BP (BP)

Oil and Natural Gas Transportation

        The Group has direct or indirect interests in certain crude oil transportation systems, the principal ones of which are the Trans Alaska Pipeline System (TAPS) in the USA and the Forties Pipelines System (FPS) in the UK sector of the North Sea. We also operate the Central Area Transmission System (CATS) for natural gas in the UK sector of the North Sea.

        BP, as operator, manages and holds a 30.1% interest in the Baku-Tbilisi-Ceyhan (BTC) oil pipeline inaugurated in May 2005. BP, as operator of AIOC, also operates the Western Export Route Pipeline between Azerbaijan and the Black Sea coast of Georgia and the Azeri leg of the Northern Export Route Pipeline between Azerbaijan and Russia.

40

        Our onshore US crude oil and product pipelines and related transportation assets are included under "Refining and Marketing" in this item. Revenue is earned on pipelines through charging tariffs. Our gas marketing business is described under "Gas, Power and Renewables" in this item.

        Activity in oil and natural gas transportation during 2004 included:

Alaska

—

BP owns a 46.9% interest in TAPS, with the balance owned by four other companies. TAPS transported production from Alaska North Slope fields averaged 927 mb/d during 2004.



—

The TAPS owners are implementing a project to upgrade and modernize four pump stations beginning in 2005. This project will install electrically driven pumps at four critical pump stations, combined with increased automation and upgraded control systems.



—

There are a number of unresolved protests regarding intrastate tariffs charged for shipping oil through TAPS. These protests were filed between 1986 and 2003 with the Regulatory Commission of Alaska (RCA). In 2002 and 2004, the RCA issued Orders requiring refunds to be made to TAPS shippers of intrastate crude oil for the period from January 1, 1997 through June 30, 2003. BP has appealed these RCA Orders to the Alaska Superior Court. Pending the resolution of these matters the RCA has imposed intrastate rates (consistent with its 2002 Order) effective July 1, 2003. The appeal process continues.



—

Tariffs for interstate and intrastate transportation on TAPS are calculated utilizing the Federal Energy Regulatory Commission (FERC) endorsed TAPS Settlement Methodology (TSM) entered into with the State of Alaska in 1985. In December 2004, the State and Anadarko filed protests at FERC of the 2005 rates on a variety of grounds. We are confident that the rates are in accordance with the TSM but are evaluating the protests.



—

The use of US-built and US-flagged ships is required when transporting Alaskan oil to markets in the USA. BP has begun replacing its US-flagged fleet as existing ships are retired in accordance with the Oil Pollution Act of 1990. For discussion of the Oil Pollution Act of 1990, see Environmental Protection—Maritime Oil Spill Regulations in this Item on page 75. BP has contracted for the delivery of four 1.3 million-barrel-capacity, double-hull tankers for use in transporting North Slope oil to West Coast refineries. The ships are being constructed by the National Steel and Shipbuilding Company in San Diego, CA. BP took delivery of the first of the four state-of-the-art double-hull tankers, the Alaskan Frontier, in August, 2004 and the second, the Alaskan Explorer, in March 2005. The third is expected to be delivered in the fourth quarter of 2005 and the fourth in 2006. In addition to the Alaskan Frontier and Explorer, BP America Inc. has a chartered fleet of seven US-flagged tankers to transport Alaskan crude oil to markets.

North Sea

—

FPS (BP 100%) is an integrated oil and NGLs transportation and processing system that handles production from over 40 fields in the Central North Sea. The system has a capacity of more than 1 mmb/d, with average throughput in 2004 at 697 mb/d. In 2004, we successfully completed the connection of the Buzzard field into the system. This was the first time that a subsea welded hot-tap technology had been applied in this way in the North Sea, allowing FPS to remain in production while the connection was made.

41

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BP operates and has a 29.5% interest in CATS, a 400-kilometre natural gas pipeline system in the central UK sector of the North Sea. The pipeline has a transportation capacity of 1.7 bcf/d to a natural gas terminal at Teesside in northeast England. CATS offers natural gas transportation services or transportation and processing via two 600 mmcf/d processing trains. In 2004, throughput was 1.4 bcf/d (gross), 405mcf/d (net).



—

In addition, BP operates the Dimlington/Easington gas processing terminal (BP 100%) on Humberside and the Sullom Voe Gas Terminal in the Shetlands.

Asia (including the former Soviet Union)

—

BP, as operator, manages and holds a 30.1% interest in the BTC oil pipeline which was inaugurated in May 2005. The 1,770 kilometre pipeline is expected to carry one million barrels of oil a day from the BP-operated ACG oilfield in the Caspian Sea to the eastern Mediterranean port of Ceyhan. The filling of the pipeline with oil commenced in May, and loading of the first tanker at Ceyhan is expected in the fourth quarter of 2005.



—

The South Caucasus Pipeline (SCP) for the transport of gas from Shah Deniz in Azerbaijan to the Turkish border is under construction and scheduled to be mechanically complete at the end of 2005. BP is the operator and holds a 25.5% interest.



—

Through the LukArco joint venture, BP holds a 5.75% interest (with a 25% funding obligation) in the Caspian Pipeline Consortium (CPC) pipeline. CPC is a 1,510-kilometre pipeline from Kazakhstan to the Russian port of Novorossiysk. The initial construction phase was completed in April 2003. The pipeline has an initial capacity of 28.2 million tonnes (approximately 225 mmboe) a year and carries crude oil from the Tengiz field (BP 2.3%). In addition to our interest in LukArco, we hold a separate 0.87% interest (3.5% funding obligation) in CPC through a 49% holding in Kazakhstan Pipeline Ventures. In 2004, CPC total throughput reached 22.5 million tonnes. This increased within the year and throughput for the month December 2004 reached the equivalent of 33.1 million tonnes on an annual basis.

Gulf of Mexico

—

Construction continued on the Mardi Gras pipeline system (BP approximately 65% and operator). When complete, the network of pipelines will extend in total more than 450 miles, and lie in waters of greater than 7,000 feet deep. The segments associated with Na Kika, Holstein and Mad Dog have been commissioned and are currently in operation. The segments supporting Thunder Horse and Atlantis will be commissioned in conjunction with the start-up of those fields in 2005 and 2006, respectively.



—

From January 1, 2005 the Mardi Gras pipeline has been transferred to the Refining and Marketing segment.

Oil and Natural Gas Transportation

        The Group has direct or indirect interests in certain crude oil transportation systems, the principal ones of which are the Trans Alaska Pipeline System (TAPS) in the USA and the Forties Pipelines System (FPS) in the UK sector of the North Sea. We also operate the Central Area Transmission System (CATS) for natural gas in the UK sector of the North Sea.

        BP, as operator, manages and holds a 30.1% interest in the Baku-Tbilisi-Ceyhan (BTC) oil pipeline inaugurated in May 2005. BP, as operator of AIOC, also operates the Western Export Route Pipeline between Azerbaijan and the Black Sea coast of Georgia and the Azeri leg of the Northern Export Route Pipeline between Azerbaijan and Russia.

39

        Our onshore US crude oil and product pipelines and related transportation assets are included under "Refining and Marketing" in this item. Revenue is earned on pipelines through charging tariffs. Our gas marketing business is described under "Gas, Power and Renewables" in this item.

        Activity in oil and natural gas transportation during 2004 included:

Alaska

—

BP owns a 46.9% interest in TAPS, with the balance owned by four other companies. TAPS transported production from Alaska North Slope fields averaged 927 mb/d during 2004.



—

The TAPS owners are implementing a project to upgrade and modernize four pump stations beginning in 2005. This project will install electrically driven pumps at four critical pump stations, combined with increased automation and upgraded control systems.



—

There are a number of unresolved protests regarding intrastate tariffs charged for shipping oil through TAPS. These protests were filed between 1986 and 2003 with the Regulatory Commission of Alaska (RCA). In 2002 and 2004, the RCA issued Orders requiring refunds to be made to TAPS shippers of intrastate crude oil for the period from January 1, 1997 through June 30, 2003. BP has appealed these RCA Orders to the Alaska Superior Court. Pending the resolution of these matters the RCA has imposed intrastate rates (consistent with its 2002 Order) effective July 1, 2003. The appeal process continues.



—

Tariffs for interstate and intrastate transportation on TAPS are calculated utilizing the Federal Energy Regulatory Commission (FERC) endorsed TAPS Settlement Methodology (TSM) entered into with the State of Alaska in 1985. In December 2004, the State and Anadarko filed protests at FERC of the 2005 rates on a variety of grounds. We are confident that the rates are in accordance with the TSM but are evaluating the protests.



—

The use of US-built and US-flagged ships is required when transporting Alaskan oil to markets in the USA. BP has begun replacing its US-flagged fleet as existing ships are retired in accordance with the Oil Pollution Act of 1990. For discussion of the Oil Pollution Act of 1990, see Environmental Protection—Maritime Oil Spill Regulations in this Item on page 69. BP has contracted for the delivery of four 1.3 million-barrel-capacity, double-hull tankers for use in transporting North Slope oil to West Coast refineries. The ships are being constructed by the National Steel and Shipbuilding Company in San Diego, CA. BP took delivery of the first of the four state-of-the-art double-hull tankers, the Alaskan Frontier, in August, 2004 and the second, the Alaskan Explorer, in March 2005. The third is expected to be delivered in the fourth quarter of 2005 and the fourth in 2006. In addition to the Alaskan Frontier and Explorer, BP America Inc. has a chartered fleet of seven US-flagged tankers to transport Alaskan crude oil to markets.

North Sea

—

FPS (BP 100%) is an integrated oil and NGLs transportation and processing system that handles production from over 40 fields in the Central North Sea. The system has a capacity of more than 1 mmb/d, with average throughput in 2004 at 697 mb/d. In 2004, we successfully completed the connection of the Buzzard field into the system. This was the first time that a subsea welded hot-tap technology had been applied in this way in the North Sea, allowing FPS to remain in production while the connection was made.

40

—

BP operates and has a 29.5% interest in CATS, a 400-kilometre natural gas pipeline system in the central UK sector of the North Sea. The pipeline has a transportation capacity of 1.7 bcf/d to a natural gas terminal at Teesside in northeast England. CATS offers natural gas transportation services or transportation and processing via two 600 mmcf/d processing trains. In 2004, throughput was 1.4 bcf/d (gross), 405mcf/d (net).



—

In addition, BP operates the Dimlington/Easington gas processing terminal (BP 100%) on Humberside and the Sullom Voe Gas Terminal in the Shetlands.

Asia (including the former Soviet Union)

—

BP, as operator, manages and holds a 30.1% interest in the BTC oil pipeline which was inaugurated in May 2005. The 1,770 kilometre pipeline is expected to carry one million barrels of oil a day from the BP-operated ACG oilfield in the Caspian Sea to the eastern Mediterranean port of Ceyhan. The filling of the pipeline with oil commenced in May, and loading of the first tanker at Ceyhan is expected in the fourth quarter of 2005.



—

The South Caucasus Pipeline (SCP) for the transport of gas from Shah Deniz in Azerbaijan to the Turkish border is under construction and scheduled to be mechanically complete at the end of 2005. BP is the operator and holds a 25.5% interest.



—

Through the LukArco joint venture, BP holds a 5.75% interest (with a 25% funding obligation) in the Caspian Pipeline Consortium (CPC) pipeline. CPC is a 1,510-kilometre pipeline from Kazakhstan to the Russian port of Novorossiysk. The initial construction phase was completed in April 2003. The pipeline has an initial capacity of 28.2 million tonnes (approximately 225 mmboe) a year and carries crude oil from the Tengiz field (BP 2.3%). In addition to our interest in LukArco, we hold a separate 0.87% interest (3.5% funding obligation) in CPC through a 49% holding in Kazakhstan Pipeline Ventures. In 2004, CPC total throughput reached 22.5 million tonnes. This increased within the year and throughput for the month December 2004 reached the equivalent of 33.1 million tonnes on an annual basis.

Gulf of Mexico

—

Construction continued on the Mardi Gras pipeline system (BP approximately 65% and operator). When complete, the network of pipelines will extend in total more than 450 miles, and lie in waters of greater than 7,000 feet deep. The segments associated with Na Kika, Holstein and Mad Dog have been commissioned and are currently in operation. The segments supporting Thunder Horse and Atlantis will be commissioned in conjunction with the start-up of those fields in 2005 and 2006, respectively.



—

From January 1, 2005 the Mardi Gras pipeline has been transferred to the Refining and Marketing segment.