Charles Nicholson

10th July 2001 - Amsterdam

Long Run Energy Demand

Long Run Energy Demand World Consumption 1999

Source: EIA International Energy Outlook 2001

Oil Gas Coal Nuclear Hydro/Renewables

Long Run Energy Demand World Consumption Trends

50

100

150

200

250

1990 1995 2000 2005 2010 2015 2020

Inde

xed

to 1

990

OilGas CoalNuclearHydro/Renewables

Source: EIA World Energy Outlook 2001

Long Run Energy Demand World Consumption by Region

0

50

100

150

200

250

300

1970 1980 1990 2000 2010 2020

Qua

drillio

n B

tu

ProjectionsHistory

EE/FSU

Developing

Industrialised

Source: EIA World Energy Outlook 2001

Long Run Energy DemandSummary

>Demand for energy will continue to grow, linked closely to population growth and economic activity

>Growth will be fastest in the developing world and weakest in Eastern Europe / FSU

>Policies will influence the distribution of energy demand and the rate of uptake of new technology

>A bias to low carbon, clean fuels will favour natural gas and renewables

Long Run Energy DemandWorld Carbon Emissions by Region

0

2

4

6

8

10

12

1990 1999 2010 2020

Mill

ion

Met

ric T

ons

Car

bon

Equi

vale

nt

Industrialised

Developing

EE/FSUWorld

Source: EIA World Energy Outlook 2001

What the Group has committed to deliver

Two commitments to the outside world 10% reduction in greenhouse gases from

1990 level by 2010 (on an equity share and direct basis)

Group wide trading by January 2000

“In our terms that target will now sit alongside our financial targets. That means it is a promise and, as with our financial targets, a promise is a personal commitment”

Sir John Browne Yale School of Management, 18 Sept 1998

GHG Reductions – Progress to date

50

55

60

65

70

75

80

85

90

95

100

1990

base

1998 1999 2000

CO

2 E

qu

iv (

MT

)

Currently 7% below 1990 adjusted baseline

US Western Gas - Conversion of well control systems

gas savings of over 430,000 metric tons

increase in the volume of natural gas available for sale

Texas City Complex - holistic approach to energy management efficiency gains equating to a 150,000 t/y saving in CO2

emissions

Grangemouth Complex - fast track programme of testing and repairs to steam traps

saved 2,800 tonnes of CO2 per year

Foinaven - flaring rates have been halved through an overhaul of instrumentation and monitoring equipment

saved 90,000 tonnes of CO2 per year

Examples of GHG reduction projects in 2000

Emissions Trading - Purpose

Tool to lower cost of delivering the 10% GHG emissions reduction target

Provide a suitable example for the development of regulatory emission trading initiatives (simple, transparent, equitable, effective and credible)

Learn through practical engagement

Trading System – Summary Jan-2000: Trading System Launched

2.7 M tn traded in 2000

Average price: $7.60/tn

Range 0.5-16.5 $/tn

2001 - +1 M tn traded

Range – 15-20 $/tn !!

ET - What we have learnt

Putting a value on greenhouse gases has:Raised awareness of the climate change issue -

Engaged a wider “audience” throughout the company

Created innovative business strategies to find cost effective solutions

Enabled us to quantify financially the GHG implications of investment decisions - “value” on the environment

The key:Keep things simple, Get started, Learn from practical experienceEngage stakeholders in the formative stages

Lower Carbon Energy

Our Energy & Emission Efficiency

Past Present Future

Decarbonisation of Fuels

Renewables

Fuel Cell Vehicles

Gas replacingCoal

Hydrogen Economy

Novel Low Energy ProcessesCO2 Capture

pv Solar Solar thermal

Energy Efficiency

DGI & Hybrids

Wind

Reduce Flaring& Venting

Global Oil Consumption 2000

Marine Fuel3%

Other4%Lubes

1%

Refinery fuels4%

Chemical feedstock8%

Heating13%

Aviation6%

Ground Mobility43%

Pow er Generation18%

Transport FuelsTotal Oil Demand Growth by Region 1999-2020

0

1

2

3

4

5

NorthAmerica

WesternEurope

OtherIndust.

EE/FSU Dev. Asia C. & S.America

OtherDev.

Gasoline

Diesel

J et-Fuel

Other

Mill

ion B

arr

els

per

Day

Source: EIA World Energy Outlook 2001

BPs Cleaner Fuels Commitment

• To lead the industry in introducing cleaner fuels wherever and whenever possible

• To introduce cleaner fuels into 40 cities worldwide by end 2000, and 90 cities by end 2001

• To remove lead from BP gasoline by Jan. 2002

• 40% of all BP products will be cleaner fuels by 2005

Impact of “Clean Fuels”BP’s ‘40 city Programme’

0

10

20

30

40

50

60

1Q99 2Q99 3Q99 4Q99 1Q00 2Q00 3Q00 4Q00

Num

ber o

f Citi

es

2000 20252020201520102005 2030

Gasoline/Diesel direct injection ICE’s

Hybrid equipped vehicles

Zero sulphur fuels:“super” ULSG / D

Designer Gasoline?Oxygenates?

FT/GTL?

Fue

l ena

ble

r

H2? Methanol?Mogas? FT/GTL?

Pow

er t

rain

tech

nolo

gy

Gas Oil

Anticipated Technology Developments

Daily oilproduction

Fuel Cell vehicles

Interactions between Key Issues

Climate Change

Biodiversity Water

….. Supplies, Operations, Products and Services.

DesertificationSpecies migrationHabitat destructionForestry projects

FloodsSea level riseDesertification

DeforestationWater Quality

FootprintResource use

Emissions/discharges

Eq

uit

y c

ap

ex

Equity, direct, GHG reduction (tonnes of CO2 equivalent)

Expectation Projection - existing technologies

New build standards, sequestration, innovative technology or flexible mechanisms are needed

Innovation

stretch

Innovation stretch

Potential Impacts of Kyoto

350

400

450

500

550

600

650

700

750

1990 2010 2030 2050 2070 2090

pp

m IS92aKyotoWRE550

Kyoto = Annex 1 Parties constant after 2010

Source T.M.L Wigley

Full Compliance to the Kyoto Protocol - 382 ppmNon Compliance - 385 ppm at 2010

Summary of Key Points

>The global demand for energy will continue to grow the foreseeable future

>There is no absolute shortage of hydro carbons

>Evolving attitudes to environment and climate change will alter the primary energy mix with an increasing demand for gas.

>Most incremental demand will be in the developing world, especially in Asia

Key Summary Points contd.

>The highest growth rates will be in transport fuels.

>The introduction of clean fuels is ahead of legislation, particularly in North West Europe.

> Industry is increasingly recognising that we are likely to work in a carbon constrained future and is facing up to this challenge.

>Many of us are building good experience of actions around the conservation and efficient use of energy.

Key Summary Points contd.

>There is good activity around the future options for reducing emissions, but more time and effort is needed to deliver these technically and economically.

>Proper motivation is a key to business success. It is important to work with the grain of the market, to mobilise support, and find the best answers on a global basis.

>There is no single answer; we need them all and the willingness to experiment and adapt.

Key Summary Points concluded

>We need the skills of the scientific community to help us develop the answers, and its understanding of climate science to help us plan.

>We need an international policy framework, and a global target for atmospheric concentration would provide a focus which is currently lacking.