BP Australia Group Pty Ltd

BP Australia Group Pty Ltd

A.C.N. 007 412 553

Annual Financial Report for the year ended 31 December 2003

BP AUSTRALIA GROUP PTY LTD CORPORATE INFORMATION

ACN 007 412 553 BOARD OF DIRECTORS G.R. Hueston (Chairman) G Nicolaides J. Norman K.M. Lucas D.J. Knox (appointed 1/08/03) R.J. McGrath (appointed 17/11/03) T.J. Ind (Alternate Director) SECRETARIES R.W. Morrison R.W. Venner (Assistant Secretary) DOMICILE AND PLACE OF INCORPORATION Australia HEAD OFFICE Levels 26 and 28-31, The Tower, Melbourne Central, 360 Elizabeth Street, Melbourne, 3000 (03 9268 4111) REGISTERED OFFICE Level 29, The Tower, Melbourne Central, 360 Elizabeth Street, Melbourne, 3000 (03 9268-3889) BANKERS TO THE GROUP Australia and New Zealand Banking Group Limited Citibank NA SOLICITORS Corrs Chambers Westgarth AUDITORS Ernst & Young

1

BP AUSTRALIA GROUP PTY LTD DIRECTORS’ REPORT

Your directors submit their report for the year ended 31 December 2003. DIRECTORS The names and details of the Company’s directors in office during the financial year and until the date of this report are as follows. Directors were in office for this entire period unless otherwise stated.

G.R. Hueston K.M. Lucas G. Nicolaides J. Norman T.J. Ind (Alternate Director) D.J. Knox (appointed 1/08/03) R.J. McGrath (appointed 17/11/03) G.D. Bourne (resigned 12/09/03) R.M. Harding (resigned 01/08/03)

CORPORATE STRUCTURE BP Australia Group Pty Ltd is a company domiciled in Australia. Its Australian parent entity is BP Regional Australasia Holdings Pty Ltd. Its ultimate parent company is BP p.l.c. BP Australia Group Pty Ltd has prepared a consolidated financial report incorporating the entities that it controlled during the financial year. EMPLOYEES The consolidated entity employed 2,202 people as at 31 December 2003 (2002: 2,160 employees). PRINCIPAL ACTIVITIES The principal activities of the Consolidated Entity constituted by the Company and the entities it controlled from time to time during the financial year were the exploration for and production of oil, natural gas and liquefied natural gas, and the refining, transportation and marketing of petroleum and lubricant products, sealants and waxes as well as the manufacture and marketing of photovoltaic cells and related solar powered equipment. DIVIDENDS A dividend of A$525.0 million, was declared on 22 May 2003 and paid on 23 May 2003. (2002: A$500.0 million). REVIEW AND RESULTS OF OPERATIONS The financial report of the Consolidated Entity for the year shows an operating profit before income tax of $1,753.6 million (2002: $764.6 million profit). The profit of the Consolidated Entity for the year after income tax was $1,649.6 million (2002: $570.2 million profit). High oil and gas prices provided good returns in the entity’s upstream business. Regional refining margins recovered in the later part of the year improving the refining financial performance. The closure of Mobil’s Port Stanvac refinery will have little impact on Australia’s refinery capacity and the Asia Pacific region should remain in surplus in the longer term. Oil prices have been at historically high prices throughout the year, which maintained pressure on historic cost operating margins in the downstream industry, as marketers struggled to pass on price increases in an increasingly competitive environment. Intense competition continues in the Australian marketplace with three supermarket majors all entering fuel retailing offering discounted fuel with their grocery purchases. Hence the organisation has had to continue its cost reduction and revenue enhancement initiatives to meet income targets.

2

BP AUSTRALIA GROUP PTY LTD DIRECTORS’ REPORT continued

SIGNIFICANT EVENTS AFTER THE BALANCE DATE No matter or circumstance has arisen since the end of the financial year that has significantly affected or may significantly affect the operations of the Consolidated Entity, the results of those operations, or the state of affairs of the Consolidated Entity, in subsequent years. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS There have been no significant changes in the state of affairs of the Consolidated Entity other than those mentioned elsewhere in this report. LIKELY DEVELOPMENTS AND EXPECTED RESULTS Through all of its business the Consolidated Entity will continue to look for opportunities to improve its profitability and competitiveness. Profitability will remain sensitive to the competitive pressures in the domestic and international marketplace, the exchange rate of the Australian dollar, international oil prices and government policy and action on domestic prices. INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS The Company's ultimate holding company, BP p.l.c., maintains insurance for directors and officers of all its Group companies insuring them against the financial consequences of actions brought against them for acts or omissions in the performance of their duties. ENVIRONMENTAL REGULATION AND PERFORMANCE BP’s Health, Safety and Environment (“HSE”) commitment states that: “Our goals are simply stated - no accidents, no harm to people and no damage to the environment. We will continue to drive down the environmental and health impact of our operations by reducing waste, emissions and discharges and using energy efficiently.” and “Openly report our performance, good and bad”. BP’s focus is on reducing our environmental footprint in Australia and around the world, and ensuring our staff and customers are safe and healthy in all interactions with our operations and products. We are doing this by targeting those parts of our business which have the greatest environmental and health and safety impact as articulated by Australians. Key environmental concerns to Australians include local air quality, climate change and water use. There is a culture of continual improvement within BP. This is supported by a robust HSE management and assurance system, based around the 13 expectations highlighted in the document ‘getting HSE right’, (http://www.bp.com/liveassets/bp_internet/globalbp/STAGING/global_assets/downloads/G/Getting_HSE_right_A_guide_for_BP_Managers_2001.pdf) annual HSE performance contracts and regular HSE assurance activities. This has driven us far beyond compliance, where adhering to State and Commonwealth environmental legislation and regulations is accepted as a minimum standard. Details of our environmental performance were published in our ‘Society, Environment and Finance’ Report available from the Company or from the web site at www.bp.com.au. Examples of how we reduced the impacts of our operations, and pursued our sustainable development journey include: • BP’s Kwinana Refinery had their Environment Management System certified to ISO14001 (Environment Management Systems) in

2000, and Bulwer Island Refinery had its system certified at the end of 2001. Each refinery retained their certification in 2003. • BP was one of the first signatories to a Greenhouse Challenge Co-Operative Agreement with the Commonwealth Government. • BP has had its emission inventories verified as part of the Greenhouse Challenge Independent Verification Program. • BP introduced a new programme called BP Global Choice, which enables customers to offset their car’s greenhouse gas emissions

when they buy BP Ultimate petrol. Under the programme, for every litre of the fuel sold, BP purchased a series of independently verified and Federal Government endorsed greenhouse abatement projects, equivalent to the life-cycle emissions of the fuel, under the ‘Greenhouse Friendly’ program.

• BP has now modified BP Global Choice, to be available to commercial customers who buy BP fuels. The first customers of this

program signed in 2003. • BP has pushed ahead on our cleaner fuels agenda and introduced:

- Low sulphur diesel in Western Australia and Queensland, and produces Ultra low sulphur Diesel (50 ppm) at the Kwinana Refinery and Bulwer Island Refinery.

3

http://www.bp.com.au/

BP AUSTRALIA GROUP PTY LTD DIRECTORS’ REPORT continued

- Lead replacement petrol in Australia. We were the first company to introduce Lead Replacement Petrol in Australia.

- Australia’s cleanest petrol, BP Ultimate, which has the lowest levels of benzene and sulphur and produces less pollution than other Australian petrols. Benzene levels have been reduced from 2% to 1%.

• BP was awarded a grant from the Federal Government under the Greenhouse Gas Abatement Program to assist with the introduction

of fuels containing 10% ethanol to be manufactured at the Bulwer Island Refinery. However due to the market’s negative response to high levels of ethanol in the Sydney fuel market, the trial has now been concluded.

• BP has reintroduced fuel containing 10% ethanol into the Australian market with a further market trial in Far North Queensland. • BP currently has 42 solar powered service station sites in New South Wales, Queensland, Western Australia, South Australia and

Victoria. • BP is planting trees that helps reduce global warming and land degradation, and has supported the planting of 1.4 million trees in

Western Australia since 1998. • Part of the Bulwer Island Refinery clean fuels upgrade requires an increase in water usage. This increase was achieved by recycling

treated wastewater from the near by Council operated Lugage Point wastewater treatment plant. The wastewater is now further purified and then supplied to BP for use in cooling systems, fire water and steam generation. This provides two benefits:

- Reduced treated sewerage discharges to Brisbane River; and - Reduced fresh water consumption for the refinery operations.

During the current and previous financial years there have been a number of incidents at the Kwinana Refinery which have resulted in breaches of the environmental license. For each incident there is the possibility of a fine being imposed of between A$125,000 and A$1,000,000. The likelihood of a fine being imposed is currently unknown. However, management considers that a contingent liability of US$5,000,000 should be disclosed. Draft legislation is being released in 2004 which may result in the Kwinana refinery being liable for the 'clean up' costs associated with the release of hydrocarbons into the soil at a site in North Fremantle. It is estimated that the cost of remediation may be in the range of US$1.5-15 million. This is dependent upon the extent of remediation required by the draft legislation. The BP Group has been publishing a stand alone Environment Report since the early 90’s. For a full picture of our environmental performance during 2003, this report should be read in conjunction with our BP Group 2003 Environment and Society Report, at http:// www.bp.com the Australian Environment, Society and Finance Report referred to earlier. In conclusion the Directors are not aware of any other breaches of environmental legislation during the financial year by the entity, which are material in nature, and have no reason to believe that any possible legal or remedial action would result in a material cost, or loss to the company or the entity. ROUNDING The amounts contained in this financial report have been rounded off to the nearest one hundred thousand dollars (where rounding is applicable) under the option available to the Company under ASIC Class Order 98/0100. The company is an entity to which the Class Order applies. CORPORATE GOVERNANCE In recognising the need for the highest standards of corporate behaviour and accountability, the directors of BP Australia Group Pty Ltd support and have adhered to the principles of corporate governance. Signed in accordance with a resolution of the directors. J. Norman Director Melbourne Date:

4

BP AUSTRALIA GROUP PTY LTD STATEMENT OF FINANCIAL PERFORMANCE FOR THE YEAR ENDED 31 DECEMBER 2003

Millions of dollars CONSOLIDATED BP Australia Group Pty Ltd

Notes 2003 2002 2003 2002

REVENUES FROM ORDINARY ACTIVITIES 2 8,317.1 6,187.5 525.0 801.1

Changes in inventories of finished goods and work in progress (117.2) 699.6 - -

Raw materials and consumables used (5,948.4) (5,125.6) - -

Depreciation and amortisation expenses 3(a) (557.0) (400.2) - -

Borrowing costs expense 3(a) (184.1) (199.5) (213.5) (234.9)

Salaries and employee benefits expense (323.9) (236.7) - -

Rental (31.3) (24.9) - -

Freight (96.6) (73.0) - -

Fees and commissions (65.2) (39.0) - -

Electricity (35.1) (29.5) - -

Royalties (31.9) (24.3) - -

Advertising (8.5) (11.9) - -

Travel (17.0) (15.6) - -

Repairs and maintenance (62.8) (44.6) - -

Other expenses from ordinary activities (256.6) (128.2) - -

Deficiency in net assets of acquired entity - (34.3) - -

Foreign exchange gains 3(b) 1,172.1 264.8 728.7 189.4

PROFIT FROM ORDINARY ACTIVITIES BEFORE INCOME TAX EXPENSE

1,753.6 764.6

1,040.2 755.6

INCOME TAX (EXPENSE)/CREDIT RELATING TO ORDINARY ACTIVITIES

4 (104.0) (194.4)

0.7 (0.3)

PROFIT FROM ORDINARY ACTIVITIES AFTER INCOME TAX

1,649.6 570.2 1,040.9 755.3

NET PROFIT ATTRIBUTABLE TO MEMBERS OF BP AUSTRALIA GROUP PTY LTD

1,649.6 570.2 1,040.9 755.3

5

BP AUSTRALIA GROUP PTY LTD STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2003


Notes 2003 2002 2003 2002 CURRENT ASSETS Cash 5.1 28.7 - - Receivables 6 1,845.2 1,842.9 0.7 41.9 Inventories 7 582.4 699.6 - - Other 8 29.7 35.5 - -

TOTAL CURRENT ASSETS 2,462.4 2,606.7 0.7 41.9

NON-CURRENT ASSETS Receivables 9 26.0 23.8 - 0.1 Other financial assets 10 7.4 8.3 7,112.9 7,112.9 Property, plant and equipment 12 8,211.3 8,443.3 - - Deferred tax asset 4 - 37.4 - - Intangible assets 13 154.6 164.8 - -

TOTAL NON-CURRENT ASSETS 8,399.3 8,677.6 7,112.9 7,113.0

TOTAL ASSETS 10,861.7 11,284.3 7,113.6 7,154.9

CURRENT LIABILITIES

Overdraft - 80.5 - -

Payables 15 1,584.4 919.8 0.8 0.8

Interest-bearing liabilities 16 102.3 102.7 309.4 206.8

Current tax liabilities 4 - 221.0 - 0.3

Provisions 17 60.5 59.3 - -

TOTAL CURRENT LIABILITIES 1,747.2 1,383.3 310.2 207.9

NON-CURRENT LIABILITIES

Payables 18 6.3 9.1 - -

Interest-bearing liabilities 19 3,749.6 5,082.7 2,003.4 2,662.9

Deferred tax liabilities 4 - 563.7 - -

Provisions 20 135.0 146.5 - -

TOTAL NON-CURRENT LIABILITIES 3,890.9 5,802.0 2,003.4 2,662.9

TOTAL LIABILITIES 5,638.1 7,185.3 2,313.6 2,870.8

NET ASSETS 5,223.6 4,099.0 4,800.0 4,284.1

EQUITY

Contributed equity 21 4,029.5 4,029.5 4,029.5 4,029.5 Retained profits 22 1,194.1 69.5 770.5 254.6

TOTAL EQUITY 5,223.6 4,099.0 4,800.0 4,284.1

6

BP AUSTRALIA GROUP PTY LTD STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2003


Notes 2003 2002 2003 2002 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers 8,188.8 6,226.1 - -

Payments to suppliers and employees (6,847.5) (5,308.0) - -

Dividends received 7.2 9.8 - -

Rent received 20.5 11.0 - -

Cost recoveries 22.4 14.4 - -

Other revenue received 3.8 1.6 - -

Interest received 32.4 22.1 - -

Borrowing costs (184.1) (199.5) - -

Income tax paid (302.1) (111.0) - -

NET CASH FLOWS FROM OPERATING ACTIVITIES 23(a) 941.4 666.5 - -

CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property, plant and equipment (403.1) (248.0) - -

Proceeds from sales of property, plant and equipment and investments

43.6

29.7

-

-

Payments for other financial assets - (3,083.4) - -

Cash acquired on acquisition - 10.9 - -

NET CASH FLOWS USED IN INVESTING ACTIVITIES (359.5) (3,290.8) - -

CASH FLOWS FROM FINANCING ACTIVITIES Net proceeds from borrowings - 3,072.5 - -

Dividends paid (525.0) (500.0) - -

NET CASH FLOWS FROM FINANCING ACTIVITIES (525.0) 2,572.5 - -

NET INCREASE /(DECREASE) IN CASH HELD 56.9 (51.8) - -

Add opening cash brought forward (51.8) - - -

CLOSING CASH CARRIED FORWARD 23(b) 5.1 (51.8) - -

All transactions of the parent entity are settled by way of intercompany account. The parent entity has no bank account and no cash transactions, accordingly there are no cash flows.

Closing Cash comprises: Cash in bank 5.1 28.7 - - Overdraft - (80.5) - - Closing Cash 5.1 (51.8) - -

7

BP AUSTRALIA GROUP PTY LTD NOTES continued 31 DECEMBER 2003 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Basis of accounting The financial report is a general purpose financial report which has been prepared in accordance with the requirements of the Corporations Act 2001 including applicable Accounting Standards. Other mandatory professional reporting requirements (Urgent Issues Group Consensus Views) have also been complied with. The financial report has been prepared in accordance with the historical cost convention. (b) Changes in accounting policies The accounting policies adopted are consistent with those of the previous year except for the accounting polices with respect to the provision for dividends and employee benefits. Provision for dividends The consolidated entity has adopted the new Accounting Standard AASB 1044 “Provisions, Contingent Liabilities and Contingent Assets” which has resulted in a change in the accounting for dividends provision. Previously, the consolidated entity recognised a provision for dividend based on the amount that was proposed or declared after the reporting date. In accordance with the requirements of the new Standard, a provision for dividends will only be recognised at the reporting date where dividends have been declared, determined or publicly recommended prior to the reporting date. The effect of the revised policy had no effect on the Company’s retained profits or provisions. In accordance with the new Standard, no provision for dividend has been recognised for the year ended 31 December 2003. Employee benefits The consolidated entity has adopted revised Accounting Standard AASB 1028 “Employee Benefits” applicable to annual reporting periods beginning on or after 1 July 2002. In accordance with the revised Standard, the measurement of employee benefit obligations is now based on remuneration rates that the entity expects to pay when the liability is settled. Previously, the measurement of the liability was based on remuneration rates at the date of recognition of the liability. The change in accounting policy did not have a significant impact on the entity’s financial position or result. (c) Principles of consolidation The consolidated financial statements are those of the consolidated entity, comprising BP Australia Group Pty Ltd (the parent entity) and all the entities that BP Australia Group Pty Ltd controlled from time to time during the year and at balance date. Information from the financial statements of subsidiaries is included from the date the parent entity obtains control until such time as control ceases. Where there is a loss of control of a subsidiary, the consolidated financial statements include the results for the part of the reporting period during which the parent entity has control. Subsidiary acquisitions are accounted for using the purchase method of accounting. The financial statements of subsidiaries are prepared for the same reporting period as the parent entity (from the point that control exists), using consistent accounting policies. All intercompany balances and transactions, including unrealised profits arising from intra group transactions, have been eliminated in full. (d) Foreign currencies Translation of foreign currency transactions Transactions in foreign currencies of entities within the consolidated entity are converted to local currency at the rate of exchange ruling at the date of the transaction. Amounts payable to and by the entities within the consolidated entity that are outstanding at the balance date and are denominated in foreign currencies have been converted to local currency using rates of exchange ruling at the end of the financial year. Exchange gains and losses on currency trading have been determined by referring to the spot rate on the transaction date relative to the spot rate at balance date. (e) Cash and cash equivalents Cash on hand and in banks and short-term deposits are stated at nominal value. For the purposes of the Statement of Cash Flows, cash includes cash on hand, cash in banks and money market investments readily convertible to cash within 2 working days, net of outstanding bank overdrafts. Bank overdrafts are carried at the principal amount. Interest is charged as an expense as it accrues. There are no cash flows of the parent entity as all cash transactions are made on behalf of the entity by BP Finance Australia Pty Ltd, a subsidiary of the parent. (f) Other financial assets All investments (including in associates) are carried at the lower of cost and recoverable amount. (g) Inventories Inventories are valued at the lower of cost and net realisable value. Cost includes appropriate production overheads and is determined on the first in first out basis.

8

BP AUSTRALIA GROUP PTY LTD NOTES continued (h) Receivables Trade receivables are recognised and carried at original invoice amount less a provision for any uncollectable debts. An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written-off as incurred. Receivables from related parties are recognised and carried at the nominal amount due. Interest is taken up as income on an accrual basis. (i) Recoverable amount Non-current assets are not carried at an amount above their recoverable amounts, and where carrying values exceed this recoverable amount, assets are written-down. In determining recoverable amount, the expected net cash flows have not been discounted to their present value using a market determined risk adjusted discount rate. (j) Property, plant & equipment Downstream Assets Cost All items of property, plant and equipment are measured at cost. Depreciation Depreciation is provided on a straight-line basis on all property, plant and equipment, other than freehold land. Major depreciation periods are: Freehold buildings 20 - 30 years Plant and equipment 2.5 - 30 years Upstream Assets For those assets that have an expected life associated with specific production, amortisation is determined on a unit of production basis. At current production levels, the maximum useful life of the assets depreciated on a unit of production basis (including buildings and plant and equipment) is 23 years. (k) Exploration, evaluation, development and restoration costs Costs carried forward Costs arising from exploration and evaluation activities are carried forward provided such costs are expected to be recouped through successful development, or by sale, or where exploration and evaluation activities have not, at balance date, reached a stage to allow a reasonable assessment regarding the existence of economically recoverable reserves. Restoration costs Restoration costs that are expected to be incurred are provided for as part of the cost of the exploration, evaluation, development, construction or production phases that give rise to the need for restoration. Accordingly, these costs are recognised gradually over the life of the facility as these phases occur. The costs include obligations relating to reclamation, waste site closure, plant closure, platform removal and other costs associated with the restoration of the site. These estimates of the restoration obligations are based on anticipated technology and legal requirements and future costs, which have been discounted to their present value. Any changes in the estimates are adjusted on a prospective basis. In determining the restoration obligations, the entity has assumed no significant changes will occur in the relevant Federal and State legislation in relation to restoration in the future. (l) Leases Finance Leases Leases which effectively transfer substantially all of the risks and benefits incidental to ownership of the leased item to the group are capitalized at the present value of the minimum lease payments and disclosed as property, plant and equipment under lease. A lease liability of equal value is also recognized. Capitalised lease assets are depreciated over the shorter of the estimated useful life of the assets and the lease term. Minimum lease payments are allocated between interest expense and reduction of the lease liability with the interest expense calculated using the interest rate implicit in the lease and recognized directly in net profit. Operating leases The minimum lease payments of operating leases, where the lessor effectively retains substantially all the risks and benefits of ownership of the leased term, are recognised as an expense on a straight-line basis. Operating lease commitments outstanding at balance date include all payments that can reasonably be expected to be due over the remainder of the lease term. (m) Joint ventures Interests in joint venture operations are brought to account by including in the respective classification, the share of individual assets employed, share of liabilities, expenses incurred and revenue from the sale of joint venture output. (n) Goodwill Goodwill represents the excess of the purchase consideration over the fair value of identifiable net assets acquired at the time of acquisition of a business or shares in a controlled entity. Goodwill is amortised by the straight-line method over the period during which benefits are expected to be received. This is taken as being between 10 and 20 years. (o) Payables Liabilities for trade creditors and other amounts are carried at cost which is the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the consolidated entity. Payables to related parties are carried at the principal amount. Interest, when charged by the lender, is recognised as an expense on an accrual basis.

9

BP AUSTRALIA GROUP PTY LTD NOTES continued (p) Interest-bearing liabilities All loans are measured at the principal amount. Interest is charged as an expense as it accrues. (q) Provisions Provisions are recognised when the economic entity has a legal, equitable or constructive obligation to make a future sacrifice of economic benefits to other entities as a result of past transactions or other past events, it is probable that a future sacrifice of economic benefits will be required and a reliable estimate can be made of the amount of the obligation. The provision for restoration represents the provision for environmental clean up of terminals. This includes provisions for terminals that have been sold, are planned to be sold or are operating where there is a known problem that requires attention. (r) Interest Interest is capitalised where it relates to the financing of major projects during the development period and is then amortised with the relevant fixed assets. All other interest is charged against profit. (s) Deferred income Amounts received for gas volumes not yet taken in accordance with take-or-pay contracts are recorded as deferred income. These amounts will be recognised as sales revenue when the gas to which the payments relate is delivered to the purchaser. (t) Contributed equity Issued and paid up capital is recognised at the fair value of the consideration received by the company. (u) Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the entity and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised: Sale of Goods Control of the goods has passed to the buyer. Rendering of Services Control of a right to be compensated for the services has been attained. Interest Control of a right to receive the interest payment. Dividends Control of a right to receive the dividend payment. (v) Taxes Income Tax Expense Tax effect accounting is applied using the liability method whereby income tax is regarded as an expense and is calculated on the accounting profit after allowing for permanent differences. To the extent timing differences occur between the time items are recognised in the financial statements and when items are taken into account in determining taxable income, the net related taxation benefit or liability, calculated at current rates, is disclosed as a future income tax benefit or a provision for deferred income tax. The net future income tax benefit relating to tax losses and timing differences is not carried forward as an asset unless the benefit is virtually certain of being realised. Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of GST except: • where the GST is incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is

recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and • receivables and payables are stated with the amount or GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the Statement of Financial Position. Cash flows are included in the Statement of Cash Flows on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. (w) Employee entitlements Provision is made for employee entitlement benefits accumulated as a result of employees rendering services up to the reporting date. These benefits include wages and salaries, annual leave and long service leave. Liabilities arising in respect of wages and salaries, annual leave, and any other employee entitlements expected to be settled within 12 months of the reporting date are measured at their nominal amounts based on remuneration rates which are expected to be paid when the liability is settled. All other entitlement liabilities are measured at the present value of the estimated future cash outflow to be made in respect of services provided by employees up to the reporting date. In determining the present value of future cash outflows, the interest rates attaching to the government securities, which have terms to maturity approximating the term of the related liability are used. The value of the employee share scheme described in note 25 is not being charged as an employee entitlement expense. The contributions made to the defined benefits superannuation fund are charged against profits when due.

10

BP AUSTRALIA GROUP PTY LTD NOTES continued Millions of dollars CONSOLIDATED BP Australia Group Pty Ltd

Notes 2003 2002 2003 20022. REVENUE FROM ORDINARY ACTIVITIES Revenues from operating activities Revenue from sale of goods 8,076.3 5,998.0 - -Revenue from services 110.9 100.9 - -

Total revenues from operating activities 8,187.2 6,098.9 - -

Revenues from non-operating activities Rent 20.5 11.0 - -Dividends - related parties within wholly-owned group - - 525.0 799.9 - other corporations 7.2 9.8 - -Interest - related parties within wholly-owned group 29 - - - 1.2 - other related parties – common controlled entities 29 32.4 22.1 - -Total interest 32.4 22.1 - 1.2

Proceeds on sale of non-current assets 43.6 29.7 - -Cost recoveries 22.4 14.4 - -Other revenue 3.8 1.6 - -

Total revenues from non-operating activities 129.9 88.6 525.0 801.1

Total revenues from ordinary activities 8,317.1 6,187.5 525.0 801.1

3. EXPENSES AND LOSSES/(GAINS)

(a) Expenses Cost of sales Upstream

Costs of production

Production costs 129.3 115.4 - - Royalty 93.8 75.4 - -

223.1 190.8 - - Depreciation and amortisation Plant and equipment 392.0 275.2 - - Buildings 2.5 1.6 - - Provision for restoration of operating locations 7.8 6.9 - -

402.3 283.6 - -Downstream Depreciation and amortisation Plant and equipment 73.4 49.9 - -Raw materials and consumables used 6,065.6 4,426.0 - -

Total cost of sales 6,764.4 4,950.3 - -

Depreciation and amortisation expense Upstream Plant and equipment 392.0 275.2 - - Buildings 2.5 1.6 - -Downstream Depreciation of non-current assets Plant and equipment 135.0 100.1 - -

11

BP AUSTRALIA GROUP PTY LTD NOTES continued Millions of dollars CONSOLIDATED BP Australia Group Pty Ltd Notes 2003 2002 2003 20023. EXPENSES AND LOSSES/(GAINS) (cont’d) Depreciation and amortisation expense (cont’d) Buildings 19.7 16.8 - - Amortisation of non-current assets Goodwill 7.8 6.5 - -

Total depreciation and amortisation expense 557.0 400.2 - - Borrowing costs expensed Interest expense Wholly owned group - - 213.5 234.9 Other related parties – common controlled entities 29 183.7 195.4 - - Other persons/corporations 0.4 4.1 - -

Total borrowing costs expensed 184.1 199.5 213.5 234.9

Bad and doubtful debts – trade debtors 17.3 (7.8) - -Superannuation contributions – Defined benefit fund 34.7 14.7 - -Operating lease rental : -minimum lease payments 22.7 18.1 - -Total operating lease rental 22.7 18.1 - -

(b) Losses/(Gains)

Net (gain) on disposal of controlled entities (7.8) - - -

Net (gain) on disposal of property, plant and equipment (9.0) (4.6) - -

Net foreign currency (gains) (1,172.1) (264.8) (728.7) (189.4)

4. INCOME TAX

The prima facie tax, using tax rates applicable in the country of operation, on operating profit differs from the income tax provided in the financial statements as follows:

Prima facie tax on profit from ordinary activities 526.1 229.4 312.0 226.7

Tax effect of permanent differences: Non-taxable gain on sale (8.6) (6.7) - -

Depreciation of fixed assets step up and amortisation of goodwill

4(a) 72.4 54.5

- -

Non-allowable site clearance expenses 1.2 0.4 - -

Non-allowable travel and legal expenses 0.6 0.4 - -

Research and development (3.5) (1.0) - -

Dividends received - - (157.5) (240.0)

Other 1.5 0.5 - -

Interest paid - - 63.4 70.5

Deficiency in net assets of acquired entity - 10.3 - -

Amortisation of acquisition expenditure 22.3 18.0 - -

Unrealised exchange results (354.7) (93.4) (218.6) (56.9)

Gain arising from the restatement of deferred tax liabilities due to the reset of the tax base of assets under tax consolidation

(153.1) -

- -

Under/(over) provision of previous year (0.2) (18.0) - -

Income tax expense/(credit) attributable to operating activities 104.0 194.4 (0.7) 0.3

12

BP AUSTRALIA GROUP PTY LTD NOTES continued Millions of dollars CONSOLIDATED BP Australia Group Pty Ltd Notes 2003 2002 2003 20024. INCOME TAX (cont’d)

Deferred tax assets and liabilities

Current tax payable - 221.0 - 0.3

Provision for deferred income tax – non-current - 563.7 - -

Future income tax benefit – non-current - 37.4 - -

(a) Fixed asset step up arises from the Australian Group restructuring in March 2002

This future income tax benefit will only be obtained if:

(i) future assessable income is derived of a nature and of an amount sufficient to enable the benefit to be realised; (ii) the conditions for deductibility imposed by tax legislation continue to be complied with; and (iii) no changes in tax legislation adversely affect the consolidated entity in realising the benefit.

Tax consolidation Effective 1 January 2003, for the purposes of income taxation, BP Regional Australasia Holdings Pty Ltd and its 100% affiliated Australian companies have formed a tax consolidated (MEC) group. Income tax expense has been allocated to the members of the consolidated group on a pro rata basis consistent with the determination of the members’ income tax expense in prior years. BP Regional Australasia Holdings Pty Ltd has been formally elected the Head Entity of the consolidated group. Current tax liabilities of $207 million, deferred tax assets of $76.6 million and deferred tax liabilities of $414.1 million have been transferred from the BP Australia Group Pty Ltd to BP Regional Australasia Holdings Pty Ltd in exchange for an intercompany balance with BP Regional Australasia Holdings Pty Ltd.

As a result of entering tax consolidation and the consequent resetting of the tax basis of assets, the deferred tax liability has been restated resulting in a non taxable write back of $153,124,920 in BP Regional Australasia Holdings Pty Ltd’s accounts.

The Australian Taxation Office has been formally notified of the consolidated group’s formation and entry into the consolidated regime on 1 January 2003.

13

BP AUSTRALIA GROUP PTY LTD NOTES continued Millions of dollars

CONSOLIDATED BP Australia Group Pty Ltd

Notes 2003 2002 2003 20025. DIVIDENDS PAID OR PROVIDED FOR

Dividends paid Franked dividends (13.0 cents per share) (2002: 12.4 cents) 525.0 500.0 525.0 500.0

525.0 500.0 525.0 500.0

The amount of franking credits available for the subsequent financial year are:

- franking account balance as at the end of the financial year (30%) (2002: 30%)

- 104.6

- franking credits that will arise from the payment of income tax payable as at the end of the financial year

- 0.3

- franking debits that will arise from the payment of dividends as at the end of the financial year

- -

- franking credits that the entity may be prevented from distributing in the subsequent financial year

- -

- 104.9

All franking credits have been transferred to the head entity, BP Regional Australasia Holdings Pty Ltd, under tax consolidation.

6. RECEIVABLES (CURRENT)

Trade debtors 6(a),(b) 900.1 899.7 - -Provision for doubtful debts (8.1) (6.2) - -

892.0 893.5 - -

Sundry debtors 6(b) 45.4 59.6 - -Advances to joint venture operator 3.6 3.3 - -Amounts other than trade debts receivable from related parties: Wholly-owned group 29 - - 0.7 41.9 Other related parties – common controlled entities 6(a),29 904.2 886.5 - -

953.2 949.4 0.7 41.9

1,845.2 1,842.9 0.7 41.9

(a) Related party receivables Aggregate amounts receivable from related parties: Other related parties – common controlled entities 1,049.2 1,170.7 - -

(b) Terms and conditions

Terms and conditions relating to the above financial instruments:

(i) Trade debtors are generally on 30-day terms.

(ii) Sundry debtors and other receivables are due under normal commercial terms and conditions.

(iii) Details of the terms and conditions of related party receivables are set out in note 29.

14


CONSOLIDATED BP Australia Group Pty Ltd Notes 2003 2002 2003 20027. INVENTORIES (CURRENT) Project stores 10.0 12.0 - -

Gas inventories 0.4 1.2 - -Raw materials and stores - at cost 282.5 301.5 - -Provision for stores write-off (7.6) (3.2) - -

285.3 311.5 - -Work-in-progress - at cost - 0.3 - -Finished goods - at cost 291.8 382.6 - -

Other inventory - at cost 5.3 5.2 - -

Total inventories at lower of cost and net realisable value 582.4 699.6 - -

8. OTHER CURRENT ASSETS Prepayments 29.7 35.5 - -

9. RECEIVABLES (NON-CURRENT) Staff loans - 0.1 - -

Investment loans to other companies - 0.4 - 0.1

Customer loans 26.0 23.3 - -

26.0 23.8 - 0.1

10. OTHER FINANCIAL ASSETS (NON-CURRENT)

Investments at cost comprise: Controlled entities 11 - - 7,112.9 7,112.9 Shares

Unlisted 6.3 7.5 - - Provision for diminution on unlisted shares (1.4) (1.4) - - Other 5.3 5.0 - -

Provision for diminution on other (2.8) (2.8) - -

Total investments 7.4 8.3 7,112.9 7,112.9

15

BP AUSTRALIA GROUP PTY LTD NOTES continued 11. INTERESTS IN SUBSIDIARIES

Consolidated

Place of Parent Entity’s

Incorporation Investment Beneficial Interest

2003 2002 $m $m %

BP Solar Australia Pty Ltd VIC (i) 100(iii) Burmah Oil Investments Australia Pty Ltd NSW 101.8 100(iii) BP Developments Australia Pty Ltd VIC 5,322.0 5,322.0 Controlled entities of BP Developments Australia Pty Ltd:

BP Amoco Australia Finance Pty Ltd VIC - - 100(iii) NSW - - 100(ii) (iv)

Controlled entities of Burmah Castrol Australia Pty Ltd:

Investments in controlled entities comprises:

Entity’s

(i) 101.8

100(ii)

Burmah Castrol Australia Pty Ltd

BP Global Special Products (Australia) Pty Ltd NSW - - 100(iii) (v) Castrol Australia Pty Ltd NSW - 100(iii) (v) Burmah Group (Australia) Nominees Pty Ltd - -

- NSW 100(v)

Kinnaird Pty Ltd NSW - - 100(ii) Controlled Entities of Kinnaird Pty Ltd: FH Pty Ltd NSW - - 100(ii)

BP Oil Australia Pty Ltd ACT 1,689.1 1,689.1 100(ii) Controlled Entities of BP Oil Australia Pty Ltd: BP Solar Pty Ltd NSW - - 100(ii)

BP Australia Shipping Pty Ltd WA - - 100(ii) BP Australia Pty Ltd VIC - - 100(ii) BP Finance Australia Pty Ltd ACT - - 100(ii)

BP Refinery (Kwinana) Pty Ltd WA - - 100(ii) Elite Customer Solutions Pty Ltd VIC - - 100(ii) BP Australia Nominees Pty Ltd VIC - - 100(v)

BP Petroleum Developments (NWS) Pty Ltd VIC - - 100(ii) BP Petroleum Developments Australia Pty Ltd VIC - - 100(ii) Getfreight Pty Ltd VIC - - 100(ii)

BP Lubricants Services Pty Ltd VIC - - 100(ii) Burmah Fuels Australia Pty Ltd NSW - - 100(iii) (vii) (v) Controlled Entities of Burmah Fuels Australia Pty Ltd:

Strongflow Petroleum Pty Ltd NSW - - 100(iii) (v) (vii) Burmah Fuels (Queensland) Pty Ltd NSW - - 100(iii) (v) (vii) Controlled Entities of Burmah Fuels (Queensland) Pty Ltd: Queensland Fuels Trust - - 100 (vi) (vii)

Controlled Entities of BP Solar Pty Ltd: Alternate Power Supplies Pty Ltd NSW - - 100 (iii) (v)

Controlled Entities of BP Australia Shipping Pty Ltd: BP LNG Shipping Pty Ltd Bermuda - - 100 Controlled Entities of BP Australia Pty Ltd:

BP (Fremantle) Ltd UK - - 100 Polygon Retailing Pty Ltd VIC - - 100 (iii) BP Refinery (Bulwer Island) Pty Ltd ACT - - 100 (ii)

No. 1 Riverside Quay Pty Ltd VIC - - 100 (iii) (v) BP Minerals (Roxby Downs) Pty Ltd NSW - - 100 (iii) (v)

16

BP AUSTRALIA GROUP PTY LTD NOTES continued 11. INTERESTS IN SUBSIDIARIES (cont’d) Consolidated

Place of Parent Entity’s Entity’s Incorporation Investment Beneficial Interest

2003 2002 $m $m %

Acroframe Pty Ltd WA - - 100 (v) BP Australia Employee Share Plan Pty Ltd VIC - - 100 (iii) (v) Veruba Pty Ltd NSW - - 100 (iii) (v)

Taradadis Pty Ltd VIC - - 100 (iii) Controlled Entities of Taradadis Pty Ltd:

Melbourne Petroleum Pty Ltd VIC - - 100 (v)

Purot Pty Ltd VIC - - 100 (v)

7,112.9 7,112.9

(i) $2.00 (ii) Pursuant to Class Order 98/1418, relief has been granted to BP Oil Australia Pty Ltd, BP Australia Pty Ltd, BP Australia Shipping Pty Ltd,

BP Finance Australia Pty Ltd, BP Lubricants Services Pty Ltd, BP Refinery (Bulwer Island) Pty Ltd, BP Refinery (Kwinana) Pty Ltd, BP Solar Pty Ltd, Elite Customer Solutions Pty Ltd, BP Developments Australia Pty Ltd, Burmah Castrol Australia Pty Ltd and Kinnaird Pty Ltd from the Corporations Act 2001 requirements for preparation, audit and lodgement of their financial reports.

As a condition of the Class Order, BP Australia Group Pty Ltd, BP Oil Australia Pty Ltd, BP Australia Pty Ltd, BP Australia Shipping Pty

Ltd, BP Finance Australia Pty Ltd, BP Lubricants Services Pty Ltd, BP Refinery (Bulwer Island) Pty Ltd and BP Refinery (Kwinana) Pty Ltd (the “Closed Group”), entered into a Deed of Cross Guarantee on 1 November 2002. BP Solar Pty Ltd, Elite Customer Solutions Pty Ltd, BP Developments Australia Pty Ltd, Burmah Castrol Australia Pty Ltd and Kinnaird Pty Ltd were added to and obtained the benefit of the Class Order during 2003. The effect of the Deed is that BP Australia Group Pty Ltd has guaranteed to pay any deficiency in the event of winding up any of these and any other of the controlled entities. The controlled entities have also given a similar guarantee in the event that BP Australia Group Pty Ltd is wound up.

(iii) This controlled entity is a party to the Deed of Cross Guarantee but is not part of the Closed Group. (iv) BP Developments Australia Pty Ltd owns 75% of the voting share capital of Burmah Castrol Australia Pty Ltd. The remaining 25% of the

voting share capital is owned by Burmah Oil Investments Australia Pty Ltd, which is 100% owned by BP Australia Group Pty Ltd. (v) This controlled entity meets the criteria for small companies under the Corporations Act 2001, relieving it from the requirement to prepare, audit and lodge financial reports. (vi) This controlled entity is a Trust and is not required to comply with the Corporations Act 2001 and therefore is not required to prepare or lodge audited financial reports. (vii) Burmah Castrol Australia Pty Ltd has a 100% ownership interest in Burmah Fuels Australia Pty Ltd, Burmah Fuels (Qld)

Pty Ltd, the Burmah Fuels Trust and Strongflow Petroleum Pty Ltd. The directors of the company however have determined that effective control of these entities passed to BP Oil Australia Pty Ltd in 2001.

17

BP AUSTRALIA GROUP PTY LTD NOTES continued 11. INTERESTS IN SUBSIDIARIES (cont’d) The consolidated statement of financial performance of the closed group. Millions of dollars

Closed Group

2002

Operating profit before income tax 1,044.3 Income tax expense attributable to operating profit (68.4)

Operating profit after income tax 975.9

Dividends paid (634.4)

Net profit 341.5

Net profit attributable to outside equity interest (i) (25.9)

Net profit attributable to members of BP Australia Group Pty Ltd 315.6 Retained profits at the beginning of the financial year (0.7)

Retained profits at the end of the financial year attributable to the members of BP Australia Group Pty Ltd

314.9

(i) Outside equity interest arose in the 2002 Closed Group from a 30% shareholding in BP Oil Australia Pty Ltd held by BP Developments Australia Pty Ltd. BP Oil Australia Pty Ltd and BP Developments Australia Pty Ltd are both part of the Closed Group as defined. BP Developments Australia Pty Ltd was among a number of companies, already party to the Deed, which took benefit of the Class Order during 2003. The parties to the Closed Group are materially the same as the BP Australia Group Pty Ltd group of companies. For comparative purposes the Closed Group for 2003 can be materially taken as the BP Australia Group Pty Ltd group consolidated statement of financial performance and consolidated statement of financial position. It should be noted that due to the restructuring in March 2002 the 2002 Closed Group represents operations for the 9 months to 31 December 2002.

18

BP AUSTRALIA GROUP PTY LTD NOTES continued 11. INTERESTS IN SUBSIDIARIES (cont’d) The consolidated statement of financial position of the closed group. Millions of dollars

Closed Group

2002

CURRENT ASSETS Receivables 1,592.2 Inventories 598.1 Other 34.0

TOTAL CURRENT ASSETS 2,224.3

NON-CURRENT ASSETS Receivables 1.2 Investments 4,506.8 Property, plant and equipment 1,897.5 Intangibles 9.7 Deferred tax assets 50.5 TOTAL NON-CURRENT ASSETS 6,465.7

TOTAL ASSETS 8,690.0

CURRENT LIABILITIES Overdraft 80.4

Accounts payable 720.3

Current tax liabilities 108.9

Borrowings 263.4

Provisions 38.2

TOTAL CURRENT LIABILITIES 1,211.2


Borrowings 2,815.5

Deferred tax liabilities 248.0

Provisions 45.0

TOTAL NON-CURRENT LIABILITIES 3,108.5

TOTAL LIABILITIES 4,319.7

NET ASSETS 4,370.3

SHAREHOLDERS' EQUITY

Parent entity interest Share capital 4,029.5 Retained profits 314.9 Total parent entity interest in equity 4,344.4 Total outside equity interest (i) 25.9 TOTAL SHAREHOLDERS’ EQUITY 4,370.3

(i) Outside equity interest arose in the 2002 Closed Group from a 30% shareholding in BP Oil Australia Pty Ltd held by BP Developments Australia Pty Ltd. BP Oil Australia Pty Ltd and BP Developments Australia Pty Ltd are both part of the Closed Group as defined. BP Developments Australia Pty Ltd. Was among a number of companies, already party to the deed, which took benefit of the Class Order during 2003. The parties to the Closed Group are materially the same as the BP Australia Group Pty Ltd group of companies. For comparative purposes the Closed Group for 2003 can be materially taken as the BP Australia Group Pty Ltd group consolidated statement of financial performance and consolidated statement of financial position. It should be noted that due to the restructuring in March 2002 the 2002 Closed Group represents operations for the 9 months to 31 December 2002.

19

BP AUSTRALIA GROUP PTY LTD NOTES continued 11. INTERESTS IN SUBSIDIARIES (cont’d)

(b) Controlled Entities Disposed of: During the year, the following controlled entities were disposed: Fosroc Mining Pty Ltd Sericol Australia Pty Ltd Ventmine Pty Ltd Ventmine (Queensland) Pty Ltd Tecrete Industries Pty Ltd Millions of dollars


12. PROPERTY, PLANT AND EQUIPMENT Notes 2003 2002 2003 2002

Exploration Permit – exploration phase 12(c) 360.6 363.0 - -

360.6 363.0 - -

Land and buildings

At cost 448.2 419.6 - -

Provision for depreciation (31.4) (16.8) - -

416.8 402.8 - -

Plant and equipment

At cost 1,622.4 1,587.0 - - Provision for depreciation (211.0) (100.1) - -

1,411.4 1,486.9 - -

Plant and equipment – production phase

At cost 6,289.2 6,125.4 - -

Provision for depreciation (665.8) (276.7) - -

5,623.4 5,848.7 - -

Work in progress - at cost 399.1 341.9 - -

Total plant and equipment 7,433.9 7,677.5 - -

Total property, plant and equipment Cost 9,119.5 8,836.9 - -

Provision for depreciation and amortisation (908.2) (393.6) - -

Total written down amount 8,211.3 8,443.3

-

-

(a) Valuations The consolidated entity has a policy for regular valuation of freehold land and buildings at least once every three years, which is in accordance with legal statutory requirements. Therefore, the next valuation will be performed within three years of the restructuring, i.e. before April 2005. The fair values of freehold land and buildings on freehold land have been determined by reference to director valuations, based upon independent valuations previously obtained. Such valuations are performed on an open market basis, being the amounts for which the assets could be exchanged between a knowledgeable willing seller in an arm’s length transaction at the valuation date.

20


Notes 2003 2002 2003 2002

12. PROPERTY, PLANT AND EQUIPMENT (cont’d)

(b) Reconciliations

Reconciliations of the carrying amounts of property, plant and equipment at the beginning and end of the current and previous financial year.

Exploration Permit – exploration phase

Carrying amount at beginning 363.0 2.4 - - Additions - 360.6 - - Write-offs (2.4) - - -

360.6 363.0 - -

Land and Buildings Carrying amount at beginning 402.8 - - - Additions 50.2 435.8 - -

Disposals (14.0) (16.2) - - Depreciation expense (22.2) (16.8) - -

416.8 402.8 - -

Plant and Equipment Carrying amount at beginning 1,486.9 - - -

Additions 125.1 1,593.5 - - Disposals (65.6) (6.5) - - Depreciation expense (135.0) (100.1) - -

1,411.4 1,486.9 - -

Plant and Equipment – production phase Carrying amount at beginning 5,848.7 - - -

Additions 191.7 6,127.8 - - Disposals (25.0) (2.4) - - Depreciation expense (392.0) (276.7) - -

5,623.4 5,848.7 - -

Work in progress

Carrying amount at beginning 341.9 - - - Additions 216.3 482.8 - - Transfers (159.1) (140.9) - -

399.1 341.9 - -(c) The ultimate recoupment of costs carried forward for exploration and evaluation phases is dependent on the successful development and commercial exploitation or sale of the respective upstream areas. Amortisation of the costs carried forward for the development phase is not being recognised pending thecommencement of production.

13. INTANGIBLES Goodwill 171.4 171.4 - -Provision for amortisation (16.8) (6.6) - -

154.6 164.8 - -

21

BP AUSTRALIA GROUP PTY LTD NOTES continued

Millions of dollars


Notes

2003 2002 2003 2002

14. INTEREST IN JOINT VENTURE OPERATIONS

The consolidated entity has a 1/6 interest in the assets, liabilities and output of the North West Shelf joint venture operation, which produces liquefied natural gas, domestic gas, condensate, liquefied petroleum gas, and oil in Western Australia.

The net assets employed in the joint venture are included in the financial statements as follows:

CURRENT ASSETS

JV Cash assets 3.6 3.3 - -

Inventories - spare parts at cost 11.2 13.2 - -

TOTAL CURRENT ASSETS 14.8 16.5 - -

NON-CURRENT ASSETS

Land and buildings - at WDV 14.8 19.5 - -

Work-in-progress 210.8 186.6 - -

Plant & equipment - at WDV 2,404.9 2,410.6 - -

TOTAL NON-CURRENT ASSETS 2,630.5 2,616.7 - -

TOTAL ASSETS 2,645.3 2,633.2 - -

CURRENT LIABILITIES

Payables 56.9 60.8 - -

Provisions 6.3 4.7 - -

TOTAL CURRENT LIABILITIES 63.2 65.5 - -


Payables 6.3 9.1 - -

Provisions 87.8 91.0 - -

TOTAL NON-CURRENT LIABILITIES 94.1 100.1 - -

TOTAL LIABILITIES 157.3 165.6 - -

NET ASSETS 2,488.0 2,467.6 - -

Capital Expenditure commitments and contingent liabilities in respect of the joint venture are disclosed in notes 24 and 26 respectively.

22


CONSOLIDATED BP Australia Group Pty Ltd Notes 2003 2002 2003 2002

15. PAYABLES (CURRENT) Trade creditors 15(b) 793.2 773.7 - -Amounts other than trade debts payable to related parties:

Wholly-owned group 29 - - 0.8 0.8 Other related parties – common controlled entities 15(b), 29 656.0 - - -Other creditors 15(b) 135.2 146.1 - -

1,584.4 919.8 0.8 0.8

(a) Related party payables Aggregate amounts receivable from related parties:

Other related parties – common controlled entities 992.9 397.7 - -

(b) Terms and conditions

Terms and conditions relating to the above financial instruments:

(i) Trade creditors are normally settled on 30 day terms. (ii) Other creditors are settled on normal commercial terms and conditions

(iii) Details of the terms and conditions of related party payables are set out in note 29

16. INTEREST-BEARING LIABILITIES (CURRENT) Borrowings payable to other related parties – common controlled entities

29 102.3 102.7

309.4 206.8

102.3 102.7 309.4 206.8

(a) Terms and conditions

Details of the terms and conditions of related party payables are set out in note 29.

17. PROVISIONS (CURRENT) Employee entitlements 25 54.5 54.5 - -

Restoration 20(a),(b) 0.5 0.8 - -

Other Provisions 5.5 4.0 - -

60.5 59.3 - -

23


Notes 2003 2002 2003 2002

18. PAYABLES (NON-CURRENT)

Deferred income – take or pay contracts 6.3 9.1 - -

6.3 9.1 - -

19. INTEREST-BEARING LIABILITIES (NON-CURRENT)

Borrowings payable to related parties: Other related parties – common controlled entities 29 3,749.6 5,082.7 2,003.4 2,662.9

3,749.6 5,082.7 2,003.4 2,662.9

(a) Details of the terms and conditions of related party payables are set out in note 29.

20. PROVISIONS (NON-CURRENT) Employee entitlements 25 36.4 33.0 - -

Restoration 20(a),(b) 77.0 72.9 - -Athena Reserves 20(c) 21.3 32.1 Other 0.3 8.5 - -

135.0 146.5 - -

(a) The provision for restoration represents the provision for environmental clean up. This includes provisions for terminals that have been sold, are planned to be sold or are operating where there is a known problem that requires attention and restoration costs are expected to be incurred as part of the cost of the exploration, evaluation, development, construction or production phases that give rise to the need for restoration.

The costs associated with upstream activities are recognised gradually over the life of the facility as these phases occur. The costs include obligations relating to reclamation, waste site closure, plant closure, platform removal and other costs associated with the restoration of the site. These estimates of the restoration obligations are based on anticipated technology and legal requirements and future costs, which have been discounted to their present value. Any changes in the estimates are adjusted on a prospective basis. In determining the restoration obligations, the entity has assumed no significant changes will occur in the relevant Federal and State legislation in relation to restoration in the future.

(b) Movement in provisions Restoration A$m Carrying amount at the beginning of the financial year 73.7 Additional provision 5.9 Amounts utilised during the year (2.1)

Carrying amount at the end of the financial year 77.5

-Current 17 0.5 -Non-current 20 77.0

(c) The provision for Athena Reserves relates to the Athena Gas acquisition. At the Perseus producing field it was discovered that Perseus extends into another licence area owned by Mobil and Phillips. The extension into this licence area is known as Athena. Production at the Perseus field is ultimately also producing from the Athena field. An agreement was reached between the North West Shelf JV and Mobil and Phillips for compensation for production of their field. The structure of the agreement is such that the North West Shelf JV will pay for a stream of future cash payments up until 2020. The price is determined quarterly via a base price plus/minus movements in the Japanese Crude Cocktail price.

24


Notes 2003 2002 2003 2002

21. CONTRIBUTED EQUITY

Issued and paid up capital - 4,029,537,881 ordinary shares fully paid 4,029.5 4,029.5 4,029.5 4,029.5

(a) Terms and condition of contributed equity Ordinary shares Ordinary shares have the right to receive dividends as declared and, in the event of winding up the company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts of paid up on shares held. Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the company.


Notes 2003 2002 2003 2002

22. RESERVES AND RETAINED PROFITS Retained profits 22(a) 1,194.1 69.5 770.5 254.6

(a) Retained Profits

Balance at the beginning of year 69.5 (0.7) 254.6 (0.7)Net profit 1,649.6 570.2 1,040.9 755.3

Total available for appropriation 1,719.1 569.5 1,295.5 754.6Dividends paid (525.0) (500.0) (525.0) (500.0)

Balance at end of year 1,194.1 69.5 770.5 254.6

25


Notes 2003 2002 2003 2002

23. STATEMENT OF CASH FLOWS a) Reconciliation of the operating profit after tax to the net cash flows from operations

Profit from ordinary activities after tax 1,649.6 570.2 1,040.9 755.3

Non-cash items Depreciation / Amortisation of non-current assets 557.0 400.2 - - Write down of investment - 1.4 - -

Deficiency in net assets acquired - 34.3 - - Net profit on disposal of non current assets (16.8) (4.6) - - Provision for restoration 5.9 3.4 - -

Unrealised net foreign currency (gains) (1,333.5) (287.3) (728.7) (189.4)

862.2 717.6 312.2 565.9

Changes in assets and liabilities

(Increase) / decrease in trade and other receivables (4.5) 100.2 - - (Increase) / decrease in inventory 117.2 (19.1) - - (Increase) / decrease in other assets 68.2 45.1 - -

(Increase) / decrease in Future income tax benefit 37.4 77.7 - - (Decrease) / increase in trade and other creditors 661.8 (270.0) - - (Decrease) / increase in tax payable (221.0) 7.9 (0.3) 0.3

(Decrease) / increase in deferred income tax liability (563.7) (2.3) - - (Decrease) / increase in employee entitlements 3.5 8.6 - - (Decrease) / increase in other provisions (19.7) 0.8 - -

(Decrease) / increase in intercompany net position - - (311.9) (566.2)

Net cash flow from operating activities 941.4 666.5 - -

b) Reconciliation of cash Cash balance comprises:

- cash on hand 5.1 28.7 - - - bank overdraft - (80.5) - -

Closing cash balance 5.1 (51.8) - -

26


CONSOLIDATED

Notes 2003 2002

23. STATEMENT OF CASH FLOWS (cont’d)

c) Financing facilities available

The total facilities available at balance date were as follows: Bank overdraft 16.0 16.0

Inter group financing / US dollar commercial paper 5,580.6 7,252.5

5,596.6 7,268.5

Used at balance date:

Bank overdraft - 10.0

Inter group financing / US dollar commercial paper 3,539.6 4,704.5

3,539.6 4,714.5

Available at balance date: Bank overdraft 16.0 6.0 Inter group financing / US dollar commercial paper 2,041.0 2,548.0

2,057.0 2,554.0

The bank overdraft facilities disclosed above are local facilities. Further bank overdraft facilities are available to the Consolidated Entity through overseas accounts held in conjunction with other related companies within the BP worldwide group.

d) Acquisition of controlled entities During the year the company did not acquire any material controlled entities.

e) Disposal of Controlled Entity

During the year the company did not dispose of any material controlled interests or entities.

27


Notes 2003 2002 2003 2002

24. EXPENDITURE COMMITMENTS (a) Capital expenditure commitments

Estimated capital expenditure contracted for at

balance date, but not provided for, payable: - not later than one year

- joint venture - other

- later than one year and not later than five years - joint venture

47.812.8

-

99.010.6

8.1

- -

-

--

-

(b) Lease expenditure commitments (i) Operating leases (non-cancellable) 24(d)

- not later than one year 64.4 82.6 - - - later than one year and not later than five years 211.0 238.8 - - - later than five years 67.7 89.1 - -

- aggregate lease expenditure contracted for at balance date 343.1 410.5 - -

Aggregate expenditure commitments comprise: Amounts provided for: - lease incentive liability - current 15, 24(c) 2.0 2.0 - -

- non-current 20, 24(c) 7.8 9.8 - -

Total provided for 9.8 11.8 - -

Amounts not provided for: - rental commitments 333.3 398.7 - -

Total not provided for 333.3 398.7 - -

Aggregate lease expenditure contracted for at balance date 343.1 410.5 - -

(c) These commitments represent the non-cash incentive received by the consolidated entity for entering into a non-cancellable operating lease for premises occupied by a controlled entity, entered into in October 1993. The lease term is 18 years, with the first 6 years being rent free. The incentive liability is being reduced evenly over the remainder of the lease.

(d) Operating leases have an average lease term of 2-3 years and an average implicit interest rate ranging between 7% and 9%. Assets that are the subject of operating leases include motor vehicles and items of office equipment, office space, pipeline rental, vessel charter and helicopter.

28



Notes 2003 2002 2003 2002

25. EMPLOYEE ENTITLEMENTS AND SUPERANNUATION COMMITMENTS

Employee Entitlements

The aggregate employee entitlement liability is comprised of: Provisions (current) 17 54.5 54.5 - -

Provisions (non-current) 20 36.4 33.0 - -

90.9 87.5 - -

The Consolidated Entity participates in BP Group pension plans covering all employees of the Consolidated Entity. Employee Share Scheme Subject to Group results meeting pre agreed criteria, companies within the Consolidated Entity may elect to participate in an annual share scheme offer to their employees. All permanent employees of companies making an offer are entitled to participate, subject to minimum periods of service. There were 1,529 eligible employees in 2003 (2002: 1,278 eligible employees) and 1,277 employees took up the offer. The scheme enables eligible employees to acquire shares in BP p.l.c. at market value and receive an additional free share funded by the employing company for each share contributed by the employee. Employees purchased and/or contributed 236,032 shares and BP purchased 577,616 shares to the scheme in 2003 (2002: 461,194 shares). The market value of shares in BP p.l.c. at 31st December 2003 was A$10.76/GBP4.45 per share (2002: A$12.24/GBP4.27 per share ). Superannuation Commitments All employees are entitled to varying benefits on retirement, disability or death. The superannuation plan provides defined benefits based on years of service and final average salary. The Consolidated Entity remains committed to making contributions to the fund on the basis of actuarial advice and in amounts to adequately fund the retirement benefits provided for in the rules of the Fund. Expatriate employees of BP Developments Australia Pty Ltd are members of overseas pension funds. Details of the defined benefit fund as extracted from their most recent actuarial valuation at 31 December 2001 are as follows:

BP Superannuation Fund 2001

$'000

Accrued benefits

Vested benefits

304,487

Net market value of fund assets

289,316

Deficiency of net market value of plan assets over funds

(15,171)

Burmah Castrol Superannuation Fund 2001

$'000

Accrued benefits

Vested benefits

39,421

Net market value of fund assets

52,507

Surplus of net market value of plan assets over funds

13,086

29

BP AUSTRALIA GROUP PTY LTD NOTES continued Actuarial assessments of plans were last made as follows: Australia: Mr Richard Raoul Codron, Fellow of the Actuaries of Australia Date of Report : 9 August 2002. The Consolidated Entity has a policy of procuring actuarial valuations at least once every three years, which is consistent with local statutory requirements. On 1 January 2002 the BP Superannuation Fund and the Burmah Castrol Australia Pty Ltd Fund (BCARP) merged into one. Per the actuarial assessment, the current surplus held by Burmah Castrol will be used solely for the funding of former Burmah Castrol members and thus the deficit noted in the BP Fund will be “made good” through cash contributions. Since the last actuarial assessment, a review of the BP fund has shown a deficit of $55,200,000. The Consolidated Entity made top up payments to the BP Fund of $18,400,000 during 2003, leaving a deficit of $36,800,000. This deficit will be “made good” through cash contributions over the next two years. Through its involvement in a joint venture under an agreement entitled “Australian North West Shelf Project Agreement” BP Developments Australia Pty Ltd makes contributions to a superannuation fund for the employees of Woodside Offshore Petroleum, the operator of the joint venture. The superannuation fund constitution states that any shortfall in the fund to meet defined benefits will be allocated across the members of the fund. The consolidated entity therefore has no commitment beyond its current contributions. Millions of dollars

CONSOLIDATED BP Australia Group Pty Ltd Notes 2003 2002 2003 2002

26. CONTINGENT LIABILITIES

Contingent liabilities are categorised as follows: Bank guarantees: - Government

Vic Workcover Authority 3.0 3.0 3.0 3.0 Other 6.3 11.7 - -

- Other 10.6 5.0 - - Pursuant to Class Order 98/1418, relief has been granted to certain controlled entities from the Corporations Act requirements for preparation, audit and publication of their financial reports. As a condition of the Class Order, the company has entered into an approved Deed of Cross Guarantee with the controlled entities that wish to take the benefit of the Class Order. The effect of the deed is that the company has guaranteed to pay any deficiency in the event of winding up of any of the controlled entities party to the Deed of Cross Guarantee. The controlled entities have also given a similar guarantee in the event that the company is wound up. No liabilities are expected to arise in relation to the company or the controlled entities party to the Deed of Cross Guarantee taking the benefit of the Class Order in respect of that deed. Refer to Note 11 for further details. A Put and Call Option Agreement exists between ANZ and BP under which ANZ may require BP to assume, or BP may elect to assume, the rights and obligations of ANZ under the Facility Agreement. The maximum amount that may become payable by BP to ANZ under the Facility Agreement, which has not been recognised as a liability, is $235 million (2002: $248 million). The Accident Compensation Act 1985, section 146, subsection (5) requires that either one and a half times the sum of the actuarial value of the current, non-current and contingent liabilities for Workcover Liabilities or $3 million, whichever the greater, be held as a guarantee. An amount of $3 million is held as a bank guarantee with the ANZ bank at year-end. During the current and previous financial years there have been a number of incidents at the Kwinana refinery, which have resulted in breaches of the environmental license. For each incident there is the possibility of a fine being imposed of between A$125,000 and A$1,000,000. The likelihood of a fine being imposed is currently unknown. However, management consider that a contingent liability of US5,000,000 should be disclosed. Draft legislation is being released in 2004 which may result in the Kwinana refinery being liable for the clean up costs associated with the release of hydrocarbons into the soil at a site in North Fremantle. It is estimated that the cost of remediation may be in the range of US$1 to US$15 million. This is dependent upon the extent of remediation required by the draft legislation.

30

BP AUSTRALIA GROUP PTY LTD NOTES continued Whole dollars CONSOLIDATED BP Australia Group Pty Ltd

2003 2002 2003 2002

27. REMUNERATION OF DIRECTORS Income paid or payable, or otherwise made available, in respect of the financial year, to all directors of each entity in the consolidated entity, directly or indirectly, by the entities of which they are directors or any related party:

14,937,486 18,021,881

Income paid or payable, or otherwise made available, in respect of the financial year, to all directors of BP Australia Group Pty Ltd, directly or indirectly, from the entity or any related party: 12,882,285

15,519,699

The number of directors of BP Australia Group Pty Ltd whose income (including superannuation contributions) falls within the following bands is:

Number of Directors 2003 2002

30,000 - 39,999 1 - 160,000 - 169,999 - 1 180,000 - 189,999 1 -

190,000 - 199,999 1 - 740,000 - 749,999 1 - 870,000 - 879,999 1 -

1,010,000 - 1,019,999 - 1 1,060,000 - 1,069,999 - 1 1,450,000 - 1,459,999 1 -

1,570,000 - 1,579,999 - 1 1,830,000 - 1,839,999 - 1 2,270,000 - 2,279,999 1 -

2,390,000 - 2,399,999 - 1 2,770,000 - 2,779,999 1 - 3,190,000 - 3,199,999 - 1

4,260,000 - 4,269,999 - 1 4,340,000 - 4,349,999 1 -

9 8

Whole dollars CONSOLIDATED BP Australia Group Pty Ltd

2003 2002 2003 2002

28. AUDITORS’ REMUNERATION Amounts received or due and receivable by Ernst & Young for:

- an audit or review of the financial report of the entity and any other entity in the consolidated entity

1,634,421 1,027,167 - -

- other services in relation to the entity and any other entity in the consolidated entity

161,538 281,963 - -

1,795,959 1,309,130 - -

31

BP AUSTRALIA GROUP PTY LTD NOTES continued 29. RELATED PARTY DISCLOSURES

(a) The directors of BP Australia Group Pty Ltd during the financial year were:

G.D. Bourne (resigned 12/09/03)

G. Nicolaides R.M. Harding (resigned 01/08/03) G.R. Hueston

J. Norman K.M. Lucas

D.J. Knox (appointed 1/08/03)

R.J. McGrath (appointed 17/11/03)

T.J. Ind (alternate director)

(b) The following related party transactions occurred during the financial year:

(i) Transactions with related parties in wholly-owned group Sales and purchases are made under normal commercial terms and conditions. Loans made to and received from wholly-owned subsidiaries are under normal terms and conditions. (ii) Transactions with the directors of BP Australia Group Pty Limited and the consolidated entity Nil (iii) Transactions with other related parties Sales of fuel/lubricants made under normal commercial terms and conditions aggregating to $555.9 million for the financial year (nine months to 31/12/2002: $349.0 million) in sales revenue of BP Australia Pty Ltd were undertaken with distributors with whom BP Australia Pty Ltd have entered into consultancy agreements. Consulting fees received under normal commercial terms and conditions were $1,188,000 for the financial year (nine months to 31/12/02: $926,500). Sales of solar components aggregating to $73.7 million (2002: $48.8 million) for the financial year in sales revenue of BP Solar Pty Ltd were undertaken with entities under common control. These sales are made at cost. Subsidiaries within the wholly-owned group have provided loans during the period to entities under common control. The total amount outstanding in relation to these transactions is $904,200,000 at period end. Interest on the loans range from 0% to 5.6% (2002: 6.3% to 7.1%) at period end and are repayable on demand. Subsidiaries within the wholly-owned group have received loans during the period from entities under common control. The total amount outstanding in relation to these transactions is $3,851,800,000 at period end. The loans are repayable on demand with interest rates payable of 1.83% to 6.06% (2002: 1.65% to 6.3%) at period end. Under tax consolidation, all tax balances have been transferred to BP Regional Australasia Holdings Pty Ltd. An intercompany balance owing from BP Australia Group Pty Ltd consolidated group to BP Regional Australasia Holdings Pty Ltd of $543,600,000 has arisen from these transfers. Sales and purchases are made under normal commercial terms and conditions. The amount owing to entities under common control in relation to these transactions is $336,900,000 at period end. Foreign exchange transactions are made under normal commercial terms and conditions. A guarantee has been given by BP p.l.c. to BP Finance Australia Pty Ltd indemnifying transactions undertaken by BP Finance Australia Pty Ltd with third parties. (c) Parent entity BP Regional Australasia Holdings Pty Ltd is the ultimate Australian parent entity and the ultimate controlling entity is BP p.l.c. (incorporated in England).

32

BP AUSTRALIA GROUP PTY LTD NOTES continued 30. SEGMENT INFORMATION Segment products and locations The Consolidated Entity’s operating companies are organised and managed separately according to the nature of the products that they provide, with each segment offering different products and serving different markets. The Consolidated Entity operates in the following categories: - Upstream – this segment’s principal activities include the exploration for petroleum and natural gas and the development of facilities to produce petroleum and natural gas; - Downstream – the primary operations of this segment consist of the refining, distribution and marketing of petroleum products; the manufacture, marketing and distribution of lubricants; and the manufacture and marketing of specialty chemicals. - Financing – includes interest bearing liabilities to common controlled entities and the financing charges and the foreign exchange movements on these loans. Geographically all operations have taken place in Australia. Segment accounting policies The group generally accounts for inter-segment sales and transfers as if the sales or transfers were made to third parties at current market prices. Segment accounting policies are the same as the Consolidated Entity’s policies described in Note 1. During the financial year, there were no changes in segment accounting policies that had a material effect on the segment information.

Millions of dollars Business Segments Upstream Downstream Financing Eliminations Consolidated

2003 2002 2003 2002 2003 2002 2003 2002 2003 2002

Revenue Sales of goods to customers outside the consolidated entity

1,116.4 905.9 6,959.9 5,092.1 - -

8,076.3 5,998.0

Services provided - - 110.9 100.9 - - 110.9 100.9

Other revenues from outside the consolidated entity

10.9 8.6 86.6 57.9 32.4 22.1

129.9 88.6

Intersegment revenues 1.2 2.2 25.4 13.1 26.6 17.5 (53.2) (32.8) - -

Total segment revenue 1,128.5 916.7 7,182.8 5,264.0 59.0 39.6 (53.2) (32.8) 8,317.1 6,187.5

Total consolidated revenue 8,317.1 6,187.5

Results Segment result 281.7 239.8 287.4 263.0 1,176.5 251.8 8.0 10.0 1,753.6 764.6

Unallocated expenses - -

Consolidated entity profit from ordinary activities before income tax expense

1,753.6 764.6

Income tax expense (104.0) (194.4)

Net Profit 1,649.6 570.2

Assets

Segment assets 6,571.6 6,846.9 3,747.8 3,982.8 889.3 882.9 (347.0) (428.3) 10,861.7 11,284.3

Liabilities Segment liabilities 465.5 537.6 1,336.1 1,890.6 3,851.9 5,185.4 (15.4) (428.3) 5,638.1 7,185.3

Other segment information Depreciation 394.5 276.8 154.7 116.9 549.2 393.7Amortisation - - 7.8 6.6 7.8 6.5

33

BP AUSTRALIA GROUP PTY LTD NOTES continued 31. FINANCIAL INSTRUMENT (a) Interest rate risk The Consolidated Entity’s exposure to interest rate risks and the effective interest rates of financial assets and financial liabilities, both recognised and unrecognised at the balance date, are as follows:

Fixed interest rate maturing in: Total Weightedcarrying average

Floating Non-interest amount effectiveinterest 1 year Over 1 More than bearing as per the interest

Financial Instruments rate or less to 5 years 5 years balance sheet rate

2003 2002 2003 2002 2003 2002 2003 2002 2003 2002 2003 2002 2003 2002$m $m $m $m $m $m $m $m $m $m $m $m % %

(i) Financial assetsCash 5.1 28.7 - - - - - - - - 5.1 28.7 4.06% 3.81%Receivables - trade - - - - - - - - 755.1 615.5 755.1 615.5 N/a N/aReceivables - related parties (trade) - - - - - - - - 145.0 284.2 145.0 284.2 N/a N/aReceivables - related parties (non-trade) 904.2 886.5 - - - - - - - - 904.2 886.5 2.56% 4.04%Sundry Debtors - - - - - - - - 45.4 59.6 45.4 59.6 N/a N/aOther Receivables - - - - - - - - 29.6 27.1 29.6 27.1 N/a N/a Total financial assets 909.3 915.2 - - - - - - 975.1 986.4 1,884.4 1,901.6 - -

(ii) Financial liabilitiesCash - overdraft - 80.5 - - - - - - - - - 80.5 5.56% 5.31%Creditors - trade - - - - - - - - 456.3 376.0 456.3 376.0 N/a N/aCreditors - related parties (trade) - - - - - - - - 336.9 397.7 336.9 397.7 N/a N/aCreditors - related parties (non-trade) - - - - - - - - 656.0 - 656.0 - N/a N/aInterest bearing liabilities - related parties 3,851.9 5,185.4 - - - - - - - - 3,851.9 5,185.4 2.62% 4.05%Other Creditors - - - - - - - - 135.2 146.1 135.2 146.1 N/a N/a Total financial liabilities 3,851.9 5,265.9 - - - - - - 1,584.4 919.8 5,436.3 6,185.7 - -

N/a not applicable for non-interest bearing financial instruments

34

BP AUSTRALIA GROUP PTY LTD NOTES continued 31. FINANCIAL INSTRUMENTS (cont'd) (b) Net fair values All financial assets and liabilities have been recognised at balance date at historic cost. The following methods and assumptions are used to determine the net fair values of financial assets and liabilities Recognised financial instruments Cash, cash equivalents and short-term investments: The carrying amount approximates fair value because of their short term to maturity. Trade receivables and payables: The carrying amount approximates fair value. Unrecognised financial instruments Put and Call Option: The fair value of the Put and Call Option Agreement between ANZ and BP is the value at the end of the period of the debt (tranche A, tranche B and overdraft) held by distributors with the ANZ under the Facility Agreements referenced in the Put and Call Option Agreement. In the event that the Put and Call Option is exercised, BP would potentially assume a receivable into the balance sheet eg. loan to the distributors. Oil and Oil Product Future Agreements: The fair value of oil and oil product future contracts is determined as the difference between the fixed contract price and the market price of the underlying oil product at balance date. The net fair value of future contracts open at balance date is $0.3 million. (c) Credit risk exposures The Consolidated Entity's maximum exposures to credit risk at balance date in relation to each class of recognised financial assets, other than derivatives, is the carrying amount of those assets as indicated in the balance sheet. The maximum credit risk exposure does not take into account the value of any collateral or other security held, in the event other entities/parties fail to perform their obligations under the financial instruments in question. Concentrations of credit risk The company minimises concentrations of credit risk in relation to trade receivables by undertaking transactions with a large number of customers within the petroleum industry. However, the majority of customers are concentrated in Australia. Credit risk in trade receivables is managed in the following ways: - payment terms are normally 30 days; - a risk assessment process is used for customers; and - credit insurance is obtained for high risk customers.

35

BP AUSTRALIA GROUP PTY LTD DIRECTORS’ DECLARATION

In accordance with a resolution of the directors of BP Australia Group Pty Ltd, I state that:

(1) In the opinion of the directors:

(a) the financial statements and notes of the company and of the consolidated entity are in accordance with the Corporations Act 2001, including:

(i) giving a true and fair view of the company’s and consolidated entity’s financial position

as at 31 December 2003 and of their performance for the year ended on that date; and (ii) complying with Accounting Standards and Corporations Regulations 2001; and

(b) there are reasonable grounds to believe that the company and consolidated entity will be able to

pay its debts as and when they become due and payable. (2) In the opinion of the directors, as at the date of this declaration, there are reasonable grounds to believe

that the members of the Closed Group identified in note 11 will be able to meet any obligations or liabilities to which they are or may become subject, by virtue of the Deed of Cross Guarantee.

On behalf of the Board John Norman Director Melbourne Date:

36

37

Independent audit report to members of BP Australia Group Pty Ltd Scope The financial report and directors’ responsibility The financial report comprises the statement of financial position, statement of financial performance, statement of cash flows, accompanying notes to the financial statements, and the directors’ declaration for BP Australia Group Pty Ltd (the company) and the consolidated entity, for the year ended 31 December 2003. The consolidated entity comprises both the company and the entities it controlled during that year. The directors of the company are responsible for preparing a financial report that gives a true and fair view of the financial position and performance of the company and the consolidated entity, and that complies with Accounting Standards in Australia, in accordance with the Corporations Act 2001. This includes responsibility for the maintenance of adequate accounting records and internal controls that are designed to prevent and detect fraud and error, and for the accounting policies and accounting estimates inherent in the financial report. Audit approach We conducted an independent audit of the financial report in order to express an opinion on it to the members of the company. Our audit was conducted in accordance with Australian Auditing Standards in order to provide reasonable assurance as to whether the financial report is free of material misstatement. The nature of an audit is influenced by factors such as the use of professional judgement, selective testing, the inherent limitations of internal control, and the availability of persuasive rather than conclusive evidence. Therefore, an audit cannot guarantee that all material misstatements have been detected. We performed procedures to assess whether in all material respects the financial report presents fairly, in accordance with the Corporations Act 2001, including compliance with Accounting Standards in Australia, and other mandatory financial reporting requirements in Australia, a view which is consistent with our understanding of the company’s and the consolidated entity’s financial position, and of their performance as represented by the results of their operations and cash flows. We formed our audit opinion on the basis of these procedures, which included: • examining, on a test basis, information to provide evidence supporting the amounts and disclosures in

the financial report, and • assessing the appropriateness of the accounting policies and disclosures used and the reasonableness of

significant accounting estimates made by the directors. While we considered the effectiveness of management’s internal controls over financial reporting when determining the nature and extent of our procedures, our audit was not designed to provide assurance on internal controls. We performed procedures to assess whether the substance of business transactions was accurately reflected in the financial report. These and our other procedures did not include consideration or judgement of the appropriateness or reasonableness of the business plans or strategies adopted by the directors and management of the company. Independence We are independent of the company, and have met the independence requirements of Australian professional ethical pronouncements and the Corporations Act 2001. In addition to our audit of the financial report, we were engaged to undertake the services disclosed in the notes to the financial statements. The provision of these services has not impaired our independence.

38

Independent audit report to members of BP Australia Group Pty Ltd (continued) Audit opinion In our opinion, the financial report of BP Australia Group Pty Ltd is in accordance with: (a) the Corporations Act 2001, including:

(i) giving a true and fair view of the financial position of BP Australia Group Pty Ltd and the consolidated entity at 31 December 2003 and of their performance for the year ended on that date; and

(ii) complying with Accounting Standards in Australia and the Corporations Regulations 2001; and

(b) other mandatory financial reporting requirements in Australia. Ernst & Young J D Davies Partner Melbourne Date:

Documents

BP Australia Group Pty Ltd