Forward-Looking StatementsDuring the course of this presentation we may make forward-looking statements regarding future events or the future performance of the company. No reliance should be placed on forward looking statements which are included only to provide indicative information and should always be considered in conjunction with an assessment of the political, economic, social and legal environment in which BP operates.

Such forward looking statements speak only as of the time of this presentation today. Accordingly BP does not undertake any obligation to update or revise them, whether as a result of new information, future events or otherwise, other than that as required by applicable laws.

Cautionary Note

• Introduction

• BP’s North Sea Strategy

• Procurement and Supply Chain Management(PSCM) Process

• Context and Challenges

– Quality in the O&G industry

– Wells

– Reliability and Maintenance

• Questions

Agenda - AM

• Introduction

• BP’s North Sea Strategy

• Procurement and Supply Chain Management(PSCM) Process

• Context and Challenges

– Quality in the O&G industry

– Wells

– Global Projects Organisation

• Questions

Agenda - PM

• Divested assets

• Existing base assets

• Major projects

Focussed on value but growing production

North Sea strategy

• Safety and asset reliability

• Simplification and efficiency

• Quality portfolio• Targeted investment

• Renewal of existing infrastructure

• Drilling• Seismic• Enhanced Oil

Recovery (EOR)

•Focus •Maximise the Base

• Exploration• Resource appraise• Major projects• Relationships

•Invest for the FutureFocus Maximise the Base Invest for the Future

Valhall

SVT ETAP Magnus

Andrew FPS

We are renewing existing assets…

…and investing for the future

• Second phase development of Clair field

• Two new bridge-linked platforms

• Jackets and modules installed

• Production expected to start 2017

• Estimated 640m barrels over 40 years

• Peak production up to 120,000 barrels/day

• 25 new wells planned

• New drilling rig ‘Deep Sea Aberdeen’

• New FPSO ‘Glen Lyon’

• Polymer Enhanced Oil Recovery

• Production restarts in 2016

• Extends field life to at least 2035

Clair Ridge Quad204

• Direct supplier relationships for more critical activity

BP Supply Chain Process

Spen

d $

Criticality/Complexity

Supplier Engagement Matrix

• We need supply chain help to improve efficiency

• We’ll listen to all credible offers

Quality in the Oil & Gas IndustryCost of poor quality > £50m (conservative figure)# Non-conformance 702

(North Sea Region – 6 months to Sep 15)

– Huge impact /opportunity on North Sea lifting costs– Potential cost benefit to suppliers and operators alike– Does Oil & Gas have an embedded quality/improvement culture?– Can’t afford not to any more!Operator/Supplier collaboration is key

– Effective root cause failure analysis– Relevant and rigorous corrective actions– Both operator and supplier causes need to be addressed– Celebrate improvement, not fire fighting!

We must be rigorous and consistent in our use of quality tools– Excellence through Supplier Quality (ESQ) system for non-conformance

management (planned internal & external)– PO Quality Requirements for BP communication of quality requirements on POs

(progressive roll out)– Focus on “Right-First-Time”

Wells: Purchased Equipment - Challenges

• Design to new standards

− ISO 28781, 14998, 14130, Norsok− Qualify equipment ONCE, to the rated envelope− API Monogrammes required

• Quality of Equipment Design

− To manage our risks, BP verify the design of critical well equipment (~140 items per year)

− On average we find 20 design faults per review, which take ~8 months to fix

− Self-verify your designs to eliminate faults

• Quality of Manufacturing− API Q1 qualification (to eliminate BP’s Quality

Control Plan programme)• Smarter purchasing & use of inventory

− Challenge our Scopes of Work− Fit for purpose equipment

Wells: Rental Equipment - Challenges

• Design

− Less customer involvement in design, but who pays for the cost of failure?

− We expect self-verified Failure Mode & Effect Analyses (FMEA)

• Build and Maintain

− We require 100% material traceability

− Refurb cost decisions vs. operator risk

− Suppliers qualified to API-Q2

• Process Safety Risks

− Rig operator’s legal obligation under Design Construction Regulations (DCR)

− Rigorous HAZOP to BS: IEC 61882

− Procedures + compliance + competency

Wells: Technology - Challenges

• $50 oil drives additional need for innovation

− Cost efficiency, risk reduction

− Do more with less

• Zonal isolation

− Verification of cement bonds

− Alternatives to cement

− Solutions for secondary cementing

• Sidetrack/milling technology

− Multi-string milling & recovery

− Downhole swarf recovery

• Data acquisition

− Wireline-quality data acquisition with Logging While Drilling (LWD)

− Alternatives to coring / well testing

Wells: Integrity - Challenges

• Ageing well stock– How do we prolong the life of wells– Is ‘paint’ adequate protection– Fit for purpose low cost replacement equipment

(1 kpsi rated?)• Pressure path management

– What is best way of managing sustained casing pressures

• Corrosion– External casing corrosion monitoring– Reliable ‘through-metal-metal-rock face’ logging

• Multi skilled integrity engineers– Can we do simultaneous jobs offshore

• Remedial equipment– Industry wide well kill equipment package

• Industry training– Standardised scope or minimum standards

Wells: Intervention - Challenges

• Huge scope for innovative changes– Open our minds…..

• Volume of equipment required– Smaller footprint for available deck space– Can we use height better?

• Weight of equipment– Eliminate heavier lifts – Eliminate manual handling

• Personnel requirements– Design-out complexity – Online vs. Onsite specialist personnel– Maintain competencies & capabilities

• Duration of workscope– Design-in rig-up & rig down efficiencies– Plug & Play

• LWI– Heavy Duty Light Well Intervention (LWI)

capability

Reliability & Maintenance

Current Issues….• Maintenance is too expensive

• Material costs have increased significantly over 5 years

• Labour rates have increased• Management fees have increased• Unnecessary maintenance still being

executed

• Maintenance activity takes too long• Lack of ‘right first time’ - rework is too

common• Technician competence is variable • Planning is not robust• Inefficient in execution

• Equipment is generally old and unreliable• ‘Old’ is too often used as an excuse for

poor Mean Time Between Failure (MTBF)• Too much focus on projects/modifications

& not enough on sweating the existing equipment

How can you help….• Maintenance is too expensive

• Work on leveraging the supply chain to ensure competitive tenders and best value for money on materials

• Improve rental equipment turn around times• Apply realistic labour charges at $45 oil • Help to identify value adding maintenance

and eliminate non-value adding

• Maintenance activity takes too long• Ensure high quality preparation prior to

deployment offshore• Improve repair turn around times for high

value equipment• Focus on right technician for the right job• Provide suggestions on how to improve

execution efficiency

• Equipment is generally old and unreliable• Focus on how to achieve high MTBF for

existing equipment without the need for costly/time consuming modifications

• Quad 204 / Clair Ridge –

Execute

• Gt Clair – Appraise

• Cat B – Appraise, Select, • Define, Execute

Future Opportunities

• Culzean

• Vorlich

Major Projects Portfolio

Global Projects Organisation

• Involvement of Suppliers in FEED stage of Projects− Add value at front end in return for greater cost transparency –

provide visibility to cost base, mark up and profit− Contribute to design, execution and cost efficiency− Transparency would allow early Contractor selection

• Standardisation− Suppliers best positioned to see operators different requirements &

spec’s− Pushback on bespoke engineering to drive standardisation− Benchmark solutions required for hardware

• Innovation− Early sharing of new technologies developed for other

operators/projects− Intent should be to reduce costs and project complexity− No point hearing about this late in design or execute phase

Other Business areas

• Material from Subsea and Reservoir Development included in the following slides.

• Unfortunately no one from these areas were available to present on the day, however material representing their current issues and challenges has been provided for reference.

• BP encourage suppliers with any innovative solutions with regards to these areas to contact the email address provided in the feedback slide.

Subsea & Pipelines Operations (GOO) North Sea Subsea Operations

The majority of North Sea assets operating subsea systems & pipelines are ageing assets.Life of field assurance – keep subsea systems operating until expected field life. Require certainty over the condition of equipment operating Subsea. Require accurate, reliable & cost effective inspection and equipment validation

techniques.Ability to repair or plan the repair of equipment that has failed or is predicted to fail. Require safe, efficient and quick repair turnaround. Reduced Subsea Equipment lead times.Life extension projects Extended field life can open up viable options for further field development.

Subsea & Pipelines Operations (GOO) Technology Wish-list

Pipeline inspection – Requirement to remove coating from our pipelines prior to completing inspection of the pipelines using existing technology for corrosion mapping and time of flight diffraction

Riser Inspection – Execute inspections with a reduced level of PoB demand, fewerconstraints regarding HSE or weather and with greater scope completion to deliverbetter value.

Temporary Subsea Flowline/Pipeline Isolations to allow repair works – lower leadtimes on stopples and temporary plugs with better technical & safety assurance.

Subsea electrical system – fault detection technology. For example Subsea Low IRmonitoring/switching. Time Domain Reflectometry from the platform.

Autonomous Inspection Vehicle (AIV) – Subsea Inspections – potential large savingson vessel costs. Challenges with battery life and communications.

Clamp-on subsea condition monitoring technology – Acoustic Emission technologyfor detecting cracking, erosion monitoring. Challenges getting the data to surface.

More reliable SCMs & subsea controls equipment – replace components in field withmore reliable replacements.

Standardised ROV tooling – more lightweight manipulator deployed ‘pilot friendly’tooling. Ability to operate in high current environments.

Reservoir Development: Issues and challenges

• Subsurface

– Optimising waterflood and EOR (Water Alternating Gas, polymer, Low Salinity Water Flooding (LoSal®)

– Cost effective data gathering (seismic, instrumented wells)

• Wells

– Cost effective well interventions especially subsea

– Hydraulic fracturing

2014 Well reliability: Causes of deferrals

Well reliability: top issues by volume

• Well integrity is the major cause of well deferrals impacting every hub

− Common causes are: Downhole Safety Valves issues, Xmas tree valve failures and tubing to annulus communication

− Failed SCSSV control lines mean no ability to retrofit valves

− Availability of spares for older trees

• Sand is the second major cause of well deferrals in the NS

− Sand production has increased with depletion and water cut with systemic consequences on the whole hub, not just the well (e.g. ETAP)

− Magnus and ETAP are the main fields with sand deferrals

− Produced water management with sand is a major problem where water is re-injected

• Cyclic well deferrals is predominately driven by Valhall and Marnock with contribution from Bruce.

− Requirement to retrofit gas lift− Ability to shut-off water

• Scale vulnerability on Ula, Valhall, Madoes & Magnus

− Key improvement actions are on SSQ treatment life & verification of scale precipitation envelopes for high risk wells.

• H2S is a cause of well deferrals on Clair, Foinaven and potentially ETAP.

− Significant focus on scavenger chemicals, injection water quality over last 3 years.

• Water/ gas Injection reliability is causing longer term losses

− Well integrity on injection wells (particularly gas injectors)

− Reliability of surface pumping equipment− Treatment of produced water

Questions?

Feedback

• All enquiries should be addressed to;– PSCM@uk.bp.com

• We will endeavour to respond to all enquiries within 30 - 60 days