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BP North Sea business update

27th November 2014

UK-Norway Oil & Gas Technology Partnerships

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Tim Smith, Vice President – Communications & External Affairs

UKCS basin-wide outlook

Production Operating cost

Exploration activity Project investment

Keeping the UKCS competitive

UKCS Sanctioned

UKCS Unsanctioned

Non UKCS Projects

NPV

Bubble size proportional to total Capital

UKCS projects in BP portfolio

IRR

UKCS vs. other mature basins

• Mature North Sea basin faces challenges

• BP UKCS projects need to compete for global resources

– Materiality (NPV) and Quality (IRR)

Source: data and peer group taken from the Wood Mackenzie Exploration Service mature basins

Wood Review

• Agreed objective of Maximising Economic Recovery (MER)

from UKCS

• Need for greater resourced and more proactive regulator

• Significantly improved asset stewardship

• Far greater constructive collaboration between operators

• Six industry strategies

Industry

New

regulator:

Oil and

Gas

Authority

• Exploration strategy

• Asset stewardship strategy

• Regional development strategy

• Infrastructure strategy

• Technology strategy

• Decommissioning strategy

Fiscal review • Announced by HM Treasury in December 2013:

.

“To ensure that the UK’s tax treatment of the

UKCS continues to incentivise economic

recovery as the basin matures”.

• Consultation launched in July.

• Industry requested action on:

- Headline rate

- Single uniform capex allowance

- Cashable tax credit for exploration

- PRT

• Initial report at Autumn Statement, December.

• New tax legislation: post 2015 general election.

BP North Sea strategy

6

• Risk reduction

• Quality portfolio

• Area development

planning

• Production efficiency

• Renewal of existing

infrastructure

• New wells

• EOR

Focus Maximise the Base

• Major Projects

• Exploration

• Resource Appraise

• Relationships

Invest for the Future

High value upstream assets

Focus

• Quality portfolio following selective divestments

• Increased equity in operated assets

• Area development planning, e.g. Valhall

Renewal of existing infrastructure

• Offshore – Valhall, Andrew, Magnus & ETAP

• Onshore - SVT & FPS

High value projects

• Kinnoull

• Quad 204

• Clair Ridge

Continued exploration and appraisal

• 27th & 28th round (UKCS) and 22nd round (NCS)

• Snadd and Vorlich discoveries

• Clair appraisal wells

Key - Areas

Norway

Shetland

Central NS

Clair field – 40 yrs young

‘74 ‘77 ‘06 ‘16 ’50 ‘96 Appraisal wells & seismic Appraisal wells & seismic

Life Extension Projects

2014

1982 ETAP Magnus

Scope Increased bed space;

critical OE

improvements; integrity

management scopes;

planned maintenance.

Accommodation

refurbishment/expansion;

upgrade drilling rig, replace

BOP; fabric maintenance;

power generation; repair.

Value Aimed to deliver OE of

90%; enable rate

adding well work;

protect proven

reserves.

Return to drilling; step-

change in platform

capability; helping

production to continue into

the next decade.

Spend £0.4bn gross £0.3bn gross

Status Define Execute

Other work Projects

• Quad 204 Enhanced Oil Recovery (EOR); SVT Gas Sweetening; FPS Enhanced Gas Separate Project

(EGSP); Laggan Tormore condensate pipeline.

• Skarv Well Annuli Pressure Management (SWAPM); Valhall IP platform Crestal Gas Lift (CGL); Ula fire

and gas upgrade – P, Q & D platforms; Butch tie back to Ula.

Operations

• Marine gas oil provision (SVT, Aberdeen and possibly Hound Point)

- RFP expected March 2015.

• Marine consultancy (UK vessel assurance; marine HSE consultancy and general marine consultancy)

- RFP expected February 2015.

• UK North Sea platform supply vessel services 2015/16

- Sourcing strategy being agreed internally. Approach to market likely in 2015.

• Norwegian North Sea engineering, maintenance modifications

- RFP expected in January.

• Scatsta Airport licence holding

- Potential suppliers identified and RFP expected Q1 2015.

North Sea technology needs

- Integrity management and validation

- Lower cost well access

- EOR in mature water flood fields

- Improving plant efficiency – current industry focus

- Water management

- Decommissioning

Existing BP innovation

Seismic imaging and monitoring of reservoirs

- Seabed Arrays over Valhall and Clair

Enhanced oil recovery

- Gas injection in Ula and Magnus

- LoSal™ water flooding built into Clair Ridge

- Polymer-capabale FPSO for Quad 204

“Longer, deeper relationships with fewer suppliers”

BP Supply Chain Process Sp

en

d $

Criticality/Complexity

Supplier Engagement Matrix

- Develop long-term relationships

- Become customer of choice

- Leverage BP’s scale and spend

The way BP engages with suppliers is either:

- Direct contractual relationship

- Indirect relationship via 3rd parties

Category specialists cater for specific supply

chain sub-sectors

Planning for the long term

Questions?