BP (BP)

GAS, POWER AND RENEWABLES (concluded)

The profit before interest and tax for the second quarter was $235 million compared with $463 million a year ago. This included inventory holding gains of $45 million compared with $10 million in the second quarter of 2006. The result for the second quarter of 2007 included fair value losses of $23 million on embedded derivatives related to long-term gas contracts and was after an impairment charge of $15 million. The corresponding period in 2006 included net fair value gains on embedded derivatives of $107 million.

The profit before interest and tax for the first half of 2007 was $441 million compared with $701 million a year ago. The first half of 2007 included inventory holding gains of $45 million compared with an inventory holding loss of $53 million in the first half of 2006. The first half of 2007 included net disposal gains of $4 million was after net fair value losses on embedded derivatives of $16 million and an impairment charge of $15 million. The first half of 2006 included net fair value gains on embedded derivatives of $52 million.

The second quarter result decreased by 49% over the second quarter of 2006 and the first half result was also lower. The results for both periods were impacted by weaker contributions from the gas trading and marketing business, decreasing profit by around $100 million and $270 million respectively, higher expenditure in the Alternative Energy business, reducing the result by around $40 million and $60 million respectively and a negative impact in respect of fair value losses on embedded derivatives and impairment charges. However, the decreases in the first half of 2007 were partially offset by better operating performance in the NGL business in North America, increasing the result by around $65 million.

Non-GAAP information on fair value accounting effects is set out on page 13.

In May, BP and Rio Tinto announced the formation of a new jointly owned company, Hydrogen Energy, which will develop decarbonized energy projects around the world. The venture will initially focus on hydrogen-fuelled power generation, using fossil fuels and carbon capture and storage (CCS) technology to produce new large-scale supplies of clean electricity.