Bp Sustainability Review 2008

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    SustainabilityReview2008

    01 This is BP 05 How we operate 06 Our performance

    100 yearsof operatingat thefrontiers

    bp.com/sustainability

    Meeting the energy demandsof today and tomorrow Oil Natural gas Wind Solar Biofuels

    http://www.bp.com/sustainabilityhttp://www.bp.com/sustainability
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    BP Sustainability Review 2008

    Whats inside

    01 This is BP

    02 Group chiefexecutives review

    04 BP in 2008

    05 How we operate

    06 Our performance

    08 Safe andreliable energy

    12 Diverse andaffordable energy

    15 Cleaner energy

    18 People energy

    21 Local energy

    23 Independent assurancestatement to BPmanagement

    24 Our approachto reportingand glossary

    25 More information

    08

    12

    21

    About this ReviewAt BP we dene sustainability as the capacity to endureas a group: by renewing assets; creating and deliveringbetter products and services that meet the evolvingneeds of society; attracting successive generations

    of employees; contributing to a sustainable environment;and retaining the trust and support of our customers,shareholders and the communities in which we operate. BP Sustainability Review 2008 is aimed at allreaders with an interest in BPs sustainability performance.

    This year, in response to stakeholder feedbackand research, we have updated the structure and contentof BP Sustainability Review 2008 . The new structure isbased around ve key sustainability topics identied byour materiality process: safe and reliable energy, diverseand affordable energy, cleaner energy, people energyand local energy. The Review covers BPs position,strategy and performance on each topic. Each chapter istitled to provide a clear indication of the topics containedwithin them, which we hope is more intuitive for ouraudiences to navigate.

    Those readers wanting more detail areencouraged to visit the comprehensive environmentand society section of bp.com, which covers a widerset of issues and reports on them in more depth.

    This document is availableto view or order atwww.bp.com/sustainability

    For glossary of terms and acronymssee page 24 .

    Cover imageA technician keepswatch at BPsAtlantic liqueednatural gas facility,Trinidad & Tobago.

    BP p.l.c. is the parent company of the BP group of companies. Unless other wise stated,the text does not distinguish between the activities and operations of the parent companyand those of its subsidiaries.

    Cautionary statementBP Sustainability Review 2008 and online BP Sustainability Report 2008 contain certainforward-looking statements concerning the businesses, operations and strategy of BP.By their nature, forward-looking statements involve risks and uncertainties because theyrelate to events and depend on circumstances that will or may occur in the future. A ctualresults may differ from those expressed in such statements depending on a variety of factorsincluding future levels of industry product supply; demand and pricing; operational problems;general economic conditions; political stability and economic growth in relevant areas of theworld; changes in laws and governmental regulations; exchange rate uctuations; developmentand use of new technology; changes in public expectations and other changes in businessconditions; the actions of competitors; natural disasters and adverse weather conditions; warsand acts of terrorism or sabotage; and other factors discussed elsewhere in this document andin BP Annual Report and Accounts 2008.

    An introduction to Ernst & Youngs assurance processWe have reviewed the contents of BP Sustainability Review 2008 to provideassurance on the information reported. This work included testing relevantmanagement information, interviewing BP management and reviewingexternal media sources. Our conclusions, which can be found on page 23,have been prepared against the main principles of the AA1000 AssuranceStandard (2003). Several of our specic observations have also beenincluded on relevant pages of this Review.

    http://www.bp.com/sustainabilityhttp://www.bp.com/sustainability
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    BP Sustainability Review 2008

    This is BPBP wants to be recognized as a great organization competitively successful and a force forprogress. We have a fundamental belief thatwe can make a difference in the world.

    We help the world meet its growing needfor heat, light and mobility. We strive to do thatby producing energy that is affordable, secureand doesnt damage the environment.

    Our main brands Our valuesBP is progressive, responsible, innovativeand performance driven.

    ProgressiveWe believe in the principle of mutualadvantage and build productiverelationships with each other,our partners and our customers.

    ResponsibleWe are committed to the safety anddevelopment of our people and thecommunities and societies in whichwe operate. We aim for no accidents,no harm to people and no damage tothe environment.

    InnovativeWe push boundaries today and createtomorrows breakthroughs through ourpeople and technology.

    Performance drivenWe deliver on our promises throughcontinuous improvement and safe,reliable operations.

    These values guide us in the conduct of ourbusiness. In all our business we expect highethical standards and act in accordance withour code of conduct.

    Our strategyBPs strategy is to create value forshareholders by producing energy in a waythat is affordable, secure and doesntdamage the environment. We will participateacross the hydrocarbon value chain to: Explore for, develop and produce more

    fossil fuel resources that the world needs. Efciently manufacture, process and

    deliver better and more advanced products. Be a material contributor to the transition to

    a low-carbon future.We expect Exploration and Production

    (E&P) to be our core vehicle of growth.We expect to make investments across thefull life cycle of our assets with an increasedemphasis on technology as a source ofproductivity, access and competitiveadvantage. We expect to strengthen ourposition further by securing new accessand achieving exploration success.

    In Rening and Marketing (R&M),we expect to continue building our businessaround advantaged assets in material andsignicant energy markets. We intend toinvest selectively in international businesses,including lubricants and petrochemicals,

    where we believe there is the potential todeliver strong returns. We also intend tocontinue investing in improving the safetyand reliability of our operations. Additionally,we intend to drive further operationalperformance and productivity by investingin the upgrade of manufacturing capabilitieswithin our integrated fuels value chains.

    In Alternative Energy, we arefocusing our investment activity innew energy technology and low-carbonenergy businesses, which we believe willprovide long-term options to meet energydemand and provide BP with signicantlong-term growth potential. These arewind, solar, biofuels and carbon captureand storage (CCS).

    How we create value

    Powerful partnerships Excellence in A highly diversegrounded in mutual project delivery energy portfolio,advantage. and the integration pioneering energy

    of technology. efciency andinnovation.

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    3

    May 2008Tony Haywardspeaking withemployees atBPs Texas Cityrenery, US.

    Given mounting concern that a peak in oilproduction is close, with the International

    Energy Agency (IEA) admitting that the productiondecline rate for mature oil elds is nearly 7% a year,how will BP go about meeting future demand?

    As a geologist and a businessman, I dont believe theworld is running out of oil in the near or foreseeablefuture. The data shows that there are around 40 yearsof proved oil reserves left in the ground and 60 years ofnatural gas, at todays consumption rates, not includingunconventional hydrocarbons. When it comes to meetingdemand, the problems are above ground not below it.

    How can policy frameworks help the industryto meet future demand sustainably?

    The policy frameworks should support investmentsnecessary to meet future energy demand as well asaddress the challenge of climate change. In order tostimulate investment, we need stable scal andregulatory policies and active support for a free and openenergy market. We also need measures that enable theindustry to nd and develop new sources of oil and gas.Energy efciency needs to be encouraged as it benetsboth the environment and the economy.

    In order to address climate change, carbon needsto be priced, preferably through cap-and-trade systems,so that its cost is included in everything from taking atrain to turning on a light. There should also betransitional incentives that make low-carbon energycompetitive with other energy sources, rewarding costreductions and deployment at scale. And, in order tomake our investments effective and efcient, we needa step-change in investment in research, developmentand deployment of energy technology.

    Has BP really improved the safety andintegrity management of its operations since

    the Texas City re and explosion in 2005 and theAlaskan pipeline leaks in 2006?Yes. Safe and reliable operations are BPs number one

    priority and we have taken a series of actions to improveperformance. The short-term programme has includedimproving processes to assess risks of major accidentsand new standards for control of work and integritymanagement. For the longer term, we have introducedthe OMS to improve the management of safety risksand the quality of performance in our operationsworldwide. While I deeply regret every fatality or injury,Im encouraged by the overall improvement in our safetyperformance in 2008, as detailed in this review and ouronline report and recognize we still have a lot to do.

    Why would someone want to work at BP?BP is celebrating its centenary this year. The

    qualities that rst drove us 100 years ago continue todrive us now. Weve always been an organization thatoperates at the frontiers and that strives to make adifference in the world. A person joining BP now canexpect a varied and challenging career in a successful,global business with a strong sense of its role andcontribution to the world. That sounds to me like anexciting and interesting place to work.

    Speeches by Tony Haywardwww.bp.com/speeches

    http://www.bp.com/speecheshttp://www.bp.com/speeches
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    4

    BP Sustainability Review 2008

    BP in 2008

    2008 was a record nancial year for the group,with replacement cost prot of $25.6 billion,up 39% on 2007. The year was one of the bestin the past decade for our E &P business, with

    signicant discoveries in the US Gulf of Mexico,Angola, Algeria, Egypt and the North Sea.Excluding production-sharing impacts, 2008 oiland gas production rose by 5%. Nine new majorprojects started up, including Thunder Horsein the US. This enabled us to achieve resourcereplacement of more than 200% and reservesreplacement of more than 100% in 2008.This continues our track record of 100% plusreported reserve replacement ratio over thepast 15 consecutive years. In our R &M business ,we restored our Texas City and Whiting reneriesto full economic capability.

    31 JanuaryBP Egypt makes a signicant gasdiscovery at record depths in theNile Delta.

    1 FebruaryBP and its partner MarathonPetroleum West of Shetlandsmake a new oil discovery inblock 204/23 in the UKcontinental shelf.

    10 MarchBP launches a new leadershipframework creating a singlecommon set of expectedleadership accountabilities andbehaviours. These focus onvaluing expertise, energizingpeople, acting decisively anddelivering results.

    21 MarchThe Whiting renery in the USis restored to its full clean fuelcapability of 360,000 barrelsper day.

    31 MarchBP completes a deal with Husky

    Energy to create an integratedNorth American oil sandsbusiness by means of twoseparate joint ventures, oneof which entails Husky takinga 50% interest in BPs Toledorenery. The Toledo reneryis intended to be expandedto process approximately170,000 barrels per day ofheavy oil and bitumen by 2015.

    3 AprilBP America announcessignicant discovery at itsKodiak prospect in the Gulfof Mexico.

    20 AprilThe Azerbaijan InternationalOperating Company,operated by BP, startsoil production from theDeepwater Gunashliplatform complex.

    24 AprilBP announces it is to takea 50% stake in TropicalBioEnergia, a joint ventureestablished by Brazilian

    companies Santelisa Valeand Maeda Group to operatea 435-million-litre-per-yearethanol renery in Edia,Goias state, Brazil.

    21 MayBP and its co-venturers,ENI UK and Petro SummitInvestment UK, make an oildiscovery, known as Kinnoull,in North Sea block 16/23s.

    14 JuneCommissioning begins at theThunder Horse platform in the

    Gulf of Mexico. By the end of2008 four wells had startedup with production of around200,000 barrels of oil equivalentper day at the end of the year,signalling the completion ofcommissioning.

    3 JulyA year of volatile prices reachesits peak as the oil price hits arecord $144.22 per barrel ofdated Brent. On the same day,gasoline prices jump to a newUS record of $4.092 a gallonon average.

    3 JulyBP announced as the OfcialOil and Gas Partner for theLondon 2012 Olympic andParalympic Games.

    24 JulyRobert Dudley, chief executiveofcer of TNK-BP, reaches theconclusion that the interests ofTNK-BP would be best servedif he performed his dutiesoutside Russia.

    29 JulyMulti-billion-dollar projectannounced to modernizeand upgrade the Whitingrenery, increasing itsprocessing capability ofCanadian heavy crude.

    4 SeptemberBP and its Russian partner inTNK-BP, Alfa Access-Renova,sign a memorandum ofunderstanding to resolvethe dispute between thepartners and align theirrespective interests.

    16 SeptemberHurricanes Gustav and Ike haltoil production across most of

    the Gulf of Mexico, requiringthe shutdown of our Texas Cityrenery. On-site inspectionsnd minimal signs of damageto most of BPs platforms otherthan the Mad Dog drilling derrick.

    14 OctoberBP makes an oil discovery atits Freedom prospect in theDeepwater Gulf of Mexico.

    20 NovemberSuccessfully commissionedin rst quarter 2008, BPcelebrates the safe completionand start-up of the secondpuried terephthalic acidplant of BP Zhuhai ChemicalCompany Limited, Guangdongprovince, China.

    24 DecemberOil price falls to $33.66 perbarrel of dated Brent.

    31 DecemberFull economic capability at TexasCity renery is restored.

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    5

    BP Sustainability Review 2008

    How we operate

    Board and executive committees

    Board

    Executive team

    Groupoperationsrisk committee

    Group nancialrisk committee

    Group peoplecommittee

    Resourcescommitmentsmeeting

    Groupdisclosurescommittee

    Technologyadvisorycommittee

    Audit committee Safety, ethics and

    environmentassurancecommittee

    Remuneration

    committee

    Chairmans

    committee

    Nomination

    committee

    BP operates globally in morethan 90 countries under asystem of internal control thatextends from the high-levelcorporate governance policies,used to guide the boardsactivities, through to the detailedprocesses that are applied inour day-to-day operations.

    Corporate governanceThe board is responsible for direction andoversight of BP. The board has set an overallgoal for BP, which is to maximize long-termshareholder value through the allocation ofits resources to activities in the oil, naturalgas, petrochemicals and energy businesses.The board delegates authority for achievingthis goal to the GCE.

    The board operates according toa set of board governance principles thatprovide, among other things, that a majorityof its directors will be non-executive andthat all directors will stand for re-election byshareholders each year. In December 2008the board consisted of 14 directors, 10 beingnon-executive. The boards permanentcommittees, composed entirely of non-executives, include the audit committeeand the safety, ethics and environmentassurance committee (SEEAC). The boardand its committees monitor the identicationand management of the groups risks.SEEAC monitors non-nancial risk. Amongstits activities during the year, SEEACreviewed information and reports from thesafety and operations (S&O) function. It alsoreceived the rst annual report and otherregular updates from L Duane Wilson,

    who was appointed by the board in 2007as an independent expert to monitorBPs progress in implementing therecommendations of the BP US ReneriesIndependent Safety Review Panel (Panel).Committee members also undertooka series of site visits during the year,including visits to BPs renery operationsin Rotterdam and coalbed methaneoperations in Durango, Colorado.

    The GCE maintains a comprehensivesystem of internal control, which is denedas the holistic set of management systems,organizational structures, processes,standards and behaviours that are usedto conduct our business and deliver returnsfor shareholders. Key elements of thesystem are: the control environment;the management of risk and operationalperformance; and the managementof people and individual performance.

    Controls include the BP codeof conduct ( see page 20 ), our leadershipframework ( see page 19 ) and our principlesfor delegation of authority, designed tomake sure employees understand whatis expected of them.

    As part of the control system,the GCEs senior team known as theexecutive team is supported by sub-

    committees to own and monitorspecic group risks. These include thegroup operations risk committee (GORC),the group nancial risk committee (GFRC)and the group people committee (GPC).

    Group risks the important risksthat could affect the achievement of ourobjectives have responses designed todeal with the risks in the most appropriateway. These range from group standards,which set out processes for major areassuch as safety and integrity, through todetailed administrative instructions onissues such as fraud reporting.

    People management, describedfully under People energy ( see page 18 ),is based on performance objectivesthrough which individuals are accountablefor delivering specic elements of thegroup plan within agreed boundaries.

    For more detail visitwww.bp.com/corporategovernance

    http://www.bp.com/corporategovernancehttp://www.bp.com/corporategovernance
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    BP Sustainability Review 2008

    Our performance

    Five-year performance data, trends and interpretation

    For the year ended 31 December

    2004 2005 2006 2007 2008

    aSafetyFatalities employeesFatalities contractorsDays away from work cases workforceDays away from work case frequency (DAFWCF) b workforceRecordable injuries workforceRecordable injury frequency (RIF) b workforceHours worked employees (million hours) Hours worked contractors ( million hours) Number of oil spills loss of primary containment d Volume of oil spilled (million litres) Volume of oil unrecovered (million litres)

    eDirect carbon dioxide (CO ) (million tonnes (Mte)) 2)f g (Mte)Indirect carbon dioxide (CO 2

    eDirect methane (Mte) eDirect greenhouse gas (GHG) (Mte CO 2 equivalent (CO 2e))

    Flaring (E&P) (thousand tonnes (Kte) of hydrocarbons) Sulphur dioxide (Kte) Nitrogen oxides (Kte) Non-methane hydrocarbons (Kte)Discharges to water (Kte) Fresh water withdrawal i (million cubic metres) Hazardous waste j (Kte) Environmental and safety nes ($ million) Environmental expenditure ($ million)

    kCustomer emissions (MteCO 2)

    47

    2300.08

    1,5130.532413305785.71.5

    76.89.9

    0.2381.7

    1,343126215245

    574931594.8

    1,948588

    126

    3050.11

    1,4710.532423135414.41.2

    73.213.90.2378.0

    1,514124218298

    46 h 479237

    56.02,914

    554

    07

    1880.085 c 1,067

    0.48 c 207236 c 4172.20.4

    59.310.10.2464.4

    1,241106196225

    71 h 3422702.5

    4,026523

    34

    1670.0751,060

    0.482042413401.00.3

    59.210.70.2063.5

    1,12499

    204187

    61326170

    22.53,293

    506

    1750.080

    9510.431952453353.40.9

    57.09.2

    0.2161.4

    1,71864

    190163

    733411991.1

    2,519515

    People a l

    Number of employees groupNumber of employees group leadershipWomen in group leadership (%) People from UK and US racial minorities

    in group leadership (%) People from beyond the UK and US in group leadership (%) OpenTalk cases

    oDismissals for non-compliance and unethical behaviour(excludes dismissals from the retail business,including those for minor or immaterial incidents)

    102,900610

    15

    419

    343

    252

    96,200606

    17

    520

    634

    478

    97,000625

    17

    520

    1,064

    642

    98,100 m 624

    16

    519

    973

    944

    92,000 n

    58314

    19925

    765

    PerformanceTotal hydrocarbons produced

    (thousand barrels of oil equivalent (mboe) per day)

    Total renery throughputs (thousand barrels per day (Kbd)) pTotal chemicals production (Kte)

    Replacement cost prot q ($ million) Taxes to governments comprising income taxes and

    production taxes paid ($ million) Dividends paid to shareholders ($ million) Benets to employees including wages, salaries,

    share-based payments, benets and pensions r ($ million)

    Contracts terminated or not renewed due to non-complianceor unethical behaviourContribution to communities ($ million)

    3,9972,607

    13,35815,946

    8,5956,041

    9,965

    4187.7

    4,0142,399

    14,07620,168

    11,9957,359

    10,746

    7795.5

    3,9262,198

    14,06422,111

    17,6907,686

    10,643

    69106.7

    3,8182,127

    14,02818,370

    13,2678,106

    11,511

    48135.8

    3,8382,155

    12,42725,593

    19,69010,342

    12,280

    22125.6

    23

    6

    a Quantitative performance indicators have been chosen, with external input, to reect the mostimportant sustainability issues for BP. Data is reported here only from operations under BPmanagement control, except in footnotef. We use consistent processes that seek to provideacceptable estimates to enable year-to-year comparisons.

    b DAFWCF and RIF are the annual frequency per 200,000 hours worked.c 2006 DAFWCF, RIF and contractor hours worked have been corrected from 0.083, 0.47 and

    244 respectively.d Oil spills are dened as any liquid hydrocarbon release of more than or equal to one barrel

    (159 litres, equivalent to 42 US gallons).e Direct GHG emissions are the physical emissions from operations on an equity share basis.

    TNK-BP direct emissions are not included.f Indirect GHG emissions are a consequence of the import by operations of steam, electricity and

    heat on an equity basis from third-party sources. TNK-BP indirect emissions are not included.g Prior to 2005, the BP CO 2 protocol allowed credit for exported power against reported

    indirect emissions.h Does not include discharges in new category of discharges to third-party treatment at 8,000

    and 7,000 tonnes in 2005 and 2006 respectively.i Global data for freshwater withdrawal reects our best estimate at the time of publication (certain

    data is not available for our onshore E&P operations in the Lower 48 United States between 2004and 2008). The 2007 total for freshwater withdrawal has been revised downward since last yearsreport to reect improved estimates from Texas City.

    j Data prior to 2005 has been restated to correct inadvertent overstatements of hazardous wasteat the Whiting renery, US.

    k Estimate rebased in 2008: all years now based on BPs total reported production rates of naturalgas and share of all renery throughputs only.

    l Employees are dened as individuals who h ave a contract of employment with a BP group entity.m 2007 data corrected from 97,600 to 98,100.n As at 31 December.o Misconduct-related dismissals of employees and contractors (other than those in the retail

    businesses) fell by 19% in 2008 as compared with 2007. While employee dismissals are inline with prior years, contractor dismissals across BP declined by 25%; this change is drivenmost signicantly by the 51% decrease in R&M contractor dismissals, primarily the resultof improvements in US rening operations.

    p Aromatics and acetyls and olens and derivatives production reported within R&M.q Replacement cost prot reects the replacement cost of supplies. The replacement cost prot

    is arrived at by excluding from prot inventory holding gains and losses and their associated taxeffect. Inventory holding gains and losses, for this purpose, are calculated for all inventories exceptfor those that are held as part of a trading position and certain other temporary inventory positions.BP uses this measure to assist investors in assessing BPs performance from period to period.

    r A minor amendment has been made to the comparative gures for 2006 and 2007 to includesome employee costs that had been previously incorrectly excluded.

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    7

    Oil and gas producers global benchmarkAmerican Petroleum Institute US benchmark

    BP workforce

    Personal safety recordable injury frequency a b(per 200,000 hours worked)

    2.0

    1.5

    1.0

    0.5

    04 05 06 07 08

    SafetyFor our total workforce (employees and contractors), ourreported RIF in 2008 was 0.43 per 200,000 hours worked,compared with 0.48 for 2007 and our DAFWCF was 0.080compared with 0.075 in 2007. BP annually benchmarksthese safety performance indicators against its peersthrough industry associations and other groups.

    Management oversight

    Group operationsrisk committee

    Exploration and Production

    Refining

    Petrochemicals

    Innovene

    Normalized greenhouse gas emissions c d ebaselined to 2001 (2001 = 100)

    110

    10090

    80

    70

    60

    01 02 03 04 05 06 07 08

    On environment, one way we judge GHG performanceis by normalizing GHG emissions against a 2001 baselinefor each of our major business sectors. Compared with2007, rening delivered an improved efciency from1,024 to 986teCO 2e/kbdUEDC, over 10% lower thanin 2001. Petrochemicals increased slightly from 346 to349teCO

    2e/kte, still some 34% lower than 2001, although

    this is largely due to the sale of Innovene in 2005. E&Pincreased by 3% in 2008 to 25teCO 2e/mboe which isabout the same level as in 2001. BP is working with itspeers to improve comparability in this area to betterfacilitate benchmarking.

    Diversity and inclusion f (%)

    1408 191607 19

    1706 201705 20

    1504 19WomenNon-UK/US

    PeopleSince we started reporting the composition of ourgroup leader population in 2000, the percentage ofwomen leaders has increased from 9% to 14%.The number of leaders from outside the US or UK hasincreased from 14% to 19%. Meanwhile, the numberof group leaders from US or UK racial minorities hasincreased from 4% to 6% since 2000, with an increasein the US from 6% in 2000 to 13% in 2008.

    Group peoplecommittee

    Global diversitycouncil

    Supermajor oil production 2002-2008(barrels of oil equivalent, as reported in company disclosures, indexed to 2002)

    BP

    ExxonMobil

    Shell

    Chevron

    Total115

    108

    101

    94

    87

    02 03 04 05 06 07 08

    PerformanceDuring the year we beneted from record high oil prices.Replacement cost prot for the year was a record$25.6 billion, with a return on average capital employedgreater than 20%. In 2008 BP, on a combined basis ofsubsidiaries and equity-accounted entities, added 1.7 billionbarrels of new oil and gas to its reserve base, a replacementratio of 121%, excluding acquisitions and divestments BPs15th consecutive year of reported reserves replacement ofmore than 100%.

    Executive team

    Group nancialrisk committee

    Resourcescommitmentsmeeting

    a Workforce refers to employees and contractors.b Our 2006 RIF data was corrected from 0.47 to 0.48.c Chart based on direct GHG emissions in tonnes of CO 2e, per mboe for E&P, per KbdUEDC for

    rening and per Kte for petrochemicals.d The rening measure was recalculated and rebased to 2001 using the updated Solomon

    Associates UEDC calculation methodology. The UEDC data is calculated by Solomon Associatesevery other year. As the 2008 Solomon data is not yet available, we have used internal data for thisand interim years.

    e Measures utilize the GHG emissions from businesses that account for more than 85% of thegroup total reported GHG emissions. It relates to oil- and gas-related activity for E&P, all reneriesand all petrochemicals assets. Emissions from specic downstream and natural gas liquidsactivities and assets located within E&P are excluded from the measure.

    f The percentage of women and individuals from countries other than the UK and US amongBPs top 583 leaders (2007 624, 2006 625).

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    BP Sustainability Review 2008

    Safe and reliable energy

    Are BPs operationsbecoming safer andmore reliable?Delivering energy safely and reliably lies at the heart of our business.Our values incorporate the goal of no accidents, no harm to peopleand no damage to the environment. We are implementing a newOMS worldwide and investing in people, plant and processes to drivecontinuous improvement in our safety and operational performance.

    For more detail visitwww.bp.com/safetywww.bp.com/environmentalmanagement

    8

    A step-change in safeand reliable operationsBPs commitment to safety comes fromthe top. The GCE, Tony Hayward, andhis executive team have consistentlyemphasized that safety, people andperformance are our top priorities.

    Implementation of the OMS, acornerstone of our approach to achievingsafe, reliable and responsible operationsat every BP site, progressed signicantly

    in 2008. We believe embedding the OMSwill help us deliver a further step-changein the effectiveness of how we manage ourpeople, processes and plant and protectthe environment.

    When fully implemented, the OMSwill be our single framework for operations,consolidating BPs requirements relating toprocess safety; environmental performance;legal compliance in operations; and personal,marine and driving safety. It is informed inpart by some of the recommendations madeby the Panel and, for our US reneries,it provides a framework for action to

    implement those recommendations.The OMS establishes a set ofrequirements and provides businesses witha systematic approach to improve operatingperformance on a continuous basis. BPbusinesses implementing the OMS mustwork to integrate group requirementswithin their own processes to meet legalobligations, address local stakeholder needs,reduce risk and improve efciency andreliability. A number of mandatory operatingand engineering technical practices havebeen dened within the OMS to addressprocess safety and related risks.

    We are introducing the OMS over a

    four-year period, in a series of waves, eachconsisting of a cross-section of businesses.Eight sites completed the transition in 2008:two US petrochemicals plants CooperRiver and Decatur in the US; two reneries Lingen and Gelsenkirchen in Germany;and four E&P businesses North AmericaGas, Gulf of Mexico, Colombia and theEndicott eld in Alaska. Implementation iscontinuing across the group. A number ofother sites, including all reneries not alreadyoperating under the OMS, are expected tocomplete the transition in 2009.

    Implementing the OMS is involving

    detailed planning at the relevant site orbusiness, including gap assessmentssupported by external facilitators. Eachsite or business implementing OMS willproduce its own local OMS enabling it tofocus on risks and mitigation actions mostrelevant to its location to be captured in alocal OMS handbook. They are developingprioritized improvement plans, whichwill be subject to annual review, to ensurea systematic approach is taken toperformance improvement. The transitionto the OMS, at local and group level, is

    http://www.bp.com/safetyhttp://www.bp.com/environmentalmanagementhttp://www.bp.com/safetyhttp://www.bp.com/environmentalmanagement
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    being handled in a formal and systematicway to ensure the change is managed safelyand comprehensively.

    Experience so far has supported ourexpectation that having one integratedoperating system will bring greater simplicityand clarity, and that the process of changeis supporting our renewed commitment tosafe operations.

    We are on track to meet our targetof implementing the OMS across the groupby the end of 2010.

    Striving for process safety leadershipWe remain fully committed to becominga recognized industry leader in processsafety management.

    We have continued to implementour six-point plan to address immediatepriorities for improving process safety.Progress against the plans commitmentsis regularly monitored by the GORC, whichis chaired by the GCE. We also continuedto respond to recommendations made bythe Panel and engaged with the IndependentExpert who reports to the board on BPs

    progress in implementing the Panelsrecommendations.

    To improve performance, actions havebeen taken to reduce complexity and clarifyroles and accountabilities. We have directedresources to where they are most needed,deploying functional S&O staff into thebusinesses. We have extended efforts todevelop our operators, managers andexecutives through targeted trainingon operations. We continued to build ourteam of S&O auditors, responsible foranalyzing compliance with group and legalrequirements and making sure required

    actions are completed.We have made progress in identifyingand reducing process safety risks at ourUS reneries through a systematic, risk-based process that prioritizes the activitiesneeded to close gaps. We completedsafety audits and took corrective actions,continued to relocate workers to lower-riskaccommodation, and conrmed animproved process safety culture in anemployee opinion survey.

    We continue to work with theCenter for Chemical Process Safety in theUS and other industry organizations to sharelearning on process safety and develop

    performance indicators.

    Safeguarding people and assetsDelivering safe and reliable performance alsorequires us to respond to external eventsbeyond our control. We responded to themilitary conict in Georgia in 2008, providingfor the safety of employees and managingthe precautionary shutdown and restart ofpipeline operations. In the aftermath ofHurricane Ike, we safely restored productionat the Texas City renery and manageddamage to the Mad Dog platform in theGulf of Mexico.

    Time

    Operating management systemSystematic approach

    underpinned by capability

    Operating management system relationship to safety and operations group strategy

    Sustainable cultural changeLeadership and underlying

    systemic issues

    Six-point planImmediate risks

    and priorities

    Embedding the operating management system will help BP deliver a step-change in the effectiveness of howwe manage our people, processes and plant and protect the environment.

    Safety performance

    Personal safetyThere were ve workforce fatalities in2008, compared with seven in 2007. Oneresulted from fatal injuries sustained duringoperations at our Texas City renery; onewas the result of a fall from height atthe Tangguh construction activities inIndonesia; one fatality was on a land farmnear Texas City; and two were drivingfatality incidents in Mozambique and SouthAfrica. We deeply regret this loss of life.GORC reviews every major incident andwe continue to seek to learn as much aspossible from each incident.

    Our workforce reported RIF was 0.43in 2008. This was an improvement on therate of 0.48 recorded in both 2007 and 2006.Our DAFWCF was 0.080 in 2008, comparedwith 0.075 in 2007.

    Process safetyWe measure lagging indicators of processs afety, which record events that have alreadyoccurred and leading indicators that focuson the strength of our controls to preventundesired incidents. Twenty-one majorincidents which include those resulting infatalities, signicant property damage orsignicant environmental impact werereported in 2008. Two of the major incidentswere related to hurricanes and eight wererelated to driving incidents.

    We also track and analyze highpotential incidents those that could haveresulted in a major incident. A total of 150of these were reported, a decrease of 15%compared with 2007.

    There were 335 oil spills of one barrelor more in 2008, similar to the 2007performance of 340 oil spills. The volumeof oil spilled in 2008 was approximately3.5 million litres, an increase of around2.5 million litres compared with 2007.This was largely the result of two incidents,one at Texas City and one at the Whitingrenery, which accounted for aroundtwo-thirds of the volume of oil spilled,the great majority of which remainedcontained, with the oil recovered.

    Engaging withstakeholder concerns

    When planning and executing new projects,we consult with stakeholders to addressenvironmental and social concerns. Forexample, in April 2008 the fth Papuastakeholder review meeting wasconducted in Bintuni, Papua. Approximately80 participants from various groups ofstakeholders, including the Regent andVice Regent of Teluk Bintuni, traditionaland religious leaders and non-governmentalorganizations (NGOs) attended. The focusof the annual meeting was to provide anupdate on the Tangguh liqueed natural gasproject and its social programme activitiesand to receive feedback from stakeholders.

    We worked in other locations in 2008with local regulators, such as those in Alaskaand Colorado, to minimize the impact of oiland gas development on critical wildlifehabitats. To further protect biodiversity, wehelped NGOs develop a web-based tool the Integrated Biodiversity AssessmentTool, which builds from the World Databaseon Protected Areas enabling companies toaccess critical biodiversity information.

    9

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    Independent Expertsannual reportIn May 2007, L Duane Wilson, a member ofthe BP US Reneries Independent SafetyReview Panel (Panel), was appointed bythe BP board as the Independent Expertto monitor progress in implementing thePanels recommendations. Mr Wilsonperiodically briefs SEEAC on progress andsubmits an annual report to it. His secondannual report was submitted in March 2009.

    Comment and summary from Sir WilliamCastell, Chairman of SEEACThe board welcomes the insights, analysisand challenges communicated by Mr Wilson.From my position as Chairman of SEEAC,it is clear that his engagement, whichfocuses on US reneries, is provingextremely valuable as BP continues toimplement the Panels recommendations.

    Overall, it is Mr Wilsons view thatthe board, executive management andrening management have demonstratedstrong support for the multi-year programme

    required to deliver this goal and thatsubstantial resources have been deployedand signicant effort expended in this regard.

    Since the publication of BP Sustainability Report 2007 , Mr Wilsonhas highlighted some areas of signicantprogress as well as some areas wherehe feels more focused attention wouldbe benecial.

    Areas of notable progress observed byMr Wilson include: BPs tone at the top has continued to

    reinforce valuable positive messageson the importance of process safety.

    Plans for implementing the Panelsrecommendations have becomeembedded in the planning and resourceallocation processes at all US reneries.

    BP has introduced and regularly reviewsnew metrics to enhance monitoring ofprocess safety performance by executivemanagement and the board.

    BP has continued to develop andimplement the OMS to achieveconsistent and efcient implementationof operating processes and systemsacross BP. Implementation has begunin all US reneries with plans for all ve

    reneries to be operating under the OMSby the end of 2009. The S&O audit programme has matured

    into a comprehensive, high-qualityprogramme. Three US reneries wereaudited in 2008 as part of the regularaudit programme and these audits eachprovided valuable process safety insights.

    Results of the 2008 US Rening processsafety culture survey indicated goodprogress in improving process safetyculture when compared with a similarsurvey undertaken in 2006.

    Training programmes for enhancingprocess safety competencies have beenfurther developed, with substantiveprogress made in delivery of theseprogrammes.

    US Rening implemented an effectiveprocess safety management reviewsystem in 2007, which was reviewed in2008 and will be further enhanced onan ongoing basis.

    Summary of areas where Mr Wilson believesmore focused attention is warranted: Following reductions in overtime, four of

    the ve US reneries now have moderateaverage overtime rates. However, veryhigh overtime rates continue for a smallpercentage of individuals at four USreneries. Further reductions are plannedto reduce the potential for fatigue.

    Quarterly reports addressing a number

    of process safety-relevant programmesand overdue actions across BP arereviewed by executive managementand by SEEAC on behalf of the board;however, these reports do not yetencompass the full scope of overdue-action-item reporting from US Reneriesthat was recommended by the Panel.

    Improvements are recommended to thelearning summaries and investigationreports associated with incidentinvestigations at US reneries. It wasobserved that US Rening has respondedby improving processes and allocating

    additional resources. All ve US reneries have commencedwork to implement the Panelsrecommendation to use industrybest-practices for safety instrumentedsystems (SIS). However, overall workprogrammes at the sites have beenrisk-based, and none of the US renerieshas yet developed comprehensive SISplans that enable Mr Wilson to determinewhether the sites are on track to meetstated target dates.

    While process safety metrics wereincluded in the variable pay bonuscriteria for US Rening for 2008, year-

    end performance scores for specicitems were not itemized. Consequently,Mr Wilson was unable to determinewhether the reward structure isproviding appropriate incentives tomeet BPs and US Renings processsafety goals and objectives. In addition,variable pay plans will need to includeadditional process safety performanceobjectives to fully comply with thePanels recommendations.

    While the audit and verication processis comprehensive and high quality, someprocess safety audit action items havedue dates that, in the opinion of MrWilson, appear to be too long given theapparent risk associated with the ndingsthey address.

    In summary, Mr Wilson believes that BP hascontinued to make signicant progress inimplementing the Panels recommendations,although a substantial amount of workremains. The board and management of BPremain committed to implementing thoserecommendations and welcome Mr Wilsonsinsights as we progress.

    Mr Wilsons second annual report, issuedin March 2009, can be viewed online.

    For more detail visitwww.bp.com/independentexpertreport

    Managing ourenvironmental impactsJust as the OMS sets a framework forsafe operations, it also provides siteswith a systematic approach to reducingenvironmental risk. It is consistent with theISO standard for accredited environmentalmanagement systems, building on anddeveloping the rigorous approach we havetaken in the past.

    We have taken a progressive stanceon several environmental issues for morethan a decade, launching voluntary initiativesto reduce GHG emissions, for example.In reviewing our environmental strategy in2008, we determined to retain focus on the

    fundamental priorities of managing risk, witha particular focus on sensitive areas; drivingcontinuous improvement; and complyingwith applicable laws and regulations.

    Specic observations from Ernst & YoungWe have seen evidence that BP maintains regularcommunication with key stakeholders on sustainabilitysubjects and has a process for recording these dialogues.However, BPs sustainability reporting would benetfrom explaining not only the engagement processes, butalso how these stakeholder views have been taken intoconsideration alongside business needs when determiningBPs response to challenging issues.

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    Using technology to addressenvironmental concernsResearch and development of newtechnology helps us nd ways to reduce theenvironmental impact of providing energy.

    As well as supporting research intoways to address issues, such as the growingdemand for natural resources, we carry outnearer- term collaborative projects thatfocus on operational priorities.

    E&Ps environmental technologyprogramme, for example, examinesenvironmental risks linked to upstreamactivities such as access, seismic surveys,drilling and operations. One of theprogrammes projects, which is jointlyfunded with British Gas and led by a teamat the University of Nottingham, UK, aimsto develop more energy-efcient andcost-effective methods for managing thechallenge of waste offshore, especially foroil-based drill cuttings.

    In R&M, technology research seeksto minimize environmental impacts fromour own operations and from the use of ourproducts. We are supporting, for example,independent research into emergingtechnologies for improving wastewatertreatment options from rening. The

    project, triggered by plans for modernizingthe Whiting renery in the US to enableincreased processing of Canadian heavycrude oil, has included screening newtechnologies for removing ammonia andtotal suspended solids from wastewater,and is also examining novel approachesto treating heavy metal discharges. Thetechnologies under assessment are likelyto have wider application at other reneriesfacing similar challenges.

    We also participate in many jointindustry technology projects, such as thoseoverseen by the Global Petroleum IndustryResearch Institute. Projects cover diversethemes, such as produced water, monitoringtechnologies, or research to understand howoffshore sounds affect marine mammals.

    Managing risk in new projectsOur processes for assessing risk in newprojects have led to improvements insubsequent management. After twoyears of implementation, we are updatingour environmental requirements for newprojects (ERNP) to include social indicatorsand integrating them in an environmentaland social group dened practice, partof the OMS.

    Several new projects have used

    the social indicators when screeningfor environmental and social risks. Thendings have helped the projects tofocus on the most important social andenvironmental risks when performingthe impact assessments.

    By embedding the new requirementswithin the OMS, we are reinforcing ourcommitment to them, emphasizing thatreviewing and mitigating environmentaland social risks is an important issue forus and our stakeholders.

    We used the ERNP to reviewenvironmental impact assessmentscompleted by our joint venture partner,Husky Energy, on the Sunrise oil sandsproject in Alberta, Canada. The reviewconrmed that project design features,including low-impact bitumen recoveryprocesses and maximizing recycledwater use, are seeking to minimizeimpacts. We continue to work tointegrate environmental and socialmitigation measures within the project,considering, for example, possible useof CCS technologies.

    Responding to emerging issuesAs part of the OMS, we are formalizing

    how we identify, monitor and respondto emerging environmental issues, suchas access rights to water, to ensurewe can assess and respond at an earlystage of an issues development.

    On some issues, our early responsehas enabled us to be better prepared forregulation. For example, the implementationof our own energy-efciency and GHG-reduction programmes has given usinsight into reducing emissions whiledelivering bottom line value, which willhelp our operations prepare to meetmore stringent regulations.

    For more detail on ourenvironmental emissionssee pages 6 and 7.

    Direct greenhouse gas emissions

    For more detail visitwww.bp.com/environmentalperformance

    Days away from work case frequency (per 200,000 hours worked)

    0.3

    0.2

    0.1

    99 00 01 02 03 04 05 06 07 08

    a (million tonnes of carbon dioxide equivalent) b

    a Data is reported on an equity-share basis. TNK-BP emissionsare not included.

    b BPs reported GHG emissions include methane emissions

    converted to the quantity of CO 2 that would create anequivalent warming effect.

    90

    60

    30

    04 05 06 07 08

    Environmental performanceOperations at our major operating sites,except at two locations, are covered bycertication to ISO 14001. The Texas Cityrenery, after completing planned work tostrengthen its environmental managementsystems, is now working on re-certicationin 2009. Our Angola business is workingtowards an expansion of its existingcerticate to include its offshore productionfacilities by the end of 2009.

    Over the next few years, we intendto phase out reporting of aggregatedenvironmental data on non-GHG emissionsand discharges, such as sulphur dioxideand nitrogen oxide emissions, in favour ofincreased reporting of local, disaggregateddata. This change, informed by stakeholderfeedback, will emphasize the importance ofmanaging and reporting emissions of localpollutants in a manner appropriate to thelocal context.

    For GHG emissions, where theenvironmental impact is global, we intendto continue to report aggregated BPemissions. Our total 2008 GHG emissions

    of 61.4MteCO 2e on a direct-equity basiswere 2.1Mte lower than the 63.5MteCO 2ereported in 2007. The principal reason forthe drop in emissions is the change in BPShippings treatment of time-charteredvessels to better align with industry practicefor emissions reporting.

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    Diverse andaffordable energy

    What is BP doing tomeet rising demandfor secure andaffordable energy?Despite todays uncertain economic conditions and volatile oil prices,global demand for energy is expected to increase in the long term.We are using our skills, knowledge and innovation to get more fromexisting fossil fuels resources, to transform technically demandingresources into energy and to make low-carbon technologieseconomically viable.

    For more detail visitwww.bp.com/annualreport

    12

    The market context

    Long-term rising demandDespite the volatile oil prices of 2008,ranging from just over $144 per barrelto approximately $34, demand for energyis still expected to rise signicantly in thelong term as a result of demographic andeconomic forces. Drivers for growth arethe rapid industrialization of emergingeconomies and a world population thatis expected to grow from approximately6.7 billion today to approximately nine billionby 2050. The IEA estimates that worldenergy demand could be 45% higher by2030, half of it coming from China and India.It estimates that meeting such demand willrequire around $26 trillion a of investment insupply by energy producers over the nexttwo decades.

    a Adapted from World Energy Outlook 2008 . OECD/IEA 2008.

    Plentiful supplyAs well as substantial investment, meetingfuture demand requires plentiful energy

    resources but, as the ow from many matureoil and gas elds declines, some questionwhether global oil production may bereaching a peak, threatening future supplies.However, data we monitor indicates thatas well as there being sufcient provedreserves for around 40 years of oil and 60years of gas at todays consumption rates,

    Global proved oil reserves at end 2007(billion barrels)

    40.8

    69.3

    111.2

    117.5

    143.7

    755.3

    Asia Pacific

    Middle EastEurope and Eurasia

    Africa

    South and Central America

    North America

    Source: BP Statistical Review of World Energy June 2008 .

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    proved reserves have actually grown bymore than 70% in the past 25 years. Thishas been driven in large part by advancesin technology that enable more oil andgas to be discovered and produced.Although sufcient resources exist, theyare concentrated in relatively few regions.Around 70% of the worlds proved oilreserves are located in just seven countriesand more than half the worlds proved naturalgas reserves are found in three countries.This prompts concern over the potentialimpacts of political instability, internationaldisputes or other disruptions, concerns thatare reduced when energy is available froma more diverse range of sources.

    BPs responseMeeting this challenge with secure suppliesis part of BPs role. In a world that has agrowing need for secure heat, light andmobility, we dene our purpose asproducing more energy in a way that isaffordable, secure and doesnt damagethe environment. We participate across thehydrocarbon value chain with an aim to: Explore for, develop and produce

    more fossil fuel resources that theworld needs.

    Efciently manufacture, process anddeliver better and more advancedproducts.

    Be a material contributor to the transitionto a low-carbon future.

    Pushing back the frontiersIn implementing our strategy, we build onour distinctive experience as an internationaloil company (IOC). While state-controllednational oil and gas companies account for

    around three-quarters of the worlds oilproduction, IOCs have succeeded bybeing innovative, pushing back the frontiersof the industry, both geographical andtechnological. BP, for example, hasspecialized in producing oil and gas inchallenging locations such as very deepwater or Arctic conditions, as well asusing new techniques such as enhancedoil recovery to extend the life of matureoilelds. BP has also played a leadingrole among IOCs in the development ofrenewable and alternative energy sourcesthat provide low-carbon energy and helpto diversify supplies.

    Spare oil production capacity

    Global capacity (mmb/d)Global production (actual output) (mmb/d)

    mmb/d90858075706560555045

    74 79 84 89 94 99 04 08

    Source: Platts. Global production capacity data receivedfrom Energy Information Administration, BP Statistical Review of World Energy June 2008, BP estimates.

    Stable framework forinvestment neededThe need for investment in all forms ofenergy to meet future demand has beenhighlighted by the high prices that prevaileduntil the second half of 2008. These hadtheir roots in the 1990s when growth,prices and revenues were low, leadingto low investment in production capacity.The higher growth of the current decadedrove up production, pushing it close to thecapacity limit. This experience has shownthat while demand and prices can be volatile,

    supplies of energy depend on a complexnetwork of production facilities, pipelines,ships, terminals, reneries and otherinvestments that cost billions of dollarsand take many years to build. This is whyenergy providers argue for a stable scaland regulatory framework that reectsthe long-term nature of the industry andencourages investment.

    Our technology

    Technology plays a crucial role in addressingthe worlds energy challenges and is a keyfactor in maximizing the effectiveness ofinvestment. Inside BP, as a major IOCoperating on the industrys frontiers,research and technology is critical for ourcompetitive business performance andnew business development. Expenditureon research and development (R&D) in2008 was $595 million, compared with$566 million in 2007 and $395 million in2006. Beyond R&D, we also invest intechnologies to get them to the point ofcommercial readiness, and we have 20major technology programmes across ourbusiness segments.

    In E&P, there are 10 agshiptechnology programmes, including ourlatest advanced seismic imagingtechniques, enhanced oil recovery andour FieldoftheFuture programme, whichapplies digital technologies and usesreal-time data from oil and gas elds tooptimize production and improve recovery.Each of these programmes has the potentialto add more than one billion boe to reservesfrom our discovered elds.

    Energy securityThere is a wide acceptance in the energyindustry and beyond that changes areneeded in the way power and fuel areproduced and consumed. For example,in its 2008 World Energy Outlook , theIEA said: The worlds energy systemis at a crossroads. Current global trendsin energy supply and consumption arepatently unsustainable environmentally,economically, socially. It is not anexaggeration to claim that the futureof human prosperity depends on howsuccessfully we tackle the two centralenergy challenges facing us today:securing the supply of reliable andaffordable energy; and effecting a rapidtransformation to a low-carbon, efcientand environmentally benign system ofenergy supply. What is needed is nothingshort of an energy revolution.

    The worlds energy systemis at a crossroads. Currentglobal trends in energy supplyand consumption are patentlyunsustainable environmentally,economically, socially.

    IEA, 2008 World Energy Outlook

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    In R&M, technology advancements enhancethe exibility and reliability of our reneriesand, in turn, improve the margins of ourexisting asset base. In Naperville, US,we opened a new rening R&D centre,installing more than 50 new pilot units atthe forefront of experimental technologyand modelling. We have installed predictiveanalytics technology for fault detection andprediction on critical machinery acrossseven of our reneries, reducing lossesfrom machinery failure.

    In the alternative energy area, weled patents in 2008 covering biofuels,CCS and hydrogen membranes. Oursolar business produced the rstprototype of a high-voltage module,giving a 5% increase in power overconventional modules.

    Our diverse portfolioOur diverse energy portfolio reects theworlds need to source energy frommany different substances, regions andtechnologies and is underpinned byour resource base, which is biased to

    conventional hydrocarbons. We also seekaccess to unconventional hydrocarbons,such as the worlds considerable reservesof oil sands and tight gas gas that iscontained in low permeability formationsand is therefore difcult to develop andproduce. In another area of the portfolio,in our low-carbon energy businesses, weare focusing on those with the potentialto be material businesses for BP: wind,solar, biofuels and CCS.

    BP is also a major producer of naturalgas, the cleanest burning fossil fuel, whichaccounted for 37% of the energy produced

    by E&P in 2008. During 2008 our gasbusiness grew with start-up projects inAustralia and Egypt. We furtherstrengthened our North America gasposition, through two shale gas access

    deals, building on our incumbent positionin the Arkoma Basin.

    We also have a series of gas-redpower plants, recognizing that gas-redpower represents one of the main waysto mitigate GHG emissions today. Wherepossible, we integrate plants with other BPproduction facilities, such as the WhitingClean Energy facility, which we acquired inJuly 2008 to provide steam for our Whitingrenery and an opportunity to sell low-carbon power into the local power market.

    Investments in energy are long termin nature. We believe that if policy-makers

    provide appropriate frameworks andbusinesses make the necessaryinvestments, our industry will be able toprovide the diverse and affordable energyneeded by consumers in the future.

    BPs major technology programmes

    Resource Conversion Low-carbonbusiness technologies technologiesextensions

    Unconventional gas Fuels Solar Unconventional oil Lubricants Biofuels Gulf of Mexico paleogene Puried terephthalic acid Carbon capture and storage Advanced seismic imaging Acetic acid Beyond sand control Advanced rening Pushing reser voir limits Rener y of the Future Subsea well intervention/ Coal

    deepwater facilities FieldoftheFuture

    Inherently reliable facilities Effective reservoir access

    Our technologyOnboard BPs Marlinsubsea platform in theGulf of Mexico, US.

    The oil and gasindustry represents59.4% of the worldstraded primary energysupply. BPs oil andgas production in2007 accountedfor about 1.7% ofglobal traded primaryenergy supply.

    OilNatural gasCoalNuclearHydro

    World energy supply 2007 a (%)

    Source: BP Statistical Review of World Energy June 2008 . a This chart shows commercially traded fuels only. Excluded are fuels such

    as wood, peat, animal waste, wind, geothermal and solar power generation.

    6.4 35.65.6

    28.6

    23.8

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    BP Sustainability Review 2008

    Cleaner energy

    Is BP really doingenough to addressclimate change?Publicly acknowledged as the rst major oil company to advocateprecautionary action over climate change, we have since focused onthe business opportunities raised by the issue, such as increasing energyefciency in BP operations, reducing GHG emissions and establishinga number of low-carbon energy businesses. We remain a leading advocateof strong legislation and international co-operation to address climate change.

    For more detail visitwww.bp.com/climatechange

    Our positionOur position on climate changecovers six key points:

    1 A major issueBP accepts the ndings of theIntergovernmental Panel on ClimateChange that global warming isunequivocal and very likely due tohuman activity. We accept that in order

    to avoid the dangerous consequencesof climate change, temperature increaseswill probably need to be limited to abouttwo to three degrees Celsius abovepre-industrial levels.

    Collabo2 ration requiredClimate change is a global issue thatrequires all countries, all sectors of industryand society at large to play their part.

    To3 ugh decisionsGovernments need to make tough decisionsto balance the pressures of climate changewith those of economic development andenergy security.

    4 Driven by policyThe scale of change required to addressthe issue means that it can only beachieved through government policy todrive emissions reduction and stimulateinvestments in low-carbon technologies .

    Ene5 rgy efciencyEnergy efciency has a major role to play.With technical improvements, changedattitudes and the right policies, a majorreduction in energy use and emissionscan be achieved, often at very low cost.

    I6 nnovationInnovation is needed to address thechallenge. We will need to move someimportant existing technologies, such asCCS, from demonstration phase to full-scaleimplementation on a rapid timescale.

    BPs climate commitmentIn 2002 we committed that any increasein our operational GHG emissions by 2012would be less than the benets of ourlow-carbon products, measured against a2001 baseline. During 2008 we conrmedthat our performance was on track to deliverthis commitment but we determined thatlinking operational and low-carbon energyactivities was no longer practical or useful indriving emissions reduction at the plant level.

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    Instead, we have decided that we willmanage operational emissions as part ofour OMS, by requiring each operation toassess their GHG performance and to lookfor best practice and new technologies thatcan be incorporated into their operations.We also improved the way in whichwe factor the cost of carbon into ourengineering design optimization process.We continue to monitor our operationalGHG performance against a comparatorgroup of IOCs and we believe that theprocesses we are putting in place willmaintain or improve our competitive position.

    We also decided that our scale ofactivity in low-carbon businesses shouldbe judged as an independent businessdecision, designed to create material futurebusiness opportunities for BP. We investa signicant amount in alternative energytechnology compared with our peers.

    08 155

    07 148 5% growth

    06 93 59% growth

    05 59 58% growth

    04 35 68% growth

    Note: Adjusted for reinvestment. Geared reinvestmentassumes a one-year lag between venture capital and privateequity/public markets funds raised and reinvestment inprojects. Grossed-up and buffered values are based ondisclosed deals.Source: New Energy Finance, IEA, World Energy Outlook 2008 (4v9.01) .

    Global new investment in clean energy($ billion)

    WindSolar

    Demand growth per annum 2005-2030

    estimated(%)

    13.8

    20.9

    9.2

    Biofuels

    Note: Includes venture capital and private equity, publicmarkets and asset finance only. Excludes reinvestmentadjustment. Grossed-up and buffered values are basedon disclosed deals.Source: New Energy Finance, IEA, World Energy Outlook 2008 (4v9.01) .

    For more detail on our

    environmental emissionssee pages 6, 7 and 16.

    We take action over climate changein ve areas, as follows:

    1 Efcient operationsWe will maintain our decade-longefforts to manage GHG emissionsfrom our operations.Over the past seven years we haveachieved real sustainable reductionsof 7.5MteCO 2e. In 2008 we reported0.4MteCO 2e of reductions, including for

    example, expansion of the use of smartwell automation to reduce venting, andimproved well completion proceduresto reduce aring at our Wamsutternatural gas operations in the US,which resulted in emissions being48,000teCO 2e lower than they wouldotherwise have been.

    Ef2 cient productsWe will work in partnership withvehicle and equipment manufacturersto improve the overall efciency ofuse of our fuel and lubricant products.Continued fuel and lubricant productdevelopment has produced a numberof innovations. As well as offeringour Ultimate range of advancedperformance fuels in 18 countries,we launched a new gasoline offer inthe US in 2008, featuring our Invigorateformula, designed to enhance vehicleperformance by cleaning and protectingthe engine. BP eet studies haveshown this to result in lower emissionsof carbon monoxide, CO 2, nitrogen oxidesand unburned hydrocarbons. In Germanywe are marketing low-sulphur heating oil,which reduces average CO 2 emissions

    by up to 4% when used in conventionalboilers and enables higher reductionsthrough use of condensing boilers.

    Lo3 w-carbon energyWe will build a focused portfolioof material renewable and low-carbonenergy businesses.After three years of operation we have builta substantial and diverse low-carbon energybusiness. Since 2005 we have investedmore than $2.9 billion in our low-carbon

    businesses, in line with our originalcommitment to invest $8 billion by 2015.

    Ad4 vocacyWe will continue to participate in the policydebate, calling for policy action to put a priceon carbon and stimulate renewable andlow-carbon energy.BP has continued to participate actively inthe development of public policy in manyjurisdictions, as evidenced by formalsubmissions to the US federal government,the Australian government, the Californianstate government and the European Union.We also see it as part of our responsibilityto spread awareness of climate changeamong our customers and the public.For example, we have a carbon footprintcalculator on bp.com and support a carbonchallenge roadshow that enables studentsto use science, maths and enterprise skills toexamine the carbon footprint of their school.

    I5 nnovationWe will fund and actively participate inresearch on both technology and policyto help create options for the future.Our continuing support for innovationin 2008 included investing in the

    US-based Energy Biosciences Institute,a $500-million/10-year commitment, anda joint $73-million investment in the CleanEnergy Commercialization Centre withthe Chinese Academy of Sciences tocommercialize Chinese clean-energytechnologies. We renewed our funding forthe Carbon Mitigation Initiative at PrincetonUniversity in the US, a research programmefocused on building a deeper understandingof climate science and developing practicalsolutions for managing CO 2 emissions.We are a founding sponsor of UKs EnergyTechnology Institute with an annualinvestment of up to 5 million.

    Specic observation from Ernst & YoungOur review of the outputs of BPs stakeholder engagementactivities highlighted a desire to see additional environmentalperformance targets, particularly in relation to climatechange. BP has set out its approach to action on climatechange and many businesses produce their own reports onenvironmental impacts. Consideration should be given tofurther disclosure of the identication of priorities and targetsfor future performance in relation to climate change at thegroup and operational level.

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    BiofuelsHarvesting sugar caneat our biofuels jointventure in Brazil.

    Focus on low-carbonenergy businessesIn 2008 we focused our low-carboninvestments on a set of technologiesin which our experience indicates wecan develop material businesses for BP:wind, solar, biofuels and CCS.

    For more detail visitwww.bp.com/annualreport

    WindDuring 2008, we increased our grossoperational wind capacity to 785 megawatts a (MW) (net 432MW), mostly in the US,where there is an attractive environment forinvestment with major opportunities forgrowth. We have now developed a totalgross capacity of more than 1,000MW a inthe US, making us one of the largest winddevelopers in the country. Our US windportfolio includes almost 100 potentialprojects with a total generating capacityof 20,000MW.

    SolarOur solar strategy is to invest in lower-costmanufacturing to drive down costs forconsumers and enable energy from ourproducts to compete with conventionalsources of electricity. BP Solars mainproduction facilities are in the US, Spain,China and India. In 2008 we announcedplans to focus operations at largerplants, closing our plant in Australia andimplementing an intensive programmeof operational efciency improvementelsewhere. Our solar panel sales in 2008were 162MW, an increase of 41% on the2007 total of 115MW.

    a Figures represent gross wind capacity which includes 100% ofthe capacity of the equity-accounted entities where BP haspartial ownership. The equivalent capacity on a net basis is thesum of the rated capacities of the assets/turbines, includingBPs share of the equity-accounted entities.

    BiofuelsOur strategy is to develop sustainablebiofuels that provide clean and reliableenergy for transport. As well as using thebiocomponents available today, includingblending more than one billion gallons ofethanol into gasoline in the US in 2008we are investing in feedstocks thatminimize competition with food suppliesand technologies designed to createadvanced biofuels with higher energycontent and greater environmentalbenets. In 2008 we invested in bioethanolproduced from Brazilian sugar cane, themost efcient and lowest-carbon biofuelavailable today, by acquiring a 50% stakein Tropical BioEnergia S.A. We alsoannounced a $90 -million investmentand strategic alliance with VereniumCorporation, US, to develop lignocellulosicbioethanol, an advanced biofuel made fromnon-food crops.

    Hydrogen energy with carboncapture and storage

    We are helping to shape the developmentof CCS technology. We are working onprojects with our partners in Abu Dhabiand California, both of which are expectedto convert fossil fuels into hydrogen usedfor power generation, capturing some90% of the carbon that would normallybe emitted as CO 2 and injecting it intoproducing oil elds to enhance production.

    Spanning the energy spectrumWe estimate that in 2007 BP solar panelproduction accounted for about 5% ofthe added global solar generating capacity,and BPs added wind generating capacityrepresented about 1.5% of the globalcapacity increase. By comparison, BPproduces about 2.9% of global oil and gasenergy or about 1.7% of all global tradedprimary energy.

    For more detail visitwww.bp.com/carbonfootprintwww.bp.com/biofuelswww.bpalternativenergy.comwww.hydrogenenergy.comwww.targetneutral.com

    http://www.bp.com/annualreporthttp://www.bp.com/carbonfootprinthttp://www.bp.com/biofuelshttp://www.bpalternativenergy.com/http://www.hydrogenenergy.com/http://www.targetneutral.com/http://www.targetneutral.com/http://www.hydrogenenergy.com/http://www.bpalternativenergy.com/http://www.bp.com/biofuelshttp://www.bp.com/carbonfootprinthttp://www.bp.com/annualreport
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    Developing our peopleWe use a variety of methods to help peopleat all levels develop their capabilities,encouraging every employee to complete atleast ve training days per year. Employeesmay attend training in a variety of subjectsincluding safety; technical areas, such asnance, sales and marketing and engineering;and leadership skills. Among managers,we run a programme called ManagingEssentials, designed to drive continuous

    improvement in performance. This beginswith a module on effective performanceconversations (EPC), which helps leaders tohave clear and constructive discussions withstaff. In 2008 we ran 245 of these moduleswith a total of 5,500 managers attending,exceeding the targets given in last yearsreport. In total, more than 6,200 managershave now attended the EPC module.

    Attracting talented individualsWe are continuing to develop our graduaterecruitment programmes, particularlyfocusing our attraction efforts on universitieswith strengths in subjects related to theenergy industry. In the UK in 2008 around75% of graduate hires came from theseuniversities. As part of our efforts to be alocal energy company as far as we can, weaim to ensure that our workforce reects thelocal communities in which we operate.

    LeadershipConstruction of thenatural gas pipeline inthe Rhourde El-Bagueloil eld, Algeria.

    LeadershipWe believe that a high-performance culturerelies on having a consistent view of whatleadership means. We have developed asingle, common, leadership framework,which sets out four expectations for leadersaccountabilities and behaviour: to value

    expertise, to energize people, to actdecisively, and to deliver results.

    Employee viewsIn 2008 we combined our biannualsatisfaction survey with a more frequentpulse survey that tracks employeesresponses to the organization changesannounced as part of the forward agendaprogramme in late 2007.

    The survey ran for ve weeks inAugust and September and sampled allnon-retail employees using online andpaper questionnaires in 12 languages.

    Overall, results showed that theemployee satisfaction index score, at 59%,has fallen by 7% (compared with the lastequivalent employee survey in 2006). Highscores were recorded in areas such as thesupervisor/line manager relationship, creatingan environment where people from diversebackgrounds can succeed and employeeperceptions of BPs societal performance.

    Scores for the opportunity to develop skillsalso increased on the 2006 survey. Thewider ndings of the survey also indicatedthat BPs focus on safety over the pastfew years has been embedding a strongersafety culture.

    The areas where scores had declined

    were around employee recognition, nancialreward and certain aspects of management.Such responses were not unexpected giventhe stage of corporate transformation insideBP and the uncertainties in the externaleconomic environment that were beginningto emerge in 2008.

    The results of the surveys werereviewed by the executive team, the boardand business leadership teams, and actionplans to tackle both local and broader issueshave been developed for 2009 acrossthe organization.

    An engaging andinclusive environmentWe aim to create an engaging and inclusiveworking environment where people from allbackgrounds have the same opportunity tomake a contribution and advance on merit.We aim to ensure that the principles ofdiversity and inclusion (D&I) are practisedacross the group, and as such we have setup global and business specic D&I councils.The 15-member global diversity council,chaired by the GCE, was set up in 2008 toprovide governance for all D&I work. Amongour group leadership, the percentage ofwomen leaders in BP has increased from

    9% to 14% since 2000, while the numberof leaders from outside the US or UK hasincreased from 14% to 19%. Meanwhile,the number of leaders from US or UK racialminorities has increased from 4% to 6%,with an increase in the US from 6% in 2000to 13% in 2008.

    Diversity and inclusion a (%)

    1408 19

    1607 19

    1706 20

    1705 20

    1504 19

    WomenNon-UK/US

    a The percentage of women and individuals from countriesother than the UK and US among BPs top 583 leaders(2007 624, 2006 625).

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    Performance management and rewardWe have simplied the performancemanagement process so that we canclearly identify and reward top performingbusinesses and individuals. Our incentiveplans provide a clear link between businessperformance, individual performance andthe bonuses that are received.

    Executive reward packagesThere is direct alignment between the goalsof BP set by the board, the goals of our keybusinesses and the performance contractsof our executive leadership. As part of astandard approach, executives performanceis evaluated against their performancecontract. We believe our reward packagesstrike the appropriate balance betweenrewarding individual performance andreecting group performance. Remunerationfor executives is delivered in cash and BPshares. Policy governing the reward ofexecutive directors is established by theremuneration committee of the board.Policy for all other executives is establishedby the GPC.

    For more detail visitwww.bp.com/annualreport

    Compliance and ethicsWe believe that our reputation, andtherefore our future, depends on everyBP employee, everywhere, every day,taking personal responsibility for ethicaland compliant business conduct. It is afundamental BP commitment to complywith all applicable legal requirements andadhere to high ethical standards.

    The code of conductOur code of conduct denes what weexpect of our business and our people,regardless of location and background.The code covers health, safety, securityand the environment; employees; businesspartners; governments and communities;and company assets and nancial integrity.

    Compliance in tradingA deferred prosecution agreement(DPA) was entered into in October2007 by BP America Inc. with the USDepartment of Justice (DOJ) relatingto manipulation of the price of propaneby BP traders in February 2004.The DPA runs for three years providedBP America complies with its terms.As a further result of BPs propanetrading, a consent order was enteredinto in October 2007 by BP ProductsNorth America Inc. with the US CommodityFutures Trading Commission (CFTC).Under the terms of the DPA and the consentorder, an Independent US Trading Monitorwas appointed by the DOJ and the CFTC.In December 2008 the IndependentMonitor advised the CFTC and the DOJ asfollows: BP continues to co-operate fullywith the Independent Monitoring Team andthe Independent Monitor believes that thecompany continues to be in compliance withthe consent order and is making every effort

    to remain in that status.The Independent Monitors ndingsdo not constitute a defence to any actionthat the CFTC or the DOJ may elect tobring. BP remains committed to improvingits trading business.

    Managing and certifying complianceand ethicsWe have an annual certication process,in which all our senior leaders are askedto submit a certicate regarding theirunderstanding of and adherence tothe code of conduct and their reportingof breaches. During 2008 we simpliedthe process, introducing a web-basedsystem and providing for risks of non-compliance to be assessed alongsideother business risks.

    Raising concernsBP expects employees to abide by the codeof conduct and to report any concerns orpossible breaches of compliance. Whileemployees are encouraged to raise concernswith line managers, human resources orthe legal or compliance functions, BP alsomaintains OpenTalk, an independentcondential helpline. In the US, they can alsocontact our independent US ombudsmanand the Independent Monitor.

    EuropeThe AmericasAfrica, Middle East, Russia and the CaspianAsia, India and Australasia

    0 200 400 600 800 1000 1200

    08

    07

    06

    05

    04

    Location withheld

    OpenTalk cases

    925

    973

    1,064

    634

    343

    Individuals can contact OpenTalk any time,seven days a week. Any employee whoseeks advice, raises concern or reportsmisconduct is following our code of conductand BP will not tolerate retaliation againstthat employee. Retaliation claims are takenseriously, investigated and appropriateaction taken.

    In 2008 925 cases were raisedthrough OpenTalk, compared with 973cases raised in 2007.

    Specic observation from Ernst & YoungWe interviewed staff in the compliance and ethics (C&E)function and reviewed management information reportedby them to SEEAC. We noted that the C&E function hastaken steps to develop additional indicators to include withinits reporting.

    http://www.bp.com/annualreporthttp://www.bp.com/annualreport
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    BP Sustainability Review 2008

    Local energy

    How do BPsoperations benetlocal communities?Mutual advantage is the guiding principle behind our support for localeducation, skills and business programmes. Wherever we operate weseek to align BPs business interests with those of local communities.From security and human rights to economic development, wereworking with communities to make a positive difference.

    For more detail visitwww.bp.com/developmentandcommunity

    BP operates in a diverse range ofsocio-political and economic conditions.Our projects typically have a timeframe of20 to 30 years and our success depends, inpart, on our ability to create tangible benetsfrom our presence and gain the support oflocal communities. To do this, we take actionthat is relevant to local circumstances,mutually benecial and designed to createenduring solutions, as opposed to short-termxes. As our GCE, Tony Hayward, said in2008: The focus should be to make apositive difference to society through genuinepartnerships, something that BP refers to asmutual advantage.

    Investment in education, for example,can promote sustainable development aswell as providing skilled workers for BP andother companies. Support for local enterprisedrives economic growth as well as helpinglocal companies qualify as our suppliers.

    In nancial terms, our directcontribution to communities throughcommunity programmes in 2008 was$125.6 million. This brought total spendingover the past ve years to $551.3 million,

    exceeding our anticipated spending of$500 million over the ve-year cyclebeginning in 2004.

    EducationOur involvement in education is diverse andwide ranging. We help to fund a range ofeducational programmes, from early yearslearning to advanced university research,building skills and capability in communities.

    University-level programmesMuch of our support for further and highere ducation is targeted at the development ofspecic skills needed by the energy industry.For example, in 2008 BP stepped up itssupport for geoscience engineeringeducation at the University of the WestIndies by sponsoring an MSc professorshipin petroleum and reservoir engineering.Since 2001, BPs investment of more than$1 million in BSc-level degrees at theuniversity has enabled more than 100 peoplefrom Trinidad & Tobago to become graduates.Several energy companies operating in thecountry have hired from this pool of graduates,including 17 who have been taken on by BP.

    http://www.bp.com/developmentandcommunityhttp://www.bp.com/developmentandcommunity
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    In Angola, BP supporteda programme thatdevelops agriculturally-focused businesses,which has benetedmore than 10,000people.

    We continue to support efforts to advanceunderstanding of climate change. In additionto a 10-year, $500-million commitmentto the Energy Biosciences Institute, US,to progress biofuels-related research, BPhas renewed its backing for the CarbonMitigation Initiative, a research programmeat Princeton University, US, examining ways

    of tackling climate change.

    School-level programmesIn supporting school education, BP looksto develop childrens awareness of linksbetween energy and the environment, aswell as stimulating interest in science andengineering. For example, 2008 markedthe 40th anniversary of the BP SchoolsLink programme in the UK, which enableschildren to visit BPs plants and laboratoriesand BP staff to make visits to schools. Today,around 650 employees volunteer regularly atmore than 200 schools.

    EnterpriseAs one of the largest investors in manydeveloping countries, and as a companythat spent more than $66 billion onprocurement of third-party goods andservices in 2008, BP seeks to supportthe development of local suppliers throughtraining and nancing programmes, buildingskills and sharing BPs internal standardsand practices as appropriate.

    Encouraging local industryIn Trinidad & Tobago, 2008 saw constructionof the Savonette gas production platform,the fourth to be built locally for BP by afabrication industry, which has beendeveloped over the past decade with oursupport. This process has included settingup new joint ventures, creating a fabricationsite in the rural area of La Brea and buildingcapacity and skills among local contractors.The rst platform to be built in the countrywas Cannonball, which began productionin 2006. Cannonball provided a design modelthat has been followed in building theCashima, Mango and Savonette facilities.

    Since project inception, Trinidad & Tobagonationals accounted for around 77% of theSavonette project man-hours.

    Developing our local supply baseIn Azerbaijan in 2008 we achieved ourtarget to spend $1 billion on local goodsand services, either directly from local

    organizations or indirectly through contractorcompanies. A three-year enterprisedevelopment and training programmeis under way to help suppliers meetinternational oil and gas industry standards.Since the programmes inception, morethan 150 local small- and medium-sizedbusinesses have undergone assessments.As well as micro-enterprise programmes,we supported a $15-million supplier nancefacility that offers easier access to nancefor suppliers and service companies.

    0 25 50 75 100 125 150

    08 125.6

    07 135.8

    06 106.7

    05 95.5

    04 87.7

    UKRest of EuropeUSRest of World

    Contribution to communities by region($ million)

    Supporting local entrepreneursWithin communities, we believe that one

    way to create more sustainable livelihoodsis to allow communities to develop their localeconomies through fostering indigenousentrepreneurship. For instance, in the interiorof Angola, BP has supported a programmethat has beneted more than 10,000 peoplethrough the development of businessessupporting agriculture. BP provides aguarantee fund that enables a bank BancoSol to lend money to individuals, and anNGO Action for Rural and EnvironmentalDevelopment to provide training inbusiness pl