BP (BP)

Interest Expense and Other Finance Expense

        Interest expense comprises Group interest less amounts capitalized together with interest related to equity-accounted entities. Interest expense in 2004 was $642 million compared with $644 million in 2003 and $1,067 million in 2002. These amounts included charges arising from early bond redemption of $31 million in 2003 and $15 million in 2002. The charge for 2004 reflects lower interest rates and lower debt buyback costs compared with 2003 offset by the inclusion of a full year's equity accounted interest for the TNK-BP joint venture. The charge in 2003 reflects lower interest rates and lower debt compared with 2002.

        Other finance expense includes net pension finance costs, the interest accretion on provisions and interest accretion on the deferred consideration for the acquisition of investment in TNK-BP. Other finance expense in 2004 was $357 million compared with $547 million in 2003 and $73 million in 2002. The decrease in 2004 compared with 2003 primarily reflects a reduction in net pension finance costs partly offset by a revaluation of environmental and other provisions at a lower discount rate and the inclusion of a full year's charge for interest accretion on the deferred consideration for the investment in TNK-BP. The increase in 2003 compared with 2002 reflects an increase in net pension finance costs.

Interest Expense and Other Finance Expense

        Interest expense comprises Group interest less amounts capitalized together with interest related to equity-accounted entities. Interest expense in 2004 was $642 million compared with $644 million in 2003 and $1,067 million in 2002. These amounts included charges arising from early bond redemption of $31 million in 2003 and $15 million in 2002. The charge for 2004 reflects lower interest rates and

81

lower debt buyback costs compared with 2003 offset by the inclusion of a full year's equity accounted interest for the TNK-BP joint venture. The charge in 2003 reflects lower interest rates and lower debt compared with 2002.

        Other finance expense includes net pension finance costs, the interest accretion on provisions and interest accretion on the deferred consideration for the acquisition of investment in TNK-BP. Other finance expense in 2004 was $357 million compared with $547 million in 2003 and $73 million in 2002. The decrease in 2004 compared with 2003 primarily reflects a reduction in net pension finance costs partly offset by a revaluation of environmental and other provisions at a lower discount rate and the inclusion of a full year's charge for interest accretion on the deferred consideration for the investment in TNK-BP. The increase in 2003 compared with 2002 reflects an increase in net pension finance costs.