BP (BP)

Retail

        Our retail strategy is to focus our capital into the best locations in high growth metropolitan markets where we can be number one or two in market share, whilst continuing to upgrade our offers and drive for operational efficiencies.

        There are two components of our retail offer: convenience and fuels. The convenience offer comprises sales of convenience items to customers from advantaged locations in metropolitan areas; whereas our fuel offer is deployed at service station locations in all our markets, in many cases without the convenience offer. We execute our convenience offer through a quality store format in each of our key markets, whether it is the BP Connect offer in Europe and the Eastern USA, the am/pm offer west of the Rocky Mountains in the USA, or the Aral offer in Germany. Each of these brands carries a very strong offer in itself, but we also aim to share best practices between them. Since 2003, we have also upgraded our fuel offer with the introduction of Ultimate gasoline and diesel products, which have greater efficiency and power and lesser environmental impacts. In 2004, we continued our roll-out of new generation Ultimate gasoline and diesel fuels, now available in the UK, Germany, Austria, Spain, Portugal, Greece, France, Poland, Australia and the US.

        We also aim to focus on operational efficiencies through targeted programmes for performance improvement. These have allowed us to increase our fuel throughput per site and increase our store sales per square metre. We aim to increase site performance through fuel marketing and retailing efficiencies.

        In 2004, across the network, our large format stores achieved store sales growth slightly above the market average. Total store sales, reflecting investment in new selling space, grew by 6%.

(a)

Store sales reported are sales through direct-managed stations, franchises and the BP share of store alliances and joint ventures. Sales figures exclude sales taxes and lottery sales but include quick service restaurant sales. Fuel sales are not included in these figures.

        Our retail network is largely concentrated in Europe and the USA, with established operations in Australasia, Southeast Asia and Southern & Eastern Africa. We are developing networks in China and Mexico.

        BP's worldwide network consists of nearly 27,000 stations branded BP, Amoco, ARCO and Aral. We expect the total number of service stations carrying our brands to decline further in future years, reflecting the continued optimization of our retail network and efforts to increase the consistency of our site offer. We also continue to improve the efficiency of our retail asset network through a process

49

of regular review. In July 2004, following a strategic review, we announced the divestment of our retail network in Singapore. This transaction was completed in the third quarter. In addition during 2004, further portfolio upgrading was achieved through the divestment of around a further 660 sites primarily due to underperformance.

        In 2004, we continued the rollout of the BP Connect offer at sites in the UK and USA continuing our retail strategy that builds on our advantaged locations, strong market positions and brand. These are service stations with large convenience stores that provide our customers cleaner fuels, a wider range of services and a distinctive food offer. The new BP Connect sites include service stations that are new, those that have been rebuilt, and those where extensive upgrading and remodeling has taken place. At December 31, 2004, nearly 600 BP Connect stations were open. In addition, the number of stores with the new BP Helios design increased by about 3,100 during 2004 to a total of around 19,800.

        At December 31, 2004, BP's retail network in the USA comprised approximately 14,200 service stations, of which approximately 10,300 were owned by jobbers. Through regular review and execution of business opportunities we are continuing to concentrate our ownership of real estate in markets designated for development of the convenience offer. In the USA, we increased the number of stations with the new BP Helios design by approximately 2,300 in 2004.

        In the UK and the Rest of Europe, BP's network comprised about 9,300 service stations at December 31, 2004. During the year we opened 60 BP Connect sites in Europe with the majority being in metropolitan areas of the UK. The number of stations throughout Europe that use the new BP Helios design was about 6,400 by the end of 2004.

        At December 31, 2004, BP's retail network in the rest of the world comprised some 3,300 service stations. Our established networks are primarily in Australia, New Zealand, Southern Africa and Southeast Asia. During 2004, BP China and Sinopec announced the establishment of the BP-Sinopec (Zhejiang) Petroleum Co. Ltd., a retail joint venture between BP and Sinopec. Based on the existing service station network of Sinopec, the new joint venture has plans to build, operate and manage a network of 500 service stations in Hangzhiou, Ningbo and Shaoxing. Also during the year, BP China and PetroChina announced the establishment of BP-PetroChina Petroleum Company Limited. Located in Guangdong, one of the most developed provinces in China, the joint venture is intended to acquire, build, operate and manage 500 service stations in the province. The initial investment in both joint ventures amounted to $106 million.

Retail

        Our retail strategy is to focus our capital into the best locations in high growth metropolitan markets where we can be number one or two in market share, whilst continuing to upgrade our offers and drive for operational efficiencies.

        There are two components of our retail offer: convenience and fuels. The convenience offer comprises sales of convenience items to customers from advantaged locations in metropolitan areas; whereas our fuel offer is deployed at service station locations in all our markets, in many cases without the convenience offer. We execute our convenience offer through a quality store format in each of our key markets, whether it is the BP Connect offer in Europe and the Eastern USA, the am/pm offer west of the Rocky Mountains in the USA, or the Aral offer in Germany. Each of these brands carries a very strong offer in itself, but we also aim to share best practices between them. Since 2003, we have also upgraded our fuel offer with the introduction of Ultimate gasoline and diesel products, which have greater efficiency and power and lesser environmental impacts. In 2004, we continued our roll-out of new generation Ultimate gasoline and diesel fuels, now available in the UK, Germany, Austria, Spain, Portugal, Greece, France, Poland, Australia and the US.

        We also aim to focus on operational efficiencies through targeted programmes for performance improvement. These have allowed us to increase our fuel throughput per site and increase our store sales per square metre. We aim to increase site performance through fuel marketing and retailing efficiencies.

        In 2004, across the network, our large format stores achieved store sales growth slightly above the market average. Total store sales, reflecting investment in new selling space, grew by 6%.

(a)

Store sales reported are sales through direct-managed stations, franchises and the BP share of store alliances and joint ventures. Sales figures exclude sales taxes and lottery sales but include quick service restaurant sales. Fuel sales are not included in these figures.

        Our retail network is largely concentrated in Europe and the USA, with established operations in Australasia, Southeast Asia and Southern & Eastern Africa. We are developing networks in China and Mexico.

        BP's worldwide network consists of nearly 27,000 stations branded BP, Amoco, ARCO and Aral. We expect the total number of service stations carrying our brands to decline further in future years, reflecting the continued optimization of our retail network and efforts to increase the consistency of our site offer. We also continue to improve the efficiency of our retail asset network through a process

48

of regular review. In July 2004, following a strategic review, we announced the divestment of our retail network in Singapore. This transaction was completed in the third quarter. In addition during 2004, further portfolio upgrading was achieved through the divestment of around a further 660 sites primarily due to underperformance.

        In 2004, we continued the rollout of the BP Connect offer at sites in the UK and USA continuing our retail strategy that builds on our advantaged locations, strong market positions and brand. These are service stations with large convenience stores that provide our customers cleaner fuels, a wider range of services and a distinctive food offer. The new BP Connect sites include service stations that are new, those that have been rebuilt, and those where extensive upgrading and remodeling has taken place. At December 31, 2004, nearly 600 BP Connect stations were open. In addition, the number of stores with the new BP Helios design increased by about 3,100 during 2004 to a total of around 19,800.

        At December 31, 2004, BP's retail network in the USA comprised approximately 14,200 service stations, of which approximately 10,300 were owned by jobbers. Through regular review and execution of business opportunities we are continuing to concentrate our ownership of real estate in markets designated for development of the convenience offer. In the USA, we increased the number of stations with the new BP Helios design by approximately 2,300 in 2004.

        In the UK and the Rest of Europe, BP's network comprised about 9,300 service stations at December 31, 2004. During the year we opened 60 BP Connect sites in Europe with the majority being in metropolitan areas of the UK. The number of stations throughout Europe that use the new BP Helios design was about 6,400 by the end of 2004.

        At December 31, 2004, BP's retail network in the rest of the world comprised some 3,300 service stations. Our established networks are primarily in Australia, New Zealand, Southern Africa and Southeast Asia. During 2004, BP China and Sinopec announced the establishment of the BP-Sinopec (Zhejiang) Petroleum Co. Ltd., a retail joint venture between BP and Sinopec. Based on the existing service station network of Sinopec, the new joint venture has plans to build, operate and manage a network of 500 service stations in Hangzhiou, Ningbo and Shaoxing. Also during the year, BP China and PetroChina announced the establishment of BP-PetroChina Petroleum Company Limited. Located in Guangdong, one of the most developed provinces in China, the joint venture is intended to acquire, build, operate and manage 500 service stations in the province. The initial investment in both joint ventures amounted to $106 million.