BP in 2015 

It is a challenging time for our industry but we are making the changes that are needed without compromising our longer-term goals.

Information about this report

1

Strategic report

55

Corporate governance

95

Financial statements

215

Additional disclosures

245

246

247

Shareholder information

259

260

Signatures

Cross reference to Form 20-F

Strategic
report

An overview of the key
activities, events and results
in 2015, together with
commentary on our
performance and priorities
as we move forward.

2

BP at a glance

6

Chairman’s letter

8

Group chief executive’s letter

10

Our market outlook

12

Our business model and strategy

18

Lower oil and gas prices

20

Our key performance indicators

22

Strategy, performance and pay

22

Annual statement by the remuneration committee chair

24

Our markets in 2015

26

Group performance

28

Upstream

34

Downstream

38

Rosneft

40

Other businesses and corporate

40

Renewable energy

41

Gulf of Mexico oil spill

43

Corporate responsibility

43

Safety

Employees

51

Our management of risk

53

Risk factors

BP Annual Report and Form 20-F 2015      1

  Board performance

   For information about the board and

   its committees see page 55.

  Remuneration

   For information about our directors’

   remuneration see page 76.

some clear results and I am proud of the part that Bob has played in leading the initiative within our industry. At our last AGM in April the board was pleased to support a resolution brought by a group of our shareholders that encouraged greater disclosure of our work in this area; our evolving response to this is set out in our Sustainability Report due for publication this March.

Oversight

The world continues to be a troubled place and the risks faced by BP are ever evolving. The board keeps under review its approach to the monitoring of risk – as demonstrated by the board’s oversight of cybersecurity and the sharpened focus on geopolitical risk through the formation of the geopolitical committee. This is complemented by the work of our international advisory board. As we progress with our litigation in the US, we expect to stand down the Gulf of Mexico committee during 2016 and I would like to thank my colleagues for the important work and focus they have given to this committee over the past five years. Oversight of the continuing litigation will fall to the full board.

Governance and succession

Membership of the board has continued to be refreshed and during the year Paula Reynolds and Sir John Sawers joined us as non-executive directors. Paula brings deep experience from the financial and energy worlds, while John brings long experience of international politics and security that are so important to our business. Professor Dame Ann Dowling has taken the chair of the remuneration committee in anticipation of Antony Burgmans standing down from the board after twelve years. Antony has chaired the remuneration committee and is also chairing the newly formed geopolitical committee until April when Sir John Sawers will succeed him. Phuthuma Nhleko, who joined the board in 2011, has decided not to offer himself for re-election at the forthcoming AGM due to external business commitments. On behalf of the board I thank Antony and Phuthuma for the substantial contribution that they have made to all of our work.

In 2015 Bob and his executive team have worked determinedly to steer the business through some difficult times with some tough decisions. They have met every challenge and as a result the business is in robust shape as we go into 2016. They deserve our thanks as do all our employees. I would like to thank the board for all that they have done.

And I would like to thank our shareholders for your continued support. We are set to continue supplying energy to help meet global demand while delivering value to you from a great business.

Carl-Henric Svanberg

Chairman

4 March 2016

q

Top: The safety, ethics and environmental assurance committee (SEEAC) examine safety measures at our operations in the Khazzan field in Oman.

Bottom: SEEAC members meeting crew on the Cassia platform in Trinidad and Tobago where they inspected the safety of operations.

^a See Our financial framework on page 19.

 Strategy

  For more information on our strategic

  priorities and longer-term objectives

  see pages 12-17.

 Industry context

  See how we are responding to the

  lower price environment on pages 18-19.

q

Top: Bob Dudley meets Russian deputy prime minister for social affairs, Olga Golodets, at the London Science Museum Cosmonauts exhibition.

Bottom: Bob Dudley speaks with Pemex CEO, Emilio Lozoya Austin and Total CEO Patrick Pouyanné at the OGCI event in Paris.

Our executive vice president for corporate business activities, Katrina Landis, decided to step down after a very successful 24 years in BP. We have taken this opportunity to simplify and better align responsibilities within the team, appointing Lamar McKay as deputy chief executive, leading on key accountabilities such as strategy and safety, with Bernard Looney succeeding Lamar as Upstream chief executive.

Building a platform for growth

The agreements we reached in July with US federal, state and the vast majority of local government bodies will, subject to court approval, settle our largest remaining legal exposures relating to the Deepwater Horizon accident and oil spill in 2010. This is a realistic outcome that gives BP clarity to plan for the future.

To build that future, we are continuing to invest in a disciplined way in a portfolio that is well balanced in several respects – geographically across regions, across our upstream and downstream businesses and across resource types – conventional and unconventional oil and gas, as well as the renewable energies of biofuels and wind. This gives us resilience and flexibility now and in the future.

In the Upstream, in addition to a well-managed base of existing operations, we had three major project start-ups in 2015 and we made final investment decisions on four projects, including the West Nile Delta project in Egypt, where we are seeing some best-in-class drilling performance. Looking ahead, we expect significant new production from projects starting up between 2015 and 2020, including our mega projects at Shah Deniz 2 in Azerbaijan and Khazzan in Oman, which will create value for decades. These projects are on time and on budget.

In the Downstream, we continue to focus on resilient and improving performance and growth from a quality portfolio of high-performing refineries, a competitive petrochemicals business and growing fuels marketing and lubricants businesses.

In 2015 we furthered our relationship with Rosneft to that of a strategic partner, with involvement in exploration, appraisal and production in some of the world’s most prolific oil and gas provinces. In China, we have signed new agreements to supply liquefied natural gas and to explore for shale gas. And we continue to build relationships in BP’s historic heartlands of the Middle East, with growing opportunities in Oman, Kuwait, Egypt and Iraq.

Acting on climate change

We continue to support action to address the risk of climate change. Through the Oil and Gas Climate Initiative – a business coalition that accounts for over a fifth of global oil and gas production – we are sharing best practices and developing common approaches, such as on the role of natural gas, the lowest-carbon fossil fuel and on energy efficiency. We also joined with BG Group, Eni, Reliance, Repsol, Royal Dutch Shell, Statoil and Total to call on the UN and governments to put a price on carbon so that businesses and consumers of energy can better work within frameworks that are clear.

We welcome the direction provided by the historic agreement reached at the UN climate conference in Paris. Governments, companies and consumers all have to make an appropriate contribution and we will continue to play our part through means including energy efficiency, renewable energy and increasing the share of natural gas in our portfolio.

Adapting for now and the future

Over the years BP has responded to changing circumstances many times. Each time we have learned, adapted and evolved. This experience, gained over more than 100 years, is one of our greatest assets. Today, we are well placed to weather the storm and navigate through a testing environment to emerge in good shape for taking advantage of new opportunities. I am confident that BP will be delivering energy for our customers and value for our shareholders long into the future.

Bob Dudley

Group chief executive

4 March 2016

The BP Technology Outlook shows how technology can play a major role in meeting the energy challenge by widening energy resource choices, transforming the power sector, improving transport efficiency and helping to address climate concerns out to 2050.

  See bp.com/technologyoutlook

BP Energy Outlook provides our projections of future energy trends and factors that could affect them out to 2035, based on our views of likely economic and population growth and developments in policy and technology. Also available in Excel and video format.

  See bp.com/energyoutlook

  Our strategy

  Find out how BP can help meet

  energy demand for years to come

  on page 12.

  Climate change

  Our sector has an important part to

  play in addressing climate change.

  See page 46 to find out what BP

  is doing.

Energy efficiency

Greater efficiency helps with affordability – because less energy is needed; with security – because it reduces dependence on imports; and with sustainability – because it reduces emissions. Innovation can play a key role in improving technology, bringing down cost and increasing efficiency. In transport, for example, we believe energy-efficient technologies and biofuels could offer the most cost-effective pathway to a secure, lower-carbon future.

All sorts of energy required

We believe a diverse mix of fuels and technologies is needed to meet growing energy demand, while supporting the transition to a lower-carbon economy. These are reasons why our portfolio includes oil, gas and renewables.

Oil and natural gas

Over the next few decades, we think oil and natural gas are likely to continue to play a significant part in meeting demand for energy. They currently account for around 56% of total energy consumption, and we believe they will decrease to about 54% in 2035. For comparison, under the International Energy Agency’s most ambitious climate policy scenario (the 450 scenario^a), oil and gas would still make up 50% of the energy mix in 2030 and 44% in 2040 – assuming carbon capture and storage is widely deployed.

Oil is a good source of energy for transportation as it has a high energy density. That means vehicles go further on less weight and volume of fuel than alternatives. Also, oil’s liquid form makes it easy to move around, globally and locally. For these reasons, we expect oil to still account for almost 90% of transportation fuels in 2035 – compared with 94% today.

Natural gas is likely to play an increasing role in meeting global energy demand, because it’s available at scale, relatively low cost and lower carbon than other fossil fuels. By 2035 gas is expected to provide 26% of global energy, placing it on a par with oil and coal.

^a  From World Energy Outlook 2015. © OECD/International Energy Agency 2015, page 35. The IEA 450 scenario assumes a set of policies that bring about a trajectory of greenhouse gas emissions from the energy sector that is consistent with limiting long-term average global temperature increase to 2°C.

We believe shale gas will contribute more than half of the growth in natural gas globally between 2014 and 2035. In the US, the growth of shale gas has already had a significant impact on gas demand as well as CO₂ emissions, which have fallen back to 1990s levels.

The increasing gas supply in the US and other countries is encouraging the use of liquefied natural gas worldwide, which is expected to double between 2014 and 2035.

New sources of hydrocarbons may be more difficult to reach, extract and process. BP and others in our industry are working to improve techniques for maximizing recovery from existing and currently inaccessible or undeveloped fields.

Renewables

Renewables are the fastest-growing energy source. Over the past few years, there has been rapid expansion of the use of solar power due to cost reduction in manufacturing and public subsidies. That said, renewables, excluding large-scale hydroelectricity, currently account for around 3% of energy consumption. While they are starting from a low base, we estimate that by 2035 they will contribute around 9% of total global energy demand.

Temporary policy support is needed to help commercialize lower-carbon options and technologies, but they will ultimately need to become commercially self-sustaining, supported only by a carbon price.

Beyond 2035

We expect that growing population and per capita incomes will continue to drive growing demand for energy. These dynamics will be shaped by future technology developments, changes in tastes, and future policy choices – all of which are inherently uncertain. Concerns about energy security, affordability and environmental impacts are all likely to be important considerations. These factors may accelerate the trend towards more diverse sources of energy supply, a lower average carbon footprint, increased efficiency and demand management.

  Industry context

  See how we are responding to the

  lower price environment on

  pages 18-19.

  Our key performance indicators

   See how we measure our

   progress on page 20.

  Risks

   Find out how we manage the

   risks to our strategy on page 51.

A relentless focus on safety remains the top priority for everyone at BP. Rigorous management of risk helps to protect the people at the front line, the places where we operate and the value we create. We understand that operating in politically complex regions and technically demanding geographies requires particular sensitivity to local environments.

Our strategy

We prioritize value over volume by actively managing a high-value upstream and downstream portfolio and investing where we can apply the distinctive strengths, capabilities and technologies we have built up over decades.

We aim to create shareholder value by growing sustainable free cash flow« and distributions over the long term.

We are pursuing our strategy by setting clear priorities, actively managing a quality portfolio and employing our distinctive capabilities.

Clear priorities

First, we aim to run safe, reliable and compliant operations – leading to better operational efficiency and safety performance. We target competitive project execution to deliver projects as efficiently as possible. Making disciplined financial choices focused on capital and cost discipline allows us to maximize free cash flow and increase the resilience of our portfolio to changing price environments.

Quality portfolio

We undertake active portfolio management to concentrate on areas where we can play to our strengths. We focus on high-value upstream assets in deep water, giant fields, selected gas value chains and unconventionals«. And, in our downstream businesses, we plan to leverage our upgraded assets, customer relationships, brand and technology to continue to grow free cash flow.

Our portfolio of projects and operations is focused where we believe we can generate the most value, using our commercial agility and technical capability. This allows us to build a strong pipeline of future growth.

Distinctive capabilities

Our ability to deliver against our priorities and build the right portfolio depends on our distinctive capabilities. We apply advanced technology across the hydrocarbon value chain, from finding resources to developing energy-efficient and high-performance products for customers. We work to develop and maintain strong relationships – with governments, partners, civil society and others – to enhance our operations in more than 70 countries across the globe. And the proven expertise of our employees comes to the fore in a wide range of disciplines.

Improving reliability

Improvement plans are increasing UK North Sea plant reliability.

See page 44.

20

tier 1 process safety events

2014: 28

Capturing value

Improving the quality of future investments.

See page 30.

$19.1bn

operating cash flow

2014: $32.8bn

We seek efficient ways to deliver projects on time and on budget, from planning through to day-to-day operations. Our wide-ranging project experience makes us a valued partner and enhances our ability to compete.

Adapting rapidly

Using local knowledge to increase our competitiveness.

See page 29.

3

major project start-ups in Upstream

2014: 7

Unlocking energy potential

Investing in exploration and development in Egypt.

See page 33.

61^%

reserves replacement ratio^a

2014: 63%

Optimizing our assets

Using our technical expertise to maintain a secure and reliable supply.

See page 31.

3.3

million barrels of oil equivalent per day^a

2014: 3.2 million

Improving operations

Improvements at Castellón refinery are helping to increase profitability.

See page 36.

94.7^%

refining availability

2014: 94.9%

Creating shareholder value by generating

sustainable free cash flow over the long term

 Enhanced oil recovery (EOR)

Bright Water technology, invented by BP, helps to maximize oil production by recovering and moving more oil to our wells. We use it in more than 140 wells worldwide to date. It costs less than $5 to recover each additional barrel of oil released through Bright Water, and we deliver more light oil EOR production than any other international oil company.

Lubricants

Castrol’s new technology, the Nexcel oil cell, is an easy-to-change unit containing both engine oil and filter. We believe the technology is a significant oil change innovation for the automotive industry. It is designed to lower CO₂ emissions, improve vehicle servicing and increase the recycling of used oil for cars of the future.

Petrochemicals

BP is one of the world’s largest producers of purified terephthalic acid (PTA), a raw material for many consumer products. In 2015 we entered into licensing agreements in Oman and China, for plants that will use our latest generation PTA technology, with a combined capacity to produce more than two million tonnes of PTA each year.

Corrosion prevention

We use automated phased array ultrasonic testing (PAUT) across our refineries to safely inspect our tanks and pipelines. Our PAUT technology uses ultrasonic pulses to examine the integrity of these assets and detect cracks in a non-destructive way. The technique reduces facility downtime, decreases turnaround costs and risks, and avoids production losses.

Fuels

BP began marketing a range of ‘dirt-busting’ fuels with a launch in Spain in 2015. The fuels contain our new ACTIVE technology that cleans and protects car engines with proprietary additives. Our fuels are designed to remove deposits and prevent their formation – helping engines perform in the way they were designed to do.

Biofuels

We are developing biobutanol in conjunction with DuPont. This second-generation biofuel can be blended into gasoline in greater proportions and is more compatible than ethanol with the infrastructure used for existing fuel supplies.

We work closely with governments, national oil companies, other resource holders and local communities to build long-lasting relationships that are crucial to the success of our business.

We place enormous importance on acting responsibly and meeting our obligations as we know from experience that trust can be lost. We work on big and complex projects with partners ranging from other oil companies to suppliers and contractors. Our activity creates value that benefits governments, shareholders, customers, local communities and other partners.

We believe good communication and open dialogue are vital if we are to meet their expectations.

Our financial framework is designed to re-establish a balance where operating cash flow (excluding payments related to the Gulf of Mexico oil spill) covers organic capital expenditure« and the current level of dividend per share by 2017, based on an average Brent« price of around $60 per barrel.

If prices remain lower for longer than anticipated, we expect to continue to recalibrate for the weaker environment and to capture more deflation. We would expect this to drop the balance point below $60 per barrel.

We will keep our financial framework under review as we monitor oil and gas prices and their impact on industry costs as we move through 2016 and beyond.

Our financial framework – through 2017

Underpinning our commitment to sustain the dividend for our shareholders

Optimize capital expenditure

g

2015 organic capital expenditure was $18.7 billion.

This is 18% down from the 2011-2014 period average.

We expect capital expenditure of $17-19 billion per year in 2016 and 2017 as a result of reducing costs and activity, with 2016 spend towards the lower end of this range.

Reduce cash costs

g

We made significant progress in reducing cash costs compared with 2014.

We anticipate the reduction in our cash costs to be close to $7 billion versus 2014 by the end of 2017.

Make selective divestments

g

We completed the $10-billion divestment programme announced for 2014-2015.

We expect divestments of $3-5 billion in 2016 and $2-3 billion per year from 2017 to help manage oil price volatility and fund the ongoing Gulf of Mexico commitments.

Maintain flexibility around gearing

g

Gearing« at the end of 2015 was 21.6% against a 2011-2014 average of 18%.

Looking ahead, we aim to manage gearing with some flexibility at around 20%. While oil prices remain weak, we expect gearing to be above 20%.

Upstream

We are focusing on the timing of investments to capture deflation in the supply chain, paring back access and exploration spend and prioritizing activity in our base operations. Where we are not the operator, we are influencing partners to focus on third-party costs.

We reduced unit production costs by more than 20% compared with 2013 and achieved an average reduction of 15% in upstream third-party costs in 2015. By the end of 2016, we expect to re-bid 40% of our third-party spend, including a significant proportion of our well services contracts.

Our total upstream workforce – including employees and contractors – is now 20% smaller than it was in 2013, with a reduction of around 4,000 expected in 2016. We are aiming for an upstream workforce of approximately 20,000 by the end of 2016.

Downstream

In 2015 we reorganized our fuels business from nine regions to three, streamlined the lubricants business and started restructuring petrochemicals. We are implementing site-by-site improvement programmes to drive manufacturing efficiency in refining and petrochemicals. Our focus on third-party spend has resulted in significant cost reductions and we have reduced head office related costs by around 40%.

These simplification and efficiency actions have significantly contributed to the group’s cash cost reductions in 2015.

We expect to reduce our downstream workforce roles by more than 5,000 by the end of 2017 compared with 2014, and by the end of 2015 had already achieved a reduction of more than 2,000.

Other businesses and corporate

We made significant progress in reducing corporate and functional costs in 2015. We are focusing on third-party spend and headcount both in response to the lower oil price and also to reflect the changes to our portfolio.

Figures exclude retail staff and agricultural,

operational and seasonal workers in Brazil.

Total shareholder return (TSR) represents the change in value of a BP shareholding over a calendar year. It assumes that dividends are reinvested to purchase additional shares at the closing price on the ex-dividend date. We are committed to maintaining a progressive and sustainable dividend policy.

2015 performance Negative TSR in the year reflects the fall in the BP share price exceeding the dividend.

Proved reserves replacement ratio is the extent to which the year’s production has been replaced by proved reserves added to our reserve base.

The ratio is expressed in oil-equivalent terms and includes changes resulting from discoveries, improved recovery and extensions and revisions to previous estimates, but excludes changes 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.

2015 performance This year’s reserves replacement ratio was similar to 2014. See page 229 for more information.

Major projects are defined as those with a BP net investment of at least $250 million, or considered to be of strategic importance to BP, or of a high degree of complexity.

We monitor the progress of our major projects to gauge whether we are delivering our core pipeline of activity.

Projects take many years to complete, requiring differing amounts of resource, so a smooth or increasing trend should not be anticipated.

2015 performance We delivered three major projects in Upstream – two in Angola and one in Asia Pacific, and started up Zhuhai 3 in Downstream.

We report production of crude oil, condensate, natural gas liquids (NGLs), natural bitumen and natural gas on a volume per day basis for our subsidiaries and equity-accounted entities. Natural gas is converted to barrels of oil equivalent at 5,800 standard cubic feet of natural gas = 1 boe.

2015 performance BP’s total reported production including Upstream and Rosneft segments was 4.0% higher than in 2014. This was mainly due to favourable entitlement impact in our production-sharing agreements in the Upstream segment.

Greenhouse gas emissions^b

(million tonnes of CO₂ equivalent)

We report tier 1 process safety events, which are the losses of primary containment of greatest consequence – causing harm to a member of the workforce, costly damage to equipment or exceeding defined quantities.

2015 performance The number of tier 1 process safety events has decreased substantially since 2011. We believe our systematic approach to safety management and assurance is contributing to improved performance over the long term and will maintain our focus in these areas.

We provide data on greenhouse gas (GHG) emissions material to our business on a carbon dioxide-equivalent basis. This includes carbon dioxide (CO₂) and methane for direct emissions. Our GHG KPI encompasses all BP’s consolidated entities as well as our share of equity-accounted entities other than BP’s share of TNK-BP and Rosneft.^c

2015 performance The increase in our reported emissions is due to updating the global warming potential for methane. Without this update, our emissions would have decreased primarily due to divestments in Alaska.

We track how engaged our employees are with our strategic priorities using our group priorities index. This is derived from survey questions about their perceptions of BP as a company and how it is managed in terms of leadership and standards.

2015 performance Our group priorities engagement measure fell slightly in 2015, as expected in the current low oil price environment.

Each year we report the percentage of women and individuals from countries other than the UK and the US among BP’s group leaders. This helps us track progress in building a diverse and well-balanced leadership team.

2015 performance The percentage of our group leaders who are women or non-UK/US rose slightly. We remain committed to our aim that women will represent at least 25% of our group leaders by 2020.

^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.

^b The 2015 figure reflects our update of the global warming potential for methane from 21 to 25, in line with IPIECA’s guidelines.

^c For more information on our GHG emissions see page 46.

The safety and operational risk performance has been excellent. This has led to increased reliability and more efficient operations. There is a proposed settlement of the federal and state claims and settlement of most of the local government claims relating to the Deepwater Horizon incident. BP responded quickly and decisively to the drop in oil price, continuing to simplify its activities and significantly reducing its cost base. Capital discipline has been demonstrated in a strategic way that offers flexibility and resilience now and options for future growth. Our belief is that management has delivered very well in a difficult year.

The overall group score achieved was 1.91 out of a maximum of 2.00. As is our normal practice, the committee reviewed this result and considered whether it produced a fair outcome in light of the underlying performance of the company and the wider environment. As part of this both the committee and the group chief executive believed some recognition of the dramatic fall in oil prices and its impact on shareholders was warranted. As a result the group score was lowered to 1.70 and this has been used to determine annual bonuses for BP’s wider management group. For executive directors our approved policy limits annual bonus to 1.50.

Long-term performance

The 2012 deferred bonus was contingent on safety and environmental sustainability over a three-year period. The committee saw good evidence of a continued improvement on safety that is both ingrained in the culture and has led to more reliable and efficient operations. The award vested in full.

The 2013-15 performance share plan was, as in previous years, based on three sets of measures equally weighted: relative total shareholder return (TSR) over the three-year period, 2015 operating cash flow and finally, strategic imperatives which included safety and operational risk, relative reserves replacement ratio (RRR) and major project delivery over the three years.

For TSR, BP was in third place. The target set in 2013 for operating cash flow in 2015 was $35 billion based on the plan assumptions. At the start of the year, this was normalized for the change in oil and gas price, and refining margins since 2013. We also, as in previous years, adjusted for major divestments and for contributions to the Gulf of Mexico restoration. The resulting target was $17.7 billion. This compared to an outcome of $19.1 billion. Safety performance at the end of the three-year period, against targets previously set at the outset, was strong. The final results from the comparator group for RRR are not yet available but on the evidence, our preliminary assessment is that the company is in first place. There will be a final assessment later in the year. Major project delivery exceeded target.

As a result 77.6% of the shares are expected to vest. Reviewing the period 2013-15, the committee believes that this represents a fair outcome. In that time there has been the delivery of the 10-point plan in 2014, consistent improvements in safety performance and effective budgetary and capital discipline in difficult circumstances.

Long-term: performance share plan

      Measure

Outperform 

peers 

BP’s RRR preliminary ranked first versus other oil majors.

Outperform 

peers 

Downward trend over

the last three years.

^a Adjusted in accordance with the treatment of the loss of primary containment key performance indicator on page 20.

^b Excluding biofuels.

Pay outcomes

The resulting remuneration for executive directors is shown below. Consistent with the wider population of BP employees, executive directors received no increase in base salary in 2015. This is being continued with no salary increase for the senior leadership and executive directors in 2016.

As described above, annual bonus was limited to a group score of 1.50, the 2012 deferred bonus vested fully and 77.6% of shares in the 2013-2015 performance share plan are expected to vest. These will be finally determined later in the year when results from all oil majors are known. The shares that vest will have a further

three-year retention period before being released to the individual.

In our assessment, the overall quantum of remuneration is market competitive and represents a balanced outcome. It is based heavily on performance and mainly paid in equity with long retention periods. Executive directors are required to hold shares in excess of five-times salary. While the value of their shares has, as for all shareholders, dropped with the oil price, they satisfy that requirement.

For the single figure remuneration

        table see page 77.

Conclusion

In conclusion, BP has performed well and surpassed the board’s expectations on almost all of the measures. I am pleased that our current policy has appropriately recognized this in the 2015 outcomes. There remain challenging times with an evolving remuneration landscape. During 2016, the committee will be undertaking a full review of our policy. I have already met with some of our key shareholders and look forward to continuing this engagement as we develop a

new proposed policy for approval at the 2017 Annual General Meeting.

BP is a strong company with strong leadership. The company continues to evolve as will our remuneration policy and practice to ensure we remain performance driven and competitive.

Professor Dame Ann Dowling

Chair of the remuneration committee

As with other companies within our industry, BP is taking measures to respond to the impact of a lower-price environment by limiting capital spend, looking to benefit from cost deflation and reducing headcount. In addition, for some time we have been encouraging everyone in BP to find and implement smarter ways of working, without compromising safety. From large-scale behaviour changes to small and simple ideas, our employees are helping to make a positive difference to the reliability and efficiency of our operations.

A helicopter-sharing first t

When changing crews on board BP’s Skarv platform in the Norwegian North Sea, a helicopter flies the replacement team offshore and brings the current team back to land. On these journeys an average of six of the 19 seats were unused. We discovered that nearby operator, Statoil, was in the same situation and so looked for opportunities to maximize seat usage on our journeys. Statoil offered BP a 50% share in its contracted helicopter capacity and the companies entered into a cost-sharing agreement for scheduled flights. With fewer flights offshore we have reduced costs and CO₂ emissions.

Easing the bottleneck q

The Cherry Point refinery rail facility receives crudes directly from US and Canadian producers. But with only two tracks available, the mile-long trains often had to wait to offload their oil supply. This prevented the refinery from maximizing its rail offloading efficiency. Teams at the site, along with the supply organization, worked to resolve the problem by installing additional track to reduce congestion and allow full utilization of the rail facility. In 2015 we safely executed this rail upgrade ahead of schedule and within budget.

Foundations for success p

BP drilling and cementing teams in Azerbaijan regularly review well design and construction to ensure they are safe, efficient and reliable. In efforts to improve cementing technology, a key element of well construction, the teams identified ways to simplify the process and decrease drying times. By changing cement and optimizing parameters, drying time has been reduced and more than $1 million has been saved. The process can be replicated elsewhere.

Logistics planning p

Driving supply boats to our offshore Egypt rigs can consume a lot of fuel. Through detailed logistics planning we calculated that a 25% reduction in speed consumed about 40% less fuel per trip. We also found that keeping a vessel outside the 500 metre rig zone required less engine power than the full dynamic positioning mode needed within it, and this reduced fuel consumption by around 80%. We have applied these changes across the region’s fleet and are expecting to save more than $400,000 a year. We are sharing this cost-saving approach globally.

Steam clean savings p

Refinery tank cleaning, which is done by hand, is not always efficient as it is based on estimates of waste within the tank. Downstream teams tested an existing steam injection method that was new to BP that separates the build up into sediment on the bottom, then water, and a layer of recoverable oil floating on the top. The oil and water are pumped away, leaving the sediment to be easily cleaned up in the final manual cleaning step. Since the process was implemented at the Rotterdam refinery in 2015, it has significantly reduced cleaning times – from 9-12 months down to three, reduced risks to cleaners and saved more than $3 million. It is now being adopted across BP with further savings expected.

Making storage simpler u

Throughout more than 50 years of operations in the North Sea, BP had built up large quantities of equipment that were spread around 172 locations, with significant storage fees and long lead times to get these materials offshore. By updating and improving our materials management process we reduced the number of stored inventory items by half and brought the number of storage locations down by about 65%. We also generated around $32 million by selling surplus materials and scrap.

Profit (loss) before interest and taxation

Finance costs and net finance expense relating to pensions and other post-retirement benefits

Taxation

Non-controlling interests

Profit (loss) for the year^a

Inventory holding (gains) losses«, net of tax

Replacement cost profit (loss)«

Net charge (credit) for non-operating items«, net of tax

Net (favourable) unfavourable impact of fair value accounting effects«, net of tax

Underlying replacement cost profit«

Dividends paid per share – cents

                                          – pence

Capital expenditure and acquisitions, on an accruals basis