to gas production. net zero. We plan to provide more information • For further GHG metrics see bp.com/ESGdata. on our future strategy and near-term plans at our capital markets day in September 2020. Carbon intensity • Average emissions intensity of marketed energy products. • Ratio of Scope 1 and 2 emissions: gross production. For more information on the TCFD, see page 42. Sustainability, page 40. Remuneration • 2020 annual bonus scorecard target related to sustainable emissions reductions. Directors’ remuneration report, page 100. BP Annual Report and Form 20-F 2019 17


 
Our investor proposition Our investor proposition is to grow sustainable free cash flow and distributions to shareholders over the long term. Fit for Focused We believe our strategy enables this Safer through a focus on safe, reliable and the future on returns efficient execution, leveraging our distinctive portfolio, and disciplined safe, reliable and a distinctive portfolio fit value based, disciplined investment to support growing returns. efficient execution for a changing world investment and cost focus Growing sustainable free cash flow and distributions to shareholders over the long term Our financial framework We maintain a disciplined financial We continue to expect to deliver the 2021 The CA100+ resolution requires us to disclose framework, which underpins our strategy targets laid out three years ago. (a) our anticipated investment in oil and gas and investment choices, and supports resources and reserves – this is anticipated We plan to increasingly focus our investment growth in sustainable free cash flow, to be less in 2020 than it was in 2019, and on the highest-quality barrels and drive returns returns and distributions to shareholders. (b) our anticipated investment in other energy and cash flow, not volumes. As a result, the sources and technologies – which is This discipline helps us maintain a anticipated proportion of our investment that anticipated to be significantly greater focused portfolio, which we believe is goes to oil and gas is expected to change. than 2019 levels. resilient in the long run to many potential outcomes and seeks to grow long-term We also plan to provide more information returns to shareholders. on this as part of our capital markets day in September 2020. Our capital frame is reviewed on an ongoing basis. We believe that the continuing flexibility it provides gives us the flexibility to pursue 2019 actual 2020 guidance our net zero ambition and aims, allocating an Lower than increasing proportion of investment toward Upstream production excluding Rosneft lower carbon businesses over time. This will 2.6mmboe/d 2019 help drive both the long-term resilience of Lower end of the portfolio and the creation of new value. This is balanced against the pace of i $15-17bn Organic capital expenditure range development of these new lower carbon $15.2bn business developments and levels of cash Slightly below flow generation. Depreciation, depletion and amortization $17.8bn 2019 In addition, our capital expenditure programme has flexibility, which enables us to respond Gulf of Mexico oil spill payments $2.4bn <$1bn to a low-price environment by reducing or rephasing investment. Other businesses and corporate average underlying quarterly charge $320m ~$350m Below ii Underlying effective tax rate 36% 40% Nearest equivalent GAAP measures: i Capital expenditure: $19.4bn. ii Effective tax rate: 49%. 18 BP Annual Report and Form 20-F 2019


 
Strategic report Our investment process BP’s investments fall within a governance framework. This seeks to ensure investments align with Price assumptions Resource commitment meeting our strategy, fall within our prevailing financial Investments are evaluated against a range For capital investments above defined financial framework, and add shareholder value. The of alternative prices (central, upper and lower) thresholds for organic or inorganic spend, the governance framework also provides for for oil, natural gas, refining margins and carbon investment approval is conducted by the investments to be assessed consistently prices. These price ranges do not link to executive-level resource commitment meeting and against a range of other outcomes specific scenarios or outcomes, but instead (RCM), which is chaired by the chief executive relevant to our strategy, including a range try to capture the range of different officer. The RCM reviews the merits of each of environmental and sustainability factors. possibilities surrounding the future path of such investment case against a balanced set Investments follow an integrated stage gate the global energy system. The price ranges of criteria and considers any key issues raised process designed to enable us to choose refer to the long-run level of prices over the in the assurance process. and develop the most attractive investment next 20 years. The nature of the uncertainty The CA100+ resolution requires BP to disclose cases. A balanced set of investment criteria means that these price ranges inevitably how we evaluate the consistency of new are used, see page 20. This allows for the reflect considerable judgement. The ranges material capex investments with (i) the Paris comparison and prioritization of investments are reviewed and updated on an annual basis goals and (ii) a range of other outcomes across an increasingly diverse range of as our understanding and judgement about relevant to BP’s strategy. BP’s evaluation of business models. the energy transition evolves. consistency of such investments with the Paris The governance framework also specifies Range of prices goals was undertaken by the RCM in 2019. that investments are tested against a range Henry of carbon prices for projected operational Brenta Huba RMMb The role of the board emissions and subject to assurance by ($/bbl) ($/mmBtu) ($/bbl) The board assesses the impact of portfolio functions independent of the business before Upper case 90 5.0 17 changes, such as strategic acquisitions and a final investment decision (FID) is taken. Central case 70 4.0 14 the allocation of capital. They also consider For more information on BP’s governance Lower case 50 2.0 11 specific investment cases deemed sufficiently framework, see page 83. material to warrant their attention, which have Carbon prices been approved by the RCM. ($/tonnea) For more information on climate governance, Upper case 80 see page 42. Central case 40 Lower case 0 a 2015 $ real. b Nominal. BP Annual Report and Form 20-F 2019 19


 
Balanced investment criteria For the purposes of evaluating consistency with a range of other outcomes relevant to BP’s strategy, all group-wide investment cases are required to set out the investment Investment merits in a standard format against a set of economics balanced criteria. Investments are considered against a range Safety Cash flow and risks certainty of prices (upper, central and lower). All three price assumptions place some weight on scenarios in which the transition to a low Investment carbon energy system is sufficiently rapid criteria to meet the goals of the Paris Agreement, Capability as well as scenarios in which the transition Optionality and scale is not, or may not be, sufficiently rapid. They also place some weight on a range Environment of other factors, which can drive prices, and and are not related to the goals of the sustainability Paris Agreement. In addition, investment cases are asked to present scenarios covering a range of variables, related to the economics of the investment, such as cost, resource, policy Environment and sustainability Investment economics changes and schedule, to highlight the All investment cases are considered We consider investment economics against robustness of investment cases to a range against appropriate environmental impacts a range of measures including profitability of other factors. and sustainability measures, including but index, internal rate of return, net present not limited to carbon. Investment cases value, discounted payback, investment This standardized approach creates a level above defined thresholds for anticipated efficiency, using a set of scenarios for playing field for decision making and allows annual greenhouse gas (GHG) emissions commodity prices, margins and carbon prices. portfolio wide comparisons of investment from operations must estimate those Investments are generally considered against cases. Further, the decision to endorse an anticipated GHG emissions and include internal rate of return hurdles typically set in investment based on the information an associated carbon price of $40/te the mid to high teens. Close attention is paid provided represents BP’s evaluation that 2015 $ real (and sensitivities of $0 and to discounted payback as a measure of the investment is considered consistent $80) in the investment economics. commercial risk in the context of the energy with a range of other outcomes, relevant transition and profitability index as a measure to BP’s strategy. of capital efficiency. Capability and scale Cash flow certainty For all investment cases, we consider whether Economic metrics are also considered in they involve distinctive capability that BP has, the context of the cash flow certainty of the or intends to develop, and whether it adds to investment assumptions. For example, a high an existing ‘scale’ business within the portfolio return deepwater tieback will have less certain or could help us create one. and more volatile (oil price linked) cash flows than a lower return but more certain renewable power project with a long-term power purchase agreement (and a fixed power price). Safety and risks Optionality Investment cases are required to describe All investment cases are requested to risks unique to the project which have a quantify the strategic optionality that might significantly higher probability than usual or be accessed through follow-on activity. have a significantly greater impact (relative to For example, a greenfield offshore platform the size of the project) were they to occur. may provide additional optionality to develop nearby satellite fields in the future. 20 BP Annual Report and Form 20-F 2019


 
Strategic report Evaluating new material capex investments for consistency with the Paris goals When evaluating the consistency of our 2019 The 2019 evaluation was done in the context These price assumptions do not new material capex investments with the of a ‘sustained low-price environment’, which correspond to a single specific ‘Paris- Paris goals, a focus of the evaluation criteria assumes the lower price case for oil ($50/bbla), consistent’ scenario, but instead place was on their competitiveness and financial natural gas ($2/mmBtua) and refining margins weight on a range of possibilities for how robustness as the prices of different forms of ($11/bbl (nominal)) together with the higher the demand for different forms of energy a energy and products adjust in response to the carbon price ($80/teCO2 ). may change in Paris-consistent pathways changing market environment. and how this may affect future energy pricesb. Sustained low-price environment Oil price (Brent): In many ‘Paris-consistent’ scenarios, global oil demand peaks within the next five years or so and falls a between 15-35% by 2040. Such a fall in demand, combined with the abundance of oil resources, would be $50/bbl expected to lead to an increasingly competitive market for oil. But the extent to which these competitive forces feed through into a sustained reduction in global oil prices is expected to be tempered by the dependence of many oil-producing economies on oil revenues to support their wider economies. For example, the IMF estimate that the fiscal break-even prices of the major Middle East and North African oil exporters is close to $80c. We consider that the pace at which the major oil producing economies are able to diversify their economies and so reduce the fiscally sustainable price at which they can produce oil is likely to limit the extent to which oil prices can fall on a sustained basis over the next 20 yearsd. US natural gas price (Henry Hub): The price of US gas (Henry Hub) is used as the main price for evaluating gas-based investments, either a directly for US-based projects or indirectly (via netback pricing relationships) for gas-based projects in other $2/mmBtu parts of the world. The outlook for natural gas in ‘Paris-consistent’ scenarios is more varied across different scenarios: some point to global gas consumption increasing or remaining broadly flat over the next 20 years; others point to gas demand peaking within the next five years and declining by 20-30% by 2040. These differences stem in part from the extent to which natural gas is assumed to be used in conjunction with carbon capture, use and storage (CCUS) projects, either in the power and industrial sectors directly, or to produce decarbonized gas (in the form of ‘blue’ hydrogen). US natural gas prices will also depend on a number of supply-side factors, such as: the extent to which productivity gains within shale gas continue to improve, and how quickly US tight oil production – and hence the associated gas produced as part of that production – peaks. Refining marker margin (RMM): The outlook for refining margins is most relevant when considering investments in refineries or closely $11/ bbl related activities. (nominal) Many ‘Paris-consistent’ scenarios provide less detailed information on the outlook for refined products and refining activity. However, the significant falls in global oil demand envisaged in many of these scenarios are likely to also be reflected in the demand for refined products. Indeed, some scenarios highlight the expected growth in natural gas liquids (NGLs) and biofuels which suggest that refining activity might decline by even more than the overall demand for liquid fuels. To the extent that falling demand for refined products leads to over-capacity in the refining sector, this would be expected to lead to the least-efficient refineries closing over time, raising the average efficiency of the remaining refineries and so reducing the sustainable level of refining margins. However, the need for some refineries to continue to operate can be expected to limit the extent to which refining margins can fall on a sustained basis. Carbon prices: The outlook for carbon prices has both a direct and indirect effect on the evaluation of new material a investments. The direct effect relates to the operational emissions associated with different investment $80/teCO2 projects: the greater the operational emissions, the greater the exposure to increases in carbon prices. The indirect impact relates to the impact of carbon prices on the differential between retail and wholesale prices for oil and natural gas. An increase in carbon prices can be expected to increase the differential between retail and wholesale prices: potentially both dampening demand growth (due to higher retail prices) and reducing the prices received by oil and gas producers (due to lower wholesale prices). The direct effects associated with carbon prices are explicitly assessed within BP’s investment evaluation criteria, whereas the indirect effects are captured within the overall prospects for oil and gas demand and the associated prices. In many ‘Paris-consistent’ scenarios, carbon prices are used as a key policy instrument for accelerating the transition to a low carbon energy system, with carbon prices (on a global basis) increasing to between $100‑200/teCO2 by 2040. But in these scenarios, carbon prices are typically increased only gradually, in part since this mitigates the costs to the economy of prematurely scrapping and replacing productive assets. Hence, the average level of carbon prices in these scenarios over the next 20 years tends to be significantly lower than the level they are projected to reach in 2040 or so. For example, in BP’s rapid transition scenario, carbon prices in developed economies are assumed to reach $200/teCO2 by 2040, but the average level of carbon prices between 2017 and 2040 in that scenario is around $75/teCO2. a 2015 $ real. b To aid this analysis, we consider a range of scenarios which claim to be consistent with meeting the Paris goals including: IEA’s ‘Sustainable Development Scenario’, BEIS’ ‘Low Prices’ case, Aurora Energy Research’s ‘Two degrees’ scenario and MIT’s ‘Paris to 2°C’ scenario. c Regional Economic Outlook – Middle East and Central Asia, International Monetary Fund, October 2019. d The Oil and Gas Industry in Energy Transitions | IEA 2020. BP Annual Report and Form 20-F 2019 21


 
Evaluating new material capex investments for consistency with the Paris goals – continued Evaluation process Quantitative evaluations Our new material capital investments are intended to support the delivery of Investment economics Environment and sustainability BP’s strategy. In 2019, we evaluated The calculation of profitability index (PI) Where appropriate, the operational carbon their consistency with the Paris goals using the ‘low-price’ case for commodity intensity of the investment relative to that by considering them against a balanced prices and margins and the ‘high’ carbon of the portfolio average for the segment or set of investment criteria (see page 20). price of $80 per tonne (2015 $ real). As a the related business activity (upstream, For each of the investment criteria, a guide, we would normally target a minimum refining, petrochemicals). As a guide, we qualitative explanation of each business threshold of greater than 1.0x on this basis. would normally target a ratio of less than case was considered and presented to 100%, meaning that the investment is the resource commitment meeting (RCM). expected to reduce the average operational They then discussed and addressed key carbon intensity of that portfolio. issues raised, as per the description on The potential impact of new material capex page 19. investments on BP’s greenhouse gas Two quantitative evaluations were emission targets is a further consideration. considered for Paris consistency. As our approach matures with experience, we may adjust or supplement these. There may be instances when new material capex investments are evaluated as consistent with the Paris goals despite either or both of these guide levels not being met, due to other considerations being taken into account. Evaluation outcome The figure shows the respective rankings of investment performance against each of the tests As shown in the figure, each of the new material capex investments approved in Investment economics: Environment and sustainability: 2019 met the evaluation guides, with the Profitability index Carbon intensity (%) exception of one investment not meeting the guide level for carbon intensity. This investment was evaluated to be consistent Guide with the Paris goals, based on the strength of the investment economics with a short payback period, delivering short-cycle cash returns and reducing the timeframe during which the investment would be exposed to uncertainties associated with Paris Guide consistent pathways. In 2019, the overall averages for the new material capex investments met the guide levels for each of the two quantitative Capital weighted average ~1.5x Average operational carbon intensity is ~45% evaluation tests: • Profitability index on an average capital 1. The respective 2019 new material capex investments have been ranked against the two tests. As a result they are ordered weighted basis was approximately 1.5x, differently in each graph above. versus a guide level of greater than 1.0x. 2. For two of the 2019 new material capex investments the operational carbon intensity was not calculated due to the nature of • An average operational carbon intensity these investments: of approximately 45% relative to the • We do not calculate operational carbon intensity for replacement of end of life assets. • The projected operational carbon intensity of fuels marketing businesses is not considered necessary to quantify for current portfolio(s), versus a guide level of these purposes as the relevant operational emissions would not be expected to be significant. less than 100%. 22 BP Annual Report and Form 20-F 2019


 
Strategic report Decisions taken in 2019 Eight new material capex investment decisions were taken in 2019, six in the Upstream and two in the Downstream. Upstream Azeri Central East (ACE) Angola Block 18 – Platina A new offshore platform and facilities in the Azeri-Chirag-Deepwater Four subsea well tiebacks to an existing FPSO vessel, which also support Gunashli field in Azerbaijan. continued production from the main field under the licence extension granted by the Angolan government. India KGD6 – MJ Angola Block 15 The third phase of Block KG D6 gas development, seven subsea wells Further investment, which will extend the production-sharing agreement will tie‑back to a new FPSO vessel to process and separate liquids. for the block through 2032. Thunder Horse South Expansion Phase 2 Block 61 2020 development wells Two new subsea production units with eight wells tied back to existing Further development and drilling of 18 wells at Ghazeer and seven wells at infrastructure in the US Gulf of Mexico. Khazzan, both in Oman. Downstream Gelsenkirchen steam and water project Reliance partnership Construction of four boilers and a steam turbine to further the safe and Strategic agreement with Reliance Industries Limited to form a retail and reliable management of fuel gas excess. aviation joint venture in India. BP Annual Report and Form 20-F 2019 23


 
24 BP Annual Report and Form 20-F 2019


 
Strategic report Growing advantaged oil and gas in the Upstream What this strategic priority means We aim to invest in oil and gas, producing both with increasing efficiency. This means lower cost, higher margin and close to markets, with a focus on carbon. Almost half of BP’s upstream portfolio is natural gas, and several more gas projects are planned to come onstream in the next few years. As the world moves towards net zero  emissions, we think natural gas can play an important role in getting us there. When burned for power, natural gas has, on average on a lifecycle basis, about half the GHG emissions of coal, with fewer air pollutants, so expanding its use globally to displace coal Energy with purpose will help to reduce carbon emissions. In fact, switching from coal to gas has avoided more than 500 million tonnes of CO2 from the power Gas in Oman sector globally since 2010. BP successfully brought the Khazzan major project into production in 2017, Progress in 2019 and since then we’ve continued to build We’ve started up 24 of the 35 planned successful partnerships and reinforce major projects since 2016 and are on track our commitment to the country. to deliver 900,000 barrels of oil equivalent Exploration opportunity per day of new major project production by Together with Eni, we signed an the end of 2021. exploration and production-sharing agreement for Block 77 in central Oman • Sanctioned $6 billion Azeri Central East with the Ministry of Oil and Gas of the development with partners. Sultanate of Oman. • Agreed to sell our Alaska assets to Hilcorp. • The block covers a total area of • Sanctioned the third project in block more than 2,700 square kilometres. KG D6, offshore India with our • It is located 30 kilometres east of partner Reliance. Block 61, where the Khazzan gas field is already producing around 1 billion cubic feet of gas a day. • BP and Eni will each hold a 50% interest, subject to royal decree, with Eni acting as operator during 5 $100m exploration. major project fund for projects that will start ups. help reduce greenhouse Khazzan phase two gas emissions. Ghazeer, the second development phase of the gas field, is expected to come online in 2021. Advantaged gas We used expertise and technology from our US onshore business to help access tight gas locked in the Khazzan field and bring it commercially to market. Detecting methane We installed and tested continuous measurement of methane emissions at our Khazzan central processing facility. The technology uses instruments such as a gas cloud imaging camera to continuously monitor our facilities, quickly identify new leaks and reduce time taken to respond. We now aim to install methane measurement at all our existing major oil and gas processing sites by 2023. For more information see Upstream on page 50. BP Annual Report and Form 20-F 2019 25


 
26 BP Annual Report and Form 20-F 2019


 
Strategic report Market-led growth in the Downstream What this strategic priority means We aim to innovate with advanced products and strategic partnerships, building competitively advantaged businesses that deliver profitable marketing growth. We aim to invest in higher-returning fuels marketing and lubricants businesses with growth potential and reliable cash flows. And we are continuing to expand into Energy with purpose fast-growing emerging markets. We are also delivering and developing new products, offers and business models Electrifying China that support the transition to a lower BP has joined forces with DiDi, the carbon and digitally enabled future over world’s leading mobile transportation the longer term. platform, to build an electric vehicle (EV) charging network in China. Progress in 2019 Why it matters We have continued to make strategic China is the largest and fastest- developing EV market. progress in fuels marketing, with our convenience partnership model now in • 50% of the world’s battery EVs around 1,600 sites across the network. are in China. • DiDi offers a full range of app-based • Agreed to expand our partnership with services across Asia, Latin America Reliance Industries Ltd to include a retail and Australia, including ride-hailing, service station network and aviation fuels automobile solutions and other offers. business across India. • The platform has 550 million users, • Continued to expand in other material tens of millions of drivers and serves markets – most notably in Mexico where we around 1 million EVs. now have more than 520 BP-branded retail What’s involved sites. We also continued to grow our The joint venture plans to develop network in Indonesia and expanded our high-quality EV charging hubs for China network into Shandong and Hebei DiDi users and other drivers. provinces through our joint venture with • The partners intend to add loyalty, Dongming. convenience and fleet services • Announced the development of BP Infinia, in the future. an enhanced recycling technology, capable Why we’re doing it of processing currently unrecyclable PET As the world’s largest EV market, China plastic waste. offers extraordinary opportunities to develop innovative new businesses at scale and we see this as the perfect partnership for such a fast-evolving environment. The lessons we learn here will help further expand BP’s advanced >1,20 0 ~1,600 mobility business worldwide, helping retail sites in new convenience drive the energy transition and develop markets of China, partnership sites. solutions for a low carbon world. Mexico and Indonesia. And elsewhere BP Chargemaster is powering around 1.5 million electric miles a week, making this the most-used public charging infrastructure operator in the UK. We have also begun rolling out 150kW ultra-fast chargers on BP forecourts across the UK with plans to build a national network of high-power charging – one which will closely replicate the current fuelling experience. This is helping to accelerate the adoption of EVs, by making EV charging fast, convenient and For more information see Downstream on hassle-free. page 56. BP Annual Report and Form 20-F 2019 27


 
Venturing and low carbon across multiple fronts What this strategic priority means “Pairing Calysta’s exciting We aim to pursue new opportunities to technology and meet evolving technology, consumer and entrepreneurial drive with policy trends. BP’s global scale and gas We are building up our renewable energy market expertise offers the portfolio – with activities spanning renewable opportunity to improve food fuels and products, wind and solar energy security and sustainability.” and biopower. We work across multiple fronts through our investments in low carbon Dominic Emery activities with joint ventures, collaborations Group chief of staff and new business models. Through BP Ventures we have invested more than $650 million in around 40 companies since it was set up in 2007. Our investments support technologies and innovations that we believe could benefit BP and global energy systems. Progress in 2019 We increased our stake in Lightsource BP to create a 50:50 joint venture and expanded Energy with purpose our biofuels business in Brazil by more than 50%, through a joint venture with Bunge to create BP Bunge Bioenergia. We also made a Using gas to create number of other investments spanning a range sustainable fish food of strategic focus areas. BP Ventures has invested $30 million • Started BP Launchpad, our scale-up factory, o help create new markets for our designed to help quickly grow disruptive natural gas in the fish-farming industry. technologies and business models which could become future BP business units. What we’re doing We’re extending the idea of gas • Expanded our digital energy portfolio by as a source of energy beyond its investing in Grid Edge, which has developed conventional applications, through an artificial intelligence-based energy our investment in California start-up, management platform that helps customers Calysta, to create Feedkind® – protein predict, control and optimize their buildings’ food for fish, livestock and pets. energy profile. Why it matters • Invested $5 million in Belmont Technology Finding sustainable ways to feed to further strengthen BP’s artificial a growing global population within intelligence and digital capabilities. planetary boundaries is a pressing issue and Calysta can be part of the solution: • Feedkind® is produced with fewer resources, such as water and land, >50% 7 than current alternatives. increase in biofuels new investments • Existing protein sources, including business in Brazil, through BP Ventures fishmeal and soya bean protein, are through BP Bunge in 2019. either at full capacity or connected to Bioenergia. other issues such as deforestation. • The global aquaculture market is expected to grow by around 25% by 2025 and Feedkind® offers a way to support this increase sustainably. How it works Naturally occurring bacteria is fermented using methane from gas as its energy source. The protein created is harvested, dried and sold in pellet form. Why we’re doing it The investment supports BP’s strategy of creating new markets in which gas can deliver a more sustainable future. For more information see page 63. 28 BP Annual Report and Form 20-F 2019


 
Strategic report BP Annual Report and Form 20-F 2019 29


 
“This programme reflects our commitment to be a leader in advancing the energy transition by maximizing the benefits of natural gas.” Gordon Birrell Chief operating officer– production, transformation and carbon 30 BP Annual Report and Form 20-F 2019


 
Strategic report Modernizing the whole group What this strategic priority means We aim to simplify our processes and enhance our productivity through digital solutions. We achieve this through three pillars: • Agility – improving and simplifying the way we operate. • Mindset change – accepting the reality and adopting the right attitude for a business that is increasingly competitive and margin-dependent. • Digital transformation – digitizing and automating our work. Progress in 2019 We’ve introduced a range of technologies and improved ways of working across BP to support our modernization priority. Our mentors and coaches deliver a programme of training for employees to share agile practices and support changing mindsets, which are key to generating ideas to improve how we work Energy with purpose across the whole business. • Launched ‘Connected BP’ in partnership with data technology pioneer Palantir. Managing methane The programme connects different BP is introducing a programme of new systems and business areas into one and complementary technologies to platform where users can connect, continuously detect, measure and transform and share data. help reduce methane emissions at • Developed a holistic process for leak our BP-operated upstream assets. detection and intervention using infrared Why it matters cameras, lasers and drone technology at Methane is the primary component our US onshore BPX Energy operations. of natural gas. If it escapes into the • Performed a concept trial of Spot, a robot atmosphere unburnt, it can be a from Boston Dynamics, at our US Whiting potent greenhouse gas. refinery. Spot can gather data, detect What we’re doing abnormalities and perform tasks, such We aim to install methane as detecting gas emissions and helping measurement, such as gas cloud remove people from hazardous spaces. imaging, at all BP’s major oil and gas processing sites by 2023 and then reduce methane intensity of our operations by 50%. What else? We’re also planning to deploy a new >1,000 ~$1.5bn generation of drones, hand-held devices transformation projects invested every year and multi-spectral flare combustion running in the Upstream. in maintaining BP’s cameras – drawing upon scientific infrastructure. breakthroughs made in diverse fields, spanning healthcare, space exploration and defence. Collaboration with stakeholders We have agreed to work in collaboration with the Environmental Defense Fund, a New York-based non-profit environmental advocacy group. The three-year commitment aims to advance technologies and practices to reduce methane emissions from the global oil and gas supply chain. BP Annual Report and Form 20-F 2019 31


 
Measuring our progress We assess our performance across a wide range of measures and indicators that are consistent with our strategy and investor proposition. Our key performance indicators (KPIs) provide Changes to KPIs Remuneration a balanced set of metrics that give emphasis • Added sustainable GHG emission To help align the focus of our board and to both financial and non-financial measures. reductions and methane intensity, in line executive management with the interests of These help the board and executive with our ‘reduce, improve, create’ our shareholders, certain measures are used management assess performance against our framework. for executive remuneration. strategic priorities and business plans. BP • Removed production as a volume measure Key management uses these measures to evaluate as it doesn’t reflect our value over volume New/amended operating performance and make financial, approach, and is not used to assess New or amended in 2019 strategic and operating decisions. executive remuneration. The metric is REM reported on At a glance, page 9. Used for the remuneration policy • Combined tier 1 and tier 2 process safety events, giving investors a wider view of For more information see Directors’ process safety events. remuneration report on page 100. • As reported in 2018, we have now revised our refining availability metric to BP‑operated refining availability, to more closely match our upstream plant reliability measure. Safety Tier 1 and 2 process safety eventsa We track tier 1 and tier 2 events and report the 2019 26 72 98 2019 performance aggregated outcome. Tier 1 events are losses of The total number of tier 1 and tier 2 process primary containment from a process of greatest 2018 16 56 72 safety events increased in 2019, mainly consequence – causing harm to a member of the reflecting performance in assets acquired over 2017 18 61 79 workforce, damage to equipment from a fire or the past 18 months. Underlying performance explosion, a community impact or exceeding 2016 16 84 100 across the group improved slightly from 2018. defined quantities. Tier 2 events are those of We are implementing BP procedures and lesser consequence. 2015 20 83 103 processes to help bring newly acquired assets Tier 1 Tier 2 in line with BP assets. Reported recordable injury frequencya Reported recordable injury frequency (RIF) 2019 0.166 2019 performance measures the number of reported work-related We have seen a decrease in RIF compared with employee and contractor incidents that result in a 2018 0.198 2018; and maintain our focus to drive toward zero fatality or injury per 200,000 hours worked. incidents. 2017 0.218 2016 0.211 2015 0.243 a This represents reported incidents occurring within BP’s operational HSSE reporting boundary. That boundary includes BP’s own operated facilities and certain other locations or situations. 32 BP Annual Report and Form 20-F 2019


 
Strategic report Sustainable operations Proved reserves replacement ratio (%) Proved reserves replacement ratio is the extent to 2019 67 2019 performance which the year’s production has been replaced by The lower ratio reflects a net decrease of reserves proved reserves added to our reserve base. 2018 100 due to lower gas and oil prices mainly within the US Lower 48, partly offset by new developments The ratio is expressed in oil-equivalent terms and 2017 143 and existing field optimization in Angola, includes changes resulting from discoveries, Argentina, Azerbaijan, India, Oman, Russia improved recovery and extensions and revisions 2016 109 and the US. to previous estimates, but excludes changes 2015 61 resulting from acquisitions and disposals. The ratio reflects both subsidiaries and equity‑accounted entities. This measure helps to demonstrate our success in accessing, exploring and extracting resources. Upstream unit production costs ($/boe) The upstream unit production cost indicator 2019 6.84 2019 performance shows how supply chain, headcount and scope Lower production costs compared with 2018 optimization impact cost efficiency. 2018 7.15 were mainly due to the impacts of IFRS 16. 2017 7.11 2016 8.46 2015 10.46 Upstream plant reliability (%) BP-operated upstream plant reliability is 2019 94.4 2019 performance calculated as 100% less the ratio of total Plant reliability was 1.3% lower than 2018 mainly unplanned plant deferrals divided by installed 2018 95.7 due to design and integrity issues addressed production capacity. through maintenance activities. 2017 94.7 2016 95.3 2015 95.0 90.0 Downstream refining availability (%) Refining availability represents Solomon 2019 94.9 2019 performance Associates’ operational availability for BP- Refining availability was similar to 2018, reflecting operated refineries. The measure shows the 2018 95.0 continued strong operational performance in our percentage of the year that a unit is available for portfolio. This performance is underpinned by our 2017 95.2 processing after deducting the time spent on global reliability programmes. turnaround activity and all mechanical, process 2016 95.2 and regulatory downtime. 2015 94.6 Refining availability is an important indicator of the operational performance of our downstream 90.0 businesses. Major project delivery We monitor the progress of our major projects to 2019 5 2019 performance gauge whether we are delivering our core pipeline We started up five major projects in Egypt, of projects under construction on time. 2018 6 Trinidad, the UK and US. Projects take many years to complete, requiring 2017 7 differing amounts of resource, so a smooth or increasing trend should not be anticipated. 2016 6 Major projects are defined as those with a BP net 2015 4 investment of at least $250 million, or considered to be of strategic importance to BP, or of a high degree of complexity. BP Annual Report and Form 20-F 2019 33


 
Sustainable operations Greenhouse gas emissions (MtCO2e) We provide data on greenhouse gas (GHG) 2019 46.0 2019 performance emissions material to our business on a Our Scope 1 (direct) equity share emissions carbon dioxide-equivalent basis. This particular 2018 46.5 decreased by 0.5MtCO2e to 46.0MtCO2e in 2019 KPI comprises Scope 1 (direct) emissions of (46.5MtCO2e in 2018). Emissions resulting from 2017 49.4 CO2 and methane, for 100% emissions from the BHP acquisitions were balanced out by subsidiaries and the percentage of emissions 2016 50.1 sustainable emissions reductions and the impact equivalent to our share of joint arrangements of divestments. and associates, other than BP’s share 2015 49.0 of Rosneft. Sustainable GHG emissions reduction (MtCO2e) This measure includes actions taken by our 2019 1.4 2019 performance businesses to improve energy efficiency and We delivered 1.4Mte of sustainable emissions reduce methane emissions and flaring – all leading 2018 1.3 reductions (SERs), and this meant we exceeded to ongoing, quantifiable GHG reductions. These our target of 3.5Mte of SERs for the period 2016 2017 0.5 refer to the GHG emissions that would have to 2025, six years ahead of schedule. occurred had we not made the change i.e. they 2016 0.7 could be absolute in nature or underlying. Since 2019, progress against this target is used as a 2015 0.2 factor in determining bonuses for around 37,000 employees, including executives. Methane intensity (%) We define methane intensity as the amount of 2019 0.14 2019 performance methane emissions from our upstream oil and gas Our methane intensity was 0.14%, a reduction operations as a percentage of the gas that goes to 2018 0.16 from 0.16% in 2018 and below our stated target market from those operations. This applies to of 0.2%. methane emissions within our operational control boundary, where we have the highest degree of control. Methane emissions from non-producing activities, such as exploration drilling, are excluded. We have an existing methane target of 0.2% and a new ambition that seeks to reduce that – once validated – by 50%. Diversity and inclusionb (%) 25 Each year we report the percentage of women and 2019 2019 performance individuals from countries other than the UK and 25 Both measures increased slightly. As a global the US among BP’s group leaders. business we are committed to increasing the 24 2018 diversity of our workforce and leadership. 24 21 2017 24 22 2016 23 19 2015 21 Women in group leadership People from beyond the UK and US in group leadership b Relates to BP employees. Employee engagement (%) We conduct an annual employee survey to 2019 65 2019 performance understand and monitor levels of employee The overall employee engagement score saw engagement and identify areas for improvement. 2018 66 a marginal decline since last year. We are working to identify areas for improvement. Scores prior 2017 66 to 2017 are based on questions on priorities 2016 73 set out in 2012, so the numbers are not directly comparable. 2015 71 34 BP Annual Report and Form 20-F 2019


 
Strategic report Financial performance Underlying replacement cost profit ($ billion) Underlying RC profit is a useful measure for 4.0 2019 performance 2019 investors because it is one of the profitability 10.0 2019 underlying RC profit was lower, largely measures BP management uses to assess reflecting the impact of the weaker price performance. It assists management in 9.4 environment. Profit for the year was significantly 2018 understanding the underlying trends in operational 12.7 lower, due to the above factor, divestment-related performance on a comparable year-on-year basis. impairment charges and reclassification of past 3.4 foreign exchange losses on the formation of the It reflects the replacement cost of inventories sold 2017 6.2 BP Bunge Bioenergia joint venture. in the period and is arrived at by excluding inventory holding gains and losses from profit or 0.1 2016 loss. Adjustments are also made for non‑operating 2.6 items and fair value accounting effects. (6.5) 2015 5.9 Profit (loss) for the year attributable to BP shareholders Underlying RC profit for the year (non-GAAP) Operating cash flow ($ billion) Operating cash flow is net cash flow provided 2019 25.8 2019 performance by operating activities, as reported in the group Operating cash flow was higher than 2018, cash flow statement. Operating activities are the 201� 22�9 reflecting lower Gulf of Mexico oil spill payments principal revenue-generating activities of the and the favourable impact of lease payments 201� 1��9 group and other activities that are not investing that are now classified as financing cash flows or financing activities. 201� 10�� under IFRS 16. 201� 19�1 Return on average capital employed (%) Return on average capital employed (non-GAAP) 2019 8.9 2019 performance gives an indication of a company’s capital The decrease reflects lower profit due to the efficiency, dividing the underlying RC profit after 201� 11�2 impact of lower oil and gas prices and weaker adding back net interest by average capital refining environment. 201� ��� employed, excluding cash and goodwill. See page 345 for more information including the nearest 201� 2�� equivalent GAAP data. 201� ��� Total shareholder return (%) Total shareholder return (TSR) represents the 5.8 2019 performance 2019 change in value of a BP shareholding over a 1.1 Improvement in TSR reflects increased dividends calendar year. It assumes that dividends are in 2019. reinvested to purchase additional shares at the ����� 201� closing price on the ex-dividend date. 0�� We are committed to maintaining a progressive 20�0 201� and sustainable dividend policy. 9�� 29�0 201� ���� �12��� 201� ����� A�S �a�i� �rdinar� ��are �a�i� BP Annual Report and Form 20-F 2019 35


 
Group performance “Despite the challenging environment in 2019, we continued to deliver operating cash flow growth, which together with continued capital discipline has underpinned growth in free cash flow. Furthermore, we have made significant progress towards our $10 billion divestment target. Together this supported our decision to increase the dividend with the fourth-quarter results.” Dr Brian Gilvary Group chief financial officer $10.0bn Underlying replacement cost (RC) profit (2018 $12.7bn) $4.0bn $25.8bn Profit attributable to BP shareholders Operating cash flow (2018 $9.4bn) (2018 $22.9bn) Financial and operating performance $ million except per share amounts 2019 2018 2017 Segment RC profit (loss) before Profit before interest and taxation 11,706 19,378 9,474 interest and tax Finance costs and net finance expense relating to pensions and (3,552) (2,655) (2,294) ($ billion) other post-retirement benefits Taxation (3,964) (7,145) (3,712) 2019 Non-controlling interests (164) (195) (79) 2018 Profit for the yeara 4,026 9,383 3,389 2017 Inventory holding (gains) losses, before tax (667) 801 (853) (5) 0 5 10 15 20 25 Taxation charge (credit) on inventory holding gains and losses 156 (198) 225 ● Upstream ● Downstream ● Rosneft RC profit 3,515 9,986 2,761 ● Other businesses and corporate (includes Net (favourable) adverse impact of non-operating items 8,263 3,380 3,730 costs related to the Gulf of Mexico oil spill) ● Consolidation adjustment – UPll★ and fair value accounting effects before tax ❙ Group RC profit before interest and tax Taxation charge (credit) on non-operating items (1,788) (643) (325) and fair value accounting effects Underlying RC profit 9,990 12,723 6,166 Dividends paid per share – cents 41.0 40.5 40.0 – pence 31.977 30.568 30.979 a Profit (loss) attributable to BP shareholders. More information Upstream, see page 50. Downstream, see page 56. Rosneft, see page 61. Other businesses and corporate, see page 63. Oil and gas disclosures for the group, see page 308. For a discussion of BP’s financial and operating performance for the year ending 31 December 2017, see BP Annual Report and Form 20-F 2018, pages 19-39 and BP Annual Report and Form 20-F 2017, pages 21-43. 36 BP Annual Report and Form 20-F 2019


 
Strategic report Results Cash flow and net debt information Profit for the year ended 31 December 2019 attributable to BP $ million shareholders was $4.0 billion, compared with $9.4 billion in 2018. 2019 2018 2017 Excluding inventory holding gains, replacement cost (RC) profit was Operating cash flow 25,770 22,873 18,931 $3.5 billion, compared with $10.0 billion in 2018. Net cash used in investing activities (16,974) (21,571) (14,077) After adjusting RC profit for a net charge for non-operating items Net cash used in financing activities (8,817) (4,079) (3,296) of $7.2 billion and net favourable fair value accounting effects of Cash and cash equivalents at end of year 22,472 22,468 25,586 $0.7 billion (both on a post-tax basis), underlying RC profit for the year Capital expenditure ended 31 December 2019 was $10.0 billion, a decrease of $2.7 billion Organic capital expenditure (15,238) (15,140) (16,501) compared with 2018. The decrease was predominantly due to lower  oil and gas prices in the Upstream segment and a significantly weaker Inorganic capital expenditure (4,183) (9,948) (1,339) environment in the Downstream segment. (19,421) (25,088) (17,840) Finance debt 67,724 65,132 62,574 Profit for the year ended 31 December 2018 attributable to BP  shareholders was $9.4 billion, including inventory holding losses, Net debt 45,442 43,477 37,819 RC profit was $10.0 billion. After adjusting RC profit for a net charge Finance debt ratio (%) 40.2% 39.3% 38.6% for non-operating items of $2.8 billion and net favourable fair value Gearing (%) 31.1% 30.0% 27.0% accounting effects of $68 million (both on a post-tax basis), underlying RC profit for the year ended 31 December 2018 was $12.7 billion. This Operating cash flow reflected higher oil prices, record plant reliability and the benefit of new major projects start-ups in Upstream; stronger refining margins and Operating cash flow for the year ended 31 December 2019 was strong fuels marketing growth in Downstream; and higher oil prices in $25.8 billion, $2.9 billion higher than 2018. Operating cash flow in Rosneft segment. 2019 reflects $2.7 billion of pre-tax cash outflows related to the Gulf of Mexico oil spill. Compared with 2018, operating cash flows in 2019 Non-operating items also reflected the favourable effect of an estimated $2.0 billion of lease payments being classified as financing cash flows from 1 January 2019 The net charge for non-operating items was $7.2 billion after tax in following the implementation of IFRS 16. 2019, mainly related to impairment charges, principally resulting from the announcements to dispose of certain assets in the US and Movements in working capital adversely impacted cash flow in the reclassification of accumulated foreign exchange losses from reserves year by $2.9 billion, including an adverse impact on working capital from to the income statement on the formation of the BP Bunge Bioenergia the Gulf of Mexico oil spill of $2.6 billion. BP actively manages its joint venture. working capital balances to optimize and reduce volatility in cash flow. The net charge for non-operating items was $2.8 billion post-tax in Operating cash flow for the year ended 31 December 2018 was 2018, mainly related to additional charges for the Gulf of Mexico oil spill, $22.9 billion, reflecting $3.5 billion of pre-tax cash outflows related to environmental and other provisions, and further restructuring costs. the Gulf of Mexico oil spill. More information on non-operating items and fair value accounting Movements in working capital adversely impacted cash flow in the year effects can be found on pages 300 and 344. by $4.8 billion. There was an adverse impact on working capital from the Gulf of Mexico oil spill of $3.1 billion. Other working capital effects, Taxation principally an increase in other current and non-current assets partially offset by a decrease in inventory, had an adverse effect of $1.7 billion. The charge for corporate income taxes was $3,964 million in 2019 compared with $7,145 million in 2018. The decrease mainly reflects the lower level of profit in 2019. The effective tax rate (ETR) on the profit or loss for the year was 49% in 2019 and 43% in 2018. The ETR for both years was impacted by various one-off items. Adjusting for inventory holding impacts, non-operating items and fair value accounting effects, the underlying ETR was 36% in 2019 (2018 38%). The lower underlying ETR in 2019 compared with 2018 reflects the reassessment of the recognition of deferred tax assets. In the current environment, the underlying ETR in 2020 is expected to be lower than 40%. BP Annual Report and Form 20-F 2019 37


 
Net cash used in investing activities Group reserves and production (including Rosneft segment)a Net cash used in investing activities for the year ended 31 December 2019 decreased by $4.6 billion compared with 2018. $ million 2019 2018 2017 The decrease mainly reflected the phasing of the payments to BHP for the Petrohawk acquisition. Estimated net proved reserves (net of royalties) Total capital expenditure for 2019 was $19.4 billion (2018 $25.1 billion), Liquids (mmb) 11,478 11,456 10,672 of which organic capital expenditure was $15.2 billion (2018 $15.1 Natural gas (bcf) 45,601 49,239 45,060 billion). Sources of funding are fungible, but the majority of the group’s Total hydrocarbons (mmboe) 19,341 19,945 18,441 funding requirements for new investment comes from cash generated by existing operations. We expect 2020 organic capital expenditure to Of which: b remain towards the lower end of our $15-17 billion range. Equity-accounted entities 9,965 9,757 8,949 Production (net of royalties) Total divestment and other proceeds for 2019 amounted to $2.8 billion Liquids (mb/d) 2,211 2,191 2,260 including $0.6 billion received in relation to the sale of a 49% interest in BP’s retail property portfolio in Australia, shown within financing Natural gas (mmcf/d) 9,102 8,659 7,744 activities in the group cash flow statement. Total divestment and other Total hydrocarbons (mboe/d) 3,781 3,683 3,595 proceeds for 2018 amounted to $3.5 billion including a $0.6 billion loan Of which: repayment, relating to the refinancing of Trans Adriatic Pipeline AG. Subsidiaries 2,420 2,328 2,164 Equity-accounted entitiesc 1,360 1,355 1,431 BP expects to meet its target of $10 billion proceeds by end-2020 and expects to announce a further $5 billion of agreed disposals by a Because of rounding, some totals may not agree exactly with the sum of their component mid-2021. parts. b Includes BP’s share of Rosneft. See Rosneft on page 61 and Supplementary information on oil and natural gas on page 232 for further information. Net cash used in financing activities c Includes BP’s share of Rosneft. See Rosneft on page 61 and Oil and gas disclosures for the group on page 308 for further information. Net cash used in financing activities for the year ended 31 December 2019 was $8.8 billion, compared with $4.1 billion in 2018. This was Total hydrocarbon proved reserves at 31 December 2019, on an oil mainly as a result of $2.3 billion in lease liability repayments which were equivalent basis including equity-accounted entities, decreased by 3% presented as operating cash flows and capital expenditure prior to the (decrease of 8% for subsidiaries and increase of 2% for equity- implementation of IFRS 16, an increase of $1.5 billion in debt financing, accounted entities) compared with 31 December 2018. Natural gas an increase of $1.2 billion in net repurchase of shares and an increase in represented about 41% (48% for subsidiaries and 34% for equity- dividend payments of $0.3 billion offset by $0.6 billion in cash received accounted entities) of these reserves. The change includes a net in relation to the sale of the 49% interest in BP’s retail property portfolio decrease from acquisitions and disposals of 133mmboe (decrease of in Australia as described above. 134mmboe within our subsidiaries and increase of 1mmboe within our equity-accounted entities). Acquisition activity in our subsidiaries Total dividends distributed to shareholders in 2019 were 41.0 cents per occurred in India, and divestment activity in our subsidiaries in the US share, 0.5 cents higher than 2018. This amounted to a total distribution and Egypt. There were no material acquisitions or divestments in our to shareholders of $8.3 billion (2018 $8.1 billion), of which shareholders equity-accounted entities. elected to receive $1.4 billion (2018 $1.4 billion) in shares under the scrip dividend programme. The total distributed in cash during the year Total hydrocarbon production for the group was 3% higher compared amounted to $6.9 billion (2018 $6.7 billion). with 2018. The increase comprised a 4% increase (1% increase for liquids and 7% increase for gas) for subsidiaries and was broadly flat Debt with 2018 for equity-accounted entities. Finance debt at the end of 2019 increased by $2.6 billion from the end of 2018. The finance debt ratio at the end of 2019 increased by 0.9%. Net debt at the end of 2019 increased by $2.0 billion from the 2018 year-end position. Gearing at the end of 2019 increased by 1.1%. Net debt and gearing are non-GAAP measures. See Financial statements – Note 26 for finance debt, which is the nearest equivalent measure on an IFRS basis, and Note 27 for further information on net debt, including the amendment of comparative information for finance debt, net debt and gearing following the implementation of IFRS 16. For information on financing the group’s activities, see Financial statements – Note 29 and Liquidity and capital resources on page 301. 38 BP Annual Report and Form 20-F 2019


 
Strategic report Sustainability Operating sustainably, safely and responsibly is core to our ability to create long-term value for our stakeholders, deliver our net zero ambition and aims, and realize our purpose to reimagine energy for people and our planet. Our sustainability focus areas Environment • Climate change and • Accrediting our low We refreshed and expanded our the energy transition. carbon activities. sustainability materiality assessment • Net zero aims. • Calling for more process in 2019. We asked a range of • Carbon intensity of our products. progressive climate policies external and internal stakeholders, • GHG emissions • Climate-related financial including shareholders and employees, from our operations. disclosures. to share their feedback on the issues that • Our ‘reduce, improve, • Working with others. matter most to them. We also asked them create’ framework. • Managing our impacts. to consider the relative impact of these issues on our business and how they think Safety and • Keeping people safe. • Cyber threats. BP can influence them positively. We security • Managing safety. • Security. validated and prioritized the findings with • Our operating • Working with contractors experts in BP to help prioritize our management system. • Our partners in joint sustainability reporting. We’ve covered • Preventing incidents. arrangements. the main issues they consider in this • Emergency preparedness. section, along with additional key non-financial information. Our people • Attraction and retention. • Employee engagement. Our reporting For more information on our sustainability • Diversity. • Share ownership. performance, see the BP Sustainability • Inclusion. Report 2019. For key environmental, social and Communities • Value to society. • Human rights. governance data, see our ESG datasheet at bp.com/ESGdata. For our mapping to some key sustainability Governance • Our values. • Lobbying and political frameworks and standards, including GRI and business • The BP code of conduct. donations. and IPIECA, see bp.com/reportingcentre. ethics • Anti-bribery and corruption. • Trade associations. • Tax and transparency. Non-financial reporting Page Other related information Page information statement Environmental matters 40-45 Business model 14-15 This sustainability section, and other pages Our employees 47, 88-89, 221 Strategy 16-18 referenced below, provide information as Social matters 48 Non-financial KPIs 32-34 required by section 414CB of the Companies Act 2006 in relation to: Human rights 48 Principal risks 69-71 Anti-bribery and corruption 49 Policies 39-49, 68-69 BP Annual Report and Form 20-F 2019 39


 
Environment Greenhouse gas emissions from our operations We report Scope 1 (direct) and Scope 2 (indirect) GHG emissions on Climate change and the energy transition a carbon dioxide equivalent (CO2e) basis. Direct emissions include CO2 The world needs more energy to fuel prosperity and improve standards and methane from the combustion of fuel and the operation of facilities, of living for a growing global population. This energy must be delivered and indirect emissions include those resulting from the purchase of in affordable and reliable ways, but it must also be lower carbon. BP’s electricity and steam we import into our operations. purpose is to reimagine energy for people and our planet. To deliver Our overall emissions, on an operational control basis, increased in this, we have set out a new ambition to become a net zero company 2019, mainly due to major acquisitions. But the SERs we achieved by 2050 or sooner, and to help the world reach net zero. came close to countering this increase. We achieved zero net growth in our operational emissions with no offsets required against our Net zero aims adjusted 2015 baseline. Aim 1: Net zero operations a Greenhouse gas emissions (MteCO2e) We aim to be net zero across our entire operations on an absolute basis by 2050 or sooner. This aim relates to Scope 1 (direct) and Scope 2 Operational controlb (indirect) greenhouse gas (GHG) emissions. 2019 2018 2017 Aim 2: Net zero oil and gas Scope 1 (direct) emissions 49.2 48.8 50.5 We aim to be net zero on an absolute basis across the carbon in our Scope 2 (indirect) emissions 5.2 5.4 6.1 upstream oil and gas production by 2050 or sooner. This is our Scope 3 Total 54.4 54.2 56.6 aim, and is on a BP equity share basis excluding Rosneft. This carbon a was equivalent to 360MteCO2e of emissions in 2019. BP equity sharec 2019 2018 2017 Scope 3 Scope 1 (direct) emissions 46.0 46.5 49.4 Scope 2 (Indirect) emissions 5.7 5.7 6.8 There are 15 categories of Scope 3 emissions. For our industry Total 51.7 52.2 56.2 the most important of these categories is the ‘use of sold products’ (category 11). For this category of Scope 3, we are a Our approach to reporting GHG emissions broadly follows the IPIECA/API/IOGP Petroleum reporting for the first time the estimated CO2 emissions from Industry Guidelines for Reporting GHG Emissions. We calculate CO2 emissions based on the carbon in our upstream oil and gas productiona. This metric the fuel consumption and fuel properties for major sources. We report CO2 and methane. We do not include nitrous oxide, hydrofluorocarbons, perfluorocarbons and sulphur replaces the ‘customer emissions’ metric, which we previously hexafluoride as they are not material to our operations and it is not practical to collect this reported in our Sustainability Report. For more information see data. bp.com/sustainabilityreport. b Operational control data comprises 100% of emissions from activities that are operated by BP, going beyond the IPIECA guidelines by including emissions from certain other activities such as contracted drilling activities. c BP equity share data comprises 100% of emissions from subsidiaries and the percentage a This figure assumes that 100% of the oil and gas produced is combusted with no carbon of emissions equivalent to our share of joint arrangements and associates, other than capture, use and storage, although a proportion of global oil and gas goes into non- BP’s share of Rosneft. combusted uses, such as petrochemicals and lubricants. Ratio of Scope 1 (direct) and Scope 2 (indirect) GHG emissions to gross Aim 3: Halving intensity d production (teCO2e/te) Our aim is to cut the carbon intensity of the products we sell by 50%, by 2050 or sooner. This is a lifecycle GHG emissions intensity approach, 2019 2018 2017 2016 per unit of energy. It covers marketing sales of energy products and, 0.22 0.22 0.24 0.24 potentially, in the future, certain other products, such as those d Gross production comprises upstream production, refining throughput and associated with land carbon projects. petrochemicals produced. This metric also responds to the CA100+ resolution, which requires us to report the estimated carbon intensity of our energy products. Estimated emissions intensity (gCO2e/MJ) 2019 Average emissions intensity of marketed energy products 79.7 Refined energy products 93.7 Gas products 71.6 Bio-products 28.8 Power products 43.8 40 BP Annual Report and Form 20-F 2019


 
Strategic report Our ‘reduce, improve, create’ framework In 2018 we set out our low carbon ambition and targets in In 2019 we announced plans to link our annual cash bonus to our our ‘reduce, improve, create’ (RIC) framework: sustainable emissions reduction (SER) target. This means around 37,000 employees, including executives, are now incentivized and • Reducing GHG emissions in our own operations. rewarded for their contribution to reducing carbon emissions in BP. • Improving products to help our customers and consumers lower their emissions. We’ve met our SER target six years ahead of schedule and this has • Creating low carbon businesses. motivated us to start work to set new targets. We plan to provide more detail in September 2020. Reducing Improving Creating emissions in our operations our products low carbon businesses 2019 progress 2019 progress 2019 progress • Achieved zero net growth in • Continued to scale up our • Began rolling out BP Chargemaster operational emissions. Our total co-processing business, growing ultra-fast charging across BP forecourts GHG emissions (operated) increased the volume of lower carbon bio- in the UK and piloted ultra-fast charging slightly in 2019, largely due to the feedstock processed at our refineries. at Aral forecourts in Germany. major acquisitions at the end of 2018. • Established more than 30 carbon • Increased our stake in Lightsource BP, This was countered by other neutral BP retail sites, offering a to create a 50:50 joint venture, see emissions reductions. Total emissions range of carbon neutral products page 73. were still below the adjusted 2015 and services. • Took a leading role in the OGCI’s Net baseline so no offsets were required. • Increased the supply of BP biojet, our Zero Teesside project in the UK. Using • 1.4Mte of SERs delivered in 2019 sustainable aviation fuel, to 11 locations integrated carbon capture, use and and 3.9Mte since 2016. And we linked worldwide – including in Sweden, storage, the project aims to store the this target to the annual cash bonus France and the US. carbon dioxide emissions of the of around 37,000 eligible employees carbon-intensive industries situated in 2019. within the Teesside industrial cluster. • Methane intensity of 0.14%, below our target of 0.2%. More information Our strategy on page 16. Directors’ remuneration report on page 100. bp.com/sustainability. Accrediting our lower carbon activities Calling for more progressive climate policies Our advancing low carbon (ALC) accreditation programme aims to We plan to allocate more resources to advocate for well-designed inspire every part of BP to identify lower carbon opportunities. Since its policies, including carbon pricing. We believe carbon pricing is the launch, the programme has motivated people across BP to do more to most efficient way to reduce GHG emissions and incentivize everyone, advance low carbon, with 76 activities being accredited in 2019. Each including energy producers and consumers, to play their part. In our activity supports one of our low carbon ambitions. Deloitte conducts view, pricing can be as effective as a tax or a cap-and-trade system. independent assurance on ALC activities. We estimate that 64MteCO2e While we support well-designed carbon pricing, we’re prepared to have been saved or offset through activities delivered by BP, and oppose poorly designed proposals. For example, we opposed the 5.4Mte through activities delivered by BP partners since the ballot initiative to introduce a carbon fee in Washington State, US in programme began in 2017a. November 2018. We believed that the policy was badly designed and See bp.com/advancinglowcarbon for details on the programme and would have harmed Washington’s economy without significantly Deloitte’s assurance statement. reducing carbon emissions. The ballot was not passed. a The total emissions saved or offset from the accredited activities are estimated using a We continued to work with legislative leaders in the state and in 2019 variety of methodologies and baselines. The figures aim only to illustrate the impact of the activities within the programme, and delivered by BP or a BP partner only refers to the supported a cap-and-invest bill, which we believe will be more effective. organization leading on delivering the activity. Savings or offsets may be claimed by or We intend to continue working with the Washington legislature during its attributed to other parties. The scope of accredited activities is wider than, and does not 2020 session to see if a new carbon bill can be advanced. seek to align with, our GHG reporting boundaries. Therefore, the figures are not directly comparable to BP’s reported emissions. BP Annual Report and Form 20-F 2019 41


 
Climate-related financial disclosures and the preparation and consideration of corporate reporting documents and AGM materials. The board has reviewed the consistency of our We support the recommendations of the Task Force on Climate-related current strategy with the Paris goals, see page 17. Financial Disclosures (TCFD), which was established by the Financial Stability Board with the aim of improving the reporting of climate- The executive related risks and opportunities. We intend to work constructively with The assessment and management of climate-related matters is the TCFD, and others, to develop good practices and standards for embedded across BP at various levels and delegated authority flows transparency. This will be a multi-year journey, but we have already down from the board, see page 83. started, and our latest reporting provides information supporting the Climate-related matters were discussed at each of the 11 executive TCFD’s recommended disclosures. team meetings in 2019 including the development of BP’s net zero Governance ambition and aims ahead of discussion with the board. Recommendation: Disclose the organization’s governance around The executive team is supported by BP’s senior-level leadership and climate-related issues and opportunities. their respective teams, with dedicated business and functional The board expertise focused on climate-related matters. This includes our carbon The board is responsible for the overall conduct of the group’s business, management, safety and operational risk, group policy and our which extends to setting our strategy and approach to the energy economics teams. transition. The board and its associated committees, where appropriate, Alignment between group, business and functional leaders is fostered have oversight of climate-related matters (which include issues and through cross-functional bodies, including the group, upstream and opportunities) and are updated on these matters as frequently as downstream carbon steering committees.
 necessary. In 2019 climate matters were included on the agenda for each of the six board meetings. This informed the board’s consideration of strategy. The process by which the board is updated on climate-related matters is managed by our company secretary’s office and depends on the topic being discussed. In 2019 these processes included formal analysis of our RIC targets, briefings with subject matter experts from the business Climate governance: investments in 2019 BP board Considers investment cases deemed sufficiently material to warrant the board’s attention. New business models Existing and new business models Renewal committee Resource commitment meeting Reviews strategic, commercial and investment decisions outside of core Reviews strategic, commercial and investment decisions related to activity and related to new lines of business (up to $250 million organic existing and new lines of business (above $250 million organic and and $25 million inorganic capital investment). Chaired by our chief $25 million inorganic capital investment). Chaired by our chief executive. transition officer. New energy frontiers Ventures investment steering committee committee Oversees strategy and Oversees strategic, commercial development of growth and investment decisions in opportunities in low carbon venturing business. Chaired by business models that can be our group head of technology. scaled up to create new businesses for BP. Chaired by our chief transition officer. BP Launchpad Launchpad is BP’s business-builder and scale-up factory. Its mission is to build five $1 billion business unicorns. Chaired by our group head of technology. Executive-level committee. Cross-functional committee. 42 BP Annual Report and Form 20-F 2019


 
Strategic report Strategy For the first time we have published the estimated lifecycle carbon Recommendation: Disclose the actual and potential impacts of intensity of our marketed energy products, see page 40. climate-related risks and opportunities on the organization’s We recognize that climate-related risks include both: business, strategy and financial planning where such information is material. • Physical risks – risks related to the physical impacts of climate change including event driven risks such as changes in the severity We recognize the significance of the energy transition and the risks and/or frequency of extreme weather events. and opportunities it presents. As part of their consideration of BP’s • Transition risks – risks related to the transition to a lower carbon strategy, the board and executive team consider risks and opportunities economy including policy and legal, technology, markets and associated with climate change and the energy transition informed by reputational risks. a range of external inputs, including the International Panel on Climate Change (IPCC), academic research and emerging regulatory The potential impacts of such climate-related risks are described in Risk requirements, and BP materials such as the different scenarios factors, see pages 70-71. We place importance on pursuing a flexible described in the BP Energy Outlook 2019. strategy which gives us optionality where there is uncertainty about the pathways to achieve the Paris goals. This positions us to deliver our We believe that the transition to a lower carbon economy presents strategic priorities, and net zero ambition and aims. significant business opportunities for BP. One of our strategic priorities is to pursue new opportunities to meet evolving technology, consumer When developing our strategy, we draw on expertise from across the and policy trends through venturing and low carbon, see page 28. organization. This includes our group economics team and their work Some of the opportunities we see are set out in our RIC framework – on the scenarios described in the BP Energy Outlook 2019. The Energy to improve our products, to help customers lower their emissions and to Outlook, together with other scenarios, informs our price assumptions create new, lower carbon businesses, see page 41. which are part of our investment governance processes. The evaluation of new material capex investment in 2019 for consistency with the Paris We have set out 10 aims to support our ambition to be a net zero goals is discussed on page 21. company by 2050 or sooner and to help the world reach net zero. We believe that collectively, these 10 aims set out a path that is consistent with the Paris goals. One of our specific aims relates to halving the carbon intensity of our marketed products by 2050 or sooner. See page 6 for more information on our net zero ambition and aims. Climate governance: management of climate-related matters in 2019 Chief executive and the executive team Senior leadership Carbon steering group Accountability Focuses on strategy, policy, performance oversight and collaboration relating to carbon management activities across the group. Chaired by our vice president of carbon management. Delegation Upstream carbon steering committee Downstream advancing the energy transition committee Focuses on the delivery of lower carbon plans in the Upstream. Develops and drives the implementation of advancing the Chaired by our chief operating officer of production, energy transition in the Downstream. Chaired by our head transformation and carbon, Upstream. of technology, Downstream and chief scientist. Underpinned by systems, processes and risk management. Executive-level committee. Cross-functional committee. Senior-leadership level. Business and segment committee. BP Annual Report and Form 20-F 2019 43


 
Our group strategic planning team is responsible for using data from Metrics and targets the BP Energy Outlook and implementing the insights in our strategic Recommendation: Disclose the metrics and targets used to assess frameworks, including our net zero ambition and mid-term RIC targets. and manage relevant climate-related risks and opportunities where We recognize that climate-related risks are an important consideration such information is material. in developing our strategy. Climate-related risks are incorporated into We present the principal group-wide metrics and targets used to assess BP’s governance process, see How we manage risk on page 69. and manage climate-related risks and opportunities on page 17. This Risk management includes the targets we set out in 2018 in our RIC framework. Recommendation: Disclose how the organization identifies, In addition, in 2019 BP announced that sustainable GHG emissions assesses and manages climate-related risks. reductions would be included as a factor in the reward of around Our processes for identifying and managing climate-related risks are 37,000 eligible employees across the group and around the world, integrated into BP’s risk management policy and the associated risk including executive directors. This target was 10% of the group’s annual management procedures. BP’s risk management system is designed cash bonus scorecard and we exceeded the target set of 1.0Mte to address all types of risks and as part of this system our operating (1.4Mte). In 2020 we plan to increase the percentage of remuneration businesses are responsible for identifying and managing their risks. which is linked to emissions reductions for our leadership and eligible Risks which may be identified include potential effects on operations employees. Our aim is to mobilize our workforce to become advocates at asset level, performance at business level and developments at for our net zero ambition. regional level from extreme weather or the transition to a lower For information on our 2020 remuneration policy, see page 110. carbon economy. As part of our annual planning process we review the group’s principal risks and uncertainties. Climate change and the transition to a lower carbon economy has been identified as a principal risk, see page 69. This covers various aspects of how risks associated with the energy transition could manifest. Similarly, physical climate-related risks such as extreme weather are covered in our principal risks related to safety and operations. TCFD index table TCFD recommended disclosure Where reported Governance a. Describe the board’s oversight of climate-related Page 42. Disclose the organization’s risks and opportunities. governance around climate- b. Describe the management’s role in assessing and Page 42. related issues and opportunities. managing climate related risks and opportunities. Strategy a. Describe the climate-related risks and opportunities Achieving the Paris goals, page 13 – for a discussion of the Disclose the actual and potential the organization has identified over the short, different pathways and time horizons considered impacts of climate-related risks medium, and long term. RIC framework, page 41 – for an outline of opportunities. and opportunities on the Risk factors, pages 70-71 – description of principal risks. organization’s business, strategy b. Describe the impact of climate-related risks and Risk factors, pages 70-71 – description of principal risks. and financial planning where opportunities on the organization’s businesses, such information is material. strategy, and financial planning. c. Describe the resilience of the organization’s strategy, Achieving the Paris goals, page 13. taking into consideration different climate-related Our strategy, page 16. scenarios, including a 2°C or lower scenario. Risk management a. Describe the organization’s processes for identifying Risk management, page 44. Disclose how the organization and assessing climate-related risks. Upstream, page 50. identifies, assesses and Downstream, page 56. manages climate-related risks. Other businesses and corporate, page 63. b. Describe the organization’s processes for managing Risk management, page 44. climate-related risks. c. Describe how processes for identifying, assessing, Risk management, page 44. and managing climate-related risks are integrated How we manage risk, pages 68-69. into the organization’s overall risk management. Risk factors, pages 70-71. Metrics and targets a. Disclose the metrics used by the organization to Relevant group-wide metrics and targets, page 17. Disclose the metrics and targets assess climate-related risks and opportunities in line used to assess and manage with its strategy and risk management process. relevant climate-related risks b. Disclose Scope 1, Scope 2, and, if appropriate, GHG emissions data, page 40. and opportunities where such Scope 3 GHG emissions, and the related risks. information is material. c. Describe the targets used by the organization to RIC framework, page 41. manage climate-related risks and opportunities and (Also note: Net zero ambition and aims, page 6). performance against targets. 44 BP Annual Report and Form 20-F 2019


 
Strategic report Working with others Safety and security We work with peers, non-governmental organizations and Safety remains our number one priority and one of our core values. academic institutions to support the energy transition. Our aim is to have no accidents, no harm to people and no damage to the environment. The Oil and Gas Climate Initiative (OGCI) brings together 13 oil and gas companies to increase the ambition, speed and scale of the initiatives We are working to continue to improve personal and process safety and undertaken by its individual companies to help reduce manmade GHG operational risk management across BP and to strengthen our safety emissions. OGCI announced a collective methane intensity target for management. Our approach builds on our experience, including learning member companies in 2018. from incidents, operations audits, annual risk reviews and sharing For more information on BP’s methane intensity, see page 34. lessons learned with our industry peers. BP is working with OGCI Climate Investments and certain other OGCI Process safety events Recordable injury frequency member companies to help progress the UK’s first commercial (number of incidents) (workforce incidents per 200,000 hours worked) full-chain carbon capture, use and storage project. Net Zero Teesside 100 0.4 83 84 plans to capture CO2 from new, efficient gas-fired power generation and 72 transport it by pipeline to be stored in a formation under the southern 75 0.3 61 North Sea. The infrastructure would also allow other industries in 56 Teesside to store CO2 captured from their processes. The project, 50 0.2 which is currently undergoing a feasibility study, could be in operation by the mid-2020s. 25 0.1 26 20 16 18 16 Managing our impacts 0 0 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 We work hard to avoid, mitigate and manage our environmental Tier 1 Tier 2 Workforce 0.243 0.211 0.218 0.198 0.166 and social impacts over the life of our operations. Employee 0.203 0.194 0.202 0.152 0.128 Contractor 0.279 0.222 0.229 0.233 0.193 The way our businesses around the world are expected to understand American Petroleum Institute US benchmark* and manage their environmental and social impacts is set out in our International Association of Oil & Gas operating management system (OMS). This includes requirements on Producers benchmark* engaging with stakeholders who may be affected by our activities. * API and IOGP 2019 data reports are not available until May 2020. In planning our projects, we identify potential impacts from our activities in areas such as land rights, water use and protected areas. We use the Keeping people safe results of this analysis to identify actions and mitigation measures and All our employees and contractors have the responsibility and the look to implement these in project design, construction and operations. authority to stop unsafe work. Our safety rules guide our workers on For example, in Mauritania and Senegal we are working with national staying safe while performing tasks with the potential to cause most and international scientists on the biodiversity action plan for the harm. The rules are aligned with our OMS and focus on areas such as Greater Tortue Ahmeyim development. working at heights, lifting operations and driving safety. Our OMS requires each of BP’s operating businesses and functions to We monitor and report on key workforce personal safety metrics in line create and maintain its own OMS handbook, describing how it will carry with industry standards. We include both employees and contractors in out its local operating activities. Through self-verification, local business our data. processes are reviewed and areas for improvement are prioritized, allowing focus on delivering safe, reliable and compliant operations. Tragically we suffered two fatalities in 2019. In July a fire-fighting assistant in our biofuels business in Brazil was fatally injured following a For information on our oil spill performance see page 46. fire truck accident while attending to an agricultural fire. In October a Water contractor at our Whiting refinery in the US was fatally injured when he We review water risks every year, taking into account availability, fell from a scaffold ladder. quantity, quality and regulatory requirements. We also use a range of tools, including the Global Environmental Management Initiative Local 2019 2018 2017 a Water Tool and the World Resources Institute Aqueduct Global Water Recordable injury frequency 0.166 0.198 0.218 Risk Atlas. Day away from work case frequencyb 0.047 0.048 0.055 Severe vehicle accident rate 0.05 0.04 0.03 In 2019 we saw a 4% rise in freshwater withdrawals and a 3% rise in freshwater consumption. This was largely due to increased production, a Incidents that result in a fatality or injury per 200,000 hours worked. with freshwater withdrawal and consumption intensities remaining flat, b Incidents that result in an injury where a person is unable to work for a day (shift) or more compared with 2018. per 200,000 hours worked. Air emissions Our recordable injury frequency, which includes BHP assets acquired in We put measures in place to manage our air emissions, in line with 2018, reduced by 16% in 2019. There is always more we can do and we regulations and industry guidelines designed to protect the health of remain focused on achieving better results today and in the future. local communities and the environment. In 2019 we took delivery of the last three vessels in our new fleet of six liquefied natural gas (LNG) carriers. These use around 25% less fuel and emit less nitrogen oxides than the older LNG carriers in the BP operated fleet. See bp.com/environment for more information. BP Annual Report and Form 20-F 2019 45


 
Managing safety Cyber threats BP-operated businesses are responsible for identifying and managing The severity, sophistication and scale of cyber attacks continues to operating risks and bringing together people with the right skills and evolve. The increasing digitalization and reliance on IT systems makes competencies to address them. Our safety and operational risk team managing cyber risk an even greater priority for many industries, works alongside BP-operated businesses to provide oversight and including our own. technical guidance, while our group audit team visits sites on a The risk comes from a variety of cyber-threat actors, including nation risk-prioritized basis to check how they are managing risks. states, criminals, terrorists, hacktivists and insiders. As with previous Our operating management system years, we’ve experienced threats to the security of our digital infrastructure, but none of these had a significant impact on our Our OMS is a group-wide framework designed to help us manage risks business in 2019. We have a range of measures to manage this risk, in our operating activities and drive performance improvements. It brings including the use of cyber-security policies and procedures, security together BP requirements on health, safety, security, the environment, protection tools, continuous threat monitoring and event detection social responsibility and operational reliability, as well as related issues, capabilities, and incident response plans. We also conduct exercises such as maintenance, contractor relations and organizational learning, to test our response to and recovery from cyber attacks. To encourage into a common management system. vigilance among our staff, our cyber-security training and awareness programme covers topics such as phishing and the correct classification Our OMS also helps us improve the quality of our activities by setting a and handling of our information. We collaborate closely with governments, common framework that our operations must work to. We review and law enforcement and industry peers to understand and respond to new amend these requirements from time to time to reflect our priorities. and emerging threats. Any variations in the application of our OMS, in order to meet local regulations or circumstances, are subject to a governance process. Security Recently acquired operations need to transition to our OMS. We monitor for hostile actions that could harm our people or disrupt Preventing incidents our operations. These actions might be connected to political or social unrest, terrorism, armed conflict or criminal activity. We take these We carefully plan our operations, with the aim of identifying potential potential threats seriously and assess them continuously. hazards and having rigorous operating and maintenance practices applied by capable people to manage risks at every stage. We design Our 24-hour response information centre in the UK uses state-of-the-art our new facilities in line with process safety, good design and technology to monitor evolving high-risk situations in real-time. It helps engineering principles. us to assess the safety of our people and provide them with practical advice if there is an emergency. We track our safety performance using industry metrics such as the American Petroleum Institute recommended practice 754 and the This year, we faced a number of protests. We worked with local police, International Association of Oil & Gas Producers recommended including marine authorities, to minimize any disruption from these to practice 456. our operations. 2019 2018 2017 Working with contractors Tier 1 and tier 2 process safety eventsa 98 72 79 Through documents that help bridge between our policies and those Oil spills – numberb 152 124 139 of our contractors, we define the way our safety management system Oil spills contained 90 63 81 co-exists with those of our contractors to manage risk on a site. For our Oil spills reaching land and water 58 57 58 contractors facing the most serious risks, we conduct quality, technical, Oil spilled – volume (thousand litres) 710 538 886 health, safety and security audits before awarding contracts. Once they Oil unrecovered (thousand litres) 300 131 265 start work, we continue to monitor their safety performance. a Tier 1 process safety events are losses of primary containment of greatest consequence Our OMS includes requirements and practices for working with – such as causing harm to a member of the workforce, costly damage to equipment or contractors. Our standard model contracts include health, safety and exceeding defined quantities. Tier 2 events are those of lesser consequence. security requirements. We expect and encourage our contractors and b Number of spills greater than or equal to one barrel (159 litres, 42 US gallons). their employees to act in a way that is consistent with our code of The total number of tier 1 and tier 2 process safety events increased conduct and take appropriate action if those expectations, or their in 2019, mainly reflecting performance in assets recently acquired. contractual obligations, are not met. Underlying performance across the group improved slightly from 2018. We are implementing BP procedures and processes to help bring newly Our partners in joint arrangements acquired assets in line with BP assets. In joint arrangements where we are the operator, our OMS, code of We investigate incidents including near misses. And we use leading conduct and other policies apply. We aim to report on aspects of our indicators, such as inspections and equipment tests, to monitor the business where we are the operator – as we directly manage the strength of controls to prevent incidents. We also use techniques that performance of these operations. We monitor performance and how risk is help teams to analyse and redesign tasks to reduce the chance of managed in our joint arrangements, whether we are the operator or not. mistakes occurring. Where we are not the operator, our OMS is available as a reference point for BP businesses when engaging with operators and co- Emergency preparedness venturers. We have a group framework to assess and manage BP’s The scale and spread of BP’s operations means we must be prepared exposure related to safety, operational and bribery and corruption risk to respond to a range of possible disruptions and emergency events. from our participation in these types of arrangements. Where We maintain disaster recovery, crisis and business continuity appropriate, we may seek to influence how risk is managed in management plans and work to build day-to-day response capabilities arrangements where we are not the operator. to support local management of incidents. 46 BP Annual Report and Form 20-F 2019


 
Strategic report Our people At the end of 2019 we had five female directors (2018 5) on our board. Our nomination committee remains mindful of diversity when considering BP’s success depends on having a talented and diverse workforce that potential candidates. For more information on the composition of our represents the communities we serve. board, see page 74. In the UK we report the gender pay gap for five BP entities. Our 2019 Number of employees at 31 Decembera 2019 2018 2017 report shows small improvements since 2018, including improvements Upstream 16,600 16,900 17,700 in our highest pay gap entities – BP p.l.c. and BP Exploration Operating Downstream 44,300 42,700 42,100 Company Limited. Six of the 10 gaps have narrowed. Our challenge is Other businesses and corporate 9,200 13,400 14,200 to maintain and, if possible, accelerate this trend. We are working to Total 70,100 73,000 74,000 address the differences but recognize that this is a long-term challenge. a Reported to the nearest 100. For more information see Financial statements – Note 35. See bp.com/ukgenderpaygap for data and more information on our gender pay gap in the UK. Our people are the most important element of our success. We need a motivated, engaged, and diverse workforce to deliver our purpose Inclusion and strategy. We aim to build a culture that generates the diversity of thought, approach and ideas needed to play a leading role in the To promote an inclusive culture we provide leadership training and energy transition, a culture in which people’s wellbeing is valued and support employee-run advocacy groups in areas such as gender, differences are respected. ethnicity, sexual orientation and disability. As well as bringing employees together, these groups support our recruitment programmes and The group people committee helps facilitate the group chief executive’s provide feedback on the potential impact of policy changes. Each oversight of policies relating to employees. In 2019 the committee group is sponsored by a senior executive. discussed people policies, including our remuneration policy, progress in our diversity and inclusion programme, modernizing and strengthening In 2019 we built closer ties between our central diversity and our attractiveness as an employer, our talent and learning programmes inclusion team and local business resource groups (BRGs). We also and long-term people priorities. held a number of events for employees from our BRGs, including an ‘economics of diversity’ webcast, a roadshow and a diversity and Attraction and retention inclusion week. We aim to recruit talented people from diverse backgrounds, and We aim to ensure equal opportunity in recruitment, career development, invest in training, development and competitive rewards for all our promotion, training and reward for all employees – regardless of ethnicity, people. We invest in employee development – with a focus on driving national origin, religion, gender, age, sexual orientation, marital status, safe, reliable and compliant operations, and on building technical, disability, or any other characteristic protected by applicable laws. functional and leadership capability. This includes a range of Where existing employees become disabled, our policy is to engage development opportunities for our people through a mix of on-the-job and use occupational assistance where needed, and to use reasonable learning, developmental relationships with mentors, managers and accommodations or adjustments to enable continued employment. peers, and training delivered face-to-face, virtually and through We have been recognized by a number of external awards in 2019, simulation or e-learning. including The Times newspaper’s Top 50 Employers for Women, Stonewall Global Leader and the FT’s Inclusive Companies recognition. Diversity We set out our current diversity and inclusion ambition in 2012. It is Employee engagement based on our core values of safety, respect, excellence, courage and Our managers hold regular team and one-to-one meetings with their one team. team members, complemented by formal processes through works We aim to attract, develop and retain the best talent and to create a councils in parts of Europe. We regularly communicate with employees diverse and inclusive working environment, where everyone is on factors that affect BP’s performance, and seek to maintain accepted, valued and treated equally without discrimination. constructive relationships with labour unions formally representing our employees. A total of 25% of our group leaders came from countries other than the UK and the US in 2019 (2018 24%). To understand what our employees think and feel about BP, we run an annual ‘Pulse’ survey and in 2019 we introduced ‘Pulse Live’, which Workforce by gender enables us to monitor changes in employee sentiment on a weekly As at 31 December 2019 Male Female Female % basis. The overall employee engagement score in our 2019 survey was Board directors 7 5 42 65% (2018 66%). Pride in working for BP was 75% (2018 76%). In the Executive team 11 2 15 2019 survey, participating employees told us we should focus more attention in several areas, including: sharing our strategy, reinforcing the Group leaders 285 93 25 need for an open speak-up culture, explaining how BP is taking action to Subsidiary directors 1,202 247 17 help create a low carbon future and providing updates on safety All employees 43,762 26,280 38 improvements and other priorities. The gender balance across BP as a whole is improving, with women Share ownership representing 38% of BP’s total population (2018 35%). We are working to improve these numbers further by, for example, developing We encourage employee share ownership and have a number of mentoring, sponsorship and coaching programmes to help more employee share plans in place. For example, we operate a ShareMatch women advance. But we still have work to do at the executive and plan in more than 50 countries, matching BP shares purchased by our senior levels. employees. We also operate a group-wide discretionary share plan, which allows employee participation at different levels globally and is linked to the company’s performance. BP Annual Report and Form 20-F 2019 47


 
Communities Value to society We aim to have a positive and enduring impact on the communities in which we operate. In supplying energy, we contribute to economies around the world by employing local staff, helping to develop national and local suppliers, and through the funds we pay to governments from taxes and other agreements. Additionally, our social investments support community efforts to increase incomes and improve standards of living. We committed $84 million in social investment in 2019 (2018 $114.2 million). We aim to recruit our workforce from the community or country in which we operate. We also run programmes to build the skills of businesses and develop the local supply chain in a number of locations. For example, in the West Nile Delta, we provided training on vocational skills and health and safety standards for local people. We reached more than 2,000 people by the end of 2019. Nationals employed 2019 2018 Angola 88% 87% Azerbaijan 92% 91% Egypt 81% 78% Indonesia 97% 96% Oman 80% 77% Trinidad & Tobago 96% 96% See bp.com/society for more information on how we generate value to society. Human rights We are committed to respecting the rights and dignity of all people when conducting our business. We respect internationally recognized human rights as set out in the International Bill of Human Rights and the International Labour Organization’s Declaration on Fundamental Principles and Rights at Work. These include the rights of our workforce and those living in BP Target Neutral communities potentially affected by our activities. By buying carbon offsets, Target Neutral is supporting finance in projects that not only reduce We set out our commitments in our business and human rights policy carbon but make a critical difference to the health and our code of conduct. Our OMS contains guidance on respecting the of low-income families. rights of workers and community members. The ONIL cookstove project has equipped 25,000 We are incorporating the UN Guiding Principles on Business and Human rural homes in Mexico with cookstoves that burn Rights, which set out how companies should prevent, address and more efficiently, using up to 58% less firewood remedy human rights impacts, into our business processes. Our focus than a traditional open fire, and are equipped with areas include ethical recruitment and working conditions, responsible chimneys to take harmful cooking fumes outside the household. security and community health and livelihoods. See bp.com/humanrights for more information about our approach to human rights. 48 BP Annual Report and Form 20-F 2019


 
Strategic report Governance and business ethics Lobbying and political donations Our aim is to more actively advocate for policies that support net zero, Our values including carbon pricing, see page 41. Our values of safety, respect, excellence, courage and one team We work with governments on a range of issues that are relevant to represent the qualities and actions we wish to see in BP. They inform our business, from regulatory compliance, to understanding our tax the way we do business and the decisions we make. We use these liabilities, to collaborating on community initiatives. The way in which values as part of our recruitment, promotion and individual performance we interact with those governments depends on the legal and management processes. regulatory framework in each country. See bp.com/values for more information. We prohibit the use of BP funds or resources to support any political The BP code of conduct candidate or party. We recognize the rights of our employees to participate in the political Our code of conduct is based on our values and sets clear expectations process and these rights are governed by the applicable laws in the for how we work at BP. It applies to all BP employees, including countries in which we operate. For example, in the US we provide members of the board. administrative support for the BP employee political action committee Employees, contractors or other third parties who have a question (PAC), which is a non-partisan committee that encourages voluntary about our code of conduct or see something that they feel is unethical employee participation in the political process. All BP employee PAC or unsafe can discuss this with their managers, supporting teams, contributions are reviewed for compliance with federal and state law works councils (where relevant) or through OpenTalk, a confidential and are publicly reported in accordance with US election laws. and anonymous helpline operated by an independent company. Trade associations We received more than 1,800 concerns or enquiries through these channels in 2019 (2018 1,712). The most commonly raised concerns We aim to set new expectations for our relationships with trade were related to the ‘Our people’ section of our code. The section associations around the world. BP is a member of many industry addresses issues such as harassment, equal opportunity, and diversity associations that offer opportunities to share good practices and and inclusion. collaborate on issues of importance to our sector. In 2019 we began an in-depth review assessing the alignment of the climate-related We take steps to identify and correct areas of non-conformance and policies and activities of 30 key trade associations to which we take disciplinary action where appropriate. In 2019 our businesses belong with BP’s position. As a result of this process we will be dismissed 74 employees for non-conformance with our code of conduct leaving three associations due to misalignment on climate policy. or unethical behaviour (2018 50). This excludes dismissals of staff For more information on the review process and outcomes see employed at our retail service stations. bp.com/tradeassociations. See bp.com/codeofconduct for more information. Tax and transparency Anti-bribery and corruption We are committed to complying with tax laws in a responsible manner We operate in parts of the world where bribery and corruption present and having open and constructive relationships with tax authorities. a high risk. We have a responsibility to our employees, our shareholders We paid $6.9 billion in income and production taxes to governments and to the countries and communities in which we do business to be in 2019 (2018 $7.5 billion). ethical and lawful in all our work. Our code of conduct explicitly prohibits engaging in bribery or corruption in any form. We disclose information on payments to governments for our upstream activities on a country-by-country and project basis under national Our group-wide anti-bribery and corruption policy and procedures reporting regulations such as those in effect in the UK. We also make include measures and guidance to assess risks, understand relevant payments to governments in connection with other parts of our laws and report concerns. They apply to all BP-operated businesses. business – such as the transporting, trading, manufacturing and We provide training to employees appropriate to the nature or location marketing of oil and gas. of their role. Around 11,000 employees completed anti-bribery and corruption training in 2019 (2018 10,957). We are a founding member of the Extractive Industries Transparency Initiative (EITI), which requires disclosure of payments made to and We assess any exposure to bribery and corruption risk when working received by governments in relation to oil, gas and mining activity. with suppliers and business partners. Where appropriate, we put in place a risk mitigation plan or we reject them if we conclude that risks Through EITI we work with governments, NGOs and international are too high. We also conduct anti-bribery compliance audits on agencies to improve transparency. For example, in 2019 we enacted selected suppliers when contracts are in place. For example, our our global commitment through membership of the international board, upstream business conducts audits for a number of suppliers in including supporting decision making on the new global EITI standard, higher-risk regions to assess their conformance with our anti-bribery which represents a further evolution in transparency. The focus is on and corruption contractual requirements. We take corrective action making disclosure and open data a routine part of government and with suppliers and business partners that fail to meet our expectations, corporate reporting, providing information to stakeholders in a way which may include terminating contracts. In 2019 we issued 25 audit that supports its widespread use in analysis and decision making. It reports (2018 27). now requires contract transparency for new contracts from 2021, as well as new requirements on environmental reporting and gender. See bp.com/tax for our approach to tax and our payments to governments report. BP Annual Report and Form 20-F 2019 49


 
Upstream The Upstream segment is responsible for our activities in oil and natural gas exploration, field development and production. Business model Exploration Wells and Global operations projects organization The exploration function is The global wells organization The global operations responsible for renewing our and the global projects organization is responsible for resource base through access, organization are responsible for safe, reliable and compliant exploration and appraisal, while the safe, reliable and compliant operations, including upstream the reservoir development execution of wells (drilling and production assets and midstream function is responsible for the completions) and major projects. transportation and processing stewardship of our resource activities. portfolio over the life of each field. Performance in 2019 Upstream profitability 2 ($ billion) 58,000km 94.4% 9 new exploration access BP-operated upstream plant successful completion 4.9 2019 (2018 63,000km2) reliability of turnarounds 11.2 (2018 95.7%) (2018 7) 14.3 2018 14.6 5.2 5 5 2.6 2017 5.9 final investment decisions major project start ups million barrels of oil equivalent (2018 9) (2018 6) per day – hydrocarbon production 0.6 2016 (2018 2.5mmboe/d) –0.5 –0.9 2015 1.2 RC profit (loss) before interest and tax Underlying RC profit (loss) before interest and tax★ 50 BP Annual Report and Form 20-F 2019


 
Strategic report Strategy In 2016 we identified a future growth target of 900,000 barrels of oil equivalent per day of production from new major projects by 2021 and Our strategy has three parts and is enabled by: we remain on track to deliver that, having started up 24 of the 35 major Quality execution projects needed to reach this target by the end of 2019. We want to be the best at what we do – everywhere we work. We see our scale and long history in many of the great basins in the This starts with executing our activity safely. In every basin, we will world as a differentiator for BP and believe in the strength of our benchmark against the competition and aim to be the best – whether incumbent positions. We believe we are balanced and flexible – in it be operating facilities reliably and cost effectively, with a focus on terms of geography, hydrocarbon type and geology – and rather than emissions, drilling wells, managing our reservoirs, exploring, building being restricted by a traditional way of working, we have and will projects, or deploying technology. Through the quality of our execution, continue to use creative business models to generate value. scale and infrastructure, we aim to be competitive in every basin, and as a business, get more from a unit of capital than our peers. This describes our strategy and organizational model in 2019. Growing advantaged oil and gas Following BP’s new ambition and aims set out in February 2020, We manage our portfolio through disciplined investment in the world’s we are transforming our business. We plan to provide more great oil and gas basins. information on our future strategy and near-term plans at our We intend to make longer-term investments in natural gas as a lower capital markets day in September 2020. carbon fuel which can complement renewables and provide stable cash flows while contributing to the energy transition to a lower carbon future. We see our gas portfolio being complemented by oil assets that we consider to be advantaged in the energy transition; this is oil we can produce at a lower cost and higher margin, with faster payback Financial performance times and ready access to markets, and maintaining a rigorous focus $ million on carbon. 2019 2018 2017 Sales and other operating revenuesa 54,501 56,399 45,440 We aim to maintain a strong financial frame, allocating capital to build resilience to withstand uncertainty and change in the external RC profit before interest and tax 4,917 14,328 5,221 environment. Ensuring sustainability of our business model and Net (favourable) adverse impact of products will be key to maintaining competitiveness. non-operating items and fair value accounting effects 6,241 222 644 Returns-led growth Underlying RC profit (loss) before We want to grow returns and value, and believe this will come from interest and tax 11,158 14,550 5,865 many sources – expanding and managing our margins, operational Organic capital expenditureb 11,904 12,027 13,763 efficiency, unit cost reduction, and capital efficiency with disciplined BP average realizationsc $ per barrel levels of capital reinvestment. Crude oild 61.56 67.81 51.71 Our major projects are selected and evaluated on a balanced set of Natural gas liquids 18.23 29.42 26.00 investment criteria, which allow for comparison and prioritization, and to Liquids 57.73 64.98 49.92 evaluate for consistency with Paris goals within an appropriate portfolio context. In the Upstream this evaluation includes confirming whether $ per thousand cubic feet we expect them to generate positive returns within a price and demand Natural gas 3.39 3.92 3.19 environment we consider to be consistent with those goals, with a bias US natural gas 1.93 2.43 2.36 towards shorter payback times and a comparison with the operational $ per barrel of oil equivalent emissions profile of our wider Upstream portfolio. Total hydrocarbons 38.00 43.47 35.38 Underpinning our business model and strategy is our transformation $ per barrel of oil equivalent agenda. In 2019 we had more than 1,000 projects across the Upstream Average oil marker pricese $ per barrel aimed at sustainably improving both performance and ways of working Brent 64.21 71.31 54.19 in the Upstream. Since the inception of our transformation programme in 2016, projects are estimated to have delivered an additional West Texas Intermediate 57.03 65.20 50.79 $1.5 billion of cash flow to the business. Average natural gas marker prices $ per million British thermal units Average Henry Hub gas pricef 2.63 3.09 3.11 In addition to our core upstream exploration, development and production activities, the segment is responsible for the midstream pence per therm transportation, storage and processing that support its operations. We Average UK National Balancing e also market and trade natural gas, including liquefied natural gas (LNG), Point gas price 34.70 60.38 44.95 power and natural gas liquids. In 2019 our activities took place in 34 a Includes sales to other segments. countries. b A reconciliation to GAAP information at the group level is provided on page 299. c Realizations are based on sales by consolidated subsidiaries only, which excludes BPX Energy, our onshore oil and gas business in the US Lower 48 equity-accounted entities. states, continues to operate as a separate, asset-focused, onshore d Includes condensate. business. Integration of the BHP assets acquired in 2018 has gone e All traded days average. well, with realized savings from synergies more than double our f Henry Hub First of Month Index. original target for 2019. We optimize and integrate the delivery of our activities across 12 regions, with support provided by global functions in specialist areas of expertise: technology, finance, procurement and supply chain, human resources, information technology and legal. BP Annual Report and Form 20-F 2019 51


 
Market prices Financial results Brent remains an integral marker to the production portfolio, from which Sales and other operating revenues for 2019 decreased compared a significant proportion of production is priced directly or indirectly. with 2018, primarily reflecting lower liquids and gas realizations partially offset by higher production and strong gas marketing and trading revenues. Brent ($/bbl) Replacement cost profit before interest and tax for the segment 120120 included a net non-operating charge of $6,947 million. This primarily relates to impairments arising from disposal transactions. 90 See Financial statements – Note 5 for further information. Fair value accounting effects had a favourable impact of $706 million relative to 60 management’s view of performance. 30 The 2018 result included a net non-operating charge of $183 million, primarily related to impairment charges associated with a number of 0 0 assets, following changes in reserves estimates, the decision to Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec dispose of certain assets and the decision to relinquish a number of 2019 2018 2017 Five-year range leases expiring in the near future, partially offset by reversals of prior year impairment charges. Fair value accounting effects had an adverse Dated Brent prices averaged $64.21 per barrel in 2019 – a 9% decrease impact of $39 million relative to management’s view of performance. from 2018 levels but almost 30% above the 2015-17 average. Prices After adjusting for non-operating items and fair value accounting fluctuated during the year reaching a peak of $71 in April on OPEC+ effects, the underlying replacement cost result before interest and tax supply restraints and the decline in Venezuelan and Iranian output. In was lower in 2019 compared with 2018. This primarily reflected lower the second half of the year, prices fluctuated between $59 in August liquids and gas realizations and higher depreciation, depletion and to $67 in December as OPEC+ restrained supply amid trade tensions. amortization partly offset by strong gas marketing and trading results Global consumption increased by 0.9 million barrels per day (mmb/d) to and higher production. 100.1mmb/d for the year (0.9%) – a slowdown from growth rates seen in the prior two years as trade tensions slowed global macroeconomic Organic capital expenditure was $11.9 billion (2018 $12.0 billion). growth. Global oil production remained flat at 100.5mmb/d, with growth In total, disposal transactions generated $2 billion in proceeds in 2019, from non-OPEC countries offsetting supply restraint and disruptions with a corresponding reduction in net proved reserves of 134mmboe in OPEC countries. The fall in output in Venezuela and Iran due to within our subsidiaries. The major disposal transaction during 2019 was sanctions significantly contributed to the 1.9mmb/d decline in the disposal of our interests in Gulf of Suez oil concessions in Egypt. OPEC output in 2019. At year end, a number of balances associated with assets awaiting the completion of announced disposals were held within the Assets Henry Hub ($/mmBtu) held for sale category in the balance sheet. These related to assets in Alaska and US Lower 48. Impairment charges totalling $6.0 billion were 9 9 recognized in connection with these planned disposals. See Financial statements – Notes 2 and 4 for further information. 6 More information on disposals is provided in Upstream analysis by region on page 303. 3 Outlook for 2020 At the current time the global spread of the coronavirus (COVID-19) 0 0 is causing considerable uncertainty in the market, lowering demand Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec forecasts. This, and the changing dynamic among OPEC+ members, has put downward pressure on prices. Aside from these factors, 2019 2018 2017 Five-year range we had expected price volatility in the near term. Taking these factors into account, we expect the outlook for the year as a whole Henry Hub prices decreased to $2.63/mmBtu in 2019 from to remain challenging. $3.09/mmBtu in 2018 as US associated gas production continued to grow strongly while US gas consumption growth slowed down. The UK National Balancing Point hub price was almost halved from 60.38 pence per therm in 2018, down to 34.70 in 2019, due to a significant increase in European LNG imports and record high storage levels. Asian spot prices declined from $9.76/mmBtu in 2018, down to $5.49/mmBtu on the back of global LNG oversupply, declining LNG demand in Japan and Korea and a slow-down of Chinese LNG imports. 52 BP Annual Report and Form 20-F 2019


 
Strategic report Exploration Proved reserves replacement ratio The group explores for oil and natural gas under a wide range of The proved reserves replacement ratio for the segment in 2019 was licensing, joint arrangement and other contractual agreements. 41% for subsidiaries and equity-accounted entities (2018 69%), 25% We may do this alone or, more frequently, with partners. for subsidiaries alone (2018 66%) and 210% for equity-accounted entities alone (2018 106%). For more information on proved reserves Our exploration and new access teams work to find advantaged barrels replacement for the group see page 308. to build our hopper of options for potential future development. That hopper of options gives us the flexibility to grow the cash and value Upstream proved reserves in the Upstream business while increasing the average quality of (mmboe) the portfolio. Liquids In line with our strategy, we are spending less on exploration and we 4,902 Subsidiaries plan to spend a significant part of our exploration budget on lower-risk, 831 Equity-accounted entities shorter-cycle-time opportunities around our incumbent positions. Gas 4,473 Subsidiaries New access in 2019 854 Equity-accounted entities We gained access to new acreage covering around 58,000km2 in nine countries – Argentina, Australia, Brazil, the Gambia, India, Oman, Peru, the UK North Sea and the US Gulf of Mexico. Estimated net proved reservesa (net of royalties) Exploration success 2019 2018 2017 We participated in 10 potentially commercial discoveries in 2019 – King Liquids million barrels Embayment in the US Gulf of Mexico, Bele-1, Tuk-1, Hi-Hat-1, Boom-1 b and Ginger in Trinidad, Nour North Sinai in Egypt, GTA-1 and Yakaar-2 in Crude oil Senegal and Orca-1 in Mauritania. Subsidiaries 4,367 4,378 4,129 Equity-accounted entitiesc 810 794 674 Exploration and appraisal costs 5,177 5,172 4,803 Total exploration and appraisal costs were $1,587 million (2018 $1,478 Natural gas liquids million), of which $302 million (2018 $180 million) related to lease Subsidiaries 535 576 318 acquisition. Equity-accounted entitiesc 21 15 18 These costs included exploration and appraisal activities, which 556 590 336 were capitalized within intangible fixed assets, and geological and Total liquids geophysical exploration costs, which were charged to income Subsidiariesd 4,902 4,954 4,447 as incurred. Equity-accounted entitiesc 831 808 692 Approximately 6% of exploration and appraisal costs were directed 5,733 5,762 5,139 towards appraisal activity. We participated in 47 gross (21.15 net) Natural gas billion cubic feet exploration and appraisal wells in 11 countries. Of these, 11 were lower Subsidiariese 25,946 30,355 29,263 risk wells around incumbent positions. Equity-accounted entitiesc 4,951 4,559 2,274 Exploration expense 30,897 34,914 31,537 Total hydrocarbons million barrels of oil equivalent Total exploration expense of $964 million (2018 $1,445 million, Subsidiariese 9,375 10,188 9,492 2017 $2,080 million) comprised the write-off of expenses related to Equity-accounted entitiesc 1,685 1,594 1,085 unsuccessful drilling activities, lease expiration or uncertainties around development, as well as geological and geophysical exploration costs 11,060 11,782 10,577 (see Financial statements – Note 8). a Because of rounding, some totals may not agree exactly with the sum of their component parts. Reserves booking b Includes condensate and bitumen. c BP’s share of reserves of equity-accounted entities in the Upstream segment. During 2019 Reserves bookings from new discoveries will depend on the results upstream operations in Argentina, Bolivia, Mexico, Russia and Norway as well as some of of ongoing technical and commercial evaluations, including appraisal our operations in Angola were conducted through equity-accounted entities. d Includes 11 million barrels (12 million barrels at 31 December 2018 and 14 million barrels drilling. The segment’s total hydrocarbon reserves on an oil-equivalent at 31 December 2017) in respect of the 30% non-controlling interest in BP Trinidad & basis, including the segment’s equity-accounted entities at Tobago LLC. 31 December 2019, decreased by 6% (a decrease of 8% for e Includes 1,330 billion cubic feet of natural gas (1,573 billion cubic feet at 31 December 2018 subsidiaries and an increase of 6% for equity-accounted entities) and 1,860 billion cubic feet at 31 December 2017) in respect of the 30% non-controlling interest in BP Trinidad & Tobago LLC. compared with proved reserves at 31 December 2018. BP Annual Report and Form 20-F 2019 53


 
Developments We achieved five major project start-ups in 2019 – in the US Gulf of Mexico, Egypt, Trinidad and the UK North Sea. The Raven project in Egypt is now expected to come onstream at the end of 2020. In addition to these, we continued to progress all 11 of the remaining projects that we expect will deliver our future production growth target announced in 2016. Highlights from a selection of these are: • India – Work on the KG D6 series of projects continued and the first of the three projects is expected to begin production in 2020. • Mauritania and Senegal – In Phase 1 of the Greater Tortue Ahmeyim project, the first deepwater cross-border LNG project is underway following sanction in early 2019 with a ramp up in engineering, procurement and fabrication activity. • UK North Sea – At Vorlich, two wells were drilled during the year and production is expected to start in 2020. Subsidiaries’ development expenditure incurred, excluding midstream activities, was $10.8 billion (2018 $9.9 billion, 2017 $10.7 billion). Angelin, Trinidad & Tobago Operator: BP Includes a new platform and four Partners: BP (70%) and Repsol (30%) wells, with gas flowing to the Project type: LNG Serrette platform hub via a new Major project start-ups in 2019 13‑mile pipeline. Giza and Fayoum, Egypt Constellation, US Gulf of Mexico Includes a deepwater, long-distance Discovered in 2016, the field has tieback to an existing onshore plant been developed as a subsea tieback and eight wells. to Anadarko’s Constitution spar. Operator: BP Operator: Anadarko Partners: BP (82.75%), DEA Deutsche Partners: Anadarko (33.33%), Erdoel AG (17.25%) BP (66.67%) Project type: Conventional gas Project type: Deepwater oil Culzean, UK North Sea Includes a standalone three-bridge- linked platform development with six production wells. Operator: Total Partners: Total (50%), BP (32%), JX Nippon (18%) Project type: High-pressure gas Alligin, UK North Sea Operator: BP Includes two wells, tied-back into Partners: BP (50%) and Shell (50%) the existing Schiehallion and Loyal Project type: Conventional Oil subsea infrastructure. 54 BP Annual Report and Form 20-F 2019


 
Strategic report Production Gas and power marketing Our offshore and onshore oil and natural gas production assets include and trading activities wells, gathering centres, in-field flow lines, processing facilities, storage facilities, offshore platforms, export systems (e.g. transit lines), Our integrated supply and trading function markets and trades our own pipelines and LNG plant facilities. These include production from and third-party natural gas (including LNG), biogas, power and NGLs. conventional and unconventional assets. This provides us with routes into liquid markets for the gas we produce and generates margins and fees from selling physical products and Our principal areas of production are Angola, Argentina, Australia, derivatives to third parties as well as asset optimization and trading. Azerbaijan, Egypt, Oman, Trinidad, the UAE, the UK and the US. With This means we have a single interface with gas trading markets and BP-operated plant reliability increasing from around 86% in 2011 to 94% a single set of trading compliance and risk management processes, in 2019, efficient delivery of turnarounds and strong infill drilling systems and controls. We are continuing to expand our LNG portfolio, performance, we have maintained base decline to 3-5% on average which includes global partnerships with utility companies, gas over the last five years. Our long-term expectation for managed base distributors and national oil and gas companies. decline remains at 3-5% per guidance we have previously given. This activity primarily takes place in North America, Europe and Asia, a Production (net of royalties) and supports group LNG activities, managing market price risk and 2019 2018 2017 creating incremental trading opportunities through the use of commodity derivative contracts. It also enhances margins and Liquids thousand barrels per day generates fee income from sources such as the management of b Crude oil price risk on behalf of third-party customers. Subsidiaries 1,046 1,051 1,064 Our trading financial risk governance framework is described in Equity-accounted entitiesc 127 121 199 Financial statements – Note 29 and the range of contracts used is 1,173 1,172 1,263 described in Glossary – commodity trading contracts on page 337. Natural gas liquids Subsidiaries 104 88 85 Equity-accounted entitiesc 10 8 8 114 96 93 Total liquids Subsidiaries 1,150 1,139 1,149 Equity-accounted entitiesc 138 129 207 1,288 1,268 1,356 Natural gas million cubic feet per day Subsidiaries 7,366 6,900 5,889 Equity-accounted entitiesc 457 474 547 7,823 7,374 6,436 Total hydrocarbons thousand barrels of oil equivalent per day Subsidiaries 2,420 2,328 2,164 Equity-accounted entitiesc 216 211 302 2,637 2,539 2,466 a Because of rounding, some totals may not agree exactly with the sum of their component parts. b Includes condensate and bitumen. c Includes BP’s share of the production of equity-accounted entities in the Upstream segment. Our total hydrocarbon production for the segment in 2019 was 3.8% higher compared with 2018. The increase comprised a 3.9% increase (1.0% for liquids and 6.8% for gas) for subsidiaries and a 2.5% increase (6.4% increase for liquids and 3.6% decrease for gas) for equity- accounted entities compared with 2018. For more information on production, see Oil and gas disclosures for the group on page 308. Underlying production was broadly flat compared to 2018. The group and its equity-accounted entities have numerous long-term sales commitments in their various business activities, all of which are expected to be sourced from supplies available to the group that are not subject to priorities, curtailments or other restrictions. No single contract or group of related contracts is material to the group. BP Annual Report and Form 20-F 2019 55


 
Downstream The Downstream segment has global marketing and manufacturing operations. It is the product and service-led arm of BP and is made up of three businesses. Business model Fuels Lubricants Petrochemicals Includes refineries, logistic Manufactures and markets Manufactures and markets networks and fuels marketing lubricants and related products products that are produced businesses, which together with and services to the automotive, using industry-leading proprietary global oil supply and trading industrial, marine and energy BP technology, and are then used activities make up our integrated markets globally. We add value by others to make consumer fuels value chains (FVCs). We sell through brand, technology and products such as food packaging, refined petroleum products relationships, such as collaboration textiles and building materials. including gasoline, diesel and with original equipment Through our new BP Infinia aviation fuel, and have a significant manufacturing partners. technology, we are working to Downstream profitability presence in the convenience retail reduce plastic waste, helping ($ billion) sector. We also have a growing to enable a stronger circular presence in electric vehicle economy. 6.5 charging with a focused strategy to 2019 6.4 build the fastest, most convenient networks for our customers. 6.9 2018 7.6 Performance in 2019 7.2 2017 7.0 $2.7bn ~1,600 49% 5.2 2016 fuels marketing earnings convenience of lubricant sales 5.6 +2.5% vs 2018 partnership sites were premium grade 7.1 (2018 $2.6bn) (2018 ~1,400) (2018 46%) 2015 7.5 RC profit before interest and tax 94.9% 1.7 12.1 Underlying RC profit before interest and tax★ refining availability million barrels of oil million tonnes of (2018 95.0%) refined per day petrochemicals produced (2018 1.7mmb/d) (2018 11.9mmte) Strategy We aim to run safe and reliable Safe and reliable operations potential, making the businesses This describes our strategy and operations across all our This remains our core value and more resilient to margin volatility. organizational model in 2019. businesses, supported by leading first priority and we continue to Simplification and efficiency Following BP’s new ambition brands and technologies, to drive improvements in personal This remains central to what and aims set out in February deliver high-quality products and and process safety performance. we do to support performance 2020, we are transforming our services that meet our customers’ Profitable marketing growth improvement and make our business. We plan to provide needs. Our strategy is to deliver We invest in higher-returning businesses even more underlying earnings growth and more information on our future fuels marketing and lubricants competitive. build resilient, competitively strategy and near-term plans businesses with growth potential advantaged businesses, and we Transition to a lower carbon at our capital markets day in and reliable cash flows. are working at pace to create low September 2020. and digitally enabled future carbon businesses that can Advantaged manufacturing We are delivering and developing advance the energy transition. We aim to have a competitively new products, offers and business advantaged refining and models that support the transition The execution of our strategy in petrochemicals portfolio to a lower carbon and digitally 2019 has continued to deliver, underpinned by operational enabled future. with underlying replacement cost excellence and to grow earnings profit of $6.4 billion in the year. 56 BP Annual Report and Form 20-F 2019


 
Strategic report Financial performance $ million 2019 2018 2017 Sale of crude oil through spot 59,738 62,484 47,702 and term contracts Marketing, spot and term sales 180,236 195,020 159,475 of refined products Other sales and operating revenues 10,923 13,185 12,676 Sales and operating revenuesa 250,897 270,689 219,853 RC profit before interest and taxb Fuels 4,791 5,261 4,679 Lubricants 1,315 1,065 1,457 Petrochemicals 396 614 1,085 Energy with purpose 6,502 6,940 7,221 Net (favourable) adverse impact of non-operating items and fair value Making more plastics recyclable accounting effects Fuels (32) 381 193 Thinking beyond business as usual, Companies joining the consortium: we’re using our know-how to explore • Packaging and recycling specialist Lubricants (57) 227 22 a breakthrough technology for ALPLA. Petrochemicals 6 13 (469) recycling opaque and difficult-to- • Food, drink and consumer goods (83) 621 (254) recycle PET plastic waste – familiar producers Britvic, Danone and to consumers as coloured bottles and Unilever. Underlying RC profit before b food trays. Our enhanced recycling • Waste management and recycling interest and tax technology, BP Infinia, enables specialist REMONDIS. Fuels 4,759 5,642 4,872 PET to be diverted from landfill or Lubricants 1,258 1,292 1,479 incineration and transformed into Petrochemicals 402 627 616 virgin-quality feedstocks. 6,419 7,561 6,967 We plan to build a $25 million Organic capital expenditurec 2,997 2,781 2,399 pilot plant in the US to prove the technology, which is expected to be operational in late 2020. And a Includes sales to other segments. we’ve now joined forces with b Income from petrochemicals produced at our Gelsenkirchen and Mülheim sites in Germany leading businesses across the is reported in the fuels business. Segment-level overhead expenses are included in the fuels business result. PET packaging value chain to help c A reconciliation to GAAP information at the group level is provided on page 299. accelerate commercialization of the technology. Financial results We believe BP Infinia has the potential to be a game-changer and important Sales and other operating revenues in 2019 were lower than in 2018, stepping stone in enabling a stronger mainly due to lower crude and product prices. circular economy and helping to reduce Replacement cost (RC) profit before interest and tax for 2019 included unmanaged plastic waste. a net non-operating charge of $77 million, which includes environmental provisions. The 2018 result included a net non-operating charge of $716 million, primarily reflecting restructuring costs. In addition, fair value accounting effects had a favourable impact of $160 million, compared with a favourable impact of $95 million in 2018. After adjusting for non-operating items and fair value accounting effects, underlying RC profit before interest and tax in 2019 was $6,419 million. Outlook for 2020 The coronavirus (COVID-19) has already had significant impact on margins and activity at the start of the year. We expect this uncertainty to continue and anticipate lower industry refining margins during 2020. We also anticipate wider North American heavy crude oil discounts and a lower level of turnaround activity than in 2019. BP Annual Report and Form 20-F 2019 57


 
Our fuels business BP refining marker margin ($/bbl) Our fuels strategy focuses primarily on fuels value chains (FVCs). This includes an advantaged refining portfolio through operating reliability 32 and efficiency, location advantage and feedstock flexibility, as well as 24 commercial optimization opportunities. We believe that having a quality refining portfolio connected to strong marketing positions is core to our 16 integrated FVC businesses as this provides optimization opportunities in highly competitive markets. 8 Our fuels marketing business comprises retail, business-to-business 0 and aviation fuels. It is a material part of Downstream with a strong Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec track record of growth. We have an advantaged portfolio of assets 2019 2018 2017 Five-year range with good growth potential, attractive returns and reliable cash flows. We continue to grow our fuels marketing business through our differentiated marketing offers and strategic convenience partnerships. Refining We also partner with leading retailers, creating distinctive retail At 31 December 2019 we owned or had a share in 10 refineriesab offers that aim to deliver good returns and reliable profit growth producing refined petroleum products that we supply to retail and and cash generation. commercial customers. For a summary of our interests in refineries We have also grown our presence in electric vehicle charging in recent and average daily crude distillation capacities see page 307. years, with a focus on the key markets of China, UK and Germany, Underlying growth in our refining business is underpinned by our where we aim to build the fastest, most convenient networks for multi-year business improvement plans, which comprise globally electric vehicle customers. consistent programmes focused on operating reliability and efficiency, Underlying RC profit before interest and tax for our fuels business advantaged feedstocks and commercial optimization. Operating was lower compared with 2018, with strong refining operational reliability is a core foundation of our refining business and in 2019 performance, which led to a second consecutive year of record refining operations remained strong, with refining availability at BP-operated throughput and higher commercial optimization, despite high levels refineries of 94.9% (2018 95%) and refinery utilization rates across of turnaround activity. This was more than offset, however, by lower our refining portfolio at 91% (2018 91%). As a result, we achieved refining margins, including significantly narrower heavy crude oil record levels of refining throughput for a second consecutive year, discounts, which together represented one of the weakest refining despite high levels of turnaround activity. environments across our portfolio in the last 10 years. In fuels marketing Our refinery portfolio – along with our supply capability – enables us to we saw volumes and margins grow year on year, offset by adverse process advantaged crudes. For example, in the US, our three refineries foreign exchange effects. The full year result also reflects a higher all have location-advantaged access to Canadian crudes which are contribution from supply and trading. typically cheaper than other crudes. Our commercial optimization  programme aims to maximize value from our refineries by capturing Refining marker margin opportunities in every step of the value chain, from crude selection We track the refining margin environment using a global refining through to yield optimization and utilization improvements. marker margin (RMM). Refining margins are a measure of the difference During 2019 we also continued to scale up co-processing at our between the price a refinery pays for its inputs (crude oil) and the refineries, growing the volume of lower carbon bio-feedstock market price of its products. Although refineries produce a variety of processed. petroleum products, we track the margin environment using a simplified indicator that reflects the margins achieved on gasoline and diesel only. The refining result was lower in 2019 compared with 2018, with strong The RMM may not be representative of the margin achieved by BP in operational performance and higher commercial optimization, which any period because of BP’s particular refinery configurations and crude was more than offset by a significantly weaker refining environment, and product slates. In addition, the RMM does not include estimates of primarily driven by narrower heavy crude oil discounts. energy or other variable costs. thousand barrels per day $ per barrel 2019 2018 2017 Region Crude marker 2019 2018 2017 Refinery throughputsac US North West Alaska 17.6 16.2 18.8 US 737 703 713 North Slope Europe 787 781 773 US Mid West West Texas 16.0 16.0 16.9 Rest of the world 225 241 216 Intermediate Total 1,749 1,725 1,702 Northwest Brent 11.1 11.1 11.7 % Europe Refining availability 94.9 95.0 95.2 Mediterranean Azeri Light 9.1 9.8 10.4 Australia Brent 11.1 11.5 12.9 a This does not include BP’s interest in Pan American Energy Group. BP RMM 13.2 13.1 14.1 b On 31 December we completed the sale of our interest in the German Bayernoil refinery. c Refinery throughputs reflect crude oil and other feedstock volumes. The global RMM averaged $13.2/bbl in 2019, similar to the level in 2018 ($13.1/bbl), with weaker demand balanced by reduced supply due to an increased level of refinery maintenance over the year. In addition refining margins across our portfolio were significantly impacted by other crude and product differentials outside of the global RMM, primarily due to narrower heavy crude oil discounts. 58 BP Annual Report and Form 20-F 2019


 
Strategic report Fuels marketing and logistics US, while expanding into major growth markets that offer long-term competitive advantages, such as Asia, Africa and Latin America. Across our fuels marketing businesses, we operate an advantaged infrastructure and logistics network that includes pipelines, storage In 2019 we continued to develop new offers and solutions to advance terminals and tankers for road and rail. We seek to drive excellence the energy transition and to meet the changing needs of our customers. in operational and transactional processes and deliver compelling Through our collaboration with Neste, a leading producer of renewable customer offers in the various markets where we operate. Through products, we began supplying aviation fuel made from sustainable materials our retail business, we supply fuel and convenience retail services to to a number of airports in Sweden. We also expanded our partnership with consumers through company-owned and franchised retail sites, as China National Aviation Fuel Group, signing a joint venture agreement to well as other channels, including dealers and jobbers. We also supply operate a general aviation fuel and services business in southwest China. commercial customers in the transport and industrial sectors. The joint venture intends to support the growth and development of China’s general aviation sector. Retail is the most material part of our fuels marketing business and a significant source of earnings growth through our strong market Oil supply and trading positions, brands and distinctive customer offers. This is underpinned by the strength of our retail convenience partnerships, technology such Our integrated supply and trading function is responsible for delivering as our advanced fuels and use of digital technology, as well as our value across our crude and oil products supply chain. This enables our customer relationships. This differentiation enables our growth in downstream businesses to maintain a single interface with oil trading existing markets and supports our growth plans in new material markets and operate with a single set of trading compliance and risk markets such as Mexico, India, Indonesia and China. management processes, systems and controls. It principally achieves this objective in two ways: During 2019 we continued to expand our convenience partnership model, which is now in around 1,600 sites across our network, First, it seeks to identify the best markets and prices for our crude oil, including our differentiated REWE to Go® offer, now in around 550 sites source optimal raw materials for our refineries and provide competitive across Germany. supply for our marketing businesses. We will often sell our own crude and purchase alternative crudes from third parties for our refineries We also made significant progress towards our growth ambition in new where this will generate incremental margin. markets, most notably in Mexico where we now have more than 520 BP-branded retail sites, with volumes more than doubling in 2019, and Second, it aims to create and capture trading opportunities by entering in December we signed an agreement with Reliance Industries Limited into a full range of exchange-traded commodity derivatives and to form a fuels retail and aviation joint venture across India, providing over-the-counter spot and term contracts. In combination with its rights to access to one of the world’s largest and fastest growing fuels markets. access storage and transportation capacity, it also seeks to access advantageous price differences between locations, time periods, and We have a clear strategy and focused activity set for the transition to a markets. lower carbon and digitally enabled future. We are actively implementing and developing new offers and business models centred around digital The function has trading offices in Europe, North America and Asia. Our and advanced mobility trends. presence in the more actively traded regions of the global oil markets supports the overall understanding of the supply and demand forces In 2019 we signed an agreement with DiDi, the world’s leading mobile across these markets. transportation platform, to build an electric vehicle charging network in China, the world’s largest market for electric vehicles. In addition, in the Our trading financial risk governance framework is described in UK, BP Chargemaster began installing 150kW ultra-fast electric vehicle Financial statements – Note 29 and the range of contracts used is chargers at our BP retail sites, with plans to build a national network of described in Glossary – commodity trading contracts on page 337. high-power charging – one which will closely replicate the current thousand barrels per day fuelling experience. These advances support BP’s strategy to create the Sales volume 2019 2018 2017 fastest and most convenient electrification networks in these markets. Marketing salesa 2,727 2,736 2,799 BPme is our global customer engagement platform, which is also fast Trading/supply salesb 3,268 3,194 3,149 becoming the portal to a suite of offers and services that will transform Total refined product sales 5,995 5,930 5,948 our retail offer and deliver an enhanced and personalized customer Crude oilc 2,713 2,624 2,616 experience. The platform provides an easy, fast and convenient way for Total 8,708 8,554 8,564 customers to pay for fuel from their car, and for customers in the UK, Australia and the US, it also incorporates our new loyalty programme a Marketing sales include branded and unbranded sales of refined fuel products and lubricants BPme Rewards. to business-to-business and business-to-consumer customers, including service station dealers, jobbers, airlines, small and large resellers such as hypermarkets, and the military. Fuels marketing earnings in 2019 were similar to 2018, with volume b Trading/supply sales are fuel sales to large unbranded resellers and other oil companies. and margin growth offset by adverse foreign exchange effects. c Crude oil sales relate to transactions executed by our integrated supply and trading function, primarily for optimizing crude oil supplies to our refineries and in other trading. 2019 includes Aviation 118 thousand barrels per day relating to revenues reported by the Upstream segment. Our Air BP business is one of the world’s largest suppliers of aviation fuels Number of BP-branded retail sites and services, selling fuel to commercial airlines, the military and general Retail sitesd 2019 2018 2017 aviation customers. Air BP supplies around 6.6 billion gallons of aviation US 7,200 7,200 7,200 fuel a year at over 800 locations in more than 55 countries. Air BP’s Europe 8,200 8,200 8,100 services include the design, build and operation of fuelling facilities, technical consultancy and training, supporting customers to meet their Rest of world 3,500 3,300 3,000 lower carbon goals and digital fuelling solutions to increase efficiency and Total 18,900 18,700 18,300 reduce risk. Our Air BP business is differentiated through its strong market positions, brand strength, partnerships, technology and customer d Reported to the nearest 100. Includes sites not operated by BP but instead operated by dealers, relationships. Our strategy is to maintain a strong presence in our core jobbers, franchisees or brand licensees under a BP brand. These may move to or from the BP brand as their fuel supply or brand licence agreements expire and are renegotiated in the normal geographies of Australia, New Zealand, Europe, the Middle East and the course of business. Retail sites are primarily branded BP, ARCO, Amoco and Aral. BP Annual Report and Form 20-F 2019 59


 
Our lubricants business Our petrochemicals business We manufacture and market lubricants and related products and Our petrochemicals business manufactures and markets three main services to the automotive, industrial, marine and energy markets product lines: purified terephthalic acid (PTA), paraxylene (PX) and across the world. Our key brands are Castrol, BP and Aral. Castrol is a acetic acid. These have a large range of uses including polyester fibre, recognized brand worldwide that we believe provides us with significant food packaging and building materials. We also produce a number of competitive advantage. We are one of the largest purchasers of base other specialty petrochemicals products. In addition, we manufacture oil in the market but have chosen not to produce it or manufacture olefins and derivatives at Gelsenkirchen and solvents at Mülheim in additives at scale. Our participation choices in the value chain are Germany, the income from which is reported in our fuels business. focused on areas where we can leverage competitive differentiation and strength. Along with the assets we own and operate, we have also invested in a number of joint arrangements in Asia, where our partners are leading Our strategy is to focus on our premium lubricants and growth companies in their domestic market. markets while leveraging our strong brands, technology and customer relationships – all of which are sources of differentiation for our Our strategy is to grow our underlying earnings and ensure the business business. With 65% of profit generated from growth markets and is resilient to margin volatility, positioning ourselves to capture growth 49% of our sales from premium grade lubricants, we have a strong and investment opportunities in an attractive and growing market. base for further expansion and sustained profit growth. We do this through the execution of our business improvement In 2019 we strengthened our strategic relationship with Groupe programmes which include operational efficiency, deploying our Renault, extending the Renault Sport Racing Formula 1 sponsorship industry-leading proprietary technology, commercial optimization and through to the end of 2024 and taking over as global service fill engine competitive feedstock sourcing. We have also grown our third-party oil lubricants partner. We also announced a partnership with Bosch to technology licensing income to create additional value. run jointly branded workshops in China and the US. We aim to create material, industry leading business models in We have a robust pipeline of technology development through which sustainable chemicals and plastics circularity and in 2019 we announced we seek to respond to engine developments and evolving consumer the development of BP Infinia, an enhanced recycling technology, needs and preferences, including lower carbon options. We apply capable of processing currently unrecyclable PET plastic waste. We also our expertise to create differentiated, premium lubricants and high- formed a consortium with a number of leading companies operating performance fluids for customers in on-road, off-road, sea and industrial across the polyester packaging value chain which aims to accelerate the applications. commercialization of BP Infinia technology and to develop a new circular approach to dealing with PET plastic waste. In 2020 BP plans to build a With the onset of electrification, demand for EV-fluids is expected to pilot plant in the US to prove the technology, before progressing to grow. These include transmission fluids, battery coolants and greases. full-scale commercialization. We believe these are important steps in Castrol is investing in and partnering with original equipment enabling a stronger circular economy in the PET plastics industry, manufacturers (OEMs) to develop advantaged EV-fluid technologies, underpinned by our advantaged technology and strategic partnerships. and in 2019 we announced a new partnership with the Panasonic Jaguar Racing Formula E Team for season 2019/20. Using Castrol’s In addition, we signed an agreement with Virent and Johnson Matthey EV-fluids allows Jaguar and Castrol to collaborate and further develop to further advance the development of bio-paraxylene, a key raw advanced technology and EV-fluids for both race and road cars material for the production of renewable polyester. of the future. As part of our growth agenda we expanded capacity at our joint venture The lubricants business delivered an underlying RC profit before interest acetyls site in South Korea and signed an agreement with Zhejiang and tax that was similar to 2018, reflecting year-on-year unit margin Petroleum and Chemical Corporation (ZPCC) to explore the creation of a improvement, offset by adverse foreign exchange rate movements. new, world-scale joint venture to build and operate a 1 million tonne per annum acetic acid plant in Zhejiang Province, China. In December 2018 we signed a heads of agreement with SOCAR to evaluate the creation of a joint venture to build and operate a world- scale petrochemicals complex in Turkey. This advantaged facility would be the largest integrated aromatics and PTA complex in the western hemisphere. Significant progress has been made in defining the project with a final investment decision expected towards the end of 2020. In 2019 the petrochemicals business delivered an underlying RC profit before interest and tax that was lower compared with 2018, reflecting a significantly weaker margin environment across both aromatics and acetyls. Our petrochemicals production of 12.1 million tonnes in 2019 was higher than in 2018 (2018 11.9mmte). 60 BP Annual Report and Form 20-F 2019


 
Strategic report Rosneft Rosneft is the largest oil company in Russia, with a strong portfolio of current and future opportunities. Russia has one of the largest and lowest-cost hydrocarbon resource bases in the world and its resources play an important role in long-term energy supply to the global economy. Rosneft shareholding About Rosneft Rosneft is the largest oil company Rosneft is the leading Russian Rosneft’s largest shareholder in Russia and one of the largest refining company based on with 50% plus one share publicly traded oil companies in throughput. It owns and operates is Rosneftegaz JSC the world based on hydrocarbon 13 refineries in Russia, and holds (Rosneftegaz), which is production volume. Rosneft stakes in three refineries in wholly owned by the has a major resource base of Germany, one in India and Russian government. hydrocarbons onshore and one in Belarus. BP has a 19.75% shareholding offshore, with assets in all of Downstream operations include and two directors on the a Russia’s key hydrocarbon ROSNEFTEGAZ JSC 50.00% jet fuel, bunkering, bitumen and 11-person board. regions and abroad. BP 19.75% lubricants. Rosneft also owns and Bob Dudley and Guillermo QH Oil operates Rosneft-branded retail Investments LLC 18.93% Quintero are currently elected service stations, as well as to those roles. Others 11.32% BP-branded sites operating a 50% plus one share. under a licensing agreement. 2019 summary • BP received $785 million, net of withholding taxes, (2018 $620 million), representing its share of BP share of Rosneft dividend Rosneft’s dividends. This dividend represents 50% of IFRS net profit, and is paid twice a year in line ($ millions)b with the dividend policy adopted in 2017. • BP remains committed to our strategic investment in Rosneft, while complying with all relevant sanctions. 2019 451 334 785 2018 420 200 620 2017 124 190 314 8,281 18 19.75% 2016 332 million barrels of oil equivalent refineries – owned BP’s shareholding in Rosneft – BP share of Rosneft or hold a stake in 2015 271 proved reserves (2018 18) Interim (2018 8,163mmboe) Annual for previous year, less interim b Net of withholding taxes. 1.1 2.24 >3,000 million barrels of oil equivalent million barrels of oil retail service stations per day – BP share of Rosneft refined per day in Russia and abroad hydrocarbon production (2018 2.33mmb/d) (2018 >2,960) (2018 1.1mmboe/d) BP Annual Report and Form 20-F 2019 61


 
Co-operation with Rosneft $ million Our strategy is to work in co-operation with Rosneft to increase total 2019 2018 2017 shareholder return. We also partner with Rosneft in building a material Profit before interest and taxa b 2,306 2,288 923 business in addition to our shareholding. Inventory holding (gains) losses 10 (67) (87) Joint ventures RC profit before interest and tax 2,316 2,221 836 BP partners with Rosneft to generate incremental value from joint Net charge (credit) for non-operating items 103 95 – ventures and associates that are separate from BP’s core 19.75% Underlying RC profit before interest and tax 2,419 2,316 836 shareholding. Average oil marker prices $ per barrel • BP holds a 49% interest in Kharampurneftegaz LLC (Kharampur), Urals (Northwest Europe – CIF) 62.96 69.89 52.84 together with Rosneft (51%), which develops resources within the Kharampurskoe and Festivalnoye licence areas in Yamalo-Nenets a BP’s share of Rosneft’s earnings after finance costs, taxation and non-controlling interests in northern Russia. BP’s interest is reported through the is included in the BP group income statement within profit before interest and taxation. Upstream segment. b Includes $(11) million (2018 $(5) million, 2017 $(2) million) of foreign exchange (gain)/losses arising on the dividend received. • BP holds a 20% interest in Taas-Yuryakh Neftegazodobycha (Taas), together with Rosneft (50.1%) and a consortium comprising Oil India Market price Limited, Indian Oil Corporation Limited and Bharat PetroResources The price of Urals delivered in North West Europe (Rotterdam) averaged Limited (29.9%). In 2019 BP received dividends from Taas of $62.96/bbl in 2019. The discount to dated Brent was $1.25/bbl in line $157 million, net of withholding taxes (2018 $48 million). BP’s with 2018 ($1.42/bbl). interest in Taas is reported through the Upstream segment. Financial results • Rosneft (51%) and BP (49%) jointly own Yermak Neftegaz LLC Replacement cost (RC) profit before interest and tax for the segment (Yermak). The joint venture conducts onshore exploration in the included a non-operating charge of $103 million for 2019 and $95 million West Siberian and Yenisei-Khatanga basins. In April the right to for 2018. explore two additional oil and gas licence areas located in Sakha (Yakutia) was transferred to a wholly owned subsidiary of Yermak. After adjusting for non-operating items, the increase in the underlying BP’s interest in Yermak is reported through the Upstream segment. RC profit before interest and tax compared with 2018 primarily reflected • Rosneft and BP are in the process of creating a joint venture favourable foreign exchange and certain one-off items offset by lower investment fund (VIF). This supports BP and Rosneft’s agenda to oil prices. See also Financial statements – Notes 17 and 32 for other accelerate new innovations in the oil and gas industry. foreign exchange effects. Collaboration Balance sheet BP collaborates on the provision of technical, HSE and non-technical $ million services on a contractual basis to improve functional asset performance. As at 31 December 2019 2018 2017 BP and Rosneft have developed an innovative cable-less onshore Investments in associatesc 12,927 10,074 10,059 seismic acquisition system and are in discussions about further collaboration. Production and reserves Social projects 2019 2018 2017 BP together with Rosneft sponsor the Petroleum Engineering Masters Production (net of royalties) (BP share) degree programme led by the Kazan Federal University (Russia) and Liquids (mb/d) Imperial College London (UK), providing financial support, mentoring Crude oild 920 919 900 and lecturing for the students. Natural gas liquids 3 4 4 Also, with Rosneft, BP sponsors the Britten-Shostakovich Festival Total liquids 923 923 904 Orchestra which brings together the finest young talents from British Natural gas (mmcf/d) 1,279 1,285 1,308 and Russian music schools, with an average age of 22. Performances in 2019 took place in both the UK and Russia. Total hydrocarbons (mboe/d) 1,144 1,144 1,129 Estimated net proved reserves Rosneft segment performance (net of royalties) (BP share) Liquids (million barrels) BP’s investment in Rosneft is managed and reported as a separate Crude oild 5,604 5,539 5,402 segment under IFRS. The segment result includes equity-accounted earnings, representing BP’s 19.75% share of the profit or loss of Natural gas liquids 141 154 131 Rosneft, as adjusted for the accounting required under IFRS relating Total liquidse 5,745 5,693 5,533 to BP’s purchase of its interest in Rosneft and the amortization of Natural gas (billion cubic feet)f 14,705 14,325 13,522 the deferred gain relating to the disposal of BP’s interest in TNK-BP. Total hydrocarbons (mmboe) 8,281 8,163 7,864 See Financial statements – Note 17 for further information. c See Financial statements – Note 17 for further information. d Includes condensate. e Includes 357mmb (356mmb at 31 December 2018; 338mmb at 31 December 2017) for the 6.21% non-controlling interest (6.32% at 31 December 2018; 6.31% at 31 December 2017) in Rosneft held assets in Russia including 26 million barrels (24mmb at 31 December 2018; 6mmb at 31 December 2017) held through BP’s interests in Russia other than Rosneft. f Includes 1,430bcf (1,211bcf at 31 December 2018; 306bcf at 31 December 2017) for the 9.72% non-controlling interest (8.60% at 31 December 2018; 2.30% at 31 December 2017) in Rosneft held assets in Russia including 569bcf (480bcf at 31 December 2018; 2bcf at 31 December 2017) held through BP’s interests in Russia other than Rosneft. 62 BP Annual Report and Form 20-F 2019


 
Strategic report Other businesses and corporate Currently comprises our Alternative Energy business, shipping, treasury, BP Ventures and corporate activities, including centralized functions and any residual costs of the Gulf of Mexico oil spill. Alternative Energy Financial performance $ million 2019 2018 2017 Sales and other operating revenuesa 1,788 1,678 1,469 BP Ventures RC profit (loss) before interest and tax Gulf of Mexico oil spill (319) (714) (2,687) Other (2,452) (2,807) (1,758) RC profit (loss) before interest and tax (2,771) (3,521) (4,445) Shipping Net adverse impact of non-operating items Gulf of Mexico oil spill 319 714 2,687 Other 1,172 1,249 160 Net charge (credit) for non-operating items 1,491 1,963 2,847 Underlying RC profit (loss) before interest and tax (1,280) (1,558) (1,598) Treasury Organic capital expenditureb 337 332 339 a Includes sales to other segments. b A reconciliation to GAAP information at the group level is provided on page 299. Insurance The replacement cost (RC) loss before interest Alternative Energy and tax for the year ended 31 December 2019 was $2,771 million (2018 $3,521 million). The Renewables are the fastest-growing energy 2019 result included a net charge for non- source, potentially contributing half of the operating items of $1,491 million, primarily growth in global energy, with its share in relating to the reclassification of $877 million primary energy increasing from 4% in 2019 of accumulated foreign exchange losses from to around 15% by 2040a. reserves to the income statement, which In BP, we have an established and growing arose as a result of the contribution of our alternative energy business, with a significant Brazilian biofuels business to BP Bunge portfolio across renewable fuels, power Bioenergia, as well as Gulf of Mexico oil spill and products. And we are developing new related costs of $319 million (non-operating business models in areas such as low carbon items in 2018 $1,963 million). power and digital energy. After adjusting for these non-operating items, a BP Energy Outlook 2019: ‘evolving transition’ scenario. the underlying RC loss before interest and tax for the year ended 31 December 2019 was $1,280 million (2018 $1,558 million). This Our ‘reduce, improve, create’ framework result mainly reflected improved shipping We have set targets and aims to reduce performance. emissions in our operations, improve our products to help customers reduce Outlook their emissions and create low carbon businesses – see page 41. Other businesses and corporate annual charges, excluding non-operating items, are expected to be around $1.4 billion in 2020. BP Annual Report and Form 20-F 2019 63


 
Our Alternative Energy portfolio We formed BP Bunge Bioenergia, a joint venture that We increased our stake in Lightsource BP to combines BP and Bunge’s Brazilian bioenergy and become a 50:50 joint venture. Lightsource BP aims Biofuels sugarcane ethanol businesses. The venture operates Solar to develop 10GW of solar projects by 2023, see 11 biofuels sites and has a production capacity of energy page 73 for more information. 32 million metric tonnes of sugarcane a year (see Going big in biofuels). BP Bunge Bioenergia produces renewable energy Butamax® our 50:50 joint venture with DuPont from its biofuels manufacturing sites. The joint produces bio-isobutanol from corn. The energy-rich Biopower venture is capable of exporting 1,200GW hours of Renewable bioproduct has a variety of uses, such as in paints biopower to the national grid. products and lubricants. We operate nine sites in six US states and hold an We are developing a number of digital platforms to interest in another facility in Hawaii. Together they connect consumers with local, low carbon electricity Wind have a net generating capacity of 926MW. Low carbon to power their homes and transport, and are energy power and exploring opportunities to create value at the digital energy interplay between gas and renewable energy. Energy with purpose Investing in energy management To help grow our digital energy portfolio, we have invested in Grid Edge, an energy management company. Its technology helps customers predict, control and optimize a building’s energy profile. • Grid Edge can help customers lower carbon emissions by 10-15% on average. The cloud-based software can anticipate a building’s energy demand using data such as weather forecasts and expected occupancy. • This allows building managers to adapt energy use and take advantage of periods of high renewable power generation. • Customers can also use the building’s flexibility in energy demand and generation like a giant battery. “This investment is Going big in biofuels Brazil is the world’s second-largest “With a shared market for ethanol as a transportation in support of our BP has formed a 50:50 joint commitment to safety fuel, with around 75% of the country’s venture in Brazil with leading strategy to create vehicles able to run on it. and sustainability, agri-commodities company Bunge an ecosystem of Limited. The deal expands our • Demand for ethanol is growing bringing together our distinctive, digitally existing biofuels business by more rapidly in the country. In 2019 assets and expertise enabled, low carbon than 50%. demand increased 10% versus allows us to improve 2018 and is set to increase up to • BP Bunge Bioenergia is now businesses for 55% by 2030. performance, develop the second-largest operator by commercial and effective crushing capacity in the options for growth and industrial customers.” country’s bioethanol market. generate real value.” Nick Wayth Dev Sanyal Chief development officer, Chief executive, Alternative Energy Alternative Energy 64 BP Annual Report and Form 20-F 2019


 
Strategic report BP Ventures The energy transition is driving the need for rapid change in technology and ways of working, and the imperative for innovation has never been more urgent. Venturing plays a key role in BP, helping meet the world’s need for more energy, while at the same time reducing carbon emissions. We aim to do this by leveraging our investments across a portfolio of relevant technology businesses that can help BP transition to a lower carbon economy. BP Ventures is set up to grow new energy businesses in the Upstream, Downstream, Alternative Energy and in five areas: advanced mobility, power and storage, carbon management, bio and low carbon products, and digital transformation. We have invested over $650 million dollars Energy with purpose BP invests in forest since 2007 in more than 40 companies with technologies and carbon offsets leader innovations that we believe will materially impact BP and global BP Ventures’ investment in Finite energy systems. Resources is helping to grow its We invested $30 million into Calysta in 2019. This alternative protein business, supporting sustainable producer uses natural gas to produce protein for fish, livestock and pet forest management practices. feeds, see page 28. We also invested a further $30 million into Fulcrum The funding will help Finite Carbon, Bioenergy®, a pioneer in making low carbon, low-cost, transportation “The conservation and a subsidiary of Finite Resources, fuels from one of the most abundant resources – household garbage. scale up its voluntary carbon offsets And we made two investments in energy management companies – restoration of forests programme for businesses. Grid Edge and R&B – totalling $5.4 million. is vital to combatting The programme aims to connect climate change. We look landowners to businesses that want BP Launchpad to purchase forest carbon offsets, with forward to supporting corporations paying a fee per tonne of BP’s scale-up factory, BP Launchpad, became fully operational in 2019. the team’s expansion carbon stored in the forest. The initiative aims to quickly create multiple businesses valued over into the voluntary $1 billion that can help tackle the dual energy challenge. Launchpad is This investment is part of our aim to support the technologies and focused on building world-scale businesses that specialize in digital and carbon market.” innovations we believe will benefit BP low carbon technologies and the circular economy, with potential for and global energy systems during the these businesses to become future BP business units. Nacho Gimenez Managing director, transition to a low carbon economy. Examples of growth businesses in the Launchpad portfolio: BP Ventures • Lytt: a subsurface analytics business, providing fibre optic development, deployment and operational services, including acoustic and temperature sensing. • STRYDE: a land seismic receiver technology business. STRYDE’s technology breaks the cost/time trade-off to generate high-quality Treasury seismic images of the subsurface. • Fotech: a technology company focused on developing and deploying Treasury manages the financing of the group centrally, with advanced fibre optic sensing hardware. Launchpad acquired Fotech in responsibility for managing the group’s debt profile, share buyback late 2019; BP Ventures has been a minority investor since 2013. programmes and dividend payments, while seeking to ensure that liquidity is sufficient to meet group requirements. It also manages key financial risks including interest rate, foreign exchange, pension funding and investment, and financial institution credit risk. From locations in Shipping the UK, US and Singapore, treasury provides the interface between BP and the international financial markets and supports the financing of BP’s shipping and chartering activities help to ensure the safe and efficient BP’s projects around the world. Treasury holds foreign exchange and transportation of our hydrocarbons using a combination of BP-operated, interest rate products in the financial markets to hedge group time-chartered and spot-chartered vessels. At 31 December 2019, BP had exposures. In addition, treasury generates incremental value through 35 BP-operated and 40 time-chartered vessels for our international oil and optimizing and managing cash flows and the short-term investment of LNG shipping operations. All vessels conducting BP shipping activities are operational cash balances. For more information, see Financial required to meet BP approved standards. statements – Note 29. Insurance The group generally restricts its purchase of insurance to situations where this is required for legal or contractual reasons. Some risks are insured with third parties and reinsured by group insurance companies. This approach is reviewed on a regular basis or if specific circumstances require such a review. BP Annual Report and Form 20-F 2019 65


 
Section 172 statement How the board complied with its Section 172 duty. 3. Monitoring decisions and actions of the CEO and the performance of BP: including implementation of, and performance The board welcomes the new reporting requirement as an opportunity against, the strategy and the plan; and the exercise of authority to explain how dialogue with stakeholders has informed and helped to delegated to the CEO. The board satisfies itself that emerging and shape its decisions. For example the board’s engagement with Climate principal risks to BP are identified and understood, systems of risk Action 100+ in the lead up to the 2019 AGM. management, compliance and controls are in place to mitigate such Following the announcement of Bernard Looney’s appointment as chief risks and expected conduct of BP’s business and its employees is executive officer (CEO) in October 2019, the board engaged with Bernard reflected in a set of values established by the CEO. and the leadership team to develop the company’s new purpose, net 4. Succession: ensuring systems and processes are in place for  zero ambition and aims. This was supported by extensive dialogue with succession, evaluation and compensation of the CEO, executive and investors, governments, employees and other stakeholders. non-executive directors and key members of senior management. Through working collaboratively with management and listening to Those delegated to by the directors to take decisions have access to feedback from the company’s many stakeholders, the board believes functional assurance support to identify matters which may have an that BP is well positioned to respond to increasing uncertainty. We are impact on a proposed decision. embarking on a period of change to deliver on our purpose to reimagine energy for people and our planet, while reinventing BP so that we can succeed over the long term. This means continuing to deliver our The Companies Act 2006 (CA2006) sets out a number of general investor proposition, while responding to society’s expectations. duties which directors owe to the company. New legislation has Delegation of authority been introduced to help shareholders better understand how directors have discharged their duty to promote the success of The board believes governance of BP is best achieved by delegation the company, while having regard to the matters set out in section of its authority for the executive management of BP to the CEO, subject 172(1)(a) to (f) of the CA2006 (s172 factors). In 2019 the directors to defined limits and monitoring by the board. The board routinely continued to exercise all their duties, while having regard to these monitors the delegation of authority, ensuring that it is regularly and other factors as they reviewed and considered proposals from updated, while retaining ultimate responsibility. senior management and governed the company on behalf of its The board has adopted a long-standing corporate governance shareholders through the BP board. framework, which includes principles outlining: • The board’s relationship with shareholders and executive management. Further information as to how the board has had regard to the s172 factors: • The conduct of board affairs and the tasks and requirements for board committees. Section 172 factor Key examples Page • The board’s focus on activities that enable it to promote shareholders’ Consequence of any New ambition and purpose 6 interests, including development of strategy, monitoring of executive decision in the long term Investment process 19 action and ongoing board and executive management succession. Strategy 16 Interests of employees Engagement, below and page 88 The framework is being reviewed to ensure it is best suited to support Sustainability ‘Our people’ 47 the evolving strategy and BP’s new purpose, ambition and aims. Parental leave 89 Alignment of ACB and option 34, 41, 44 The current framework covers the following principal areas: to carbon offset 1. Company purpose: pursuing BP’s purpose and accountability to Fostering business Engagement, below and page 88 shareholders for the company’s actions. This means focusing relationships with suppliers, primarily on strategic issues, while having regard to economic, customers and others political and social issues and other relevant external matters which Impact of operations New ambition and purpose 6 may influence or affect the development of BP’s business and on the community See our support for CA100+ 6 exemplify through the board principles (including the executive and the environment resolution and response limitations), its expectations for the conduct of the BP business Engagement, below and pages 40-45, 48 and its employees. Maintaining high standard Governance, pages 81-99, 101 of business conduct Sustainability 40-49 2. Strategy: responsibility for establishing and reviewing the long-term Acting fairly between Stakeholder engagement, 88 strategy and the annual plan (the plan) for BP, based on proposals members below and page made by the CEO for achieving BP’s purpose. Balanced long-term decision making 67 Investor proposition 18 How we engage and foster strong relationships with some of our key stakeholders Customers Employees Government Investors and Partners and Society and regulators shareholders suppliers • Original equipment • Pulse survey. • Country economic • Annual engagement • Industry events and • Social media. manufacturer • Town halls. impact reports. programme. memberships. • Community workshops collaborations. • Helios awards. • Multi-stakeholder • Quarterly and • Supplier workshops and and training. • Global customer groups. year‑end results. training. • Social investment brand tracking. • Government lobbying. • Annual general meeting. • University collaborations. programmes. • Customer events. See bp.com/ See Sustainability See bp.com/ See Corporate See bp.com/technology. See Sustainability sustainabilityreport. on page 47 and tradeassociations and governance on on page 39 Corporate governance bp.com/tax. page 88. and bp.com/ on page 88. sustainabilityreport. 66 BP Annual Report and Form 20-F 2019


 
Strategic report How our board considers stakeholders in decision making Strategy Performance People Governance At every board meeting the directors In order to become a net zero company by BP’s workforce is key to its success. The board, led by the chairman, believes review, with the management team, the 2050 or sooner, BP must perform as we Our people help us maintain our strong that strong governance is essential to progress against strategic priorities and the transform. reputation for high standards of business the success of the company. At the end changing shape of the business portfolio. conduct are fundamental in delivering our of 2018, it participated in an external This collaborative approach by the board, The board regularly reviews and monitors purpose to reimagine energy. evaluation of its performance. The board together with the board’s approval of the BP’s safety, reliability and environmental discussed the findings of this review company strategy, helps it to promote the performance, with the aim of continually The past year was significant for BP, and the chairman introduced changes to long-term success of BP. The board making BP safer for our entire workforce with the announcement of Bernard the board’s ways of working. It agreed assesses different areas of the business and minimizing our environmental impact. Looney as new CEO. As part of the to implement changes to board meetings, so that BP is well positioned to deliver on It also focuses on maintaining financial succession planning for this role, the so that agendas will be structured around its ambition to become a net zero company discipline and delivering strong earnings, board considered a number of factors, four distinct pillars in 2020 – strategy, by 2050 or sooner, and to help the world cash flow and returns to shareholders. including the values and leadership performance, people and governance. behaviours that this role requires. Bernard get to net zero. Ultimately board decisions In 2019, BP increased its stake in are taken against the backdrop of what has been with BP since 1991 and has a In light of BP’s new corporate purpose, Lightsource BP, see page 73; formed strong sense of BP’s culture and values. ambition and aims and the changing it considers to be in the best interest of a new joint venture with BP Bunge the long-term financial success of the As chief executive of Upstream, he corporate governance landscape, the Bioenergia, see page 64; partnered with oversaw improvements in personal board is reviewing its governance company and BP’s stakeholders, the world-leading mobility platform, including shareholders, employees, safety and initiated developments in the framework in order to modernize its DiDi, to create a new electric vehicle workplace in areas such as mental health, principles and processes. The new the community and environment, charging network in China, see page 27; our suppliers and customers. diversity and inclusion. framework will continue to drive the and is exiting BP’s Alaska business as highest levels of business standards We made strong progress with our part of a two-year $10 billion divestment Together the board and new CEO and best practice, aligning these with divestment plans and built exciting new programme. reviewed the new organizational structure, BP’s business purpose, values, strategy opportunities in fast-growing markets in including the appointment of the and culture. In 2019 a recordable injury frequency rate leadership team and restructuring plans. 2019. BP’s flexible strategy allows it to of 0.166 was the lowest since reporting grow in ways that can make a significant The board will continue to assess and began, while the number of injuries The board is reviewing the manner in monitor culture and will look to obtain contribution to the energy transition, recorded fell by 17%. Safety will always which it engages with the workforce helping deliver the lower carbon energy useful insight through effective dialogue be one of our core values. This is to enable it to better understand the with our key stakeholders and taking the world wants and needs, while important to our workforce, local interests and concerns of BP’s people, fostering strong relationships with our feedback into account in the board’s communities and the environment, while see page 88. decision-making process. stakeholders. This further strengthens the securing strong operational availability company’s balance sheet, enabling us to and reliability is crucial to our partners, pursue new advantaged opportunities for suppliers and customers. BP’s portfolio within our disciplined financial framework. Relevant section 172 factors The board (including delegation of authority) Customers Employees Government Investors and Partners and Society and regulators shareholders suppliers Our broad customer We work to attract, develop We aim to help countries Our investment proposition We depend on the We consult with local base spans industries, and retain the world’s best around the world grow their is to grow sustainable capability and performance people and NGOs to gain businesses and end talent, equipped with the domestic energy supplies free cash flow and of our suppliers, contractors valuable perspectives on consumers of our products right skills for the future. and boost energy security. distributions to shareholders and other partners, such as the ways in which our and services. We work Our people have a crucial This in turn helps create over the long term. We rely small businesses, industry activities could impact closely with our customers role in delivering against our jobs and generates on the support of our peers and academia, to help the local community or to understand their evolving strategy and creating value. revenues for governments. investors, analysts and deliver the products and environment. We typically needs so we can improve We aim to maintain dialogue proxy voting agencies and services we need for our engage well before any and adapt to meet them. with governments and engage with global operations and our physical work begins on a engage in policy debates investment centres, sharing customers. project and continue the that are of concern to us updates on our strategic conversation throughout a and the communities in progress and our financial project’s lifespan. which we operate. and non-financial plans. >10m 70,100 $6.9bn $8.3bn $364m $84m retail customers served employees paid in income and total dividends invested in research committed to social every day worldwide production taxes to distributed to BP and development investment in 2019 governments in 2019 shareholders in 2019 BP Annual Report and Form 20-F 2019 67


 
How we manage risk BP manages, monitors and reports on the principal risks and Risk oversight and governance uncertainties that can impact our ability to deliver our strategy. Key risk oversight and governance committees include the following: These risks are described in the Risk factors on page 70. Our management systems, organizational structures, processes, Executive committees standards, code of conduct and behaviours together form a system of • Executive team meeting – for strategic and commercial risks. internal control that governs how we conduct the business of BP and • Group operations risk committee – for health, safety, security, manage associated risks. environment and operations integrity risks. • Group financial risk committee – for finance, treasury, trading BP’s risk management system and cyber risks. BP’s risk management system and policy is designed to be a consistent • Group disclosure committee – for financial reporting risks. and clear framework for managing and reporting risks from the group’s • Group people committee – for employee risks. operations to management and to the board. The system seeks to avoid • Group ethics and compliance committee – for legal and incidents and maximize business outcomes by allowing us to: regulatory compliance and ethics risks. • Resource commitment meeting – for investment decision risks. • Understand the risk environment, identify the specific risks and • Renewal committee – for strategic, commercial and investment assess the potential exposure for BP. decision risks related to new lines of business. • Determine how best to deal with these risks to manage overall potential exposure. Board and its committees • Manage the identified risks in appropriate ways. • BP board. • Monitor and seek assurance of the effectiveness of the management • Audit committee. of these risks and intervene for improvement where necessary. • Safety, environment and security assurance committee. • Report up the management chain and to the board on a periodic basis • Geopolitical committee. on how significant risks are being managed, monitored, assured and See BP governance framework on page 83, Board activity in 2019 the improvements that are being made. on page 84 and committee reports on pages 90-99 and 101. Our risk management activities Risk management processes Day-to-day risk Business and Oversight and We aim for a consistent basis of measuring risk to: management strategic risk governance • Establish a common understanding of risks on a like-for-like basis, management taking into account potential impact and likelihood. �dent���� Plan� mana�e �et pol��� • Report risks and their management to the appropriate levels of mana�e and per�orman�e and mon�tor the organization. report r���� and a��ure pr�n��pal r���� • Inform prioritization of specific risk management activities and resource allocation. Fa��l�t�e�� Bu��ne�� ��e�ut��e ��e a��et� and �e�ment� and and �orporate �oard Businesses and functions review significant risks and associated risk operat�on� �un�t�on� �un�t�on� management activities in alignment with key business processes to help enable key decisions to be risk informed. Day-to-day risk management – management and staff at our As part of BP’s annual planning process, the executive team and board facilities, assets and functions seek to identify and manage risk, review the group’s principal risks and uncertainties and determine risks promoting safe, compliant and reliable operations. BP requirements, for particular oversight by the board and its committees. These may be which take into account applicable laws and regulations, underpin the updated during the year in response to changes in internal and external practical plans developed to help reduce risk and deliver safe, compliant circumstances. and reliable operations as well as greater efficiency and sustainable financial results. Our risk profile Business and strategic risk management – our businesses and The nature of our business operations is long term, resulting in many of functions integrate risk management into key business processes such our risks being enduring in nature. Nonetheless, risks can develop and as strategy, planning, performance management, resource and capital evolve over time and their potential impact or likelihood may vary in allocation, and project appraisal. We do this by using a standard framework response to internal and external events. These may include emerging for collating risk data, assessing risk management activities, making further risks which are considered through existing processes, including BP’s improvements and in connection with planning new activities. risk management system, BP’s Energy Outlook, BP’s Technology Oversight and governance – throughout the year functional Outlook and group strategic reviews. leadership, the executive team, the board and relevant committees We identify longer-term strategic risks and high priority risks for particular provide oversight of how significant risks to BP are identified, assessed oversight by the board and its various committees in the coming year. and managed. They help to ensure that risks are governed by relevant Those identified for particular oversight in 2020 are listed in this section. policies and are managed appropriately. Such oversight may include These may be updated throughout the year in response to changes in reviews of the outcomes of business processes including strategy, internal and external circumstances. The oversight and management of planning and resource and capital allocation. other risks is undertaken in the normal course of business. BP’s group risk team analyses the group’s risk profile and maintains the There can be no certainty that our risk management activities will group risk management system. Our group audit team provides mitigate or prevent these, or other risks, from occurring. Further details independent assurance to the group chief executive and board as to of the principal risks and uncertainties we face are set out in Risk whether the group’s system of internal control is adequately designed factors on page 70. and operating effectively to respond appropriately to the risks that are significant to BP. 68 BP Annual Report and Form 20-F 2019


 
Strategic report Risks for particular oversight by the board and its We seek to manage this risk through development and maintenance of committees in 2020 relationships with governments and stakeholders and by becoming trusted partners in each country and region. In addition, we closely The risks for particular oversight by the board and its committees in monitor events and implement risk mitigation plans where appropriate. 2020 have been reviewed. In addition to the risks reviewed in 2019, climate-related risks have been added as a longer-term strategic risk. The impact of the UK’s exit from the EU Climate-related risks We have been assessing the potential impact on BP of Brexit and the UK’s future global relationships and have considered Risks associated with climate change and the transition to a lower carbon different outcomes but do not believe any of these outcomes economy impact many elements of our strategy and, as such, these risks are pose a significant risk to our business. The board’s geopolitical considered through key business processes including the strategy, annual committee continues to monitor these developments. plan, capital allocation and investment decisions. The outputs of these key business processes are reviewed in line with the cadence of these activities. Further details are described in Environment on page 40 and Climate Safety and operational risks change and the transition to a lower carbon economy on page 70. Process safety, personal safety and environmental risks Strategic and commercial risks The nature of the group’s operating activities exposes us to a wide range of significant health, safety and environmental risks such as Financial liquidity incidents associated with releases of hydrocarbons when drilling wells, External market conditions can impact our financial performance. operating facilities and transporting hydrocarbons. Supply and demand and the prices achieved for our products can be Our operating management system helps us manage these risks and affected by a wide range of factors including political developments, drive performance improvements. It sets out the rules and principles consumer preferences for low carbon energy, global economic which govern key risk management activities such as inspection, conditions and the influence of OPEC. maintenance, testing, business continuity and crisis response planning We seek to manage this risk through BP’s diversified portfolio, our and competency development. In addition, we conduct our drilling financial framework, liquidity stress testing, maintaining a significant activity through a global wells organization in order to promote a cash buffer, regular reviews of market conditions and our planning and consistent approach for designing, constructing and managing wells. investment processes. Security See Prices and markets and Liquidity, financial capacity and financial, Hostile acts such as terrorism or piracy could harm our people and including credit, exposure on page 70. disrupt our operations. We monitor for emerging threats and vulnerabilities to manage our physical and information security. The impact of coronavirus (COVID-19) Our central security team provides guidance and support to our The spread of coronavirus coupled with actions from OPEC+ has businesses through a network of regional security advisors who advise caused a significant drop in the oil price. Our financial frame is and conduct assurance activities with respect to the management of designed to be robust to periods of low price, with flexibility to security risks affecting our people and operations. We continue to reduce cost and capital expenditure if required. We continue to monitor threats globally and maintain disaster recovery, crisis and assess the potential impact of coronavirus on our staff and business continuity management plans. operations and have instigated appropriate mitigation plans. Compliance and control risks Cyber security Ethical misconduct and legal or regulatory non-compliance The targeted and indiscriminate threats to the security of our digital Ethical misconduct or breaches of applicable laws or regulations infrastructure and those of third parties continue to evolve rapidly and could damage our reputation, adversely affect operational results are increasingly prevalent across industries worldwide. and shareholder value, and potentially affect our licence to operate. We seek to manage this risk through a range of measures, which Our code of conduct and our values and behaviours, applicable to all include cyber security standards, security protection tools, ongoing employees, are central to managing this risk. Additionally, we have various detection and monitoring of threats and testing of cyber response and group requirements and training covering areas such as anti-bribery and recovery procedures. We collaborate closely with governments, law corruption, anti-money laundering, competition/ anti-trust law and international enforcement agencies and industry peers to understand and respond to trade regulations. We seek to keep abreast of new regulations and legislation new and emerging cyber threats. We build awareness with our staff, and plan our response to them. We offer an independent confidential helpline, share information on incidents with leadership for continuous learning OpenTalk, for employees, contractors and other third parties. and conduct regular exercises including with the executive team to test Trading non-compliance response and recovery procedures. In the normal course of business, we are subject to risks around our Geopolitical trading activities which could arise from shortcomings or failures in our The diverse locations of our operations around the world expose us to systems, risk management methodology, internal control processes or a wide range of political developments and consequent changes to the employee conduct. economic and operating environment. Geopolitical risk is inherent to We have specific operating standards and control processes to manage many regions in which we operate, and heightened political or social these risks, including guidelines specific to trading, and seek to monitor tensions or changes in key relationships could adversely affect compliance through our dedicated compliance teams. We also seek to the group. maintain a positive and collaborative relationship with regulators and the industry at large. BP Annual Report and Form 20-F 2019 69


 
Risk factors The risks discussed below, separately or in combination, could have Failure to accurately forecast or work within our financial framework could impact a material adverse effect on the implementation of our strategy, our our ability to operate and result in financial loss. Trade and other receivables, including business, financial performance, results of operations, cash flows, overdue receivables, may not be recovered, divestments may not be successfully liquidity, prospects, shareholder value and returns and reputation. completed and a substantial and unexpected cash call or funding request could disrupt our financial framework or overwhelm our ability to meet our obligations. Strategic and commercial risks An event such as a significant operational incident, legal proceedings or a geopolitical event in an area where we have significant activities, could reduce our Prices and markets – our financial performance is impacted by financial liquidity and our credit ratings. Credit ratings downgrades could potentially fluctuating prices of oil, gas and refined products, technological change, increase financing costs and limit access to financing or engagement in our trading exchange rate fluctuations, and the general macroeconomic outlook. activities on acceptable terms, which could put pressure on the group’s liquidity. Oil, gas and product prices are subject to international supply and demand and Credit rating downgrades could also trigger a requirement for the company to margins can be volatile. Political developments, increased supply from new oil review its funding arrangements with the BP pension trustees and may cause and gas or alternative low carbon energy sources, technological change, global other impacts on financial performance. In the event of extended constraints on economic conditions, public health situations and the influence of OPEC can our ability to obtain financing, we could be required to reduce capital expenditure impact supply and demand and prices for our products. Decreases in oil, gas or or increase asset disposals in order to provide additional liquidity. See Liquidity product prices could have an adverse effect on revenue, margins, profitability and and capital resources on page 301 and Financial statements – Note 29. cash flows. If significant or for a prolonged period, we may have to write down assets and re-assess the viability of certain projects, which may impact future Joint arrangements and contractors – varying levels of control over the cash flows, profit, capital expenditure and ability to maintain our long-term standards, operations and compliance of our partners, contractors and investment programme. Conversely, an increase in oil, gas and product prices sub-contractors could result in legal liability and reputational damage. may not improve margin performance as there could be increased fiscal take, We conduct many of our activities through joint arrangements, associates or cost inflation and more onerous terms for access to resources. The profitability of with contractors and sub-contractors where we may have limited influence and our refining and petrochemicals activities can be volatile, with periodic over- control over the performance of such operations. Our partners and contractors supply or supply tightness in regional markets and fluctuations in demand. are responsible for the adequacy of the resources and capabilities they bring to a Exchange rate fluctuations can create currency exposures and impact underlying project. If these are found to be lacking, there may be financial, operational or costs and revenues. Crude oil prices are generally set in US dollars, while products safety risks for BP. Should an incident occur in an operation that BP participates vary in currency. Many of our major project development costs are denominated in, our partners and contractors may be unable or unwilling to fully compensate in local currencies, which may be subject to fluctuations against the US dollar. us against costs we may incur on their behalf or on behalf of the arrangement. Where we do not have operational control of a venture, we may still be pursued Access, renewal and reserves progression – inability to access, by regulators or claimants in the event of an incident. renew and progress upstream resources in a timely manner could adversely affect our long-term replacement of reserves. Digital infrastructure and cyber security – breach or failure of our or third parties’ digital infrastructure or cyber security, including loss or Renewing our reserve base depends on our ability to continually replenish future misuse of sensitive information could damage our operations, increase opportunities to access and produce oil and natural gas. Competition for access costs and damage our reputation. to investment opportunities, heightened political and economic risks in certain countries where significant hydrocarbon basins are located, unsuccessful The oil and gas industry is subject to fast-evolving risks from cyber threat actors, exploration activity and increasing technical challenges and capital commitments including nation states, criminals, terrorists, hacktivists and insiders. A breach or may adversely affect our reserve replacement. This, and our ability to progress failure of our or third parties’ digital infrastructure – including control systems – due upstream resources and sustain long-term reserves replacement, could impact to breaches of our cyber defences, or those of third parties, negligence, intentional our future production and financial performance. misconduct or other reasons, could seriously disrupt our operations. This could result in the loss or misuse of data or sensitive information, injury to people, Major project delivery – failure to invest in the best opportunities or disruption to our business, harm to the environment or our assets, legal or deliver major projects successfully could adversely affect our financial regulatory breaches and legal liability. Furthermore, the rapid detection of attempts performance. to gain unauthorized access to our digital infrastructure, often through the use of We face challenges in developing major projects, particularly in geographically sophisticated and co-ordinated means, is a challenge and any delay or failure to and technically challenging areas. Poor investment choice, efficiency or delivery, detect could compound these potential harms. These could result in significant or operational challenges at any major project that underpins production or costs including fines, cost of remediation or reputational consequences. production growth could adversely affect our financial performance. Climate change and the transition to a lower carbon economy Geopolitical – exposure to a range of political developments and – policy, legal, regulatory, technology and market developments related consequent changes to the operating and regulatory environment could to the issue of climate change could increase costs, reduce demand for cause business disruption. our products, reduce revenue and limit certain growth opportunities. We operate and may seek new opportunities in countries and regions where Laws, regulations, policies, obligations, social attitudes and customer preferences political, economic and social transition may take place. Political instability, relating to climate change and the transition to a lower carbon economy could changes to the regulatory environment or taxation, international sanctions, have an adverse impact on our business (including increased costs from expropriation or nationalization of property, civil strife, strikes, insurrections, acts compliance, litigation, and regulatory or litigation outcomes), and could lead to of terrorism, acts of war and public health situations (including an outbreak of an constraints on production and supply and access to new reserves and a decline in epidemic or pandemic) may disrupt or curtail our operations or development demand for certain products. activities. These may in turn cause production to decline, limit our ability to Technological improvements or innovations that support the transition to a lower pursue new opportunities, affect the recoverability of our assets or cause us to carbon economy, and customer preferences or regulatory incentives that alter incur additional costs, particularly due to the long-term nature of many of our fuel or power choices, could impact demand for oil and gas. Depending on the projects and significant capital expenditure required. Events in or relating to nature and speed of any such changes and our response, this could adversely Russia, including trade restrictions and other sanctions, could adversely impact affect the demand for our products, investor sentiment, our access to capital our income and investment in or relating to Russia. Our ability to pursue business markets, our competitiveness and financial performance. Policy, legal regulatory, objectives and to recognize production and reserves relating to these investments technological and market developments related to climate change could also could also be adversely impacted. affect future price assumptions used in the assessment of recoverability of Liquidity, financial capacity and financial, including credit, asset carrying values including goodwill, the judgement as to whether there is continued intent to develop exploration and appraisal intangible assets, the timing exposure – failure to work within our financial framework could impact of decommissioning of assets and the useful economic lives of assets used for our ability to operate and result in financial loss. the calculation of depreciation and amortization. See Financial statements – Note 1 and Environment on page 40. 70 BP Annual Report and Form 20-F 2019


 
Strategic report Competition – inability to remain efficient, maintain a high-quality Drilling and production – challenging operational environments and portfolio of assets, innovate and retain an appropriately skilled other uncertainties could impact drilling and production activities. workforce could negatively impact delivery of our strategy in a highly Our activities require high levels of investment and are sometimes conducted in competitive market. challenging environments such as those prone to natural disasters and extreme Our strategic progress and performance could be impeded if we are unable to control weather, which heightens the risks of technical integrity failure. The physical our development and operating costs and margins, or to sustain, develop and operate characteristics of an oil or natural gas field, and cost of drilling, completing or a high-quality portfolio of assets efficiently. We could be adversely affected if operating wells is often uncertain. We may be required to curtail, delay or cancel competitors offer superior terms for access rights or licences, or if our innovation in drilling operations or stop production because of a variety of factors, including areas such as exploration, production, refining, manufacturing, renewable energy, new unexpected drilling conditions, pressure or irregularities in geological formations, technologies or customer offer that lags the industry. Our performance could also be equipment failures or accidents, adverse weather conditions and compliance with negatively impacted if we fail to protect our intellectual property. Our industry faces governmental requirements. increasing challenge to recruit and retain diverse, skilled and experienced people in the fields of science, technology, engineering and mathematics. Successful recruitment, Compliance and control risks development and retention of specialist staff is essential to our plans. Ethical misconduct and non-compliance – ethical misconduct or Crisis management and business continuity – failure to address an breaches of applicable laws by our businesses or our employees could incident effectively could potentially disrupt our business. be damaging to our reputation, and could result in litigation, regulatory Our business activities could be disrupted if we do not respond, or are perceived action and penalties. not to respond, in an appropriate manner to any major crisis or if we are not able Incidents of ethical misconduct or non-compliance with applicable laws and to restore or replace critical operational capacity. regulations, including anti-bribery and corruption and anti-fraud laws, trade Insurance – our insurance strategy could expose the group to material restrictions or other sanctions, could damage our reputation, and result in uninsured losses. litigation, regulatory action and penalties. BP generally purchases insurance only in situations where this is legally and Regulation – changes in the regulatory and legislative environment contractually required. Some risks are insured with third parties and reinsured by could increase the cost of compliance, affect our provisions and limit group insurance companies. Uninsured losses could have a material adverse our access to new growth opportunities. effect on our financial position, particularly if they arise at a time when we are Governments that award exploration and production interests may impose facing material costs as a result of a significant operational event which could put specific drilling obligations, environmental, health and safety controls, pressure on our liquidity and cash flows. controls over the development and decommissioning of a field and possibly, Security – hostile acts against our staff and activities could cause harm nationalization, expropriation, cancellation or non-renewal of contract rights. to people and disrupt our operations. Royalties and taxes tend to be high compared with those imposed on similar commercial activities, and in certain jurisdictions there is a degree of uncertainty Acts of terrorism, piracy, sabotage and similar activities directed against our relating to tax law interpretation and changes. Governments may change their operations and facilities, pipelines, transportation or digital infrastructure could fiscal and regulatory frameworks in response to public pressure on finances, cause harm to people and severely disrupt operations. Our activities could also be resulting in increased amounts payable to them or their agencies. severely affected by conflict, civil strife or political unrest. Such factors could increase the cost of compliance, reduce our profitability in Product quality – supplying customers with off-specification products certain jurisdictions, limit our opportunities for new access, require us to divest could damage our reputation, lead to regulatory action and legal liability, or write down certain assets or curtail or cease certain operations, or affect the and impact our financial performance. adequacy of our provisions for pensions, tax, decommissioning, environmental and legal liabilities. Potential changes to pension or financial market regulation Failure to meet product quality specifications could cause harm to people and the could also impact funding requirements of the group. Following the Gulf of environment, damage our reputation, result in regulatory action and legal liability, Mexico oil spill, we may be subjected to a higher level of fines or penalties and impact financial performance. imposed in relation to any alleged breaches of laws or regulations, which could Safety and operational risks result in increased costs. Treasury and trading activities – ineffective oversight of treasury Process safety, personal safety, and environmental risks – and trading activities could lead to business disruption, financial loss, exposure to a wide range of health, safety, security and environmental regulatory intervention or damage to our reputation. risks could cause harm to people, the environment and our assets and We are subject to operational risk around our treasury and trading activities in result in regulatory action, legal liability, business interruption, increased financial and commodity markets, some of which are regulated. Failure to costs, damage to our reputation and potentially denial of our licence process, manage and monitor a large number of complex transactions across to operate. many markets and currencies while complying with all regulatory requirements Technical integrity failure, natural disasters, extreme weather or a change in its could hinder profitable trading opportunities. There is a risk that a single trader or frequency or severity, human error and other adverse events or conditions, including a group of traders could act outside of our delegations and controls, leading to breach of digital security, could lead to loss of containment of hydrocarbons or other regulatory intervention and resulting in financial loss, fines and potentially hazardous materials. This could also lead to constrained availability of resources damaging our reputation. See Financial statements – Note 29. used in our operating activities, as well as fires, explosions or other personal and Reporting – failure to accurately report our data could lead to process safety incidents, including when drilling wells, operating facilities and those associated with transportation by road, sea or pipeline. There can be no certainty regulatory action, legal liability and reputational damage. that our operating management system or other policies and procedures will External reporting of financial and non-financial data, including reserves adequately identify all process safety, personal safety and environmental risks or estimates, relies on the integrity of systems and people. Failure to report data that all our operating activities, including acquired businesses will be conducted in accurately and in compliance with applicable standards could result in regulatory conformance with these systems. See Safety and security on page 45. action, legal liability and damage to our reputation. Such events or conditions, including a marine incident, or inability to provide safe The Strategic report was approved by the board and signed on its behalf environments for our workforce and the public while at our facilities, premises or by Ben J. S. Mathews, company secretary on 18 March 2020. during transportation, could lead to injuries, loss of life or environmental damage. As a result we could face regulatory action and legal liability, including penalties and remediation obligations, increased costs and potentially denial of our licence to operate. Our activities are sometimes conducted in hazardous, remote or environmentally sensitive locations, where the consequences of such events or conditions could be greater than in other locations. BP Annual Report and Form 20-F 2019 71


 
Energy with purpose means helping the world reach net zero. 72 BP Annual Report and Form 20-F 2019


 
Corporate governance Corporate governance Board of directors 74 Executive team 78 The leadership team 80 Introduction from the chairman 82 Board activities in 2019 84 How the board has engaged with shareholders, 88 the workforce and other stakeholders Nomination and governance committee 90 Audit committee 91 Safety, environment and security 96 assurance committee Geopolitical committee 98 Chairman’s committee 99 Directors’ remuneration report 100 Remuneration committee 101 Energy with purpose Expanding solar Lightsource BP is helping shape the future of global energy delivery by developing solar capacity around the world. • We increased our stake in Lightsource BP to create a 50:50 joint venture in 2019. Lightsource BP highlights in 2019 • Entered the Spanish solar market with the purchase of a 300MW portfolio of solar development projects across six sites. • Signed a long-term agreement to build a 240MW facility, supplying EVRAZ, a US steel company. • Established a presence in Brazil with the purchase of 1.9GW of solar projects in various stages of development. BP Annual Report and Form 20-F 2019 73


 
Board of directors as at 18 March 2020 Committee membership key Chairman Audit Safety, environment and security assurance Remuneration Geopolitical Chairman’s Nomination and governance Non-executive directors’ tenure Helge Lund Bernard Looney Chairman Chief executive officer Appointed to the board 26 July 2018 (appointed Appointed 5 February 2020 chairman 1 January 2019) Outside interests: Outside interests: Fellow of the Royal Academy of Engineering, Fellow Chairman of Novo Nordisk AS, Operating Advisor to of the Energy Institute, Mentor for FTSE 100 Clayton Dubilier & Rice, Member of the Board of Cross-Company Mentoring Executive Programme Trustees of the International Crisis Group, Member Age: 49 of the European Round Table of Industrialists Nationality: Irish Age: 57 1 – 3 years 5 Career summary: Nationality: Norwegian 4 – 6 years 2 Bernard Looney joined BP in 1991 as a drilling 7+ years 4 Career summary: engineer working in roles in the North Sea, Vietnam Helge served as chief executive of BG Group from and the Gulf of Mexico. Prior to becoming the chief 2015 to 2016, when the company merged with Shell. executive of BP Upstream in April 2016, Bernard held He joined BG Group from Equinor (formerly Statoil) a range of senior roles, including chief operating where he served as its president and chief executive officer of production, managing director BP North Board gender diversity officer for 10 years from 2004. Prior to Equinor, Sea and vice president in Norway and North Sea Helge was president and chief executive officer of infrastructure and BP Alaska. He has led access into the industrial conglomerate, Aker Kvaerner, and has new countries, including Mauritania and Senegal, also held executive positions in the Norwegian high-graded the portfolio with the acquisition of industrial holding company, Aker RGI and the former onshore US assets from BHP Billiton and the sale of Norwegian power and industry company, Hafslund the Alaska business, and created innovative new Nycomed. He worked as a consultant with McKinsey business models, such as Aker BP in Norway. & Company and served as a political adviser for the As chief executive of BP Upstream, Bernard parliamentary group of the Conservative party in oversaw improvements in both process and personal Norway. Prior to joining BP, he was a non-executive safety performances and production grew by 20%. director of the oil service group Schlumberger from There were also significant improvements in both 2016 to 2018, and Nokia from 2011 to 2014. He gender and global diversity. Bernard initiated a Female 5 served as a member on the United Nations group-wide dialogue on mental health in hope of Male 6 Secretary-General’s Advisory Group on Sustainable ‘ending the stigma’ associated with the issue. Energy from 2011 to 2014. Relevant skills and experience: Relevant skills and experience: Bernard has spent his career at BP and has Board nationality Helge has an impressive track record of leadership demonstrated dynamic leadership and vision as he in the oil and gas industry. His open-minded and has progressed through various roles within the forward-looking approach is vital as the industry Company. As part of the appointment process to focuses on the transition to a lower carbon world. becoming the new chief executive officer, Bernard He has deep industry knowledge and global business exceeded at range of aptitude and psychometric experience – not only in the oil and gas industry but testing. During his 10 years as a leader of Upstream, also in pharmaceuticals, healthcare and construction. Bernard saw the segment through one of the most difficult periods in the BP’s history, helping transform the company into a safer, stronger and more resilient business. He was instrumental in a number of workforce based initiatives to promote a diverse and UK 6 inclusive environment. US 3 Non UK/US 2 View the directors’ biographies in full at bp.com/board. 74 BP Annual Report and Form 20-F 2019


 
Corporate governance Brian Gilvary Dame Alison Carnwath Pamela Daley Chief financial officer Independent non-executive director Independent non-executive director Appointed 1 January 2012 Appointed 21 May 2018 Appointed 26 July 2018 Brian will retire on 30 June 2020. Outside interests: Outside interests: Member of Supervisory Board of BASF SE, Director Director of BlackRock, Inc, Director of SecureWorks, Inc Outside interests: of Zurich Insurance Group, Independent director of Non-executive director of Air Liquide SA, Non- Age: 67 PACCAR Inc, Member of UK Panel on Takeovers and executive director of Barclays PLC, Non-executive Mergers, Trustee of The Economist Group Nationality: American director of Royal Navy Board, Senior independent director of The Francis Crick Institute, Chairman of Age: 67 Career summary: The Hundred Group of Financial Directors (The 100 Pam joined General Electric Company in 1989 as tax Nationality: British Group), Fellow of the Energy Institute; Great Britain counsel and held a number of senior executive roles Age Group Triathlete Career summary: in the company, overseeing a wide range of Dame Alison is a qualified chartered accountant with corporate transactions and serving as senior vice Age: 58 a wealth of financial industry experience obtained president and senior advisor to the chairman in 2013, Nationality: British during an expansive career in London and New York. before retiring from GE. Pam has served as a director In addition to her current appointments, she was of BlackRock since 2014 and of SecureWorks since Career summary: previously Chairman of Land Securities Group plc 2016. She was a director of BG Group plc from 2014 Brian joined BP in 1986 after obtaining a PhD in from September 2004 until July 2018 and served as to 2016 until its acquisition by Shell, a director of mathematics from the University of Manchester. a non-executive director of Barclays PLC from 2010 Patheon N.V. from 2016 to 2017 until its acquisition Following a broad range of roles across the group in to 2012 and Man Group plc from November 2012 to by Thermo Fisher, and was previously a partner at upstream, downstream and trading in Europe and the May 2013. In 2014, Dame Alison was appointed to Morgan, Lewis & Bockius, a major US law firm, US, he became downstream’s commercial director in the order of Dame Commander of the Most Excellent where she specialized in domestic and cross-border 2002. From 2005 until 2009 he was chief executive Order of the British Empire for her services to tax-oriented financings and commercial transactions. of BP’s commodity trading arm and, in 2010, he was business and diversity. appointed deputy group chief financial officer. Brian Relevant skills and experience: was a director of TNK-BP over two separate periods, Relevant skills and experience: Pam is a qualified lawyer with significant from 2003 to 2005 and from 2010 until the sale of Dame Alison has extensive financial experience both management insight obtained from previous senior the business and BP’s acquisition of Rosneft equity as an executive and non-executive director. Dame positions held at companies that operate in highly in 2013. He served on the HM Treasury Financial Alison has chaired significant boards and has deep regulated industries. Pam has a wealth of experience Management Review Board from 2014 to 2017. experience of the workings of investors and the in global business and strategy gained from over 20 finance industry in the City of London. She has years in an executive role at GE. She also has Relevant skills and experience: worked with global organizations and brings this experience in the UK oil and gas industry from her Brian’s broad experience of working across the broad range of skills to the BP board and to the time served on the BG Group plc board. Pam group has provided him with deep insight into BP’s audit committee. contributes important insight to the audit committee assets and businesses. He has been key during from her previous executive experience. In 2019, she BP’s strategy implementation to transform into a joined the remuneration committee, where her ‘value over volume’ business where trading is a key understanding of employee and investor creator of value. His deep understanding of finance perspectives brings value. and trading has been vital in adjusting capital structures and operational costs while ensuring the group continues to be capable of meeting new opportunities. Brian played a major role in overseeing financial aspects of the Gulf of Mexico oil spill, and leading settlement negotiations to resolve outstanding federal and state claims. He also played a lead role in the negotiations around the exit of TNK-BP and investment into Rosneft and led the 2018 acquisition of the BHP onshore Lower 48 assets. BP Annual Report and Form 20-F 2019 75


 
Sir Ian Davis Professor Dame Ann Dowling Melody Meyer Senior independent director Independent non-executive director Independent non-executive director Appointed 2 April 2010 Appointed 3 February 2012 Appointed 17 May 2017 Outside interests: Outside interests: Outside interests: Chairman of Rolls-Royce Holdings plc, Non-executive Deputy vice-chancellor and emeritus professor President of Melody Meyer Energy LLC, Director director of Majid Al Futtaim Holding LLC, of Mechanical Engineering at the University of of the National Bureau of Asian Research, Trustee Non-executive director of Johnson & Johnson, Inc. Cambridge, Non-executive director of Smiths of Trinity University, Non-executive director of Group plc AbbVie Inc., Non-executive director of National Age: 68 Oilwell Varco, Inc. Age: 67 Nationality: British Age: 62 Nationality: British Career summary: Nationality: American Sir Ian began his career at The Bowater Corporation Career summary: Limited, a paper manufacturing company, before Professor Dame Ann is a deputy vice-chancellor and Career summary: joining McKinsey & Company in 1979. He was a emeritus professor of Mechanical Engineering at the Melody started her career in 1979 with Gulf Oil partner at McKinsey & Company for 31 years until his University of Cambridge where her research includes which later merged with Chevron Corporation, where retirement in 2010 and also served as chairman and fluid mechanics, acoustics and combustion. She has she remained until her retirement in 2016. During her managing director between 2003 and 2009. Sir Ian held visiting posts at MIT and at Caltech. Dame Ann career with Chevron, Melody held several key has remained as a senior partner emeritus of is a fellow of the Royal Society and the Royal leadership roles in global exploration and production, McKinsey & Company since his retirement. He also Academy of Engineering and a foreign associate of working on a number of international projects and served as a lead non-executive board member for the the US National Academy of Engineering, the operational assignments. Melody was the executive Cabinet Office from 2015 to 2016. Sir Ian was given Chinese Academy of Engineering and the French sponsor of the Chevron Women’s Network and the honour of knighthood in the 2019 Birthday Academy of Sciences. She was an advisor at continues as a mentor and advocate for the Honours for services to business. Rolls-Royce until 2015. Dame Ann was President of advancement of women in the industry. Melody has the Royal Academy of Engineering from September received several awards and accolades throughout Relevant skills and experience: 2014 to 2019. In December 2015 she was appointed her career including being recognized as a 2009 Sir Ian brings global financial and strategic experience to the Order of Merit. Trinity Distinguished Alumni, with the BioHouston to the board. He has worked with and advised global Women in Science Award and she was most recently organizations and companies in a wide variety of Relevant skills and experience: recognized by Hart Energy as an Influential Woman sectors including oil and gas and the public sector. Dame Ann is an internationally respected leader in in Energy in 2018. He is able to draw on knowledge of diverse issues engineering research and the practical application of and outcomes to assist the board and its new technology in industry. Her contribution, Relevant skills and experience: committees. research and academic leadership in these fields are Melody has spent her entire career in the oil and gas admired internationally. Her academic background industry. The breadth, variety and geographic scope Sir Ian’s previous experience as a non-executive provides balance to the board and brings a different of her experience is distinctive. Her career has been director for the Cabinet Office gives him an important perspective to the safety, environment and security marked by a focus on excellence, safety and perspective on government affairs which is an asset assurance committee, particularly as developments performance improvement. She has expertise in the to both the board and the geopolitical committee. in technology accelerate. Her work in this area is execution of major capital projects, creation of supplemented by her chairing the company’s businesses in new countries, strategic and business technology advisory council. planning, merger integration and safe and reliable operations. Melody brings a world-class operational perspective to the board, with a deep understanding of the factors influencing safe, efficient and commercially high-performing projects in a global organization. 76 BP Annual Report and Form 20-F 2019


 
Corporate governance Brendan Nelson Paula Rosput Reynolds Sir John Sawers Independent non-executive director Independent non-executive director Independent non-executive director Appointed 8 November 2010 Appointed 14 May 2015 Appointed 14 May 2015 Outside interests: Outside interests: Outside interests: Non-executive director of NatWest Markets plc, Non-executive director of BAE Systems plc, Visiting professor at King’s College London, Governor Member of the Financial Reporting Review Panel Non-executive director of General Electric Company of the Ditchley Foundation, Trustee of the Bilderberg Association, UK, Executive Chairman of Newbridge Age: 70 Age: 63 Advisory Limited Nationality: British Nationality: American Age: 64 Career summary: Career summary: Nationality: British Brendan is a qualified chartered accountant and Paula commenced her energy career at Pacific Gas & former partner at KPMG having held a number of Electric Corp in 1979 and spent over 25 years in the Career summary: senior positions at KPMG International. He served energy industry. She has held a number of executive Sir John spent 36 years in public service in the UK, on the KPMG UK board from 2000 until his positions during her career, including CEO of Duke working on foreign policy, international security and retirement in 2010. Brendan previously served as a Energy Power Services, Chairman, President and intelligence. He was chief of the Secret Intelligence member of the Financial Services Practitioner Panel CEO of AGL Resources as well as Chairman and CEO Service, MI6, from 2009 to 2014 and prior to that for six years and was president of the Institute of of Safeco Corporation and Vice Chairman and Chief spent the bulk of his career in the Diplomatic Service, Chartered Accountants of Scotland in 2013/14. He Restructuring Officer of AIG. Paula was a non- representing the British government around the has extensive financial and banking experience executive director of TransCanada Corporation and world and leading negotiations at the UN, in the having been a non-executive director of The Royal CBRE Group, Inc until May 2019, having been European Union and in the G8. After he left public Bank of Scotland Group p.l.c. and National appointed in 2011 and 2016 respectively. Paula was service, Sir John was chairman and general partner Westminster Bank p.l.c. from 2010 until April 2019 awarded the National Association of Corporate of Macro Advisory Partners, a firm that advises and December 2018 respectively. Directors (US) Lifetime Achievement Award in 2014. clients on the intersection of policy, politics and markets, from February 2015 to May 2019. He then Relevant skills and experience: Relevant skills and experience: set up his own firm, Newbridge Advisory, to carry Brendan has completed a wide variety of audit, Paula has had a long career leading global companies out similar work. Sir John was appointed Knight regulatory and due-diligence engagements over the in the energy and financial sectors. Her financial Grand Cross of the Order of St Michael and St course of his career. He played a significant role in background and deep experience of trading makes George in the 2015 New Year Honours for services the development of the profession’s approach to the her ideally suited to serve on the audit committee. to national security. audit of banks in the UK, with particular emphasis on Her experience with international and US companies, establishing auditing standards. He continues to Relevant skills and experience: including several restructuring processes and contribute in his role as a member of the Financial Sir John’s deep experience of international political mergers, gives her insight into strategic and Reporting Review Panel. and commercial matters is an asset to the board in regulatory issues, which is an asset to the board. navigating the geopolitical issues faced by a modern This wide experience makes him ideally suited to Paula currently serves as the chair of the global company. Sir John brings a unique perspective chair the audit committee and to act as its financial remuneration committee of BAE Systems plc. Her and broad experience which makes him ideal to lead expert. He brings related input from his role as the experience there and her wider business experience the geopolitical committee. His knowledge and skills chair of the audit committee of a major bank. His and understanding of the views of investors are well gained in government, diplomacy and policy analysis specialism in the financial services industry allows suited to her being the chair of the BP remuneration and advice are invaluable to both the board and the him to contribute insight into the challenges faced by committee. safety, environment and security assurance global businesses by regulatory frameworks. committee. Ben J S Mathews Ben joined BP as a company secretary in May 2019. He is chairman of the The Association of General Counsel and Company Secretaries of the FTSE Company secretary 100 (GC100) and the co-chair of the Corporate Governance Council of the Appointed 7 May 2019 Conference Board. Ben is also a Fellow of the Institute of Chartered Secretaries and Administrators. Former appointments include Group Company Secretary of HSBC Holdings plc and Rio Tinto plc. BP Annual Report and Form 20-F 2019 77


 
Executive team as at 18 March 2020 Gordon Birrell Susan Dio Tufan Erginbilgic Interim head of upstream Chairman and president of BP America Chief executive, Downstream Appointed 12 February 2020 Appointed 1 September 2018 Appointed 1 October 2014 Gordon will continue as part of the new Susan will step down from her role on 30 June 2020 Tufan will retire from the company on 31 March 2020. leadership team. and retire from the company in the second half Outside interests: of 2020. Outside interests: Member of the Turkish-British Chamber of No external appointments Outside interests: Commerce & Industry Board of Directors, Member Member of the American Petroleum Institute of the Strategic Advisory Board of the University Age: 57  Nationality: British Board and Executive Committee, Member of the of Surrey. Career summary: Greater Houston Partnership Executive Committee, Age: 60  Nationality: British and Turkish Before being appointed to his new role, Gordon Member of the Ford’s Theatre Board of Trustees was chief operating officer for production, Executive Committee. Career summary: transformation and carbon. In a long BP career, Tufan was appointed chief executive, Downstream Age: 59  Nationality: American Gordon has spent time in various technical, on 1 October 2014. safety and operational risk (S&OR) and leadership Career summary: Prior to this, Tufan was the chief operating officer of roles including four years as BP president Susan is chairman and president of BP America, the fuels business, accountable for BP’s fuels value Azerbaijan, Georgia and Turkey. providing leadership and oversight to BP’s US chains worldwide, the global fuels businesses and businesses. the refining, sales and commercial optimization Since joining the company in 1984, she has held key functions for fuels. Tufan joined Mobil in 1990 and operational and executive positions in the US, UK and BP in 1997 and has held a wide variety of roles in Australia. Before assuming her current role, Susan refining and marketing in Turkey, various European served as chief executive officer of BP Shipping. countries and the UK. David Eyton Bob Fryar Andy Hopwood Group head of technology Executive vice president, safety and Executive vice president, chief operating officer, Appointed 1 September 2018 operational risk upstream strategy Appointed 1 October 2010 Appointed 1 November 2010 David will continue as part of the new leadership team. Bob will retire from the company in the second half Andy will retire from the company in the second half Outside interests: of 2020. of 2020. Fellow of the UK Royal Academy of Engineering, Fellow of the Institute of Materials, Minerals & Outside interests: Outside interests: Mining, Fellow of the Institute of Directors, Trustee No external appointments No external appointments of the John Lyons Foundation, Member of Oil & Gas Age: 56  Nationality: American Age: 62  Nationality: British Climate Initiative Climate Investments Board. Career summary: Career summary: Age: 58  Nationality: British Bob is responsible for safety, operational risk Andy was appointed chief operating officer, upstream Career summary: management and the systematic management of strategy in April 2018. Andy joined BP in 1980, spending As group head of technology, David is accountable for operations across the BP group. He is accountable his first 10 years in operations in the North Sea, Wytch technology strategy and its implementation across BP. for a variety of group-level disciplines. In this capacity, Farm and Indonesia. In 1989 Andy joined the corporate This includes corporate venture capital investments he looks after the group-wide operating management planning team formulating BP’s upstream strategy and and conducting research and development in areas of system implementation and capability programmes. subsequent portfolio rationalization. corporate renewal. In this role, David sits on the Oil & Bob has over 30 years’ experience in the oil and gas Following the BP-Amoco merger, Andy spent time Gas Climate Initiative Climate Investments Board. industry, having joined Amoco Production Company leading BP’s businesses across the world. He was David was recognized for his services to engineering in 1985. appointed executive vice president, exploration and and energy in 2018 and awarded a CBE. production in 2010. 78 BP Annual Report and Form 20-F 2019


 
Corporate governance Lamar McKay Eric Nitcher Dev Sanyal Chief transition officer Group general counsel Chief executive, alternative energy and Appointed 16 June 2008 Appointed 1 January 2017 executive vice president, regions Appointed 1 January 2012 Lamar’s current portfolio will be redistributed on Eric will continue as part of the new leadership team. 1 July and he will continue in his capacity as chief Dev will continue as part of the new leadership team. Outside interests: transition officer. No external appointments Outside interests: Outside interests: Independent non-executive director of Man Group plc; Age: 57  Nationality: American No external appointments Member of the International Advisory Board on Energy, Career summary: Government of India; Advisory Board of the Centre for Age: 61  Nationality: American Eric is responsible for legal matters across the BP European Reform; Board of Advisors of The Fletcher Career summary: group. He joined Amoco in 1990 and over the years School of Law and Diplomacy, Tufts University; Fellow Lamar took on a new role as chief transition officer in has held a wide variety of roles. of the Energy Institute. 2019. He is responsible for supporting the chairman Eric moved to London in 2000, to join the mergers Age: 54  Nationality: British and Indian and new group chief executive in achieving a full and and acquisitions legal team. He returned to Houston orderly transfer of leadership. In addition, he Career summary: in 2007 to serve as special counsel and chief of staff continues to hold responsibility for leading BP’s Dev is responsible for BP’s global alternative energy to BP America’s chairman and president. strategy work for the energy transition. business and for the group’s interests in the Europe Most recently he played a leading role in the and Asia regions. He was appointed to the BP Group Lamar started his career in 1980 with Amoco and settlement of the Deepwater Horizon US executive committee in 2011. has since held a number of senior roles including government claims and resolution of many of the most recently group deputy CEO. Dev joined BP in 1989 and has held a variety of remaining private claims. international roles in London, Athens, Istanbul, Vienna and Dubai. Dev was previously appointed group treasurer in 2007 and was also chairman of BP Investment Management. Until April 2016, Dev was executive vice president, strategy and regions. Dame Angela Strank Helmut Schuster BP chief scientist and head of technology, Executive vice president, group human downstream resources director Appointed 1 September 2018 Appointed 1 March 2011 Angela will retire from the company at the end of 2020. Helmut will step down from his current role on 1 July and continue working with BP as an advisor. Outside interests: Non-executive director of Severn Trent plc, Fellow of Outside interests: the Royal Society, Fellow of the Royal Academy of Non-executive director of Ivoclar Vivadent AG, Germany Engineering. Age: 59  Nationality: Austrian and British Age: 67  Nationality: British Career summary: Career summary: Helmut became group human resources (HR) Dame Angela is responsible for technology across a director in March 2011. Since joining BP in 1989, number of BP’s businesses. As BP’s chief scientist Helmut has held a number of leadership roles. He she is accountable for developing strategic insights has worked for BP in the US, UK and continental from advances in science and managing technology Europe and within most parts of refining, marketing, capability in BP. trading and gas and power. She joined BP in 1982 as a geologist in exploration and Before taking on his current role, his portfolio of has held various leadership roles across the business. responsibilities as vice president, HR, included She was recognized for her services to the oil industry leading the people agenda for roughly 60,000 people and women in science, technology, engineering and across the globe. mathematics in 2017 and awarded a DBE. BP Annual Report and Form 20-F 2019 79


 
The leadership team from 1 July 2020 Murray Auchincloss Giulia Chierchia Emma Delaney Kerry Dryburgh Executive vice president, Executive vice president, Executive vice president, Executive vice president, finance strategy and sustainability customers and products people and culture From 2015 until being announced to Giulia joins BP from McKinsey, where Emma has spent 25 years working in Kerry was previously head of HR for his new position, Murray was chief she was a senior partner. She led the BP, both in the Upstream and the the Upstream and has held a series of financial officer for BP Upstream. He global downstream oil and gas practice Downstream, most recently as regional senior HR positions. She was a key has held other senior roles in the and was a key member of the president, West Africa. Prior to this driver behind the Upstream people segment and spent three years as chemicals and electricity, power and role she held a variety of senior roles: transformation during 2015-2017. Kerry head of the group chief executive’s natural gas practices. She begins this CFO (chief financial officer) for Asia previously ran HR in BP’s shipping, office. He spent his early career in role with more than 10 years’ Pacific, head of business development integrated supply and trading (IST) North America and qualified as a experience in the energy sector, for Upstream gas value chains and and corporate functions teams. She Chartered Financial Analyst. including helping companies shape commercial director for Iraq. She brings experience from other sectors their strategies for the energy was the vice president for integrated in Europe and Asia, having worked at transition. social and economic programmes in both BT and Honeywell before joining Indonesia. In Downstream she held a BP. She currently sits as a non- number of roles in marketing and executive director for the United planning. Kingdom Strategic Command. Carol Howle William Lin Geoff Morell Biographies for the Executive vice president, Executive vice president, Executive vice president, other members of the trading and shipping regions, cities and solutions communications and advocacy leadership team Before taking on her current role, Carol William served as chief operating Geoff has run group communications Bernard Looney, chief executive ran BP shipping and was the chief officer, upstream regions before joining and external affairs (C&EA) since 2017, officer, page 74. operating officer for IST oil. She has the leadership team. Previous senior after six years leading BP America’s more than 20 years’ experience in the roles include vice president – gas communications and government Gordon Birrell, executive energy industry, many in IST. Previous development and operations for Egypt, relations teams. He was instrumental vice-president, production and roles, include chief operating officer regional president for Asia Pacific and in rebuilding BP’s reputation in the operations, page 78. for natural gas liquids, regional leader head of the group chief executive’s years following Deepwater Horizon. of global oil Europe and finance. Carol office. William managed the Prior to BP, Geoff spent four years at David Eyton, executive vice also served as the head of the group successful start-up of the Tangguh the Pentagon, serving as the chief president, innovation and chief executive’s office. LNG facility during his time in spokesperson for the military under engineering, page 78. Indonesia. He is a non-executive presidents Bush and Obama. He Eric Nitcher, executive vice director for Pan American previously worked in television, president, legal, page 79. Energy Group that operates in including as White House Argentina. correspondent for ABC News. Dev Sanyal, executive vice president, gas and low carbon energy, page 79. 80 BP Annual Report and Form 20-F 2019


 
Corporate governance Introduction from the chairman “Our new purpose is the result of a period of careful development and wide debate with the management team and also reflects the valuable feedback we have received from a number of our stakeholders, both inside and outside of BP.” Helge Lund Chairman It has been a privilege to lead BP’s board for the past year, New ways of working especially given the important decisions we have taken The board itself is an important component of BP’s leadership. together. BP now begins the new decade with a new direction. The most effective boards – and the most effective board Our new purpose, to reimagine energy for people and our meetings – are inclusive, collaborative, open and transparent. planet, is supported by a new ambition - for BP to get to net During 2019, I was pleased with the support I received from zero by 2050 or sooner, and to help the world get to net zero my colleagues on the board as we fostered an atmosphere too. And we have appointed a new chief executive officer, with the management team in which those standards are Bernard Looney, who under the board’s oversight, will lead clearly exhibited. BP in achieving both its purpose and its ambition. These improvements have gone in-hand with improvements BP’s board has been deeply involved in each of these to the board’s efficiency and productivity. We have strengthened changes. It is the board’s responsibility to define and set how we manage the board’s meeting agenda, the materials the company’s purpose, its values and its strategy, and to developed for the board and the division of labour between the be assured that these are aligned with BP’s culture. Our committees and the board. I believe that these changes have strategy and evolving portfolio have been discussed with enabled us to effectively manage both the leadership succession the management team at every board meeting in 2019. Our and develop our new purpose and ambition. new purpose is the result of a period of careful development Evolving board composition and wide debate with the management team and also reflects The make-up of the board has also evolved, and I expect that the valuable feedback we have received from a number of to continue in future as we seek to ensure we have the right our stakeholders, both inside and outside of BP. balance of skills, experience and diversity. In November last BP’s new leadership year, Nils Andersen was appointed Chairman of Unilever, and During the year, the board, through its nomination and therefore stepped down from BP’s board on 18 March after a governance committee, took equal care in its executive period of transition. On behalf of the board, I thank Nils for his succession planning, including in our appointment of a service to BP. In Nils’ place, Melody Meyer agreed to chair the successor to Bob Dudley. When we began that planning in safety, environment and security assurance committee (SESAC), earnest in autumn 2018, we knew that Bob’s many recognizing her strong operational and safety experience. achievements in the role set a high bar for his eventual Separately, the board has assumed direct oversight of ethics successor. That was reflected in the time we took to define and compliance matters, previously the responsibility of SESAC. the qualities we were looking for in the new leadership of BP One of the chairman’s responsibilities is to ensure cohesion at a time of considerable change. A year on, we were delighted of the board over time, especially during times of transition. to welcome Bernard Looney to the role. He is both capable, To provide continuity, Sir Ian Davis and Brendan Nelson have performance oriented and deeply aware of the importance that kindly agreed to stand for re-election at the 2020 AGM for up to we attach to working in close dialogue with BPs stakeholders. a further year. Because they have now each exceeded nine years BP Annual Report and Form 20-F 2019 81


 
in the role, in putting them forward for re-election this year the board Our stakeholders carefully considered whether, they still demonstrate the necessary This year also marks the first year in which the board is required to qualities of independence. I am pleased to confirm that the board is report on how it has fulfilled its duties under section 172 of the satisfied that they do, and I am grateful for the support and wisdom that Companies Act, which requires directors to promote the success of the Sir Ian and Brendan bring to the board. Our nomination and governance company for the benefit of its members, and in doing so to have regard committee has, as you would expect, begun a process to identify to our stakeholders, including employees, suppliers and customers, the successors to these important roles. impact of our operations on communities and the environment, and the likely consequences of any decision in the long term. While continuity is important, BP’s new direction gives reason to examine whether the board’s composition is optimally aligned to Regard for a wider group of stakeholders is not new. Indeed, it has been BP’s new direction. We’ll always need a core cadre of members with incorporated into the board’s working for some time. But new reporting global executive experience from similar industries, but different requirements are an opportunity to explain the processes we have specialist skills may also be valuable. These include skills relevant to followed, and how dialogue with stakeholders has shaped decisions. BP’s ambition, individuals with strong digital and transformational skills Details can be found on page 66, and information about how the board and those with broader energy and sustainability experience. has engaged with BP’s workforce is on page 88. In light of the changes ahead of us, but also as a consequence of natural Closing thanks succession, I anticipate that we will add new competences and Finally, I want to express my gratitude to Bob Dudley, Bernard Looney, experiences to the board during 2020. the executive team, our employees and my board colleagues for their hard work, their commitment, and their contribution to BP’s new direction. Evolving remuneration structure The year 2019 also marked a transition for executive remuneration. In I look forward to working with our teams to compete effectively in a order to develop a new remuneration policy, which will be proposed at changing energy market. the 2020 AGM, the remuneration committee sought candid feedback from some of our largest shareholders. Consequently, while we will retain our current structure, which is simple and well understood, we will strengthen the elements relating to our energy transition ambition. More details of our new policy are set out in the Directors’ remuneration report on page 100. Helge Lund Chairman 82 BP Annual Report and Form 20-F 2019


 
Corporate governance Governance framework Shareholders BP board Audit committee Safety, Geopolitical Remuneration Nomination and Chairman’s HPGR* monitored environment and committee committee governance committee • Financial liquidity. security assurance HPGR monitored Responsibilities committee Responsibilities • Cyber security. committee • Geopolitical. • Recommend Responsibilities • Evaluate • Compliance remuneration • Review performance and HPGR monitored Responsibilities with business principles and composition effectiveness • Monitor marine, • Monitor social, regulations. policy. of board. of chief executive well and pipeline economic and • Trading • Maintain dialogue • Review outside officer. incidents. political events compliance with shareholders commitments • Review the • Oversee effective around the world. and control. and workforce of the NEDs. structure and controls around • Identify major and on remuneration • Maintain strong effectiveness Responsibilities releases at correlated issues. pipeline. of the business • Reviewing facilities and/or geopolitical risks. • Monitor alignment • Review organization. financial explosion. • Consider broader of remuneration developments in • Review system disclosures. • Review and advise political policy and incentives corporate of executive • Monitoring on major security developments. for all employees. development Accountability compliance. incident. governance, • Report on and succession. • Reviewing audit • Cyber security. See page 98. law and ESG. implementation effectiveness, See page 99. Responsibilities of remuneration See page 90. including internal • Review safety and policy. Delegation controls and risk operational risk. management. • Monitor security See page 101. • Advice on external developments. auditor. • Review See page 91. environmental matters. See page 96. Chief executive officer Executive committee Group Group Group Group people Group Resource Technical operations risk financial risk disclosure committee ethics and commitment advisory committee committee committee compliance meeting council committee Framework changes in 2020 As part of the governance framework review, the board committees and their responsibilities will be reviewed. * HPGR – highest priority group risks. BP Annual Report and Form 20-F 2019 83


 
Board activities in 2019 Role of the board Strategy Performance and monitoring The board is responsible for the overall During 2019 the board considered the BP strategy at The board reviews financial, operational and safety conduct of the group’s business. Directors every board meeting and held a two-day strategy performance throughout the year, as well as the have duties under the both UK company law discussion in September. The board also received a latest view on expected full-year delivery against and BP’s Articles of Association. The primary number of technical briefings to expand the directors’ external scorecard measures. During the year there tasks of the board in 2019 included: knowledge in particular areas, such as Scope 3 were a number of business and regional reviews, emissions, the BP Energy Outlook and including North Sea, Russia, the lubricants business • Active consideration and establishment of environmental, social and corporate governance and BPX Energy. long-term strategy and approval of the (ESG) matters, to best equip the board to consider Updates are also given on various components of and debate strategic themes relating to BP’s annual plan. value delivery for BP’s business. Regular reports segments, key functions and the impact of the lower • Monitoring of BP’s performance against presented to the board include: the strategy and plan including ethics and carbon transition on the group’s business model. This included looking at long-term energy trends and compliance. • Chief executive’s report. projections for world energy markets. • Group performance report. • Ensuring that the principal and emerging • Group financial outlook. The board monitored the company’s performance risks and uncertainties to BP are identified • Effectiveness of investment review. against the annual plan for 2019 and approved the and that systems of risk management and • Quarterly and full-year results. annual plan for 2020 after taking into account control are in place. • Shareholder distributions. management’s revised assumptions and outlook for • Board and executive management the year. They received regular reports on the In 2019 the board re-assumed primary responsibility succession. progress and implementation of the strategy from for ethics and compliance (E&C), having previously the group chief executive (GCE) and chief financial managed oversight jointly through the SESAC and officer (CFO) by means of a strategic performance the audit committee. The group head of E&C scorecard, which is discussed at each board attended the board meeting four times in 2019, meeting. providing an update on E&C matters, and how the importance of such was embedded within the BP The board undertook portfolio reviews of various culture throughout the business. The board was also parts of the BP group, including upstream, provided ethics and compliance training. The NEDs downstream and renewables. It assessed the held private sessions with the head of E&C. potential impact changes to the portfolio might have on the financial framework and discussed allocation The board reviews the quarterly and full-year results, of capital. The board looked at circular and including shareholder and capital distributions. The “The board is responsible sustainable solutions and business development 2019 annual report was assessed in terms of the opportunities in a low carbon future, through the lens directors’ obligations and reflects the briefings on for establishing the of what was in the best interest of long-term success updated corporate governance requirements and company’s purpose, its of the company. best practice. In a year that saw BP face significant transition, both The board monitors employee opinion via an annual values and strategy, and internally with the announcement of Bob Dudley’s ‘Pulse’ survey which includes measurement of how retirement and more widely as the company looks the BP values are incorporated into culture around satisfying itself that these to play an important role in the world’s energy our global operations. transition, the board discussed BP’s purpose and and its culture are aligned.” ambitions and their alignment with strategy and the Feedback from other stakeholders is also considered BP culture. by the board as part of its monitoring of performance, as outlined in the BP Section 172 statement and on Helge Lund pages 88-89. Chairman 84 BP Annual Report and Form 20-F 2019


 
Corporate governance Risk Succession Looking forward, the board is implementing changes to its ways of working and redefining The board, either directly or through its committees, The board, in conjunction with the nomination and its primary responsibilities. As outlined on regularly reviews the processes whereby principal and governance and chairman’s committees, reviews page 66, from 2020, board agendas will be emerging risks are identified, evaluated and managed. succession plans for executive and non-executive structured along the following four distinct directors and senior executives on a regular basis. Each of the highest priority group risks were pillars – strategy, performance, people and The board ensures that potential candidates are reviewed in 2019. The board has a focus on emerging governance. Within those areas the key areas identified and evaluated against objective criteria and risks and how these are being managed and of focus will be: on merit, with due regards to the benefits of diversity mitigated. The board undertook its annual review of of thought, gender, social and ethnic backgrounds Strategy: the board will consider and help cyber security risk in particular in December 2019. and cognitive and personal strengths, through a establish the strategy of BP alongside the Each year the board assesses the effectiveness of formal and rigorous procedure. BP operated board new CEO and leadership team to achieve the group’s system of internal control and risk and senior executive succession planning across the purpose, ambition and aims set out on management as part of the review and sign off of the three horizons. 12 February 2020, see page 6. In doing so, BP Annual Report and Form 20-F, to satisfy itself that the board will ensure that every member of 1. Contingency planning is constantly at the forefront the report, taken as a whole, is fair, balanced and the board has a deep understanding of the as mitigation against key person risk in cases of understandable, and provides the information board’s role in determining BP’s capital sudden and unforeseen departures. necessary for shareholders to assess the company’s allocation process and enabling effective position, performance, business model and strategy. 2. Medium-term planning relates to the orderly decision making. replacement of board and committee members and Further information on BP’s system of risk Performance: the board will continue to senior executives as they retire or change roles. management is outlined in How we manage risk on perform an important monitoring role, making page 68. 3. Finally, long-term planning seeks to equip BP with sure the CEO and the leadership team are held the skills required now and in the future as we to account against the 2020 Annual Plan to implement the long-term strategy. satisfy itself that BP is performing while transforming. The board employs executive search firms when it concludes that this is an effective way of finding People: the board will focus on reviewing suitable candidates. Bernard Looney’s appointment the composition, skills, experience and as chief executive officer (CEO) resulted from a diversity of the board and executive review of both internal and external candidates. The management, as well as the process for nomination and governance committee engaged with executive succession planning talent external headhunters to source external candidates management and development. It will ensure for this purpose of the CEO succession and in that workforce policies and practices are support of the overall process. consistent with the company’s values and the manner in which BP invests and rewards its • Pamela Daley was appointed to the remuneration workforce is designed and implemented in a committee on 30 January 2019. way that supports the company’s long-term • Nils Andersen was appointed to the nomination sustainable success. and governance and remuneration committees upon becoming the chair of the safety, Governance: as outlined on page 83,the environment and security assurance committee on board is developing a new corporate 8 April 2019. Subsequently Nils stepped down as governance framework. This framework will chair of the safety, environment and security reinforce the effectiveness of the internal assurance committee on 13 November 2019 control framework and be more closely aligned following the announcement of his appointment as with BP’s new purpose and ambition. chairman of Unilever. He was succeeded by Melody Meyer as chair of the SESAC on the same day. He resigned from the board and all other committees on 18 March 2020. • Alan Boeckmann and Admiral Frank Bowman stood down as directors and from all committees following the AGM on 21 May 2019. • Bob Dudley retired as group chief executive and a director on 4 February 2020. Bernard Looney succeeded him as chief executive officer on 5 February 2020. • Brian Gilvary announced his retirement in January 2020. He will be succeeded by Murray Auchincloss on 1 July 2020. BP Annual Report and Form 20-F 2019 85


 
Board and committee attendance Nomination and Audit Remuneration Geopolitical governance Chairman’s Non-executive director Board committee SESAC committee committee committee committee Helge Lund 9 (9)  6 (6)  7 (7)  Nils Andersen* 8 (9) 6 (6) 4 (6) 3 (4) 6 (7) Alan Boeckmann 3 (3) 2 (2) 3 (3) 2 (2) 2 (2) Admiral Frank Bowman 3 (3) 2 (2) 2 (2) 2 (2) Dame Alison Carnwath 9 (9) 8 (8) 7 (7) Pamela Daley 9 (9) 7 (8) 8 (8) 6 (7) Sir Ian Davis 9 (9) 8 (9) 4 (4) 6 (6) 7 (7) Professor Dame Ann Dowling 9 (9) 6 (6) 6 (7) Melody Meyer 9 (9) 6 (6)  4 (4) 7 (7) Brendan Nelson 9 (9) 8 (8)  9 (9) 6 (6) 7 (7) Paula Rosput Reynolds 9 (9) 8 (8) 9 (9) 6 (6) 7 (7) Sir John Sawers 9 (9) 6 (6) 4 (4)  6 (6) 7 (7) Executive directors Bob Dudley* 9 (9) Brian Gilvary 9 (9) Chairman of board/committee * Bob Dudley stepped down from the board 4 February; Nils Andersen stepped down from the board 18 March 2020 Background Non-executive director Background and experience Operational Global business People leadership excellence and risk leadership and and organizational Technology, digital Society, politics Finance, risk, Energy markets management governance transformation and innovation and geopolitics trading, etc Dame Alison Carnwath Pamela Daley Sir Ian Davis Professor Dame Ann Dowling Helge Lund Melody Meyer Brendan Nelson Paula Rosput Reynolds Sir John Sawers Diversity At the end of 2019 the board comprised five female directors (2018 5, 2017 3) representing 42% of a 12-person board (46% of an 11 person board at the time BP believes diversity and inclusion is vital to our values, the group strategy and of publication). Our senior management, as defined by the Corporate Governance the success of the company. We understand that better decisions and outcomes Code 2018, and their direct reports comprise 38% female and 18% black, Asian are achieved when we have different people, with differences of opinions from and minority ethnic (BAME) individuals. For details of BP workforce diversity and different backgrounds. inclusion, see Our people on page 47. The board looked at diversity across the We recognize the importance of diversity, whether that be gender, social or group as part of its annual review of HR, capability and talent management. ethnic backgrounds, personal identities, age, religion, physical abilities and more. BP continues to take action to address the broader issue of diversity within These all promote diversity of thought and reduce the risk of groupthink. This the group. approach is followed by the board, senior executives and their direct reports and throughout the BP group. Independence We are committed to attracting the best talent to BP and feel an inclusive and Non-executive directors (NEDs) are expected to be independent in character and respectful work environment, where people are valued as individuals, is key. judgement and free from any business or other relationship that could materially When reviewing the composition of the board, the nomination and governance interfere with exercising that judgement. It is the board’s view that all BP NEDs committee reviews not only the skills and experience of existing board members, are independent. but also their background and diversity. Equally, when seeking to identify candidates to join the board, the committee gives consideration to merits of The board is satisfied that there is no compromise to the independence of, and diversity, including gender, in helping to bring greater balance to the board’s nothing to give rise to conflicts of interest for, those directors who serve together discussion and debates on strategy and associated matters. as directors on other company’s boards or who hold other external appointments. Directors are required to provide the board with sufficient information to evaluate Diversity is considered as an integral part of succession planning. Executive gender their independence and the board keeps the other interests of the NEDs under and ethnicity were taken into consideration as part of the board’s wider executive review and regularly reviews the conflicts of interest register. succession review in 2019, while diversity of thought, deriving from a robust combination of gender, social or ethnic backgrounds, was a prominent factor in the Sir Ian Davis and Brendan Nelson are proposed for re-election notwithstanding selection process, ensuring that BP has a diverse executive pipeline. that they have both served beyond nine years as non-executive directors. 86 BP Annual Report and Form 20-F 2019


 
Corporate governance Following careful consideration, the board believes that both Sir Ian and Brendan Learning, development and inductions continue to provide constructive challenge and robust scrutiny of matters that The board held a number of developmental briefing sessions during the year, in which come before the board and the committees on which they serve. Neither director field experts with a range of academic and practical knowledge were invited to provide has served simultaneously with an executive director for over nine years and the bespoke training sessions, updating them on latest intelligence in their particular area. overall average tenure of the board is similar to that of the average FTSE 100 This develops and optimizes the skill set within the board on evolving technical topics directors’ tenure. In 2018 the board undertook significant refreshment of its and aids conversation around strategic planning. composition with a number of new non-executives and a new chairman. Since assuming the chairmanship of the board at the beginning of the year, Helge Lund The board continued to build its knowledge of the BP business through briefings has led the process to identify and, in October 2019, to announce the and site visits as part of its learning programme, see examples on page 89. appointment of a new group CEO. This was supplemented by a process to identify and, in January 2020, announce the appointment of a new group CFO. No new directors were appointed during 2019. In October 2019, BP announced that Sir Ian and Brendan will play crucial roles in the transition period as these new Bob Dudley would be retiring in 2020, succeeded by Bernard Looney. Bernard’s appointments come into effect, so that BP’s culture and values are not adversely functional and operational knowledge of BP meant that an in-depth induction impacted and that the integrity of its financial reporting is maintained. After programme was not necessary. Nonetheless, Bernard attended a number of town careful consideration, the board is satisfied that Sir Ian and Brendan continue halls with Helge Lund in 2019 to engage with BP people. to demonstrate the qualities of independence in carrying out their duties. Board evaluation Appointment and time commitment Each year, BP completes a review of the board, its committees and of the The chairman and NEDs each have letters of appointment. There is no term limit individual directors. It is generally recommended that such reviews are externally on a director’s service, as BP proposes all directors for annual re-election by led once every three years. Having undertaken an externally facilitated review in shareholders in line with best governance practice. 2018, the 2019 evaluation was facilitated by the incoming company secretary. The process involved interviews with each member of the board based around a The chairman’s letter of appointment sets out the time commitment expected of number of themes, including strategy formulation and portfolio development, the him. The NEDs’ letters of appointment do not set out a fixed time commitment. role of the new chairman and boardroom dynamics, the evolution of BP’s purpose The time required of directors fluctuates depending on the demands of BP and wider stakeholder engagement and the processes in place for managing business and other events. They are expected to allocate appropriate time to BP succession across the organization. Positive feedback was received on the new to perform their duties effectively and make themselves available for all regular chairman’s style and the benefits his inclusive leadership approach had brought to and ad hoc meetings. The board believes that, notwithstanding the NEDs’ other the board during the year. The outputs of this review highlighted three areas of appointments, they have sufficient time to fulfil their BP duties. future focus and attention: Executive directors are normally permitted to take up one board appointment at • Reviewing the composition, skills, experience and diversity of the board and an external listed company, subject to the agreement of the chairman and after the process for executive succession planning talent management and consultation with the company secretary. In February 2020, Brian Gilvary was development. appointed as a non-executive director of Barclays PLC. An announcement in • Ensuring every member of the board has a deep understanding of the board’s respect of Brian’s plans to retire as CFO of BP was made in January 2020. He will role in determining BP’s capital allocation process and enabling effective stay in the role until June 2020 to work with his successor, Murray Auchincloss, decision making. in order to ensure an orderly transition. Given these circumstances and after • Re-shaping the BP corporate governance framework and how this it should consideration by the chairman and company secretary, it was concluded that reinforce the effectiveness of the internal control framework and be more Brian’s role at Barclays PLC was unlikely to be detrimental to his duties as closely aligned with BP’s new purpose and ambition. outgoing CFO. Fees received for an external appointment may be retained by the executive director and are reported in the Directors’ remuneration report (see A new corporate governance framework is in development, supported by the page 100). Neither the chairman nor the senior independent director are outputs from this year’s board review process, with the aim of ensuring that this employed as an executive of the group. new framework is in place by the time that the new organizational structure and reporting arrangements take effect. The board also considers all NED external appointments and considers the impact those requiring significant commitment might have on the director’s ability to UK Corporate Governance Code compliance dedicate sufficient capacity in times of increased demand. In November 2019, the board acknowledged the appointment of Nils Andersen as Chairman of BP complied throughout 2019 with the principles and provisions of the 2018 UK Unilever NV/PLC and accepted his resignation from the BP board. Nils remained Corporate Governance Code except in the following aspects: as a non-executive director until March 2020 to support Melody Meyer who took Provision 33 over as chair of the SESAC in November 2019. The remuneration of the chairman is not set by the remuneration committee. Instead, the chairman’s remuneration is reviewed by the remuneration committee which makes a recommendation to the board as a whole for final approval, within the limits set by shareholders. This wider process enables all board members to discuss and approve the chairman’s remuneration, rather than solely the members of the remuneration committee. Provision 38 The pension arrangements for Bob Dudley and Brian Gilvary reflect the historical retirement benefits available to employees that joined BP at similar times. We recognize that the contribution rates under these arrangements are higher than the majority of the current workforce and as such the pension contributions for the new executive directors, Bernard Looney and Murray Auchincloss, have been aligned with those available to the majority of the workforce. A copy of the 2018 UK Corporate Governance Code is available at frc.org.uk. BP Annual Report and Form 20-F 2019 87


 
How the board has engaged with shareholders, the workforce and other stakeholders Shareholders In 2019 the AGM was held in Aberdeen for the first time, which enabled the board to engage with shareholders who might not have had the Institutional investors opportunity to attend a meeting before. There were two shareholder The company engages with its institutional shareholders through its requisitioned resolutions put to the meeting in 2019. active investor relations programme. The board receives feedback on shareholder views in many ways, particularly through the chairman and All resolutions supported by the board, including the shareholder senior management who meet regularly with shareholders throughout resolution from the Climate Action 100+ group, passed at the meeting, the year, as well as through the results of an independent investor study see page 6. The shareholder resolution from Follow This, which was not and report. supported by the board, did not pass. In September 2019 the chair of the remuneration committee hosted an Each year the board receives a report after the AGM giving a breakdown event for large investors on considerations for the new remuneration of the votes and investor feedback on its voting decisions to inform it on policy which is to be tabled at the 2020 AGM in May (see Remuneration any issues arising. committee report on page 101). The chairman also held one-to-one meetings with major institutional investors during the year, collecting Workforce their views and sharing these with the other board members and the At BP we believe a diverse and engaged workforce is critical to us remuneration committee. successfully delivering our group strategy. BP strives to create an open During the course of the year, senior management met regularly with culture where dialogue between the board, senior management and institutional investors through road shows, group and one-to-one the workforce, which includes a wide range of employees, contractors, meetings, events for socially responsible investors (SRIs), meetings agency and remote workers across all of its geographical locations, is with various investors to discuss environment, social and governance encouraged and expected. ‘Respect’ and ‘courage’ are two of our matters, and oil and gas sector conferences. corporate values that underpin this and are embedded in our performance management system. Employees are informed of In May 2019, the chairman and board committee chairs held their information on matters of concern to them as employees through BP’s annual investor event. This meeting enabled BP’s largest shareholders intranet and local sites, social media channels, town halls, site visits to hear about the work of the board and its committees and for and webinars including topics such as quarterly results, strategy, the investors to share their views directly with non-executive directors. low carbon transition and diversity. We have a number of employee-led See bp.com/investors for investor and strategy presentations, including the forums and business resource groups and aim to build constructive group’s financial results and information on the work of the board and its relationships with labour unions formally representing some employees. committees. Employees are consulted on a regular basis through regular team and Shareholder engagement cycle 2019 one-to-one meetings and through our annual ‘Pulse’ survey. These initiatives are applied where practicable. • Fourth quarter and full year 2018 results and strategy update Q1 Our annual employee ‘Pulse’ survey results for overall engagement, • Investor roadshows with executive management – fourth long-term cultural metrics and listening and involvement have shown quarter and full year 2018 results a steady and sustained improvement over this period, see page 47. • BP Energy Outlook presentation • BP Annual Report 2018 launch With such a diverse and globally distributed workforce, we believe • BP Sustainability Report 2018 launch ongoing dialogue through multiple channels is the best way for the Q2 • Chairman and board committee chairs meeting with investors board and management to engage with our people and listen to what • UKSA (retail shareholders’) meeting with the chairman they have to say. The board is firmly of the opinion that face-to-face • First quarter 2019 results presentation interaction with our people is the best way to get direct feedback and • Annual general meeting an understanding of the important issues of the workforce, as well as • BP Statistical Review of World Energy launch deepen the board’s operational understanding. Only by visiting and Q3 • Second quarter 2019 results presentation meeting with employees from all aspects of the business can the board • Investor roadshows with executive management following fully assess the culture and tone of BP. The board held a number of site 2Q results visits in 2019 to a number of different locations, including Busan, Kuala Q4 • Third quarter 2019 results presentation Lumpur, Singapore, Aberdeen and Denver. A number of non-executive • Investor roadshows with executive management following directors also took opportunities to engage directly with local workforce 3Q results at various BP offices around the globe. As part of Helge Lund’s first year as chairman, he conducted town hall meetings with the workforce in Washington DC, Baku, Rotterdam, Beijing, Houston and London. Retail investors BP held an event for retail investors in conjunction with the UK The board and its committees are committed to meeting with a Shareholders’ Association (UKSA) in 2019. The chairman and a wide range of employees across the entire workforce and at times representative from investor relations gave presentations on BP’s exclude senior management from meetings to get the unfettered annual results, strategy and the work of the board. Shareholders’ opinions of their teams. An example of this was the SESAC’s visit questions were focused on BP’s activities and performance. to a new LNG vessel off the coast of South Korea immediately prior to its maiden voyage. This was the first shipping visit of its kind, AGM during which members of the SESAC held private informal meetings Voting levels were relatively consistent at 67.1% (of issued share capital, with the ship’s crew, away from senior officers. The crew highlighted including votes cast as withheld) in 2019, compared to 67.3% in 2018. a couple of potential improvements, the SESAC members agreed The lower voting level of 50.8% in 2017 was due to the negative impact and, as a consequence, certain improvements were undertaken by of stock lending. shipping leadership. 88 BP Annual Report and Form 20-F 2019


 
Corporate governance As an example of how engagement has directly contributed to shaping scheme to more employees across the group. The board will dedicate policy, in 2019 we launched a new global commitment to minimum time to specifically review the outputs from the various channels of parental leave for new parents. This policy was established through workforce engagement at board sessions. engagement with our employee-led business resource groups and The board believes the existing approaches and mechanisms described employee forums, including the working parents’ forum. above enable comprehensive two-way engagement opportunities BP invests in its workforce through a number of employee share with BP’s workforce, and as such, is satisfied that these are effective ownership schemes and plans. For example, we operate ‘ShareMatch’ alternatives to the proposed workforce engagement methods set out in more than 50 countries. The plan matches BP shares purchased by in Provision 5 of the Code. Given the current period of transition within our employees. We also operate a group-wide discretionary share plan, BP, the board will continue to review its engagement mechanisms to which rewards employees with participation in BP’s equity at different seek new ways to strengthen existing workforce forums to ensure a levels globally and is linked to BP performance. continuing robust relationship and collaboration. As we look to achieve our purpose, ambition and aims – engagement Other stakeholders with our global talent pool is as critical as ever. BP wants to recruit, retain and reward people from wide-ranging and diverse backgrounds For details of how the board complied with Section 172 of the who can support us in the global transition to a low carbon energy Companies Act 2006 and how it further engaged with other system. We will continue to expand our existing networks of stakeholders, see page 66. communication to foster a listening culture that enables the board and management to gain meaningful insight directly from our colleagues around the world, and respond accordingly. For instance, following feedback from BP’s working parents’ forum, agile working and parental leave policies have been improved, and in response to growing demand 300 from our workforce, BP introduced a way for some employees to offset employees attended their personal carbon emissions and is working towards expanding this the town hall presented by Helge Lund and Bob Dudley. Site visits Denver The board visited BP’s Denver office in September 2019 where they hosted Aberdeen several employee events. A town hall Following the AGM in Aberdeen, the Members of the board had further took place, led by Helge Lund, with the board held a number of engagement engagement with the workforce at the rest of the board present to talk with activities. Helge Lund and Bob Dyce office, observing new agile ways the workforce and answer questions Dudley led a town hall which was of working and gaining technological over a community lunch with over 150 attended by over 300 employees at insight into new initiatives. Members employees in attendance. The board was BP’s Dyce office and streamed live to of the board also visited the Clair also introduced to emerging talent in the the offshore teams in the North Sea. Ridge platform, where they learnt region and met with senior leadership. The board hosted a business more about operations offshore. As part of the suite of events the board reception, inviting members of the They discussed the safety agenda also met with external stakeholders local community, local political and onsite, visited the drilling floor and at a business reception in the city. government officials, employees and spoke with employees directly to local businesses. better understand the culture when 150 working offshore. employees attended a community lunch with the board. South Korea The SESAC visited BP’s shipping function and spent a day at sea in Kuala Lumpur and Singapore South Korea on board a new LNG Members of the audit committee vessel. They experienced the vessel visited the global business services in a period of ‘shakedown’ ahead of in Kuala Lumpur. Touring BP’s going into service. The committee offices gave valuable insight into observed safety processes in action the workforce which has been and were able to discuss physical responsible for centralizing and and cyber security planning. standardizing key business processes Members of the SESAC met with across the organization and sea farers without management transforming processes end-to-end. present to discuss life working on The directors then visited the IST board the vessels. team in Singapore where they met “The committee members with senior leadership and the wider workforce at BP’s offices. noted strong morale.” BP Annual Report and Form 20-F 2019 89


 
Nomination and governance committee Role of the committee The committee seeks to ensure an orderly succession of candidates for directors, the company secretary and senior executives and oversees corporate governance matters for the group. Key responsibilities • Identify, evaluate and recommend candidates for appointment or reappointment as directors. • Review the outside directorships/commitments of the Non-Executive Directors (NEDs). • Review the mix of knowledge, skills, experience and diversity of the board for the orderly succession of directors. • Identify, evaluate and recommend candidates for appointment as company secretary. • Review developments in law, regulation and best practice relating to corporate governance and make “The committee dedicated a significant recommendations to the board on appropriate action, including on Environmental, Social and amount of time to its role in 2019 and this Governance matters. will continue as BP implements its new Membership purpose, ambition and aims.” Helge Lund Member since July 2018 and chairman since September 2018 Helge Lund Alan Boeckmann Member Committee chair (resigned April 2019) Sir Ian Davis Member Nils Andersen Member (resigned March 2020) Chairman’s introduction Brendan Nelson Member Paula Reynolds Member The committee dedicated a significant amount of time to its role in 2019, a Sir John Sawers Member year which was vitally important for BP and the future direction of the company. This will continue as BP implements its new purpose, ambition Meetings and attendance and aims. The committee met six times in 2019. All members attended each meeting with the exception of Nils During the year the committee led the search for a new CEO to succeed Andersen who missed two meetings owing to prior Bob Dudley. This involved agreeing the leadership credentials and desired commitments. experiences for the executive role. External headhunters were engaged to support the process and to identify candidates with the required skills, Activities during the year experience and diversity credentials. After a thorough and transparent 2019 saw the workload and required time commitment of committee members increase significantly as the process, Bernard Looney was identified as the best suited candidate and committee continued to monitor the composition and his appointment was announced in October 2019. skills of the board, with foresight across the three The committee’s focus on executive succession planning continued, and succession planning horizons, as part of the process BP announced Murray Auchincloss as Brian Gilvary’s successor as CFO in of developing a reinvented BP. January 2020. During the year, it supported the board in the selection of the new CEO, which was announced Finally, a review was undertaken by the committee of the new leadership in October 2019, and the new CFO, which was team which was announced in February 2020. announced in January 2020. Regular updates were As part of the selection and appointment process for each of these roles, provided to the chairman’s committee to ensure that all NEDs were kept informed of the pending changes candidates completed extensive leadership assessment testing and were to BP’s executive leadership. The committee also asked to give insight to their aims for BP’s future. reviewed the wider executive team’s succession During the year the committee also undertook a review of the executive planning, considered the implications of the new UK succession pipeline, considering the process, emerging talent and Corporate Governance Code 2018 and made recommendations to the board following the leadership role key-person-risks. As part of this review, the committee results of the external board evaluation in 2018. took into account the importance of diverse talent pipelines and the current We will continue to focus on ensuring that the and future skill sets required to help the company achieve its strategy board’s composition is strong and diverse and to The committee discussed the implications of the UK Corporate Governance promote best practice governance in the boardroom and throughout the company. Code 2018 and how to maintain the highest standards of governance. Lastly, the committee considered the findings of the 2018 board evaluation and made proposals to the board on new ways of working. Together with the results from the 2019 board review, these changes are being incorporated into a new corporate governance framework. Helge Lund Committee chair 90 BP Annual Report and Form 20-F 2019


 
Corporate governance Audit committee Role of the committee The committee monitors the effectiveness of the group’s financial reporting, systems of internal control and risk management and the integrity of the group’s external and internal audit processes. Key responsibilities • Monitoring and obtaining assurance that the process to identify, manage and mitigate principal and emerging financial risks are appropriately addressed by the chief executive officer and that the system of internal control is designed and implemented effectively in support of the limits imposed by the board (‘executive limitations’), as set out in the BP board governance principles. • Reviewing financial statements and other financial disclosures and monitoring compliance with relevant legal and listing requirements. “The committee robustly challenges • Reviewing the effectiveness of the group audit function, BP’s internal financial controls and reports...enabling it to determine systems of internal control and risk management. whether BP’s financial reporting is • Overseeing the appointment, remuneration, fair, balanced and understandable.” independence and performance of the external auditor and the integrity of the audit process as a whole, including the engagement of the external Brendan Nelson auditor to supply non-audit services to BP. Committee chair • Reviewing the systems in place to enable those who work for BP to raise concerns about possible improprieties in financial reporting or other issues and for those matters to be investigated. Chairman’s introduction Membership During 2019, in keeping with the new UK Corporate Governance Code Brendan Nelson Member since November 2010 2018, the committee continued its focus on monitoring the integrity of and chair since April 2011 the group’s financial reporting and risk management systems. Each Dame Alison Member quarter the committee robustly challenges the reports from management Carnwath and the external auditor highlighting significant accounting issues and Pamela Daley Member judgements, enabling it to determine whether BP’s financial reporting is Paula Reynolds Member ‘fair, balanced and understandable’. Throughout the year, the committee Brendan Nelson is chair of the audit committee. He reviewed the group’s principal and emerging risks, including scenarios was formerly vice chairman of KPMG and president of which could impact the company’s long-term viability which also helped the Institute of Chartered Accountants of Scotland. to inform the committee’s debates on what would constitute significant Currently he is chairman of the group audit committee failings and weaknesses in our system of internal control. of NatWest Markets plc and a member of the Financial Reporting Review Panel. The board is satisfied that he In 2019 the committee focused on the effectiveness of a number of is the audit committee member with recent and group functions including integrated supply and trading, treasury, tax, relevant financial experience as outlined in the UK information technology and security. We also received presentations Corporate Governance Code and competence in regarding, and reviewed performance of, both the Upstream and accounting and auditing as required by the FCA’s Downstream segments and regularly considered climate change risk Corporate Governance Rules in DTR7. It considers that affecting the whole business. These reviews helped inform the the committee as a whole has an appropriate and committee of the work and future plans of those functions and experienced blend of commercial, financial and audit expertise to assess the issues it is required to address, businesses and enabled the committee to understand the key risks and as well as competence in the oil and gas sector. The challenges (and associated mitigations and lessons learned) faced by board also determined that the audit committee meets each of them. In addition, the committee carried out reviews into the the independence criteria provisions of Rule 10A-3 of group risks of financial liquidity, cyber security and compliance with the US Securities Exchange Act of 1934 and that business regulations. Brendan may be regarded as an audit committee financial expert as defined in Item 16A of Form 20-F. There were no changes to the committee membership during the year and the skills and experience of our committee members remain strong, Meetings and attendance enabling the committee to continue to perform effectively. There were eight committee meetings in 2019. All members attended each meeting with the exception of Brendan Nelson Pamela Daley who was absent from the September Committee chair meeting owing to prior commitments. Regular attendees at the meetings include the chief financial officer, group controller, chief accounting officer, group head of audit, group general counsel and external auditor. BP Annual Report and Form 20-F 2019 91


 
Activities during the year The committee reviewed the group’s programme of controls and contingencies for managing this risk, including enhanced approaches to monitor the risk in light of business evolution (such as an increase in How the committee reviewed financial disclosure venturing), as well as other internal and external trends. The committee also The committee reviewed the quarterly, half-year and annual financial reviewed key areas of BP’s legal function that advise on compliance matters. statements with management, focusing on the: Cyber security risk: including inappropriate access to or misuse of • Integrity of the group’s financial reporting process. information and systems and disruption of business activity. • Clarity of disclosure. The committee reviewed ongoing developments in the cyber security • Compliance with relevant legal and financial reporting standards. landscape, including events in the oil and gas industry and within BP • Application of accounting policies and judgements. itself. The review focused on a strengthened approach in order to As part of its review, the committee received quarterly updates from manage the ever increasing threat of cyber risk and maintain cyber management and the external auditor in relation to accounting judgements security, as the focus on a digital transformation across BP continues. and estimates including those relating to the Gulf of Mexico oil spill, Financial liquidity: including the risk associated with external market recoverability of asset carrying values and other matters. The committee conditions, supply and demand and prices achieved for BP’s products keeps under review the frequency of results reporting during the year. which could impact financial performance. The committee reviewed the assessment and reporting of longer-term The committee reviewed the key assumptions, and underlying viability, systems of risk management and internal control, including the judgements, used to manage the group’s liquidity, and capital reporting and categorization of risk across the group and the examination investments (including appraisal, effectiveness and efficiency). of what might constitute a significant failing or weakness in the system of internal control. It also examined the group’s modelling for stress testing different financial and operational events, and considered whether the How other reviews were undertaken period covered by the company’s viability statement was appropriate. Other reviews undertaken in 2019 by the committee included the The committee considered the BP Annual Report and Form 20-F 2018 and following, and in each case where the committee received segment and assessed whether the report was fair, balanced and understandable and function reviews, each reported on strategy, performance, capability and provided the information necessary for shareholders to assess the group’s risk management as well as on their first, second and third lines of position and performance, business model and strategy. In making this defence policies as appropriate: assessment, the committee examined disclosures during the year, • Non-operated joint venture: including management of exposure to discussed the requirement with senior management, confirmed that financial, reputational and regulatory risks. representations to the external auditors had been evidenced and reviewed • Upstream: including strategy, business model, financial performance reports relating to internal control over financial reporting. The committee and risk management. made a recommendation to the board, which in turn reviewed the report as • Downstream: including strategy, performance, capability and risk a whole, confirmed the assessment and approved the report’s publication. management. Other disclosures reviewed included: • Tax: including strategy, performance, key drivers of the group’s effective tax rate, the global indirect tax environment, the tax • Oil and gas reserves. modernization programme and the evolving approach to management • Pensions and post-retirement benefits assumptions. of key risks. • Risk factors. • Other businesses and corporate: including overview of the • Legal liabilities. businesses and functional activities, financial performance and • Tax strategy. financial control framework. • Going concern. • Treasury: including performance, capability, and risk management. • IFRS 16 (lease accounting). • Integrated supply and trading: including strategy, performance, capability and risk management. How risks were reviewed • Capability and succession in BP’s finance function, including the group’s finance summary of change programme. • Effectiveness of investment: annual review of performance of The principal risks allocated to the audit committee for monitoring in projects with sanctioned capital over a certain threshold. 2019 included those associated with: • Assessment of financial metrics for executive remuneration: Trading activities: including risks arising from shortcomings or failures consideration of financial performance for the group’s 2019 annual in systems, risk management methodology, internal control processes cash bonus scorecard and performance share plan, including or employees. adjustments to plan conditions and non-operating items. • Internal controls: assessments of management’s plans to remediate In reviewing this risk, the committee focused on external market the external auditor’s findings. developments and how BP’s trading function had responded to a rapidly • Information technology and security: including an update on the changing environment, including modernizing its control environment transformation of the function to enable the digitization and policies to strengthen its compliance and control culture. The committee modernization of the firm at pace. further considered updates in the integrated supply and trading function’s risk management programme, including compliance with regulatory developments, activities in response to cyber threats, and How internal control and risk management efficiencies derived from more collaborative ways of working across was assessed group functions and businesses and the use of digital technologies. Group audit Compliance with business and regulations: including ethical The committee received quarterly reports on the findings of group audit in misconduct or breaches of applicable laws or regulations that could 2019, including their assessment of issues raised in previous years, damage BP’s reputation, adversely affect operational results and/or especially those relating to IT access controls. The committee met shareholder value and potentially affect BP’s licence to operate. 92 BP Annual Report and Form 20-F 2019


 
Corporate governance privately with the group head of audit and key members of his leadership How the committee assessed audit effectiveness team. The committee monitored and reviewed the effectiveness of Management undertook a survey which comprised questions across internal audit and considered whether it had the appropriate level of five main criteria to measure the auditor’s performance: independence and its importance in assessing the company culture. • Robustness of the audit process. Training • Independence and objectivity. The committee considered market updates and developments throughout • Quality of delivery. the year including the CMA statutory audit market study, the Brydon • Quality of people and service. Review and the Kingman Review. It received technical updates from the • Value added advice. chief accounting officer on developments in financial reporting and The results of the survey indicated that the external auditor’s performance accounting policy, in particular an update on IFRS 16 ‘Leases’ and the was broadly comparable with the previous year. Areas with high scores and stakeholder engagement disclosures required under The Companies favourable comments included quality of accounting and auditing judgement (Miscellaneous Reporting) Regulations 2018 for the 2019 accounting year, and robust stance on issues. Areas for improvement were identified but and amendments to IFRS 9 ‘Financial Instruments’ for interest rate none impacted on the effectiveness of the audit, mostly in recognition of it benchmark reform from the start of 2020. having been Deloitte’s first year in role. The results of the survey were GBS and integrated supply and trading visit discussed with Deloitte for consideration in their 2019 audit approach. In March the committee visited BP’s global business services (GBS) The committee held private meetings with the external auditor during centre in Kuala Lumpur. During the visit they met with the head of country the year and the committee chair met separately with the external and his leadership team who presented GBS strategy to 2025 enabling auditor and group head of audit at least quarterly. modernization of BP through accelerated standardization, digital solutions and process transformation – underpinned by a global functional operating The effectiveness of the external auditor is evaluated by the audit model. They also met with the Procurement and HR services teams committee. The committee assessed the auditor’s approach to providing including an interactive session with local business resource colleagues. audit services. On the basis of such assessment, the committee concluded that the audit team was providing the required quality in In March the committee also visited BP’s integrated supply and trading relation to the provision of the services. The audit team had shown the (IST) function in Singapore, meeting with senior leaders to discuss the necessary commitment and ability to provide the services together with role of this function in BP, review of the risks and controls processes a demonstrable depth of knowledge, robustness, independence and and a floor walk through key functions and the trading desks. See page objectivity as well as an appreciation of complex issues. The team had 89 for more information on these visits by the committee. posed constructive challenge to management where appropriate. In October, the committee held its meeting at BP’s IST function in London The committee specifically considered the findings of the FRC’s Audit and conducted its annual tour, which covered global oil strategy, integrated Quality Review team’s review of Deloitte’s 2018 audit. The committee gas and power, associated key risks and risk and compliance management noted the single observation raised and Deloitte’s proposed response and how the function was responding to a fast evolving market by using thereto. Overall the committee noted the review did not raise any digital tools to drive efficiencies. The following trading desks were visited concerns in respect of audit quality. by the committee: treasury trading, global environmental products and integrated gas and power. How the auditor reappointment and independence was assessed The committee considers the reappointment of the external auditor each External audit year before making a recommendation to the board. The committee How the committee assessed audit risk assesses the independence of the external auditor on an ongoing basis and The external auditor set out its audit strategy for 2019, identifying significant the external auditor is required to rotate the lead audit partner every five audit risks to be addressed during the course of the audit. These included: years and other senior audit staff every five to seven years. No partners or • Focus on the consistency of management’s judgements and senior staff associated with the BP audit may transfer to the group. estimates within BP’s strategy in the context of climate change. How the committee had oversight of non-audit services • Responding to the risk of material misstatements in the group, by The audit committee is responsible for BP’s policy on non-audit services way of substantive testing and the use of detailed data analytics. and the approval of non-audit services. Audit objectivity and independence • The risk of impairment of upstream oil and gas property, plant and is safeguarded through the prohibition of non-audit tax services and the equipment, and exploration and appraisal assets. limitation of audit-related work which falls within defined categories. BP’s • Accounting for structured commodity transactions in the integrated policy on non-audit services states that the auditor may not perform supply and trading function. non-audit services that are prohibited by the SEC, Public Company • Valuation of level 3 financial instruments held by the integrated supply Accounting Oversight Board (PCAOB), International Auditing and Assurance and trading function. Standards Board (IAASB) and the UK Financial Reporting Council (FRC). • Management override of controls. The audit committee approves the terms of all audit services as well as The committee received updates during the year on the audit process, permitted audit-related and non-audit services in advance. The external including how the auditor had challenged the group’s assumptions on auditor is considered for permitted non-audit services only when its these issues. expertise and experience of BP is important. How the committee assessed audit fees Approvals for individual engagements of pre-approved permitted services The audit committee reviews the fee structure, resourcing and terms of below certain thresholds are delegated to the group controller or the chief engagement for the external auditor annually; in addition it reviews the financial officer. Any proposed service not included in the permitted non-audit services that the auditor provides to the group on a quarterly basis. services categories must be approved in advance either by the audit Fees paid to the external auditor for the year were $49 million (2018 $42 committee chairman or the audit committee before engagement million), of which 2% was for non-audit assurance work (see Financial commences. The audit committee, chief financial officer and group statements – Note 36). The audit committee is satisfied that this level of controller monitor overall compliance with BP’s policy on audit-related and fee is appropriate in respect of the audit services provided and that an non-audit services, including whether the necessary pre-approvals have effective audit can be conducted for this fee. Non-audit or non-audit been obtained. The categories of permitted and pre-approved services are related assurance fees were $1 million (2018 $2 million). Non-audit or outlined in Principal accountant’s fees and services on page 322. non-audit related services consisted of other assurance services. BP Annual Report and Form 20-F 2019 93


 
How accounting judgements and estimates were considered and addressed Key judgements and estimates Audit committee activity Conclusions/outcomes in financial reporting Exploration and appraisal intangible assets BP uses technical and commercial judgements when • Reviewed exploration write-offs as part of the • Exploration write-offs totalling $0.6 billion were accounting for oil and gas exploration, appraisal and group’s quarterly due diligence process. recognized during the year. development expenditure and in determining the • Received the output of management’s annual • Exploration intangibles totalled $14.1 billion at group’s estimated oil and gas reserves. intangible asset certification process used to 31 December 2019. ensure accounting criteria to continue to carry the • BP believes it is appropriate to continue to Judgement is required to determine whether it is exploration intangible balance are met. capitalize the costs relating to intangible assets, on appropriate to continue to carry intangible assets • Received briefings on the status of upstream the ‘watch-list’. related to exploration costs on the balance sheet. intangible assets, including the status of items on the intangible assets ‘watch-list’. Recoverability of asset carrying values Determination as to whether and how much an • Held an in-depth review of BP’s policy and • The group’s long-term price assumption for Brent asset, cash generating unit (CGU) or group of CGUs guidelines for compliance with oil and gas oil, was reduced by $5 from 2018 assumptions containing goodwill is impaired involves management reserves disclosure regulation, including the and was unchanged for Henry Hub gas. judgement and estimates on uncertain matters such group’s reserves governance framework • The period over which the group’s price as future commodity prices, discount rates, and controls. assumptions transition from recent market prices production profiles, reserves and the impact of • Reviewed the group’s oil and gas price to the long-term assumption was unchanged at inflation on operating expenses. assumptions. five years for Brent oil and increased from 5 to 12 • Reviewed the group’s discount rates for years for Henry Hub gas from 2018. Reserves estimates based on management’s impairment testing purposes. • A sensitivity analysis estimating the effect of assumptions for future commodity prices have a • Upstream impairment charges, reversals and reductions in the price assumptions has been direct impact on the assessment of the recoverability ‘watch-list’ items were reviewed as part of the disclosed in Note 1. of asset carrying values reported in the financial quarterly due diligence process. • The methodology for determining the group’s statements. discount rates used for impairment testing was enhanced, resulting in country-specific rates being applied. • Impairments of $6.6 billion were recorded in the year, net of impairment reversals, primarily relating to decisions to dispose of certain assets. Investment in Rosneft Judgement is required in assessing the level of • Reviewed the judgement on whether the group • BP has retained significant influence over Rosneft control or influence over another entity in which the continues to have significant influence over throughout 2019 as defined by IFRS. group holds an interest. Rosneft, including following Bob Dudley stepping down from his role as BP group chief executive. BP uses the equity method of accounting for its • Considered IFRS guidance on evidence of investment in Rosneft and BP’s share of Rosneft’s oil participation in policy-making processes. and natural gas reserves is included in the group’s • Received reports from management which estimated net proved reserves of equity-accounted assessed the extent of significant influence, entities. including BP’s participation in decision-making. The equity-accounting treatment of BP’s 19.75% interest in Rosneft continues to be dependent on the judgement that BP has significant influence over Rosneft. 94 BP Annual Report and Form 20-F 2019


 
Corporate governance Key judgements and estimates Audit committee activity Conclusions/outcomes in financial reporting Derivative financial instruments For its level 3 derivative financial instruments, BP • Received a briefing on the group’s trading risks • BP considers that longer-term contracts to buy or estimates their fair values using internal models due and reviewed the system of risk management and sell LNG do not meet the definition of a derivative to the absence of quoted market pricing or other controls in place. under IFRS. BP has assets and liabilities of $5.5 observable, market-corroborated data. Judgement • The committee annually reviews the control and $4.4 billion respectively, recognized on the may be required to determine whether contracts to process and risks relating to the trading business. balance sheet for level 3 derivative financial buy or sell commodities meet the definition of a instruments at 31 December 2019, mainly relating derivative, in particular longer-term LNG contracts. to the activities of the integrated supply and trading function (IST). • BP’s use of internal models to value certain of these contracts has been disclosed in Note 30. Provisions BP’s most significant provisions relate to • Received briefings on decommissioning, • Decommissioning provisions of $15.1 billion decommissioning, environmental remediation environmental, asbestos and litigation provisions, were recognized on the balance sheet at and litigation. including those related to the Gulf of Mexico oil 31 December 2019. spill. These included the requirements, • The discount rate used by BP to determine the The group holds provisions for the future governance and controls for the development balance sheet obligation at the end of 2019 was decommissioning of oil and natural gas production and approval of cost estimates and provisions a nominal rate of 2.5% – based on long-dated facilities and pipelines at the end of their economic in the financial statements. US government bonds – a reduction of 0.5% lives. Most of these decommissioning events are • Reviewed the group’s discount rates for from 2018. many years in the future and the exact requirements calculating provisions. • The impact of applying the revised rate has that will have to be met when a removal event occurs been disclosed. are uncertain. Assumptions are made by BP in relation to settlement dates, technology, legal requirements and discount rates. The timing and amounts of future cash flows are subject to significant uncertainty and estimation is required in determining the amounts of provisions to be recognized. Pensions and other post-retirement benefits Accounting for pensions and other post-retirement • Reviewed the group’s assumptions used to • The method for determining the group’s benefits involves making estimates when measuring determine the projected benefit obligation at assumptions remained largely unchanged from the group’s pension plan surpluses and deficits. the year end, including the discount rate, rate 2018. The values of these assumptions and a These estimates require assumptions to be made of inflation, salary growth and mortality levels. sensitivity analysis of the impact of possible about uncertain events, including discount rates, changes on the benefit expense and obligation inflation and life expectancy. are provided in Note 24. • At 31 December 2019, surpluses of $7.1 billion and deficits of $8.6 billion were recognized on the balance sheet in relation to pensions and other post-retirement benefits. BP Annual Report and Form 20-F 2019 95


 
Safety, environment and security assurance committee (SESAC) Committee overview Role of the committee The role of the SESAC is to look at the processes adopted by BP’s executive management to identify and mitigate significant non-financial risk. This includes monitoring the management of personal and process safety risk, security and environment risks and receiving assurance that processes to identify and mitigate such non-financial risks are appropriate in their design and effective in their implementation. Key responsibilities The committee receives specific reports from the business segments and functions, which include, but are not limited to, the safety and operational risk function, shipping, group audit and group security. The SESAC can access any other independent advice and counsel it requires on an unrestricted basis. “The committee has continued to The SESAC and audit committee worked together, focus on working with executive through their chairs and secretaries, to ensure that management to drive safe and agendas did not overlap or omit coverage of any key risks during the year. reliable operations.” Meetings and attendance Melody Meyer There were six committee meetings in 2019. All Committee chair directors attended every meeting for which they were eligible. In addition to the committee members, all SESAC meetings were attended by the group chief executive, the executive vice president for safety Chairman’s introduction and operational risk (S&OR) and the head of group At the end of 2019 I took the role of chair for the committee. Alan audit or his delegate. The external auditor has access to the chair and secretary to the committee as Boeckmann retired from the board in April 2019 and Nils Andersen required. The group general counsel also attended replaced him as the committee chair. In November last year, Nils some of the meetings. At the conclusion of each announced his intention to step down from the board in March 2020 meeting the committee scheduled private sessions and I replaced Nils as SESAC chair with immediate effect. for the committee members only, without the presence of executive management, to discuss any During 2019 the committee has continued to focus on working with issues arising and the quality of the meeting. The executive management to drive safe and reliable operations. As part of group chief executive receives invitations to join the the committee’s review of the executives’ management of the highest private meetings on an ad hoc basis and at least once priority non-financial group risks assigned to SESAC we provide a year the head of group audit is invited to a private constructive challenge and oversight. The risks under our remit remained meeting with the committee. the same as for 2018: marine, wells, pipelines, explosion or release at Membership facilities, major security incidents and cyber security in the process control network. The committee receives reports on each of these risks Melody Meyer Member since May 2017 and and monitors their management and mitigation. chair since November 2019 Nils Andersen Member In 2019 the committee reviewed the BP Sustainability Report 2018. It (resigned March 2020) also reviewed work practices in BP in relation to and following publication Alan Boeckmann Member of the company’s Modern Slavery Act (MSA) statement in 2019. The (retired April 2019) committee will continue to review progress in developing and embedding Admiral Frank Member practices to mitigate the risk of modern slavery and related human rights. Bowman (retired May 2019) Professor Dame Member In March, members of the committee visited the shipping function as one Ann Dowling of the new LNG vessels went into service from the building yard in Sir John Sawers Member Busan, South Korea. This afforded the committee time with the crew on board the vessel, employees in the office and with contractors in the shipyard. See page 89 for more details. The level of access into the operations on such visits gives the directors first-hand, direct insight. This framework provides an opportunity for meaningful and open dialogue with the local site teams, allowing the committee to better fulfil its obligations. Melody Meyer Committee chair 96 BP Annual Report and Form 20-F 2019


 
Corporate governance Activities during the year The board also undertook a site visit. This was not a SESAC site visit but, nevertheless, safety and non-financial risk matters were covered System of internal control and risk management during the visit to Clair Ridge in May 2019. Corporate reporting The review of operational risk and performance forms a large part of the committee’s agenda. Group audit provided quarterly reports on its The committee oversaw the BP Sustainability Report 2018. The assurance work and its annual review of the system of internal control committee reviewed the content and worked with the external auditor and risk management. with respect to its assurance of the report. The committee also received regular reports from the group chief executive and vice president for S&OR on operational risk, including regular reports prepared on the group’s health, safety, security and environmental performance and operational integrity. These included meeting-by-meeting measures of personal and process safety, environmental and regulatory compliance, security and cyber risk analysis, as well as quarterly reports from group audit. In addition, the group auditor regularly met in private with the chairman and other members of the committee over the course of the year. During the year the committee received separate reports on the company’s management of risks relating to: • Marine. • Wells. • Pipelines. • Explosion or release at our facilities. • Major security incidents. • Cyber security (process control networks). The committee reviewed these risks and their management and mitigation in depth with relevant executive management. The committee reviewed the 2019 forward programme for the group audit function. Site visits In March members of the committee made a physical visit to the shipping function for the first time. While the committee has regular access to senior leaders in the function, attempting to visit the vessels needed careful planning. With the launch of six new LNG vessels between October 2018 and April 2019, the committee took the opportunity to visit, and arrived as the fifth LNG vessel was in its period of ‘shakedown’ – a period post-launch and pre-service, when checks are made onboard the ship. The visit, hosted by the chief operating officer of shipping, was made to The British Mentor while it was at sea, just off the coast of South Korea. Committee members went on board and were met by the ship’s crew, undertook a thorough tour, and later met with various seafarers, without the captain present, to get a sense of the culture on board. The committee also spent time at the office and held an informal town hall and lunch to hear from employees. The following day the committee was also able to visit the shipyard which had built the LNG vessels, and meet with management. The committee members were able to take a tour of a LNG vessel in the building phase and see the technology used in the construction of the vessel at various stages of completion. The committee spent time with the shipyard owners, important stakeholders in the programme of delivery. In respect of the visit, committee members and other directors received briefings on operations, the status of conformance with BP’s operating management system, key business and operational risks and risk management and mitigation. Committee members reported back in detail about the visit to the committee and subsequently to the board. See page 89 for further details. BP Annual Report and Form 20-F 2019 97


 
Geopolitical committee Role of the committee The committee monitors the company’s identification and management of geopolitical risk. Key responsibilities • Monitor the company’s identification and management of major and correlated geopolitical risk and consider reputational as well as financial consequences. • Review BP’s activities in the context of political and economic developments on a regional basis and advise the board on these elements in its consideration of BP’s strategy and the annual plan. • Major geopolitical risks are those brought about by social, economic or political events that occur in countries where BP has material investments. • Correlated geopolitical risks are those brought about by social, economic or political events that occur in “The committee continued to address countries where BP may or may not have a presence but that can lead to global political key geopolitical matters and their instability. potential impact on BP.” Membership Sir John Sawers Sir John Sawers Member since September 2015 Committee chair and chair since April 2016 Nils Andersen Member (resigned March 2020) Admiral Frank Member Bowman (resigned May 2019) Sir Ian Davis Member Melody Meyer Member Meetings and attendance Chairman’s introduction The chairman and group chief executive regularly attend committee meetings. The chief executive of The work of the geopolitical committee in 2019 continued to address key Alternative Energy and executive vice president, geopolitical matters and their potential impact on BP and how these regions and the head of government and political evolved during the year. As chair of this committee I also attended all of affairs attend meetings as required. The committee the international advisory board (IAB) meetings in 2019. Now that the IAB met four times during the year. All directors attended has been disbanded, this committee will look to take some of the IAB’s each meeting that they were eligible to attend, with the exception of Nils Andersen who missed one remit and we will report next year on how that evolves. In May 2019, meeting due to a prior commitment. Admiral Frank Bowman stood down from the committee. Nils Andersen left the committee upon his resignation from the board in March 2020. I would like to thank Frank and Nils, both of whose contributions were much valued. Other board members joined our meetings from time to time. Sir John Sawers Committee chair Activities during the year The committee discussed BP’s involvement in the key countries where it has existing investments or is considering investment. These included the EU, Mexico, Brazil, Algeria, Libya, Egypt, Iraq, Oman and The Gambia. The committee also discussed the potential impact of Brexit on BP, and the negotiations between the UK and the EU on their future relationship. It reviewed the geopolitical background to BP’s global investments, the global politics of climate change, the geopolitics of gas, Russian energy exports, OPEC, the USA-China trade war, and developments in the Persian Gulf. 98 BP Annual Report and Form 20-F 2019


 
Corporate governance Chairman’s committee Role of the committee To provide a forum for matters to be discussed by the non-executive directors. Key responsibilities • Evaluate the performance and the effectiveness of the chief executive officer. • Review the structure and effectiveness of the business organization. • Review the systems for senior executive development and determine succession plans for the chief executive officer, executive directors and other senior members of executive management. • Determine any other matter that is appropriate to be considered by non-executive directors. • Opine on any matter referred to it by the chairman of any committees comprised solely of non- executive directors. “The committee spent significant time Membership discussing the development and The committee is made up solely of non-executive progression of BP’s purpose, directors, each of whom is appointed to the committee upon their appointment to the board. expanding upon what the purpose Meetings and attendance actually means for the company and The committee met seven times in 2019. Nils how it impacts BP’s stakeholders.” Andersen, Pamela Daley and Professor Dame Ann Dowling each missed one meeting during the year, all Helge Lund other directors attended every meeting for which they Committee chair were eligible. Chairman’s introduction The chairman’s committee worked closely with the nomination and governance committee on the selection process of the new group CEO and CFO, receiving regular updates and providing feedback on the succession planning. The committee also spent significant time discussing the development and progression of BP’s purpose, expanding upon what the purpose actually means for the company and how it impacts BP’s stakeholders. We discussed the updated UK Corporate Governance Code 2018 and the implications for the business. In May 2019, Alan Boeckmann and Frank Bowman stood down from the board and the chairman’s committee. I would like to pay tribute to their exceptional service and thank them for their dedication to the committee and BP as a whole. Helge Lund Committee chair Activities during the year • Evaluated the performance of the group chief executive. • Reviewed the composition of and the succession plans for the executive team. • Discussed the company’s purpose and what it meant for the business. • Considered updates to the UK Corporate Governance Code 2018. BP Annual Report and Form 20-F 2019 99


 
Directors’ remuneration report Contents 2019 performance and pay outcomes 104 2019 annual bonus outcome 105 2017-19 performance share plan outcome 106 Executive directors’ pay for 2019 108 2020 remuneration: Policy on a page 110 Alignment with strategy 111 Wider workforce in 2019 112 Stewardship and executive director interests 114 Non-executive director outcomes and interests 116 Other disclosures 118 Directors’ remuneration report – the 2020 policy 119 “Through a vibrant exchange of views, we believe the committee will be wiser.” Paula Rosput Reynolds Committee chair Dear shareholder, Results, progress and incentive outcomes This is my second letter to you as chair of the remuneration 2019 has been another year of challenges and accomplishments in committee. It comes at the end of a period during which we have our operating and financial performance, and concludes a three-year engaged with many of you on our new remuneration policy. I have cycle which has seen significant strategic progress. From a shareholder been fortunate to get to know a number of you individually, and as perspective, robust operating cash flow gave headroom for a committee we have deeply appreciated the spirit of collaboration distributions of $8.3 billion through dividends, together with $1.5 billion evident throughout our dialogue on remuneration matters. of share buybacks. Although recent share price performance has been disappointing for BP and global share markets generally, the year It also comes at a time when, as a global community, we are nonetheless concludes a three-year cycle that has delivered a 29% navigating uncharted territory because of the global onset of total return. coronavirus (COVID-19). None of us yet know quite how broad its impact will be, nor how deeply it will be felt. What we do know is that From our analysis of annual performance outcomes, the committee our industry is seeing a significant demand and supply-side shock, determined that the 2019 bonus should be 67.5% of maximum, with consequent share price volatility. The board and I will remain rather than the purely formulaic 71.5% derived from the performance close as the situation develops, and we will respond with consideration scorecard. This was to reflect our judgment that strong cash receipts of the facts. Clearly, the remuneration targets we have set for the year at year-end would potentially impact receipts in 2020, hence the will need to be adjusted to the circumstances as they unfold. I can reduction in the formulaic result. also confirm that the remuneration committee will monitor business The committee also determined that the performance share conditions and exercise judgement in applying discretion relating to outcome should be 71.2% of maximum. We took the financial 2020 remuneration. We will proceed with great care in determining measures as reported but used our discretion in determining the the timing and magnitude of equity awards. At year-end, when we quality of the strategic progress. We determined that, over the assess performance, we will be thoughtful in the interpretation of three-year performance cycle that ended in 2019, significant results, balanced with the shareholder experience. I do believe that strategic progress was made towards a lower carbon future. But our the 2020 policy as drafted provides us with maximum flexibility in message, too, with scoring of strategic progress, is that there is the applying discretion – which the times call upon us to exercise. need for greater pace and accomplishment in the years ahead. Turning to our 2019 report, we cover three areas. First the To this point, as we look forward, the committee is faced with measuring remuneration outcomes over 2019 and the 2017-19 performance strategic progress through a different lens. As our recently appointed shares cycle are presented, along with a discussion about the BP leadership realigns strategy to reduce the carbon footprint of our relationship between company performance, earned rewards and business with greater urgency, the committee must strike the balance the shareholder experience. Second, the largely regulatory driven between rewarding progress in energy transition matters and rewarding reporting of stewardship and related matters is shown. Third, the delivery of our commitment to strong financial performance and safe 2020 directors’ remuneration policy, which will be the subject of a operations. As we progress the energy transition, we will be faced with binding vote at our annual general meeting in May. establishing new goals for which benchmark measures may not be With the number of statutory requirements increasing, this report readily and immediately available. You will read herein, even the question continues to grow. For those of you needing a quick overview, of the peer group to be used to measure relative total shareholder returns I recommend our summary pages on 104 and 110 which reflect (rTSR) is greatly complicated by the question of whose performance outcomes for 2019 and the 2020 policy respectively. should be tracked in the energy transition. 100 BP Annual Report and Form-20F 2019


 
Corporate governance Remuneration committee Role of the committee • Approve the principles of any equity plan that Meetings and attendance The role of the committee is to determine and requires shareholder approval. The chairman and the group chief executive attend recommend to the board the remuneration policy for • Ensure termination terms and payments to meetings of the committee except for matters the chairman and executive directors. In determining executive directors and the executive team are fair. relating to their own remuneration. The group chief the policy, the committee takes into account various • Receive and consider regular updates on executive is consulted on the remuneration of the factors, including structuring the policy to promote workforce views and engagement initiatives chief financial officer, the executive team and more the long-term success of the company and linking related to remuneration, insight from data sources broadly on remuneration across the wider employee reward to business performance. The committee on pay ratio, gender pay gap and other workforce population. Both the group chief executive and chief recognizes the remuneration principles applicable remuneration outcomes as appropriate. financial officer are consulted on matters relating to to all employees below board level. • Maintain appropriate dialogue with shareholders the group’s performance. on remuneration matters. Key responsibilities The group human resources director attends • Recommend to the board the remuneration Membership meetings and other executives may attend where principles and policy for the chairman and the necessary. The committee consults other board Paula Rosput Member since September 2017 executive directors while considering policies committees on the group’s performance and on Reynolds and chair since May 2018 for employees below the board and the issues relating to the exercise of judgement or executive team. Nils Andersen Member (resigned March 2020) discretion as necessary. • Determine the terms of engagement, Pamela Daley Member The committee met nine times during the year. remuneration, benefits and termination of Sir Ian Davis Member All directors attended each meeting that they were employment for the chairman and the executive Melody Meyer Member eligible to attend, except Nils Andersen who was directors, executive team and the company Brendan Nelson Member not able to attend two meetings. Pamela Daley and secretary in accordance with the policy. Sir Ian Davis each missed one committee meeting. • Prepare the annual remuneration report to shareholders to show how the policy has been implemented. We understand that these are matters of great importance to our For our new chief executive officer, Bernard Looney, pay will be governed shareholders. Therefore we will work closely with the incoming by the 2020 remuneration policy. The committee disclosed in October leadership team to assure that goal-setting, in particular for progress 2019 that it had set Bernard’s salary at £1.3 million (approximately 9% against the carbon agenda, remains ambitious while also delivering pay below Bob Dudley’s salary) as of 5 February 2020, with a reduced cash outcomes that align with your own experience. We intend to confer allowance retirement benefit of 15% of salary, which puts his allowance in with shareholders later in 2020 to establish goals once the details of our line with the majority of our wider workforce. Bernard retains a deferred energy transition efforts have been provided. pension benefit from service prior to April 2011, and certain deferred share awards from service prior to 2020. Single figure results for executive directors Earlier this year we made similar announcements regarding the 2019 single figures of total remuneration for Bob Dudley and Brian Gilvary retirement of Brian Gilvary and the appointment of his successor, are $13.23 million and £6.56 million respectively, as reported on page 108. Murray Auchincloss, with effect from 1 July 2020. Further detail is These outcomes represent a 13% decrease for Bob, and a 20% decrease provided on page 103 for the new executives. for Brian, reflecting reductions in the performance shares outcome, and in particular lower share price growth over the three-year cycle. As noted Our 2020 policy renewal above, the committee applied the well-established formulas where During 2019 we have been grateful for the time and attention our major relevant and, in conjunction with strategic progress, carefully reviewed shareholders gave us as we consulted on requirements for the new the contributions of the executives. The impact of weaker share price 2020 policy. In particular, 30 of our largest shareholders joined us in performance on realized value is consistent with the experience of September for a novel session focused on expressing unconstrained shareholders and thus we deem these outcomes reasonable. views on remuneration arrangements. Together with subsequent For an overview of our executive remuneration structure, please refer to discussions and correspondence, the key issues emerging for the “at a glance” table on page 103. consideration have been: Succession arrangements • Clear end-to-end alignment from strategy, through measurable performance indicators and reward outcomes, to shareholder 2019 also marked a point of succession, as our group chief executive experience. Bob Dudley announced his intention to retire from BP, to be succeeded • Balance our contribution to the energy transition with delivering by Bernard Looney. shareholder returns. The committee was encouraged to use appropriate discretion, given the complexity of the environment in the Bob has now stepped down from the BP board, and ceases employment energy transition. from 31 March. As we announced in October 2019, he has waived his • Assure that strategic moves align to long-term sustainability, relative entitlement to notice pay for the unserved part of his notice period, and to a wider peer group. to any bonus for any part of 2020. By any measure, Bob has been an • Use meaningful and transparent measures to reflect our progress in exemplar of corporate service; he leaves BP as a ‘good leaver’ under the energy transition and reductions to our carbon impact. the terms of our executive director incentive plan, and therefore his interests under various deferred share awards are preserved and will vest in line with scheduled vesting dates and decisions, subject only to the committee retaining its discretion in the administration of the underpin on safety. BP Annual Report and Form-20F 2019 101


 
Directors’ remuneration report With all of this in mind, we have established a policy proposal which As UK remuneration committees now have the regulatory obligation to we believe reflects our strategic imperatives and allows for competitive review remuneration of the wider workforce, our committee has sought remuneration outcomes aligned to the shareholder experience. The to understand how pay practices vary across the globe and to examine proposal makes modest but appropriate adjustments to our 2017 issues of fundamental fairness. We examined pay outcomes by gender framework which, to our mind, is well understood and has delivered and other criteria. We have also considered how the committee can appropriate results for both shareholders and executive directors. We effectively add value to our stewardship of the wider workforce and studied many far-reaching alternatives in concluding our final proposal our 2020 plans will include some additional engagement in this area. but typically found other approaches carried too much complexity, an The committee reviewed the breadth of historical pension amplified concern given the transition our industry faces. arrangements across the spectrum of our employees in 2019. As an The key changes we are making include a reduced emphasis on relative outcome, BP made changes that have brought pensions for executive total shareholder return, but measuring our returns against a more directors and the wider workforce into alignment. diverse group of companies; a sharpened focus on energy transition Our committee appreciated the time and thoughtful input shareholders measures throughout the structure; tighter limits on pension benefits; and their representatives have given to the refreshment of the and a reduction in the number of measures that will be considered for remuneration policy. Through a vibrant exchange of views, we believe the annual bonus plan. the committee will be wiser as it considers executive pay against the Other matters backdrop of a challenging environment. We respectfully ask for your endorsement of the committee’s 2019 remuneration decisions and your Our committee activity in 2019 was extensive. It included a review of approval of the proposed 2020 policy framework. the principles of remuneration to support our updated policy (page 119) and engagement with shareholders and shareholder representatives. We also spent considerable time on remuneration matters related to the succession of the group chief executive and the various leadership changes that followed, in line with our increasing accountability for setting senior executive pay. Paula Rosput Reynolds Chair of the remuneration committee 18 March 2020 In this Directors’ remuneration report RC profit (loss), underlying RC profit, return on average capital employed and operating cash flow (excluding Gulf of Mexico oil spill payments) are non-GAAP measures. These measures and upstream plant reliability, refining availability, major projects and underlying production and reserves replacement ratio are defined in the Glossary on page 335. 102 BP Annual Report and Form-20F 2019


 
Corporate governance Remuneration at a glance Purpose and Outcomes for 2019 Implementation in 2020 (2020 policy Key features link to strategy (2017 policy) proposal unless stated otherwise) Salary and • Salary is reviewed annually • Fixed remuneration • Bob Dudley’s salary • Bob Dudley’s salary to remain at benefits and, if appropriate, increased reflecting the scale and unchanged at $1,854,000. $1,854,000 until he ceases employment following the AGM. complexity of our • Brian Gilvary’s salary on 31 March. • Benchmarked to market at business, enabling us to increased by 2% to • Bernard Looney’s salary is set at inception with increases attract and keep the £790,500. £1,300,000. reflective of those of our highest calibre global • Benefits remain • Brian Gilvary’s salary to remain at wider workforce. talent. unchanged. £790,500 until he ceases employment. • Murray Auchincloss’s salary to be set at £695,000. • Bernard’s benefits remain unchanged. Murray will be eligible for standard UK benefits from his appointment on 1 July. Retirement • Bob is a member of both US • To recognize competitive • Bob’s defined benefit • Arrangements for Bob will continue benefits pension (defined benefit) and practice in home country. pension did not increase in unchanged until he ceases employment on retirement savings (defined 2019. His actual and 31 March. contribution) plans. notional company • Bernard’s cash allowance reduces to 15% • Brian is a member of a UK contributions, together of salary from the date of his appointment. final salary defined benefit with investment returns Accrued service for his deferred pension is pension plan and receives a within his retirement already capped, and the pension cash allowance in lieu of savings plans, amounted calculation will be based on his pre- further service accrual. to $543,661. appointment salary. • Brian’s accrued defined • Brian’s cash allowance is subject to a benefit pension increase previously agreed schedule of reductions was below inflation. He and will terminate when he ceases received a cash allowance employment on 30 June. at 35% of salary to 31 • Murray’s cash allowance will be set at 15% May, and at 30% of salary of salary from his appointment on 1 July. from 1 June 2019, which is He retains a deferred pension arrangement included in the single from his US service, which will be based figure table. on his pre-appointment salary. Annual • 112.5% of salary at target, • To incentivize delivery • Against our scorecard of • Bob has waived any entitlement to an bonus and 225% at maximum. of our annual and safety (20%), environment annual bonus for 2020. • 50% of the bonus is paid in strategic goals. (10%), reliable operations • Brian will qualify for a pro-rated bonus for cash and 50% is mandatorily • The 50% deferral (20%) and financial his service in 2020. deferred and held in BP reinforces the long-term performance (50%), our • Proposed scorecard with four measures shares for three years. nature of our business performance score is across safety (20%), environment (20%), • To continue under 2020 and the importance of 135% of target (67.5% of operational (10%) and financial (50%) policy. sustainability. maximum). performance. Performance • Annual grant of performance • To link the largest part of • Against our balanced • Awards granted in 2018, under our 2017 shares shares, representing the remuneration opportunity scorecard of financial policy, at 500% (Bob Dudley) and 450% maximum outcome. 500% with the long-term measures (80%), and (Brian Gilvary) of salary will vest in of salary for group chief performance of the strategic progress (20%), proportion to success against the executive and 450% of salary business. The outcome our 2017-19 performance measures of our 2018-20 scorecard, on a for chief financial officer. varies with performance score is 71.2% of pro-rata basis for time in service. • Shares only vest to the against measures linked maximum. • For our 2020-23 cycle, grant levels will extent performance directly to financial remain unchanged for our incoming chief conditions are met. returns and strategic executive and chief financial officer at • To continue under 2020 priorities. 500% and 450% of salary respectively, policy. with weightings of 40% for relative total shareholder return (rTSR), 30% for return on average capital employed (ROACE) and 30% for energy transition measures. Shareholding • Executive directors are • To ensure sustained • Both Bob Dudley and Brian • From 2020, executive directors are requirement required to maintain a alignment between the Gilvary materially exceed required to maintain their full minimum shareholding equivalent to at interests of executive the share ownership shareholding requirement for two years least five times their salary. directors and our requirements. post employment. • Additionally, they have been shareholders. • The minimum shareholding requirement expected to maintain remains five times salary for the group shareholdings of at least two chief executive and is four and a half times and a half times salary for two salary for other executive directors. years post employment. BP Annual Report and Form-20F 2019 103


 
Directors’ remuneration report 2019 performance and pay outcomes Business A strong year of operational performance, set against challenging external conditions. Improvement across safety metrics, and significant growth in our retail business. Strong underlying profits for 2019, with a 29% return to performance shareholders over the three-year cycle. Key strategic highlights • $10 billion underlying replacement cost profit 2nd (29%) $28.2bn $8.3bn • Dividend increased to 10.5 cents per share Among peers for Operating Dividends paid, • Expansion of our convenience partnership sites total shareholder cash flow including scrip to around 1,600 globally return 2017-19 (excluding Gulf of • Created BP Bunge Bioenergia, a world-class Mexico oil spill bioenergy company payments) Performance Strong results for the year, beating targets on five out of six measurement categories in our scorecards. outcomes 2019 Annual bonus 2017