BP (BP)

Preamble

The Plan has three Elements which comprise the tools available to the Committee to construct Executive Directors' long-term incentive arrangements:

The Share Element    This Element permits Performance Share Awards to be granted to Executive Directors, which may result in Shares vesting (without payment by the Executive Directors) to the extent that a demanding performance condition imposed by the Committee is met. In exceptional circumstances, Shares may be awarded which are subject to a requirement of continued service over a specified period, rather than a corporate performance condition;

The Share Option Element    This Element permits Options to be granted to Executive Directors at an Option Exercise Price no lower than the Market Value of a Share. All Options will be subject to a demanding performance condition; and

The Cash Incentive Element    This Element (which shall only be capable of grant under the Schedule to the Plan) enables the Committee to introduce long-term cash-based incentives into the remuneration package. The Committee only intends to use this Element in special circumstances.

In operating the Plan, the Committee shall at all times have regard to the following key objectives and principles (as amended in connection with renewal of the Plan at the Annual General Meeting in 2005):

(a)

policy for the remuneration of Executive Directors shall be determined and regularly reviewed independently of executive management and will set the tone for the remuneration of other senior executives;

(b)

the remuneration structure shall support and reflect the Company's stated purpose to maximize long-term shareholder value;

(c)

the remuneration structure shall reflect a just system of rewards for Participants;

(d)

the overall quantum of all potential remuneration components shall be determined by the exercise of informed judgement of the Committee taking into account the success of the Company and the competitive global market;

(e)

the majority of the remuneration shall be linked to the achievement of demanding performance targets that are independently set and reflect the creation of long-term shareholder value;

(f)

assessment of performance shall be quantitative and qualitative and shall include exercise of informed judgement by the Committee within a framework that takes account of sector characteristics and is approved by shareholders;

(g)

the Committee shall be proactive in obtaining an understanding of shareholder preferences;

(h)

remuneration policy and practices shall be as transparent as possible both for Participants and shareholders; and

(i)

the interests of Executive Directors and shareholders shall continue to be aligned by requiring Executive Directors to build up a significant shareholding in the Company, as specified by the Committee from time to time.