BP A

nnual Report and Form

20-F 2010

Annual Report and Form 20-F2010bp.com/annualreport

Whats inside?5 Business review

6 Chairmans letter 8 Board of directors 10 Group chief executives letter 12 Progress in 2010 14 Group overview 34 Gulf of Mexico oil spill 40 Exploration and Production 55 Refining and Marketing 61 Other businesses and corporate 63 Liquidity and capital resources 68 Corporate responsibility 76 Research and technology 78 Regulation of the groups business 81 Certain definitions

83 Directors and senior management 84 Directors and senior management 87 Directors interests

89 Corporate governance90 Board performance report 105 Corporate governance practices 106 Code of ethics 106 Controls and procedures 107 Principal accountants fees and services 108 Memorandum and Articles of Association

111 Directors remuneration report112 Part 1 Summary 114 Part 2 Executive directors remuneration 120 Part 3 Non-executive directors remuneration

123 Additional information for shareholders124 Critical accounting policies 127 Property, plants and equipment 127 Share ownership 128 Major shareholders and related party transactions 129 Dividends 130 Legal proceedings 133 Relationships with suppliers and contractors 134 Share prices and listings 135 Material contracts 135 Exchange controls 135 Taxation 137 Documents on display 137 Purchases of equity securities by the issuer

and affiliated purchasers 138 Fees and charges payable by a holder of ADSs 138 Fees and payments made by the Depositary

to the issuer 139 Called-up share capital 139 Administration 139 Annual general meeting 140 Exhibits

141 Financial statements142 Consolidated financial statements of the BP group 150 Notes on financial statements 228 Supplementary information on oil and natural gas

(unaudited) PC1 Parent company financial statements of BP p.l.c.

Information for shareholders

Sustainability ReviewRead the summary BP Sustainability Review 2010 in print or read more online from late March 2011. www.bp.com/sustainability

Summary Review 2010Read a summary of our financial and operating performance in BP Summary Review 2010 in print or online.www.bp.com/summaryreview

You can order BPs printed publications, free of charge, from:

US and CanadaPrecision IR Toll-free +1 888 301 2505 Fax +1 804 327 7549 bpreports@precisionir.com

UK and Rest of WorldBP Distribution Services Tel +44 (0)870 241 3269 Fax +44 (0)870 240 5753 bpdistributionservices@bp.com

Reports and publicationsBPs reports and publications are available to view online or download from www.bp.com/annualreport.

BP p.l.c. 2011

Acknowledgements Design sasdesign.co.ukTypesetting RR DonnelleyPrinting Pureprint Group Limited, UK, ISO 14001, FSC certified and CarbonNeutralPhotography Bob WheelerPaper This Annual Report and Form 20-F is printed on FSC-certified Mohawk Options 100% (cover) and Revive Pure White Offset (text pages). This paper has been independently certified according to the rules of the Forest Stewardship Council (FSC) and was manufactured at a mill that holds ISO 14001 accreditation. The inks used are all vegetable oil based.

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F(Mark One)

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) or (g)OF THE SECURITIES EXCHANGE ACT OF 1934

ORANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended 31 December 2010 OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934OR

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934Commission file number: 1-6262

BP p.l.c.(Exact name of Registrant as specified in its charter)

England and Wales(Jurisdiction of incorporation or organization)1 St Jamess Square, London SW1Y 4PD

United Kingdom(Address of principal executive offices)

Dr Byron E GroteBP p.l.c.

1 St Jamess Square, London SW1Y 4PD United Kingdom

Tel +44 (0) 20 7496 4495Fax +44 (0) 20 7496 4630

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)Securities registered or to be registered pursuant to Section 12(b) of the Act

Title of each class Name of each exchange on which registered Ordinary Shares of 25c each New York Stock Exchange*

Floating Rate Guaranteed Notes due 2011 New York Stock Exchange Substitute Floating Rate Guaranteed Note due 2011 New York Stock Exchange 1.55% Guaranteed Notes due 2011 New York Stock Exchange 3.125% Guaranteed Notes due 2012 New York Stock Exchange 5.25% Guaranteed Notes due 2013 New York Stock Exchange 3.625% Guaranteed Notes due 2014 New York Stock Exchange 3.875% Guaranteed Notes due 2015 New York Stock Exchange 3.125% Guaranteed Notes due 2015 New York Stock Exchange 4.75% Guaranteed Notes due 2019 New York Stock Exchange 4.5% Guaranteed Notes due 2020 New York Stock Exchange

*Not for trading, but only in connection with the registration of American Depositary Shares, pursuant to the requirements of the Securities and Exchange Commission

Securities registered or to be registered pursuant to Section 12(g) of the Act. None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act. None

Indicate the number of outstanding shares of each of the issuers classes of capital or common stock as of the close of the period covered by the annual report.Ordinary Shares of 25c each 18,796,461,292Cumulative First Preference Shares of 1 each 7,232,838Cumulative Second Preference Shares of 1 each 5,473,414

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes No Note Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T ( 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).* Yes No *This requirement does not apply to the registrant until its fiscal year ending December 31, 2011.Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer Accelerated filer Non-accelerated filer Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing: International Financial Reporting Standards as issued by the U.S. GAAP International Accounting Standards Board Other If Other has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17 Item 18 If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes No BPAnnualReportandForm20-F2010 1

CrossreferencetoForm20-F Page

Item1. IdentityofDirectors,SeniorManagementandAdvisors n/aItem2. OfferStatisticsandExpectedTimetable n/aItem3. KeyInformation A. Selectedfinancialdata 23 B. Capitalizationandindebtedness n/a C. Reasonsfortheofferanduseofproceeds n/a D. Riskfactors 27-32Item4. InformationontheCompany A. Historyanddevelopmentofthecompany 4,14-15 B. Businessoverview 14-22,33-82 C. Organizationalstructure 220-221 D. Property,plantsandequipment 22,43,50-54,127,247-248Item4A. UnresolvedStaffComments NoneItem5. OperatingandFinancialReviewandProspects A. Operatingresults 24-26,34,41-42,56-57,61,124-127 B. Liquidityandcapitalresources 63-67 C. Researchanddevelopment,patentandlicenses 76-77,175 D. Trendinformation 67 E. Off-balancesheetarrangements 64 F. Tabulardisclosureofcontractualcommitments 65 G. Safeharbor 4Item6. Directors,SeniorManagementandEmployees A. Directorsandseniormanagement 84-87 B. Compensation 112-121,214-217 C. Boardpractices 90-104,214-217 D. Employees 74-75 E. Shareownership 87,112-118,127-128,214-216Item7. MajorShareholdersandRelatedPartyTransactions A. Majorshareholders 128-129 B. Relatedpartytransactions 129,183-184 C. Interestsofexpertsandcounsel n/aItem8. FinancialInformation A. Consolidatedstatementsandotherfinancialinformation 129-133,134,144-227 B. Significantchanges NoneItem9. TheOfferandListing A. Offerandlistingdetails 134 B. Planofdistribution n/a C. Markets 134 D. Sellingshareholders n/a E. Dilution n/a F. Expensesoftheissue n/aItem10. AdditionalInformation A. Sharecapital n/a B. Memorandumandarticlesofassociation 108-109 C. Materialcontracts 135 D. Exchangecontrols 135 E. Taxation 135-137 F. Dividendsandpayingagents n/a G. Statementsbyexperts n/a H. Documentsondisplay 137 I. Subsidiaryinformation n/aItem11. QuantitativeandQualitativeDisclosuresaboutMarketRisk 185-190,192-196Item12. Descriptionofsecuritiesotherthanequitysecurities A. DebtSecurities n/a B. WarrantsandRights n/a C. OtherSecurities n/a D. AmericanDepositaryShares 138Item13. Defaults,DividendArrearagesandDelinquencies NoneItem14. MaterialModificationstotheRightsofSecurityHoldersandUseofProceeds NoneItem15. ControlsandProcedures 106-107Item16A. AuditCommitteeFinancialExpert 97Item16B. CodeofEthics 106Item16C. PrincipalAccountantFeesandServices 107Item16D. ExemptionsfromtheListingStandardsforAuditCommittees n/aItem16E. PurchasesofEquitySecuritiesbytheIssuerandAffiliatedPurchasers 137Item16F. ChangeinRegistrantsCertifyingAccountant NoneItem16G. Corporategovernance 105Item17. FinancialStatements n/aItem18. FinancialStatements 144-227,228-248Item19. Exhibits 140

2 BPAnnualReportandForm20-F2010

MiscellaneoustermsInthisdocument,unlessthecontextotherwiserequires,thefollowingtermsshallhavethemeaningsetoutbelow.

ADRAmericandepositaryreceipt.

ADSAmericandepositaryshare.

AGMAnnualgeneralmeeting.

AmocoTheformerAmocoCorporationanditssubsidiaries.

AnnulusThespacebetweentwoconcentricobjects,suchasbetweenthewellboreandcasingofanoilwellorbetweencasingandtubing,wherefluidcanflow.Itallowsfluids,suchasdrillingmud,tocirculateinthewell.

Atlantic RichfieldAtlanticRichfieldCompanyanditssubsidiaries.

AssociateAnentity,includinganunincorporatedentitysuchasapartnership,overwhichthegrouphassignificantinfluenceandthatisneitherasubsidiarynorajointventure.Significantinfluenceisthepowertoparticipateinthefinancialandoperatingpolicydecisionsofanentitybutisnotcontrolorjointcontroloverthosepolicies.

Barrel42USgallons.

b/dbarrelsperday.

boebarrelsofoilequivalent.

BP, BP group or the groupBPp.l.c.anditssubsidiaries.

Burmah CastrolBurmahCastrolPLCanditssubsidiaries.

Cent or cOne-hundredthoftheUSdollar.

The companyBPp.l.c.

Dollar or $TheUSdollar.

EUEuropeanUnion.

GAAPGenerallyacceptedaccountingpractice.

GasNaturalgas.

GCROGulfCoastRestorationOrganization.

HydrocarbonsCrudeoilandnaturalgas.

IFRSInternationalFinancialReportingStandards.

Joint controlJointcontrolisthecontractuallyagreedsharingofcontroloveraneconomicactivity,andexistsonlywhenthestrategicfinancialandoperatingdecisionsrelatingtotheactivityrequiretheunanimousconsentofthepartiessharingcontrol(theventurers).

Joint ventureAcontractualarrangementwherebytwoormorepartiesundertakeaneconomicactivitythatissubjecttojointcontrol.

Jointly controlled assetAjointventurewheretheventurersjointlycontrol,andoftenhaveadirectownershipinterestintheassetsoftheventure.Theassetsareusedtoobtainbenefitsfortheventurers.Eachventurermaytakeashareoftheoutputfromtheassetsandeachbearsanagreedshareoftheexpensesincurred.

Jointly controlled entityAjointventurethatinvolvestheestablishmentofacorporation,partnershiporotherentityinwhicheachventurerhasaninterest.Acontractualarrangementbetweentheventurersestablishesjointcontrolovertheeconomicactivityoftheentity.

LiquidsCrudeoil,condensateandnaturalgasliquids.

LNGLiquefiednaturalgas.

London Stock Exchange or LSELondonStockExchangeplc.

LPGLiquefiedpetroleumgas.

mb/dthousandbarrelsperday.

mboe/dthousandbarrelsofoilequivalentperday.

mmBtumillionBritishthermalunits.

mmboemillionbarrelsofoilequivalent.

mmcfmillioncubicfeet.

mmcf/dmillioncubicfeetperday.

MWMegawatt.

NGLsNaturalgasliquids.

OPECOrganizationofPetroleumExportingCountries.

Ordinary sharesOrdinaryfullypaidsharesinBPp.l.c.of25ceach.

Pence or pOne-hundredthofapoundsterling.

Pound, sterling or Thepoundsterling.

Preference sharesCumulativeFirstPreferenceSharesandCumulativeSecondPreferenceSharesinBPp.l.c.of1each.

PSAAproduction-sharingagreement(PSA)isanarrangementthroughwhichanoilcompanybearstherisksandcostsofexploration,developmentandproduction.Inreturn,ifexplorationissuccessful,theoilcompanyreceivesentitlementtovariablephysicalvolumesofhydrocarbons,representingrecoveryofthecostsincurredandastipulatedshareoftheproductionremainingaftersuchcostrecovery.

SECTheUnitedStatesSecuritiesandExchangeCommission.

SubsidiaryAnentitythatiscontrolledbytheBPgroup.Controlisthepowertogovernthefinancialandoperatingpoliciesofanentitysoastoobtainthebenefitsfromitsactivities.

Tonne2,204.6pounds.

TrustDeepwaterHorizonOilSpillTrust.

UKUnitedKingdomofGreatBritainandNorthernIreland.

USUnitedStatesofAmerica.

BPAnnualReportandForm20-F2010 3

Information about this report

ThisdocumentconstitutestheAnnualReportandAccountsinaccordancewithUKrequirementsandtheAnnualReportonForm20-FinaccordancewiththeUSSecuritiesExchangeActof1934,forBPp.l.c.fortheyearended31December2010.AcrossreferencetoForm20-Frequirementsisonpage2.

ThisdocumentcontainstheDirectorsReport,includingtheBusinessReviewandManagementReport,onpages5-109and123-140,142andPC1.TheDirectorsRemunerationReportisonpages111-121.Theconsolidatedfinancialstatementsofthegroupareonpages141-248andthecorrespondingreportsoftheauditorareonpages143-145.TheparentcompanyfinancialstatementsofBPp.l.c.andcorrespondingauditorsreportareonpagesPC1-PC16andpagePC2respectively.

Thestatementofdirectorsresponsibilitiesinrespectoftheconsolidatedfinancialstatements,theindependentauditorsreportontheannualreportandaccountstothemembersofBPp.l.c.andtheparentcompanyfinancialstatementsofBPp.l.c.andcorrespondingauditorsreportdonotformpartofBPsAnnualReportonForm20-FasfiledwiththeSEC.

BP Annual Report and Form 20-F 2010 and BP Summary Review 2010maybedownloadedfromwww.bp.com/annualreport.NomaterialontheBPwebsite,otherthantheitemsidentifiedasBP Annual Report and Form 20-F 2010orBP Summary Review 2010,formsanypartofthosedocuments.

BPp.l.c.istheparentcompanyoftheBPgroupofcompanies.Unlessotherwisestated,thetextdoesnotdistinguishbetweentheactivitiesandoperationsoftheparentcompanyandthoseofitssubsidiaries.

Thetermshareholderinthisreportmeans,unlessthecontextotherwiserequires,investorsintheequitycapitalofBPp.l.c.,bothdirectandindirect.AsBPshares,intheformofADSs,arelistedontheNewYorkStockExchange(NYSE),anAnnualReportonForm20-FisfiledwiththeUSSecuritiesandExchangeCommission(SEC).

Cautionary statementBP Annual Report and Form 20-F 2010containscertainforward-lookingstatementswithinthemeaningoftheUSPrivateSecuritiesLitigationReformActof1995withrespecttothefinancialcondition,resultsofoperationsandbusinessesofBPandcertainoftheplansandobjectivesofBPwithrespecttotheseitems.

InordertoutilizetheSafeHarborprovisionsoftheUnitedStatesPrivateSecuritiesLitigationReformActof1995,BPisprovidingthefollowingcautionarystatement.Thisdocumentcontainscertainforward-lookingstatementswithrespecttothefinancialcondition,resultsofoperationsandbusinessesofBPandcertainoftheplansandobjectivesofBPwithrespecttotheseitems.Thesestatementsmaygenerally,butnotalways,beidentifiedbytheuseofwordssuchaswill,expects,isexpectedto,aims,should,may,objective,islikelyto,intends,believes,plans,weseeorsimilarexpressions.Inparticular,amongotherstatements,(i)certainstatementsintheBusinessreview(pages6-82),includingundertheheadingOutlook,withregardtostrategy,managementaimsandobjectives,futurecapitalexpenditure,thecompletionofplannedandannounceddivestmentsanddisposals,acquisitionsandothertransactions,futurehydrocarbonproductionvolumeandthegroupsabilitytosatisfyitslong-termsalescommitmentsfromfuturesuppliesavailabletothegroup,date(s)orperiod(s)inwhichproductionisscheduledorexpectedtocomeonstreamoraprojectoractionisscheduledorexpectedtobeginorbecompleted,capacityofplannedplantsorfacilitiesandimpactofhealth,safetyandenvironmentalregulations;(ii)thestatementsintheBusinessreview(pages6-63and68-81)withregardtoanticipatedenergydemandandconsumption,globaleconomicrecovery,oilandgasprices,globalreserves,refiningcapacity,expectedfutureenergymixandthepotentialforcleanerandmoreefficientsourcesofenergy,managementaimsandobjectives,strategy,production,petrochemicalandrefiningmargins,anticipatedinvestmentinAlternativeEnergy,anticipatedfutureprojectdevelopments,growthoftheinternationalbusinesses,RefiningandMarketinginvestments,reservesincreasesthroughtechnologicaldevelopments,withregardtoplannedinvestmentorotherprojects,timingandabilitytocompleteannouncedtransactionsandfutureregulatoryactions;(iii)thestatementsintheBusinessreview(pages23-26,63-67

and73)withregardtotheplansofthegroup,thecostofandprovisionforfutureremediationprogrammesandenvironmentaloperatingandcapitalexpenditures,taxation,liquidityandcostsforprovidingpensionandotherpost-retirementbenefits;andincludingunderLiquidityandcapitalresourcesTrendInformation,withregardtoglobaleconomicrecovery,oilandgasprices,petrochemicalandrefiningmargins,production,demandforpetrochemicals,productionandproductiongrowth,depreciation,underlyingaveragequarterlychargefromOtherbusinessesandcorporate,costs,foreignexchangeandenergycosts,capitalexpenditure,timingandproceedsofdivestments,balanceofcashinflowsandoutflows,dividendandoptionalscripdividend,cashflows,shareholderdistributions,gearing,workingcapital,guarantees,expectedpaymentsundercontractualandcommercialcommitmentsandpurchaseobligations;and(iv)certainstatementsinChairmansletter(pages6-7)andBusinessreview(pages10-11)inrelationtoananticipatedincreaseinthelevelofthedividend;areallforward-lookinginnature.

Bytheirnature,forward-lookingstatementsinvolveriskanduncertaintybecausetheyrelatetoeventsanddependoncircumstancesthatwillormayoccurinthefutureandareoutsidethecontrolofBP.Actualresultsmaydiffermateriallyfromthoseexpressedinsuchstatements,dependingonavarietyoffactors,includingthespecificfactorsidentifiedinthediscussionsaccompanyingsuchforward-lookingstatements;thetimingofbringingnewfieldsonstream;futurelevelsofindustryproductsupply,demandandpricing;operationalproblems;generaleconomicconditions;politicalstabilityandeconomicgrowthinrelevantareasoftheworld;changesinlawsandgovernmentalregulations;actionsbyregulators;exchangeratefluctuations;developmentanduseofnewtechnology;thesuccessorotherwiseofpartnering;theactionsofcompetitors;naturaldisastersandadverseweatherconditions;changesinpublicexpectationsandotherchangestobusinessconditions;warsandactsofterrorismorsabotage;andotherfactorsdiscussedelsewhereinthisreportincludingunderRiskfactors(pages27-32).Inadditiontofactorssetforthelsewhereinthisreport,thosesetoutaboveareimportantfactors,althoughnotexhaustive,thatmaycauseactualresultsanddevelopmentstodiffermateriallyfromthoseexpressedorimpliedbytheseforward-lookingstatements.

Statements regarding competitive positionStatementsreferringtoBPscompetitivepositionarebasedonthecompanysbeliefand,insomecases,relyonarangeofsources,includinginvestmentanalystsreports,independentmarketstudiesandBPsinternalassessmentsofmarketsharebasedonpubliclyavailableinformationaboutthefinancialresultsandperformanceofmarketparticipants.

Unlessotherwiseindicated,informationinthisdocumentreflects100%oftheassetsandoperationsofthecompanyanditssubsidiariesthatwereconsolidatedatthedateorfortheperiodsindicated,includingminorityinterests.Thecompanywasincorporatedin1909inEnglandandWalesandchangeditsnametoBPp.l.c.in2001.BPsprimarysharelistingistheLondonStockExchange.OrdinarysharesarealsotradedontheFrankfurtStockExchangeinGermanyand,intheUS,thecompanyssecuritiesaretradedintheformofADSs.(See page 134 for more details.)

TheregisteredofficeofBPp.l.c.,andourworldwideheadquarters,is:1StJamessSquare,LondonSW1Y4PD,UK.Tel+44(0)2074964000.RegisteredinEnglandandWalesNo.102498.StockexchangesymbolBP.

OuragentintheUSisBPAmericaInc.,501WestlakeParkBoulevard,Houston,Texas77079.Tel+12813662000.

4 BPAnnualReportandForm20-F2010

http://www.bp.com/annualreport

Bu

siness review

Businessreview

6 Chairmansletter

8 B oardofdirectors

10 Groupchiefexecutivesletter

12 Progressin2010

14 Groupoverview

34 GulfofMexicooilspill

40 ExplorationandProduction

55 RefiningandMarketing

61 Otherbusinessesandcorporate

63 Liquidityandcapitalresources

68 Corporateresponsibility

76 Researchandtechnology

78 Regulationofthegroupsbusiness

81 Certaindefinitions

BPAnnualReportandForm20-F2010 5

Businessreview

Chairmansletter

Dearfellowshareholder2010wasaprofoundlypainfulandtestingyear.InApril,atragicaccidentontheDeepwaterHorizonrigclaimedthelivesof11menandinjuredothers.Aboveallelse,Iwanttorememberthosemen,andsaythatourthoughtsremainwiththeirfamiliesandfriends.BPspriorityistoensurethatthepeoplewhoworkforus,andwithus,returnhomesafely.Theaccidentshouldneverhavehappened.Weareshockedandsaddenedthatitdid.

Thespillthatresultedcausedwidespreadpollution.Ourresponsehasbeenunprecedentedinscale,andwearedeterminedtoliveuptoourcommitmentsintheGulf.WewillalsodoeverythingnecessarytoensureBPisacompanythatcanbetrustedbyshareholdersandcommunitiesaroundtheworld.

InthedaysaftertheaccidentintheGulfofMexicothecompanyfacedacomplexandfast-changingcrisis.Withoilescapingintotheocean,uncertaintygrewaroundourabilitytosealthewellandrestoretheareasaffected.Thiswasanintenseperiod,withthesituationworseningalmostdaily.OurmeetingwithPresidentObamaon16June2010providedreassurancetotheUSgovernmentthatBPwoulddotherightthingintheGulf,andthismarkedaturningpoint.Throughdiligenceandinvention,ourteamsstoppedtheflowofoilinJulyandcompletedrelief-welloperationsinSeptember.

Duringthesedifficultdaysyourboardfocusedonthreecriticalobjectives.

First,weensuredtheresponseteamhadtheresourcesitrequiredtostoptheleak,containandcleanupthedamage,andprovidefinancialsupporttothoseaffected.Thiswasanunprecedentedresponsetoanindustrialaccident,withsome48,000peopleinvolvedattheheightoftheeffort.Wehavesetupa$20-billionfundtoshowourwillingnessandcapacitytopayalllegitimateclaimsforcompensation.Forthelongterm,wehavecommitted$500milliontoa10-yearindependentresearchprogrammethatwillexaminetheenvironmentalimpactoftheoilspilledanddispersantsused.BPwillcontinuetohelprestoretheenvironmentandeconomyoftheGulf,howeverlongthattakes.

Second,weresolvedtounderstandwhathappenedonandbelowtheDeepwaterHorizon,toapplythelessonslearnedandtomakeourfindingsavailablepublicly.BPscomprehensiveinternalinvestigationconcludedthatasequenceoffailuresinvolvinganumberofdifferentpartiesledtotheexplosionandfire.

Weareimplementingthereportsrecommendations.Wehaveestablishedapowerfulsafetyandoperationalriskfunction,andwehaveenhancedriskmanagementthroughtherestructuringofourupstreambusiness.Wearealsoconductingawide-rangingreviewofwhenandhowweoutsourceoperations.

Third,wemovedtosecurethelong-termfutureofBPandourcapacitytomeetourfinancialresponsibilitiesintheGulfofMexico.DecisiveactionwasrequiredherebecauseeventsintheUSledtoacrisisofconfidenceinBPwithinthefinancialmarkets.Inresponse,wemadethedifficultdecisiontocancelthreedividendpayments.Wedonotunderestimatetheeffectofthisonsmallandlargeshareholdersalike.However,thereisnodoubtinmymindthatthisactionsteadiedandstrengthenedourpositionatacriticalpoint.

Iampleasedthatwehavebeenabletoresumedividendpaymentspromptly.Thedividendforthefourthquarterof2010,tobepaidinMarch2011,is7centspershare(US$0.42perADS).Thescripdividendprogrammeapprovedlastyearisinoperationonceagain,andthispresentsanopportunitytotakethedividendinsharesorADSsratherthancash.Weintendtoraisethelevelofthedividendasthecompanyscircumstancesandperformanceimprove.

6 BPAnnualReportandForm20-F2010

BusinessreviewB

usin

ess review

Duringtheyearwefurtherreinforcedourfinancialposition.Havingtakenatotalpre-taxchargeof$40.9billioninrelationtotheaccidentandspill,weannouncedourintentiontosellupto$30billionofassets.Wehavealreadysecuredalmost$22billion.Weintendtoreducethenetdebtratiotowithintherangeof10-20%,comparedwithourpreviouslytargetedrangeof20-30%.

WehavemadesignificantchangestotheboardandIwanttoacknowledgeTonyHaywardandAndyInglis,whohaveleftthecompany.Tonystooddownasgroupchiefexecutiveon1October2010.Theboardwassaddenedtolosesomeonewhoselong-termcontributiontoBPwassowidelyadmired.AndyInglisstooddownon31October2010.AndywasastrongleaderofExplorationandProductionandasignificantcontributortotheboard.

BPisfortunatetohaveanexceptionalsuccessortotheroleofgroupchiefexecutive.BobDudleyhasspenthisworkinglifeintheoilindustryandhasprovedhimselfarobust,successfulleaderinthetoughestcircumstances.Iamdelightedtobeworkingalongsideamanofsuchsubstanceandexperience.

DouglasFlintwillbestandingdownattheannualgeneralmeetinginApril2011,havingtakenupanewroleaschairmanofHSBCHoldingsplc.Douglashaschairedourauditcommitteeforthepastyear.DeAnneJuliuswillbestandingdownatthesametime,havingjoinedtheboardin2001.DeAnnehaschairedtheremunerationcommitteesince2005andissucceededinthatrolebyAntonyBurgmans.BothDeAnneandDouglashavebeenimmenselyvaluableboardmembers.Wethankthemandwishthembothwell.

Boardsmustevolveiftheyaretoengageeffectivelywithnewissuesandopportunities.WehaveactedtostrengthentheboardofBPtoensurewehavetherightmixofskills,knowledgeandexperienceasweworktoachievesustainablesuccessinafast-changingworld.Inearly2010weappointedPaulAndersonandIanDavisasnon-executivedirectors.Wehavesincemadethreefurthernon-executiveappointments.AdmiralFrankLSkipBowmanisformerheadoftheUSNuclearNavyandwasamemberoftheBakerPanelthatreviewedsafetyatBPsUSrefineries.WewillbenefitfromhisexceptionalexperienceonsafetymattersandhisknowledgeofBP.BrendanNelsonbringsvastfinancialandauditingexperiencefromKPMG,wherelatterlyhewasvicechairman.Heiseminentlywellqualifiedtotakeoverthechairoftheauditcommitteefollowingtheannualgeneralmeeting.PhuthumaNhlekowillbringdeepexperienceofemergingmarkets,gainedwhilehewasgrouppresidentandchiefexecutiveofficerofmultinationaltelephonycompanyMTNGroup.

Clearly,afteraverytroubledanddemanding12months,BPisachangedcompany.Asaboardwehavemuchtodo,andweareworkingwiththeexecutiveteamtoensuresuccessfulimplementationofarefocusedstrategybuiltonthepillarsofsafety,trustandvaluecreation.Foremostistheneedtoensuretherightchecksandbalancesareinplaceacrossthecompany.Thefullboardwillcontinuetomaintaincloseoversightofmattersrelatedtosafety.Andwewillhaveevengreaterengagementonthestrategicimplicationsofrisk.

Lookingahead,webelievethatagrowingpopulationandrisinglevelsofprosperitywillcreatestrongdemandforenergy.BPsabilitytoproduceoilandgasfromharshenvironmentsmeanswehaveavitalcontributiontomakehere.Wewillalsocontinuetorespondtoclimatechange,andtotheprospectoffossilfuelsbecomingasmallerpartoftheenergymix.Forthesereasons,BPmustcontinuetobealeaderinhigh-qualityhydrocarbonstoday,whiledevelopingtheintelligentoptionswewillallrelyontomorrow.Lower-carbonresourcesremaincentraltothislong-termstrategy.

BPisabletohelpmeettheworldsgrowingneedforenergy,butwecanonlydothisifwehavethetrustofsociety.Toachievethis,wemustensurethatsafetyandresponsibilityareattheheartofeverythingwedo.Wemustshowthatwecanbetrustedtounderstandandmanageourrisks.Andwemustdemonstratethatwerespecttheenvironmentandtheneedsoflocalcommunitiesandsocietyasawhole.

ThemanystrengthsofBPareunitedinourremarkablepeople,whoshowedin2010thattheycanrisetothesternestchallenge.Ithankthemfortheirefforts.

Whilewefacesubstantialchallenges,shareholdersmustbeinnodoubtBPhasthedeterminationandstrengthneededtorestoreitsreputationanddeliverlong-termshareholdervalue.Throughitsrefocusedstrategy,thecompanyisworkingtobecomemoreagileandmorecompetitive,withstrongemphasisonrealizingvalueratherthanbuildingvolumeandscale.Wewillnotbeafraidtodevelopnewandinnovativeapproachesthatredefinethemodelofaninternationaloilcompany,asourrecentlyannouncedpartnershipswithRosneftandReliancedemonstrate.

Iwanttoendbythankingshareholdersfortheirsupport.YouhavebeensteadfastthroughoneofthemosttestingperiodsinBPslonghistory.Wehavelearnedmanylessonsaboutourselvesoverthepast12months,andthesewillneverbeforgotten.Ibelievewewillemergeastronger,wisercompanywithaveryimportantroletoplay,formanyyearstocome.

Carl-Henric Svanberg Chairman2March2011

More on board performancebp.com/governance

BPAnnualReportandForm20-F2010 7

http://www.bp.com/governance

Board of directorsAs at 31 December 2010

From left to right

Sir William CastellSenior Independent Director

Brendan Nelson Non-Executive Director

Iain Conn Chief Executive, Refining and Marketing

Ian Davis Non-Executive Director

Dr DeAnne JuliusNon-Executive Director

Antony Burgmans Non-Executive Director

Carl-Henric Svanberg Chairman

Dr Byron Grote Chief Financial Officer

Bob Dudley Group Chief Executive

Douglas FlintNon-Executive Director

George David Non-Executive Director

Cynthia Carroll Non-Executive Director

Paul Anderson Non-Executive Director

Frank Bowman Non-Executive Director

8 BP Annual Report and Form 20-F 2010

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Groupchiefexecutivesletter

DearfellowshareholderThetragiceventsof2010willforeverbewritteninthememoryofthiscompanyandthepeoplewhoworkhere.TheexplosionandfireontheDeepwaterHorizonrigshockedeveryonewithinBP,andwefeelgreatsadnessthat11peopledied.Wearedeeplysorryforthegrieffeltbytheirfamiliesandfriends.Weknownothingcanrestorethelossofthosemen.

Theaccidenton20April2010turnedintoanunprecedentedoilspillwithdeepconsequencesforjobs,businesses,communities,theenvironmentandourindustry.Fromthisgrewacorporatecrisisthatthreatenedtheveryexistenceofthecompany.Anditallstartedinapartoftheworldthatsveryclosetomyheart.IgrewupinMississippi,andspentsummerswithmyfamilyswimmingandfishingintheGulf.Iknowthosebeachesandwaterswell.WhenIheardabouttheaccidentIcouldimmediatelypicturehowitmightaffectthepeoplewholiveandworkalongthatcoast.

Yet,justdaysbeforetheaccident,IhadbeenreflectingontheprogressmadebyBP.Thecompanyhadputsafeandreliableoperationsatthecentreofeverything,andwehadturnedacorneronfinancialperformance.Thencametheunthinkable.Asubseablowoutindeepwaterwasseenasavery,verylow-probabilityevent,byBPandtheentireindustrybutithappened.

Followingtheaccident,asearch-and-rescueoperationwascarriedoutbytherigsowner,Transocean,togetherwithBPandtheUSCoastGuard.Thiscontinuedforfourdaysandcovered5,000squaremiles.On22April2010theDeepwaterHorizonsank,andamajoroilspillresponsewasactivated.Atitspeakthisinvolvedthemobilizationofsome48,000people,thedeploymentofaround2,500milesofboomandtheco-ordinationofmorethan6,500vessels.Fieldoperationsbroughttogetherexpertsfromkeyagencies,organizationsandBP.Thousandsofourpeopleflewinfromaroundtheworldandstayedandworkedforweeksandmonths.Nearly500retireesfromBPAmericacalleduptosaytheywantedtohelp.Thiswasanextraordinaryresponse.

Astheresponsedeveloped,theproblemsgrewincomplexityandscale.Tacklingtheleakontheseabeddemandedgroundbreakingtechnicaladvancesanddauntlessspirit.Wealsofoundourselvesinthemidstofintensepoliticalandmediascrutiny.Wereceivedincrediblesupportandfacedtremendouscriticism,butourprioritiesremainedclearprovidesupporttothefamiliesandfriendsofthose11menwhodied,stoptheleak,attackthespill,protecttheshore,supportallthepeopleandplacesaffected.Wealsocommittedtocarryoutanimmediateanddetailedinternalinvestigation.

Asaresponsibleparty,undertheOilPollutionAct,weknewwewouldfacewide-rangingclaimsandpotentialfines,butweresolvedtogobeyondwhatthelawrequiredofus.Wemadeswiftpaymentstosupportlocaleconomies,andgaveatotalof$138millionindirectstategrantsduring2010,whichincludedbehaviouralhealthprogrammes.Wesetupthe$20-billionDeepwaterHorizonOilSpillTrusttomeetindividual,business,government,localandstateclaims,andnaturalresourcedamages.Weprovided$500millionfortheGulfofMexicoResearchInitiative,whichisfundingindependentresearchtoinvestigateimpactsonaffectedecosystems.Andwecontributedtoa$100-millionfundtosupportrigworkershitbythedrillingmoratorium.

Tomeetourfinancialcommitments,weannouncedthesaleofupto$30billioninassetsand,bytheendof2010,hadagreedto$22billionofdisposals.Wehavealsocutbackondiscretionarycapitalspendingandsecuredadditionalcreditlines.Thesoundunderlyingperformanceacrossourbusinesscontinuestogiveusasolidfoundation,andspeaksvolumesfortheinnerstrengthsofBPandourpeople.

Aspartofourresponse,wetookthedecisiontocancelfurtherdividendsin2010.Whileweknowthatmanyshareholdersrelyontheirregularpayments,wealsohadtoprotectthecompanyandsecureitslong-termfuture.TheboardofBPtookthisdecisionwithaheavyheart,butIbelieveitwastherightthingtodointrulyexceptionalcircumstances.

Ourinvestigationreportwaspublishedon8September2010,andfoundthatnosinglefactorcausedtheaccident.Thereportstatedthatdecisionsmadebymultiplecompaniesandworkteamscontributedtotheaccident,andthesearosefromacomplexandinterlinkedseriesofmechanical,humanjudgement,engineeringdesign,operationalimplementationandteaminterfacefailures.

Wehaveacceptedandareimplementingthereportsrecommendations.Wearealsosharingwhatwehavelearnedwithgovernmentsandothersinourindustry,andweareco-operatingwithaseriesofotherinvestigations,inquiriesandhearings.

2010standsasaninflexionpointforBPandourindustry,anditisrightthatweshouldhelpleadthedevelopmentofbetterwaystooperateindeepwater.Goodriskidentificationandmanagementisintegraltobecomingsafer,andweareworkingwithgovernments,servicecontractorsandindustrypeerstotakeriskmanagementandequipmentdesigntothenextlevel.WithinBP,wehaveintroducedmorelayersofprotectionandresilience,withournewsafetyandoperationalriskfunctionempoweredtointerveneinanyoperation.Toenhanceourspecialistexpertiseandriskmanagement,wehavere-organizedourupstreambusinessintothreedivisionsExploration,DevelopmentsandProduction.Toencourageexcellenceinriskmanagementthroughouttheorganization,

10 BPAnnualReportandForm20-F2010

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wearereviewinghowweincentivizeandrewardpeople.Andtothinkhardaboutwhatwaspreviouslyunthinkable,wearelookingfurtherafieldforinsightandwisdom.Ihavespenttimewithexpertsfromthenuclearandchemicalsindustries,andIamconvincedthatweintheenergyindustryhavemuchtolearnfromthemandothers.Wemusttakewhatwelearnandembeditdeepinthefabricofourorganization.

PartofBPstaskrightnowistoshowwecanbetrustedtohandletheindustrysmostdemandingjobs,includingexplorationandproductionindeepwater.Around7%oftheworldsoilsuppliescomefromthissource,andweexpectthiswillrisetonearly10%by2020.Weareoneofonlyahandfulofcompanieswiththefinancialandtechnologicalstrengthsneededtooperateinthesegeographies.BeforeApril2010,BPhaddrilledsafelyinthedeepwatersoftheGulfofMexicofor20years.ThegovernmentsofEgypt,China,Indonesia,AzerbaijanandtheUKhaveshownconfidenceinourabilitytooperatesafelyatdepths,havingsignednewdeepwaterdrillingagreementswithusinthesecondhalfof2010.

ItisimportanttorememberwhycompaniessuchasBPhavetotakeontheriskstheydo.Around40yearsago,internationaloilcompanieshadaccesstothemajorityoftheworldsoilreserves.Todaythesecompaniescanaccessamuchsmallershare.Thisstillprovidessubstantialopportunitiesforvaluecreation,butreachingmanyofthosereservesrequiresustoovercomeseverephysical,technical,intellectualandgeopoliticalchallenges.Globalenergydemandcontinuestorise,sotheworldneedsBPandotherstomeetthesechallengesinanenvironmentallysustainableway.Indoingthis,wecannevereliminateeveryhazard,butwecanbecomeanindustryleaderinunderstandingandlimitingrisk.Thatsourgoal.

Clearly,oneoftheconsequencesoftheeventsof2010wasasubstantiallossofvalueandreturnsforourshareholders.Iampleasedthatwehavebeenabletoresumedividendpayments,andourintentionistogrowthedividendlevelinlinewiththecompanysimprovingcircumstances.Wearenowtakingactiontocreateandrealizegreatervalue.Weareincreasingourinvestmentinexploration,whichisoneofourdistinctivestrengths.

Wearegainingaccesstoawiderangeofnewupstreamresourceopportunities,andalreadyhave32projectstart-upsplannedbetweennowand2016.Wearetakinganevenmoreactiveapproachtobuying,developingandsellingupstreamassets,withafocusonmaximizingreturnsratherthanbuildingvolume.AndwearedivestingroughlyhalfofourUSrefiningcapacity,sowecanfocusdownstreaminvestmentsonrefiningpositionsandmarketingbusinesseswherewehavecompetitiveadvantage.ThisbuildsonthesuccessBPsRefiningandMarketingbusinesshasachievedindrivingitselfbacktosignificantlyimprovedperformanceandreturnsoverthepastfewyears.

Inshort,BPismovingswiftlytoaddressitsweaknessesandbuildonitsstrengths.Whiledoingthiswewillnothesitatetogobeyondtheconventionalbusinessmodelofaninternationaloilcompany.Since2003wehavehadastrongallianceonshoreinRussiawithTNK-BP.InJanuary2011weannouncedourArcticalliancewithRosneft,whichfurthershowsourstrategyinaction.Pendingcompletiona,thisisexpectedtobethefirstmajorequity-linkedpartnershipbetweenanationalandinternationaloilcompany,withanagreementwithRosnefttoreceive5%ofBPsordinaryvotingsharesinexchangeforapproximately9.5%ofRosneftsshares.Undertheagreement,RosneftandBPwillseektoformajointventuretoexploreand,ifsuccessful,developthreelicenceblocksintheSouthKaraSeaanarearoughlyequivalentinsizeandprospectivitytotheUKNorthSea.BPandRosnefthavealsoagreedtoestablishanArctictechnologycentreinRussia,whichwillworkwithresearchinstitutes,designbureausanduniversitiestodeveloptechnologiesandengineeringpracticesforthesafeextractionofhydrocarbonresourcesfromtheArcticshelf.

aOn 1February2011theEnglishHighCourtgrantedaninteriminjunctionrestrainingBPfromtakinganyfurtherstepsinrelationtotheRosnefttransactionspendingtheoutcomeofarbitrationproceedings.SeeNote6Eventsafterthereportingperiod.

InFebruary2011weannouncedasecondhistoricagreement.Thiswill,subjecttocompletion,seeBPandRelianceworktogetheracrossthegasvaluechaininthefast-growingIndianmarket.ThismajorstrategicalliancewillcombineBPsdeepwatercapabilitieswithReliancesprojectmanagementandoperationsexpertise.

BPisalsopartneringwithanotherorganization,HuskyEnergy,todevelopafurtherimportantresourceofenergyCanadasoilsands.TheserepresentthesecondlargestreservesintheworldaftertheoilfieldsofSaudiArabia.Wewillworkwiththisresourceinawaythatfitswithourlong-termresponsibilitiesandobjectives,usingsteamassistedgravitydrainagetoextracttheoil,andanefficient,integratedsystemtotransportit.Ourapproachwillhavearelativelysmallfootprintandshouldnotbeconfusedwithopencastminingwewillnotengageinmining.Onawell-to-wheelbasis,greenhousegasemissionsfromCanadianoilproducedthiswayareexpectedtobeslightlyhigherthanthosefromconventionalcrudesimportedtoNorthAmerica.

Alongwithprovidingthehydrocarbonsrequiredovercomingyears,wearehelpingtobuildthesustainableoptionsneededtomeetgrowingdemandforlower-carbonenergy.Ournaturalgasoperationswillhelptoprovidealower-carbonbridgefromoilandcoaltorenewables.WearebuildingamaterialbusinesstoproducebiofuelsinBrazil,theUSandtheUK.Wearebecomingaleadingplayerinwindenergy.Wehavealong-establishedsolarbusiness.Andwehavemadesubstantialinvestmentsincarbon-capture-and-storagetechnology.Lower-carbonresourcesarethefastest-growingsectorintheenergymarket,andBPintendstodevelopitsportfolioinstepwiththisgrowth.

Astotheimmediatefuture,Iexpect2011tobeayearofconsolidationforBP,aswefocusoncompletingourpreviouslyannounceddivestmentprogramme,meetingourcommitmentsintheUSandbringingrenewedrigourtothewaywemanagerisk.Therewillalsobeanincreasingemphasisonvalueovervolume,aswesharpenourstrategyandreshapethecompanyforgrowth.

Lookingbackoverrecentdaysandmonths,ourthoughtsreturntothemenwholosttheirlives,tothosewhowereinjuredandtothecommunitieshithardbythespill.IhaveheardpeopleaskDoesBPgetit?ResidentsoftheGulf,ouremployeesandinvestors,governments,industrypartnersandpeoplearoundtheworldallwanttoknowwhetherweunderstandthatareturntobusiness-as-usualisnotanoption.Wemaynothavecommunicateditenoughattimes,butyes,wegetit.Ourfundamentalpurposeistocreatevalueforshareholders,butwealsoseeourselvesaspartofsociety,notapartfromit.Putsimply,ourroleistofindandturnenergyresourcesintofinancialreturns,butbydoingthatintherightwaywecanhelpcreateaprosperousandsustainablefutureforeveryone.ThisiswhatpeoplerightfullyexpectofBP.Thisiswhatwillinspireanddriveusoverthenext12monthsandfarintothefuture.

Bob Dudley GroupChiefExecutive2March2011

More on our performancebp.com/annualreport

BPAnnualReportandForm20-F2010 11

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Progress in 2010

SafetyPersonalsafetyreportedrecordableinjuryfrequency

Reportedrecordableinjuryfrequency(RIF)measuresthenumberofreportedwork-relatedincidentsthatresultinafatalityorinjury(apartfromminorfirstaidcases)per200,000hoursworked. In2010ourworkforceRIF,whichincludesemployeesandcontractorscombined,was0.61,comparedwith0.34in2009and0.43in2008.ThenatureoftheGulfCoastresponseeffortresultedinpersonalsafetyincidentratessignificantlyhigherthaninotherBPoperations.

EmployeesContractors

0.250.352008

0.502008

0.232009

0.432009

0.252010

0.84 2010

1.25

1.00

0.75

0.50

Processsafetyoilspills

Wereportallspillsofhydrocarbonsgreaterthanorequaltoonebarrel(159litres,42USgallons).Weincludespillsthatwerecontained,aswellasthosethatreachedlandorwater. In2010therewere261oilspillsofonebarrelormore,includingtheGulfofMexicooilspill.Wearetakingmeasurestostrengthenmandatorysafety-relatedstandardsandprocesses,includingoperationalriskandintegritymanagement.

Processsafetylossofprimarycontainment

Lossofprimarycontainmentisthenumberofunplannedoruncontrolledreleasesofmaterial,excludingnon-hazardousreleases,suchaswaterfromatank,vessel,pipe,railcarorotherequipmentusedforcontainmentortransfer. BPisprogressivelymovingtowardsthisasoneofthekeyindicatorsforprocesssafety,aswebelieveitprovidesamorecomprehensiveandbetterperformanceindicatorofthesafetyandintegrityofourfacilitiesthanoilspillsalone.

Environmentgreenhousegasemissionsa(milliontonnesofcarbondioxideequivalent)Wereportgreenhousegas(GHG)emissionsonaCO2-equivalentbasis,includingCO2andmethane.ThisrepresentsallconsolidatedentitiesandBPsshareofequity-accountedentities,exceptTNK-BP.WehavenotincludedanyemissionsfromtheGulfofMexicooilspillandtheresponseeffortduetoourreluctancetoreportdatathathassuchahighdegreeofuncertainty. WeaimtomanageourGHGemissionsthroughafocusonoperationalenergyefficiencyandreductionsinflaringandventing.

aSeeBP Sustainability Review 2010formoreinformationonourGHGemissionsperformance.

PeopleEmployeesatisfaction(%)

TheoverallEmployeeSatisfactionIndexcomprises10keyquestionsthatprovideinsightintolevelsofemployeesatisfactionacrossarangeoftopics,suchaspayandtrustinmanagement.Weuseasample-basedapproachtoachievearepresentativeviewofBP. Our2010employeesurveywasdelayedtoallowfororganizationalchangestobereflectedinthesurveyconstruction,withthesurveyexpectedtobecarriedoutinsummer2011.

Numberofemployeesa(thousands)

EmployeesincludeallindividualswhohaveacontractofemploymentwithaBPgroupentity. In2007webeganaprocessofmakingBPasimpler,moreefficientorganization.Sincethenourtotalnumberofemployeeshasreducedbyapproximately18,000,includingaround9,200inournon-retailbusinesses.

aAsat31December.

Diversityandinclusion(%)

EachyearwerecordthepercentageofwomenandindividualsfromcountriesotherthantheUKandUSamongBPstopleaders.Thenumberoftopleadersin2010was482,comparedwith492in2009and583in2008. BPhasmaintainedthepercentageoffemaleleadersin2010andremainsfocusedonbuildingamoresustainablepipelineofdiversetalentforthefuture.

5142008

192008

142009

212009

142010

192010

25

20

15

10

WomenNon-UK/US

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PerformanceProduction(thousandbarrelsofoilequivalentperday)

Wereportcrudeoil,naturalgasliquids(NGLs)andnaturalgasproducedfromsubsidiariesandequity-accountedentities.Theseareconvertedtobarrelsofoilequivalent(boe)at1barrelofNGL=1boeand5,800standardcubicfeetofnaturalgas=1boe. Reportedproductionin2010was4%lowerthanin2009,duetotheeffectofentitlementchangesinourproduction-sharingagreements,theeffectofacquisitionsanddisposals,andtheimpactofeventsintheGulfofMexico.

Reservesreplacementratioa(%)

Provedreservesreplacementratio(alsoknownastheproductionreplacementratio)istheextenttowhichproductionisreplacedbyprovedreservesadditions.Theratioisexpressedinoilequivalenttermsandincludeschangesresultingfromrevisionstopreviousestimates,improvedrecoveryandextensions,anddiscoveries. Ourreservesreplacementratioin2010exceeded100%onceagain.Wecontinuetodriverenewalthroughnewaccess,exploration,targetedacquisitionsandastrategicfocusonincreasingresourcesfromfieldswecurrentlyoperate.

aCombinedbasisofsubsidiariesandequity-accountedentities,excludingacquisitionsanddisposals.

Refiningavailability(%)

RefiningavailabilityrepresentsSolomonAssociatesoperationalavailability,whichisdefinedasthepercentageoftheyearthataunitisavailableforprocessingaftersubtractingtheannualizedtimelostduetoturnaroundactivityandallplannedmechanical,processandregulatorymaintenancedowntime. Refiningavailabilitycontinueditsincreasingtrendin2010,withthebiggestcontributorbeingtherestorationofourTexasCityrefinery.

Operatingcashflow($billion)

Operatingcashflowisnetcashflowprovidedbyoperatingactivities,fromthegroupcashflowstatement.Operatingactivitiesaretheprincipalrevenue-generatingactivitiesofthegroupandotheractivitiesthatarenotinvestingorfinancingactivities. ThereductioninoperatingcashflowprimarilyreflectedtheimpactsoftheGulfofMexicoincident.

Replacementcostprofit(loss)perordinaryshare(cents)

Replacementcostprofit(loss)reflectsthereplacementcostofsupplies.Itisarrivedatbyexcludingfromprofitinventoryholdinggainsandlossesandtheirassociatedtaxeffect.Replacementcostprofitforthegroupistheprofitabilitymeasureusedbymanagement.Itisanon-GAAPmeasure.Seepage23fortheequivalentmeasureonanIFRSbasis. In2010werecordedareplacementcostlossprimarilydrivenbya$40.9-billionpre-taxchargeinrelationtotheGulfofMexicoincident.

Dividendspaidperordinaryshare

Thismeasureshowsthetotaldividendpersharepaidtoordinaryshareholdersintheyear. InJune2010theBPboardrevieweditsdividendpolicyinlightoftheGulfofMexicoincident,andtheagreementtoestablisha$20-billiontrustfund,anddecidedtocancelordinarysharedividendsinrespectofthefirstthreequartersof2010.

CentsPence

1555.052008

29.3872008

56.002009

36.4172009

14.002010

8.679

2010

75

60

45

30

Totalshareholderreturn(%)

Totalshareholderreturnrepresentsthechangeinvalueofashareholdingoveracalendaryear,assumingthatdividendsarere-investedtopurchaseadditionalsharesattheclosingpriceapplicableontheex-dividenddate. Totalshareholderreturnsin2010weresignificantlyimpactedbythecancellationofdividendpaymentsandthefallinsharepricebroughtaboutbytheeventsintheGulfofMexico.

-20

2008(34.6)

2008(15.1)

2010(24.1)

2010(21.4)

40

20

60

0

ADS basisOrdinary share basis

2009 200933.0 27.6

BPAnnualReportandForm20-F2010 13

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Group overview

OurorganizationBPisoneoftheworldsleadinginternationaloilandgascompanies.aWeoperateormarketourproductsinmorethan80countries,providingourcustomerswithfuelfortransportation,energyforheatandlight,retailservicesandpetrochemicalsproductsforeverydayitems.

Asaglobalgroup,ourinterestsandactivitiesareheldoroperatedthroughsubsidiaries,jointlycontrolledentitiesorassociatesestablishedinandsubjecttothelawsandregulationsofmanydifferentjurisdictions.Theseinterestsandactivitiescoveredtwobusinesssegmentsin2010:ExplorationandProductionandRefiningandMarketing.BPsactivitiesinlow-carbonenergyaremanagedthroughourAlternativeEnergybusiness,whichisreportedwithinOtherbusinessesandcorporate.

ExplorationandProductionsactivitiesincludeoilandnaturalgasexploration,fielddevelopmentandproduction;midstreamtransportation,storageandprocessing;andthemarketingandtradingofnaturalgas,includingliquefiednaturalgas(LNG),togetherwithpowerandnaturalgasliquids(NGLs).Duringthefourthquarterof2010,aspartofourwiderresponsetotheGulfofMexicoincident,wedecidedtoreorganizeourExplorationandProductionsegmenttocreatethreeglobalfunctionaldivisions:Exploration,Developments,andProduction,integratedthroughaStrategyandIntegrationorganization.Thisisdesignedtofundamentallychangethewaythesegmentoperates,withaparticular

aOnthebasisofmarketcapitalization,provedreservesandproduction.

focusonmanagingrisk,deliveringcommonstandardsandprocessesandbuildingpersonnelandtechnologicalcapabilityforthefuture.TheExplorationdivisionisaccountableforrenewingourresourcebasethroughaccess,explorationandappraisalactivities.TheDevelopmentsdivisionisaccountableforthesafeandcompliantexecutionofwells(drillingandcompletions)andmajorprojects.TheProductiondivisionisaccountableforsafeandcompliantoperations,includingupstreamproductionassets,midstreamtransportationandprocessingactivities,andthedevelopmentofourresourcebase.DivisionalactivitiesareintegratedonaregionalbasisbyaregionalpresidentreportingtotheProductiondivision.

RefiningandMarketingsactivitiesincludethesupplyandtrading,refining,manufacturing,marketingandtransportationofcrudeoil,petroleumandpetrochemicalsproductsandrelatedservices.Thesegmentcomprisesanumberofstrategicperformanceunits(SPUs),whichareorganizedalongeithergeographicoractivity-relatedlines.EachSPUisofascalethatallowsforaclosefocusonperformancedelivery,startingwithsafety,andincludestheappropriatemanagementofoperatingandfinancialparameters.

Ourgroupfunctionsandregionssupporttheworkofoursegmentsandbusinesses.Thekeyobjectivesofthefunctionsaretoestablishandmonitorfit-for-purposefunctionalstandardsacrossthegroup;toactascentresofdeepfunctionalexpertise;toaccesssignificantleveragewiththird-partysuppliers;andtoestablishandmaintaincapabilitiesamongthefunctionalstaffemployedwithinouroperatingbusinesses.Inaddition,theheadofeachregionprovidestherequiredcross-segmentintegrationandco-ordinationofgroupactivitiesinaparticulargeographicareaandrepresentsBPtoexternalparties.

InJune2010,followingtheGulfofMexicoincident,weestablishedtheGulfCoastRestorationOrganization(GCRO)andsubsequentlyequippeditwithdedicatedresourcesandcapabilitiestomanageallaspectsofourresponsetotheaccident.Thisorganizationreportsdirectlytothegroupchiefexecutiveandisoverseenbyaspecificnewboardcommittee.

AmongthechangeswehavemadefollowingtheGulfofMexicoincident,wehaveredefinedandstrengthenedthescopeandaccountabilitiesofthegroupfunctionforsafetyandoperations,creatinganenhanced,independentSafetyandOperationalRisk(S&OR)function,tooverseeandauditthecompanysoperationsaroundtheworld.ThefunctionhasitsownexpertstaffembeddedinBPsoperatingunits,includingexplorationprojects

Exploration and ProductionBPs major areas of operation in 2010

BPsubsidiary Equity-accountedentity Locationwhereall,orthemajorityof,our

operationsweredisposedduring2010orheldforsaleat31December2010

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Refi ning and MarketingBPs global presence in 2010a

BP refi nery (wholly or partly owned) Petrochemicals site (s) (wholly or

partly owned) Proposed for disposal by the end of 2012

a The green shaded areas indicate the approximate coverage of BPs integrated fuels value chains.

andrefineries,withdefinedinterventionrightswithrespecttoBPstechnicalandoperationalactivities.ThefunctionreportsdirectlytothegroupchiefexecutiveandaimstoprovideassurancethatBPsoperationsarecarriedouttocommonstandards,andauditsconformancetothosestandards.

Thesignificantsubsidiariesofthegroupat31December2010andthegrouppercentageofordinarysharecapital(tothenearestwholenumber)aresetoutinFinancialstatementsNote46onpages220-221.SeeFinancialstatementsNotes25and26onpages183and184respectivelyforinformationonsignificantjointlycontrolledentitiesandassociatesofthegroup.

On14January2011,BPandRosneftOilCompany(Rosneft)announcedthattheyhadagreedastrategicglobalalliance.BPandRosnefthaveagreedtoseektoformajointventuretoexploreand,ifsuccessful,developthreelicenceblocksontheRussianArcticcontinentalshelf.BPandRosnefthaveenteredintoarelatedshareswapagreementwhereby,uponcompletion,BPwillreceiveapproximately9.5%ofRosneftssharesinexchangeforBPissuingnewordinarysharestoRosneftwithanaggregatevalueofapproximately$7.8billion(asatcloseoftradinginLondonon14January2011),resultinginRosneftholding5%ofBPsordinaryvotingshares.SeeLegalproceedingsonpage133forinformationonaninteriminjunction,grantedbytheEnglishHighCourton1February2011restrainingBPfromtakinganyfurtherstepsinrelationtotheRosnefttransactionspendingtheoutcomeofarbitrationproceedings.

On21February2011,RelianceIndustriesLimitedandBPannouncedthattheyintendtoformanupstreamjointventureinwhichBPwilltakea30%stakein23oilandgasproduction-sharingcontractsthatRelianceoperatesinIndia,includingtheproducingKGD6block,andforma50:50jointventureforthesourcingandmarketingofgasinIndia.BPwillpayRelianceIndustriesLimitedanaggregateconsiderationof$7.2billion,andcompletionadjustments,fortheintereststobeacquiredinthe23production-sharingcontracts.Futureperformancepaymentsofupto$1.8billioncouldbepaidbasedonexplorationsuccessthatresultsindevelopmentofcommercialdiscoveries.Reliancewillcontinuetobetheoperatorundertheproduction-sharingcontracts.CompletionofthetransactionsissubjecttoIndianregulatoryapprovalsandothercustomaryconditions.

Where we operateBPsworldwideheadquartersisinLondon.TheUKisacentrefortrading,legal,financeandotherbusinessfunctionsaswellasthreeofBPsmajorglobalresearchandtechnologygroups.

Wehavewell-establishedoperationsinEurope,theUS,Canada,Russia,SouthAmerica,Australasia,AsiaandpartsofAfrica.Currently,around68%ofthegroupsfixedassetsareinvestedinOrganizationforEconomicCo-operationandDevelopment(OECD)countries,witharound42%ofourfixedassetslocatedintheUSandaround20%inEurope.

OurExplorationandProductionsegmentincludedupstreamandmidstreamactivitiesin29countriesin2010includingAngola,Azerbaijan,Canada,Egypt,Norway,Russia,Trinidad&Tobago(Trinidad),theUK,theUSandotherlocationswithinAsia,Australasia,SouthAmerica,NorthAfricaandtheMiddleEast.OurExplorationandProductionsegmentalsoincludesgasmarketingandtradingactivities,primarilyinCanada,EuropeandtheUS.InRussia,wehaveanimportantassociatethroughour50%shareholdinginTNK-BP,amajoroilcompanywithexplorationassets,refineriesandotherdownstreaminfrastructure.

InRefiningandMarketing,wemarketourproductsinmorethan70countries,withaparticularlystrongpresenceinEuropeandNorthAmerica,andalsomanufactureandmarketourproductsacrossAustralasia,inChinaandotherpartsofAsia,AfricaandCentralandSouthAmerica.IntheUS,weownorhaveashareinfiverefineriesandmarketfuelprimarilyundertheARCOandBPbrands.SeeRefiningandMarketing(Ourstrategy)onpage55forfurtherinformationonforthcomingportfoliochangesintheUS.InEurope,weownorhaveashareinsevenrefineriesandwemarketextensivelyacrosstheregion,primarilyundertheAralandBPfuelbrands.Ourlong-establishedsupplyandtradingactivityisresponsiblefordeliveringvalueacrossthecrudeandoilproductssupplychain.Ourpetrochemicalsbusinessmaintainsamanufacturingpositionglobally,withanemphasisongrowthinAsia.Ourlubricantsbusinessblendsandmarketslubricantsglobally,primarilyundertheCastrolbrand,andisagrowingbusinessthroughmarketgrowthandthedevelopmentofnewproducts.WecontinuetoseekopportunitiestobroadenouractivitiesingrowthmarketssuchasChinaandIndia.

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OurmarketEnergymarketsin2010continuedtorecoverfromtheimpactoftheglobaleconomicrecession.Lookingahead,thelong-termoutlookisoneofgrowingdemandforenergya,particularlyinAsia,andofchallengesfortheindustryinmeetingthisdemand.Risingincomesandexpandingurbanpopulationsareexpectedtodrivedemand,whiletheevolutiontowardsalower-carboneconomywillrequiretechnology,innovationandinvestment.

Worldoilconsumptionreboundedin2010,withcontinuedrobustgrowthinChinaandothernon-OECDcountriesandthefirstincreaseamongOECDcountriessince2005.Averagecrudeoilpricesin2010werehigherthaninthepreviousyear.Averagenaturalgaspricesalsoincreasedin2010.Refiningmarginsstabilizedasoilproductdemandrecovered.

Economic contextTheworldeconomycontinuedtorecoverin2010.Weexpectslowerglobalgrowthin2011,ledbyemergingeconomies,withdevelopedcountrieslaggingbehindbecauseoftheneedtodealwiththeirinternalimbalances.Energydemand,andinparticularoildemand,followsthisoveralleconomicpattern,recoveringstronglyin2010butfacingmorechallengingconditionsaswemoveinto2011,especiallyinOECDmarkets.

Concernsaboutthevolatilityofcommodityandfinancialmarkets,combinedwithrenewedfocusonclimatechangeandtheearlyexperienceswitheffortstoreduceCO2emissionsintheEUandelsewhere,haveledtoanincreasedfocusontheappropriateroleformarkets,governmentoversightandotherpolicymeasuresrelatingtothesupplyandconsumptionofenergy.Weexpectregulationandtaxationoftheenergyindustryandenergyuserstoincreaseinmanyareasovertheshorttomediumterm.

Dated Brent oil price 150Henry Hub gas price (First of Month Index)Global indicator refining margin (GIM)b

120

90

60

30

2004 2005 2006 2007 2008 2009 2010

Source: Platts/BP.

Crude oil and gas prices, and refining margins($ per barrel of oil equivalent)

Crude oil pricesDatedBrentfortheyearaveraged$79.50perbarrel,about29%above2009saverageof$61.67perbarrel.Pricestradedinarelativelynarrowbandof$70-80perbarrelformostoftheyearbeforerisinginthefourthquarter.Pricesexceeded$90perbarrelinDecember,thehighestlevelsinceOctober2008.

Globaloilconsumptionreboundedsharply,reflectingarecoveryintheglobaleconomyandseveralone-timefactors,risingbyroughly2.8millionb/dfortheyear(3.3%)c,thelargestannualincreasesince2004.Growthwasbroadly-based,withthelargest(volumetric)increasesseeninChinaandtheUS.TherelativestabilityincrudeoilpricesformuchoftheyearreflectedthestabilityofOPECcrudeoilsupply,asOPECmemberssustainedtheproductioncutsimplementedinlate2008throughout2010,withcrudeproductionaveragingroughly2millionb/dbelowthe2008level.CommercialoilinventoriesintheOECDremainedhighformuchoftheyearbeforefallingastheglobalsupply-balancebegantotightenandpricesbegantoriselaterintheyear.

Thereboundinoilpricesin2010followedadeclinein2009thefirstsince2001.Globaloilconsumptionin2009reflectedtheeconomicslowdown,fallingbyroughly1.2millionb/dfortheyear(1.7%)d,thelargestannualdeclinesince1982.Thebiggestreductionswereearlyintheyear,withOECDcountriesaccountingfortheentireglobaldecline.CrudeoilpricesrosesharplyinthesecondquarterinresponsetosustainedOPECproductioncutsandemergingsignsofstabilizationintheworldeconomy,despiteveryhighcommercialoilinventoriesintheOECD.OPECmemberscutcrudeoilproductionbyroughly2.5millionb/dein2009.

Weexpectoilpricemovementsin2011tocontinuetobedrivenbythepaceofglobaleconomicgrowthanditsresultingimplicationsforoilconsumption,andbyOPECproductiondecisions.

aB P Energy Outlook 2030.bS eefootnoteeonpage56.cO il Market Report 10 February 2011OECD/IEA2011,page4,firstparagraph.dB P Statistical Review of World Energy June 2010.eOil Market Report 10 February 2011OECD/IEA2011,Table1,page59.

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Natural gas pricesNaturalgaspricesstrengthenedin2010,butwerevolatile.TheaverageUSHenryHubFirstofMonthIndexroseto$4.39/mmBtu,a10%increaseonthedepressedpricesin2009.

Gasconsumptionrecoveredacrosstheworldalongwiththeeconomy.IntheUS,acoldstartin2010,followedbyahotsummerandlowtemperaturestowardstheendoftheyearalsocontributedtodemandstrength.Yetdomesticproductiongrowthofshalegasinparticularcontinuedapaceandlimitedpricerises.HenryHubgaspricesstayedbelowcoalparityinUSpowergenerationfromthesummer,leadingtothedisplacementofcoalbygas.ThedifferentialsofproductionareapricestoHenryHubpricescontinuedtonarrowaspipelinebottleneckswerereduced.InEurope,spotgaspricesattheUKNationalBalancingPointincreasedby38%toanaverageof42.45penceperthermfor2010.YetplentifulglobalLNGsupplykeptspotgaspricesbelowoil-indexedcontractlevelsformostoftheyear,causingcompetitionwithcontractpipelinesuppliesandmarginalEuropeangasproduction.UKspotgaspricesonlyattainedcontractpricelevelsinDecemberascoldweathercausedrapidinventorydraw-downs.

Theriseinpricesfollowedsharpdeclinesin2009.TherecessionandstrongproductionhadcausedtheaverageHenryHubFirstofMonthIndextofallin2009by56%to$3.99/mmBtuthelowestlevelsince2002.IntheUK,NationalBalancingPointpricesaveraged30.85pencepertherm47%belowtherecordpricesof58.12penceperthermin2008.

In2011,weexpectgasmarketstocontinuetobedrivenbytheeconomy,weather,domesticproductiontrendsandsignificantgrowthofglobalLNGsupply.

Refining marginsRefiningmarginswereslightlyhigherin2010asdemandforoilproductsrecoveredstronglyinlinewiththeeconomicbounce-backfromrecession.Globally,oildemandgrewatthefastestratesince2004.Newrefiningcapacitycontinuedtocommission,butthestrongdemandrecoverymeantthatunusedrefiningcapacityfellforthefirsttimesince2005.TheBPglobalindicatorrefiningmargin(GIM)aaveraged$4.44perbarrel,up44centsperbarrelcomparedwith2009.

MarginsintheFarEastimprovedthemostbutcontinuedtostruggleaveraging$1.63perbarrelinSingaporeasnewrefiningcapacitycontinuedtobeaddedintheregion.MarginsalsoroseinboththeNorthWestEuropeandtheMediterraneanbutEuropeanmarginsoverallremainedwellbelow2008levels.MarginsintheUSwererelativelyunchanged,upslightlyontheWestandGulfcoastsbutdownintheMidwest.

Refiningmarginsfellsharplyin2009asdemandforoilproductscollapsedinthewakeoftheglobaleconomicrecessionandasnewrefiningcapacitycameonstream.Thepremiumforlightproductsabovefueloilsreducedasdemandfortransportfuelsfellalongwiththereductionineconomicactivity,compressingmarginsevenforfullyupgradedrefineries.

Lookingahead,refinersarelikelytocontinuetooperatewithexcesscapacityglobally,althoughnear-termsupply-demandfundamentalsappearbroadlyinbalance.From2011,wewillbereportinganewrefiningindicatormargin,replacingtheGIM,whichwecalltherefiningmarkermargin(RMM).Thisadoptsabasisthatwebelieveismorecloselyrelatedtotheapproachusedbymanyofourcompetitors.(See Refining and Marketing on page 55 for further information on RMM.)

aSeefootnoteeonpage56.

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Non-OECD economies drive consumption growth(billion tonnes of oil equivalent)

1990 2000 2010 2020 2030

18Renewables*HydroNuclearCoalGasOil

16

14

12

10

8

6

4

2

Source: BP Energy Outlook 2030 *Includes biofuels.

1990 2000 2010 2020 2030

18Non-OECDOECD

16

14

12

10

8

6

4

2

Long-term outlookOverthelongterm,globaldemandforprimaryenergyisexpectedtocontinuetogrow,butlessrapidlythantheglobaleconomy.Growingenergydemandisunderpinnedbycontinuingpopulationgrowthandbygenerallyrisinglivingstandardsinthedevelopingworld,includingtheexpansionofurbanpopulations.Thesedriversofenergydemandgrowtharetosomeextentoffsetbyeffortstoimproveefficiencyinboththeconversionanduseofenergy.

Globalenergydemandisprojectedtoincreasebyaround40%between2010and2030a.Fossilfuelsareexpectedstilltobesatisfyingasmuchas80%oftheworldsenergyneedsin2030.Atcurrentratesofconsumption,theworldhasenoughprovedreservesoffossilfuelstomeettheserequirementsbifinvestmentispermittedtoturnthosereservesintoproductioncapacity.Forexample,inoilalone,therearereservesinplacetosatisfyapproximately45yearsdemandatcurrentratesofconsumptionb.However,tomeetthepotentialgrowthindemand,continuedinvestmentinnewtechnologywillberequiredtoboostrecoveryfromdecliningfieldsandcommercializecurrentlyinaccessibleresources.Toplaytheirpartinachievingthis,energycompaniessuchasBPwillneedsecureandreliableaccesstoas-yetundevelopedresources.Itisestimatedthatmorethan80%oftheworldsoilreservesareheldbyRussia,MexicoandmembersofOPECbareaswhereinternationaloilcompaniesarefrequentlylimitedorprohibitedfromapplyingtheirtechnologyandexpertisetoproduceadditionalsupply.Newpartnershipswillberequiredtotransformpotentialresourcesintoprovedreservesandeventuallyintoproduction.

Amorediversemixofenergywillalsoberequiredtomeetthisincreaseddemand.Suchamixislikelytoincludebothunconventionalfossilfuelresourcessuchasoilsands,coalbedmethaneandnaturalgasproducedfromshaleformationsandrenewableenergysourcessuchasbiofuels,windandsolarpower.Beyondsimplymeetinggrowthinoveralldemand,adiversemixwouldalsohelptoprovideenhancednationalandglobalenergysecuritywhilesupportingthetransitiontoalower-carboneconomy.Improvingtheefficiencyofenergyusewillalsoplayakeyroleinmaintainingenergymarketbalanceinthefuture.

Alongwithincreasingsupply,webelievetheenergyindustrywillberequiredtomakehydrocarbonscleanerandmoreefficienttouseparticularlyinthecriticalareaofpowergeneration,forwhichthekeyhydrocarbonsarecurrentlycoalandgas.Theworldhasreservesofcoalforaround120yearsatcurrentconsumptionratesb,butcoalproducesmorecarbonthananyotherfossilfuel.Carboncaptureandstorage(CCS)mayhelptoprovideapathtocleanercoal,andBPisinvestinginthisarea,butCCStechnologiesstillfacesignificanttechnicalandeconomicissuesandareunlikelytobeinoperationatscaleforatleastadecade.

Incontrast,webelievethatinmanycountriesnaturalgashasthepotentialtoprovidethemostsignificantreductionsincarbonemissionsfrompowergenerationintheshortesttimeandatthelowestcost.Thesereductionscanbeachievedusingtechnologyavailabletoday.Combined-cycleturbines,fuelledbynaturalgas,producearoundhalftheCO2emissionsofcoal-firedpower,andarecheaperandquickertobuild.Itisestimatedthattherearereservesofnaturalgasinplaceequivalentto63yearsconsumptionatcurrentratesbandtheyarerisingasnewskillsandtechnologyunlocknewunconventionalgasresources.Forthesereasons,gasislookingtobeanincreasinglyattractiveresourceinmeetingthegrowingdemandforenergy,playingagreaterroleasakeypartoftheenergyfuture.

Atthesametime,alternativeenergiesalsohavethepotentialtomakeasubstantialcontributiontothetransitiontoalower-carboneconomy,butthiswillrequireinvestment,innovationandtime.Currently,biofuels,wind,solar,andothermodernformsofrenewableenergyaccountforlessthan2%oftotalglobalconsumptiona.Assumingcontinuingpolicysupportandfavourabletechnologytrends,theseformsofenergyarelikelytomeetaround6%oftotalenergydemandin2030a.

Ifindustryandthemarketaretomeettheworldsgrowingdemandforenergyinasustainableway,governmentswillberequiredtosetastableandenduringframework.Aspartofthis,governmentswillneedtoprovidesecureaccessforexplorationanddevelopmentoffossilfuelresources,definemutualbenefitsforresourceownersanddevelopmentpartners,andestablishandmaintainanappropriatelegalandregulatoryenvironment,includingamechanismforrecognizingthecostofcarbon.

a BP Energy Outlook 2030.b BP Statistical Review of World Energy June 2010.Thesereserveestimatesarecompiledfrom

officialsourcesandotherthird-partydata,whichmaynotbebasedonprovedreservesasdefinedbySECrules.

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OurstrategyDeliveringstability,restoringtrustandvalue.

2010hasbeenaverychallengingyearforBPandthereremainsmuchtobedonetoaddresstherepercussionsofthetragicGulfofMexicooilspill.BPiscommittedtotherestorationoftheGulfofMexicocoastlineanditscommunities.BPwillmanageitsliabilitiesarisingfromthisdeeplyregrettedaccidentandiscommittedtolearnandsharethelessonsfromtheincident.Aboveall,wewillworkwithregulatorsandindustrygloballytoreducetheriskofthishappeningagain.

BPsimmediateprioritybeyondtheGulfistoregainthetrustofourstakeholdersbydemonstratingthatweunderstandandcanmanagetheinherentrisksacrossourwholeportfolio.Fromthere,weseektorebuildvalueforourshareholdersbyre-establishingourcompetitivepositionwithinthesector.

BPbelievesthatwecanemergefromtheshadowoftheGulfofMexicoincidentasafer,morerisk-awarebusiness.Ourstrategy,whichwillcontinuetoevolveover2011,willremainfocusedoncreatingvalueforshareholdersthroughsafe,responsibleexploration,developmentandproductionoffossilfuelresourcesbecausetheworldneedsthem;themanufacture,processinganddeliveryofbetterandmoreadvancedproducts;andparticipationinthetransitiontoalowercarbonfuture.

Ourintentionistore-establishallnecessarypermissionstooperateinthedeepwaterGulfofMexicoandsustainbusinessmomentumoutsideoftheGulf;torestorevalueandgrowththrougharigorousfocusonourportfolioofhigh-qualityassets;todevelopourpeopletoensurewehavetherightcompetenciesandbehaviourswheretheyareneeded;tolearnandimplementthelessonsfromtheGulfofMexicoandrigorouslyfocusontheprocessesthatwilldeliversafeandreliableoperationsandcontinuousimprovement;anddosowithinaclear,conservativefinancialframework.

A safer, more risk-aware businessOuremployees,investors,regulatorsandgovernmentpartnersexpectustoputsafetyandoperationalintegrityaboveallotherconcerns.Weintendtobuildonourexistingstrengthstosystematicallymanageoperatingriskbyimprovingourunderstandingofriskexposureandtakingtheappropriateactiontomitigaterisk.Whereverweoperate,wemustembedthedisciplinedapplicationofstandardswithinBPsoperatingmanagementsystem(OMS),asasingleframeworkforallBPoperations.(See Safety on page 68 for further information on our OMS.)Wewilldemandindependentchecksandbalancesatmultiplelevelstoprovidebetterdecisionmakingandtransparentgovernanceofstandards,capability,complianceandriskmanagement.Toeffectthiswehavecreatedamorepowerfulsafetyandoperationalriskfunction,independentofthebusinesslineanddeployedintoeachoperatingentityacrosstheBPportfolio.Forfurtherinformationonoursafetyprioritiesandperformance,seeCorporateresponsibilitySafetyonpages68-71.

Fulfilling our commitments and earning back trust following the Gulf of Mexico incidentBPhascommittedtopayalllegitimateclaimsbyindividuals,businessesandgovernmentsandhasestablisheda$20-billiontrustfund,followingconsultationwiththeUSgovernment,toprovidefundsforthatpurpose.Inaddition,BPisworkingwithfederalandstateagenciestoassessthenatureandextentoftheimpactonnaturalresourcesresultingfromtheGulfofMexicoincident.Basedontheassessment,federalandstatetrusteeswillprepareplanstorestore,rehabilitate,replaceoracquiretheequivalentofinjuredresourcesundertheirtrusteeship.TheOilPollutionAct1990(OPA90)providesforrestorationtoabaselinecondition,whichistheconditiontheresourceswouldhavebeeniniftheincidenthadnotoccurred.Theassessmentwillalsobeusedtoidentifyanycompensationthatmayberequiredforthelossoftheresources,priortorestoration.

Reinstating a dividend in line with the circumstances of the company, as part of a conservative financial frameworkBPwillcontinuetoinvestwiththeaimofgrowingthecompanyandshareholdervalue,sustainablyandthroughthebusinesscycle.Weintendtounderpinthiswithaconservativecapitalstructure,whichallowstheflexibilitytoexecutestrategywhileremainingresilienttotheinherentvolatilityofthebusiness.Wewillendeavourtoactivelymanageday-to-dayliquidityinordertomeetthecashneedsofthebusiness,whilemaintainingthenetdebtratiowithinalowerrangeof10%to20%.On1February2011,weannouncedthatquarterlydividendpaymentswouldresume.ThequarterlydividendtobepaidinMarch2011is7centspershare.Theboardbelievesthisisanaffordableandsustainablelevelwhichwillallowthecompanytomeetitscommitmentswhilecontinuingtoinvestinthebusinessforgrowthandvalue.

Delivering the right high-quality portfolioAspartoftheresponsetotheGulfofMexicoincident,weannouncedandareprogressingdisposalsthatareexpectedtodeliveraround$30billioninproceedsover2010and2011.During2010,BPhassuccessfullyrealizedpremiumvaluesforupstreamanddownstreamassetsaspartoftheprogramme.SeeAcquisitionsanddisposalsonpage24.Thedisposalprogrammehasbeenanopportunitytofurtherupgradeandfocusourportfolioandweintendtoretainacapacitytoreinvest,toacquireassetsthatenhancestrategyandourportfolioonbothaplannedandanopportunisticbasisthrough2011.

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The right people, skills, capability and incentivizationItisvitalthatwedevelopanddeploypeoplewiththeskills,capabilityanddeterminationrequiredtomeetourobjectives.Thereremains,inourindustry,acontinuingshortageofprofessionalssuchaspetroleumengineersandscientists,drivenbychangingdemographics.Nonetheless,wehavethusfarbeensuccessfulinbuildingthiscapacityandwearecommittedtobuildinganddeployingcapabilitywithastrongsafetyandriskmanagementculture,includingrevisedrewardmechanismstofosterprofessionalprideinengineering,health,safety,security,theenvironmentandoperations.

ThecreationofamorepowerfulS&ORfunctionrepresentsasignificantchangethatwillstrengthenourprocessesandcapabilitiesinsafetyandriskmanagement.InExplorationandProduction,wehavereorganizedthesegmentintothreefunctionaldivisionsExploration,DevelopmentsandProductioneachofwhichreportsdirectlytothegroupchiefexecutive.Theintentisclear,tofocusexpertiseandcapabilityonamoreconcentratedassetbasetoreduceoperationalriskanddeliverlong-runsustainableimprovement.Ineachdivisionandacrosstherestofthegroupwewillcontinuetodevelopgroupleadershipandseniormanagementteams,andfocusrecruitmentonindividualswithstrongoperationalandtechnicalexpertise.

Focus on exploration and high-quality earningsThroughourstrategyweaimtodelivervaluegrowthforshareholdersbyinvestinginourExplorationandProductionbusinessandsaferoperationseverywhere,whileatthesametimeenhancingefficiencyandgrowinghigh-qualityearningsandreturnsthroughoutallouroperations.

InExplorationandProduction,ourpriorityistoensuresafe,reliableandcompliantoperationsworldwide.Ourstrategyistoinvesttogrowlong-termvaluebycontinuingtobuildaportfolioofenduringpositionsintheworldskeyhydrocarbonbasinswithafocusondeepwater,gas(includingunconventionalgas)andgiantfields.Ourstrategyisenabledbycontinuouslyreducingoperatingrisk,strongrelationshipsbuiltonmutualadvantage,deepknowledgeofthebasinsinwhichweoperate,andtechnology,togetherwithbuildingcapabilityalongthevaluechaininExploration,DevelopmentsandProduction.

WeareincreasinginvestmentinExploration,akeysourceofvaluecreationatthefrontendofthevaluechain,andweareevolvingthenatureofourrelationships,particularlywithnationaloilcompanies.Wewillalsocontinuetoactivelymanageourportfolio,withafocusonvaluegrowth.

InRefiningandMarketing,ourstrategyistoholdaportfolioofquality,efficientandintegratedmanufacturingandmarketingpositionsunderpinnedbysafeoperations,leadingtechnologiesandstrongbrands.Wewillcontinuetoaccessmarketgrowthopportunitiesintheemergingmarketsandintendtogrowourinternationalbusinesses.Overtimeweexpecttoshiftcapitalemployedfrommaturetohigh-growthregions.

InAlternativeEnergy,ourstrategyistobuildmateriallow-carbonenergybusinessesthatarealignedwithBPscorecapabilities.Inbiofuelswearebuildingadvantagedpositionsinlow-costsustainablefeedstockssuchasBraziliansugarcane,thelignocellulosicconversionofenergygrassesintheUSandthedevelopmentofadvantagedfuelmoleculessuchasbiobutanol.Inthelow-carbonpowerbusinesswearebuildingoutourUSwindportfolioandcontinuetogrowoursolarbusiness.Wecontinuetodevelopourcapabilityincarboncaptureandstorage.

Leveraging technology as we look further aheadAsdiscussedunderOurmarketonpages16-18ofthisreport,weexpectthattheworldwillrequireamorediverseenergymixasthebasisforasecuresupplyofenergyovertime.Weintendtoplayacentralroleinmeetingtheworldscontinuedneedforhydrocarbons,withourExplorationandProductionandRefiningandMarketingactivitiesremainingatthecoreofourstrategy.Wearealsocreatinglong-termoptionsforthefutureinnewenergytechnologyandlow-carbonenergybusinesses.WebelievethatthisfocusedportfoliohasthepotentialtobeamaterialsourceofvaluecreationforBP(see pages 61-62).Wearealsoenhancingourcapabilitiesinnaturalgas,whichmayprovetobeavitalsourceofrelativelycleanenergyduringthetransitiontoalower-carboneconomyandbeyond.Weintendtolead,supportandshapethistransitionwhileworkingtoachievesector-leadinglevelsofreturnforshareholders.

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OurperformancePerformancein2010wasovershadowedbythewellblowoutandsubsequentoilspillintheGulfofMexico.Beyondthistragicevent,theongoingunderlyingperformanceofthegroupwasstrong.

SafetyInApril2010,followingawellblowoutintheGulfofMexico,anexplosionandfireoccurredonthesemi-submersiblerigDeepwaterHorizon,resultinginthetragiclossof11livesandamajoroilspill.Therewerethreeothercontractorfatalitiesduring2010.Wedeeplyregretthelossoftheselivesandtheimpactfromtheoilspill.(See Gulf of Mexico oil spill on page 34 formore information on the Deepwater Horizon accident.)

Ourpriorityremainstohavesafe,reliableandcompliantoperationsworldwide.Wehavesetupamorepowerfulsafetyandoperationalriskfunction.Asanimmediatestep,wehavereinforcedthelinkbetweensafetyperformanceandrewardinthefourthquarterof2010.Otherprogrammesarenowunderway,includingareviewofcontractormanagementandafreshlookathowwemanagerisksystematicallyacrossBP.

WealsocontinuedtoembedourOMSwithinthegroup,withallofouroperatingsitestransitioningtothesystembytheendofFebruary2011.

Recordableinjuryfrequency(RIF,ameasureofthenumberofreportedinjuriesper200,000hoursworked)was0.61in2010,comparedwith0.34in2009and0.43in2008.Theincreasein2010wassignificantlyimpactedbythenumberofincidentsarisingintheresponseeffortfortheGulfofMexicooilspill,whichresultedinsignificantlyhigherpersonalsafetyincidentratesthanforotherBPoperations.

Thenumberofoilspillsgreaterthanonebarrelwas261in2010comparedwith234in2009and335in2008.ThevolumespilledwasdominatedbytheGulfofMexicoincident.SeeOilspillandlossofcontainmentinSafetyonpage68.

Ourgreenhousegas(GHG)emissionsawere64.9Mtein2010,comparedwith65.0Mtein2009.WehavenotincludedanyemissionsfromtheGulfofMexicoincidentandtheresponseeffortduetoourreluctancetoreportdatathathassuchahighdegreeofuncertainty.

PeopleDuring2010,wecontinuedtofocusonincreasingthelevelofspecialistskillsandexpertiseacrosstheworkforce.Theexceptionalresponsetotheoilspillwasareassuringexampleofthecapabilitiesandcommitmentofourstaff.

Thetotalnumberofnon-retailstaffwasbroadlystablein2010,adjustingforstaffreductionsassociatedwithassetdisposals.Totalnon-retailrecruitmentwasaround8,000.Thiswasoffsetbyaround7,700staffleavingthecompanyplusafurther2,300staffleavingassociatedwithassetdisposals.Thetotalnumberofemployees(includingretailstaff)was79,700attheendof2010.

Operating and financial performanceOurresultsin2010weregreatlyimpactedbythechargerecordedfortheGulfofMexicooilspillincident.Stepsweretakentostrengthenthebalancesheet,includingaprogrammeofassetdisposals,withverygoodprogressmade.Cashandcashequivalentsattheendof2010was$18.6billionandthenetdebtratiowas21%.

Notableachievementsin2010include:

ExplorationandProduction R eplacingmorethan100%ofourprovedreserves,excluding

acquisitionsanddisposals,onacombinedbasisofsubsidiariesandequity-accountedentitiesb.

Takingfinalinvestmentdecisionson15projects,withanexpectedtotalBPnetcapitalinvestmentof$20billion.

IncreasingproductionfortheRumailafieldinSouthernIraqbymorethan10%abovetherateinitiallyagreedbetweentheRumailaOperatingOrganizationpartnersandtheIraqiMinistryofOilinDecember2009.ThissignificantmilestonemeansthatBPanditspartnersbecameeligibleforservicefeesfromthefirstquarterof2011.

AccessingnewresourcesacrosstheglobeinAzerbaijan,China,theGulfofMexico,Indonesia,onshoreNorthAmericaandtheUK.

MakingtheHodoadiscoveryinEgypt,thefirstOligocenedeepwaterdiscoveryintheWestNileDelta.

TNK-BPincreasingitsproductionby2.5%in2010comparedwith2009. Securingagreementstodisposeofalmost$22billionofnon-core

assetsinlinewithourplansfollowingtheGulfofMexicooilspill.

RefiningandMarketing Improvingoverallfinancialperformancedelivery,primarilydrivenby

strongoperationalperformanceacrossallofourbusinesses,thecontinuationofourprogrammetodeliverfurtherefficienciesandamorefavourablerefiningenvironment.

AchievingaSolomonrefiningavailabilitycof95.0%,whichisanincreaseof1.4percentagepointscomparedwith2009.

Ac hievingrecordvolumesinpetrochemicalsandstronglubricantsperformance.

MakingsignificantprogressintheWhitingrefinerymodernizationproject.

S tartingcommercialproductionatournewjointventureacetylsplantinNanjing,China.

Castrolssponsorshipofthe2010FIFAWorldCupinSouthAfrica. SuccessfullyexitingfromourconvenienceretailbusinessinFrance. Completingthedivestmentofseveralpackagesofnon-strategic

terminalsandpipelinesintheUSEastofRockiesandWestCoast. Sellingour15%interestinEthyleneMalaysiaSdnBhd(EMSB)and

60%interestinPolyethyleneMalaysiaSdnBhd(PEMSB)toPetronas.

aSee footnoteainEnvironmentonpage72.bS eeExplorationandProductionprovedreservesreplacementonpage42formoredetailedinformationonreservesreplacementforsubsidiariesandequity-accountedentities.

cR efiningavailabilityrepresentsSolomonAssociatesoperationalavailability,whichisdefinedasthepercentageoftheyearthataunitisavailableforprocessingaftersubtractingtheannualizedtimelostduetoturnaroundactivityandallplannedmechanical,processandregulatorymaintenancedowntime.

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Oil and natural gas production and net proved reservesa

2010 2009 2008 2007 2006

Crudeoilproductionforsubsidiaries(thousandbarrelsperday) 1,229 1,400 1,263 1,304 1,351Crudeoilproductionforequity-accountedentities(thousandbarrelsperday) 1,145 1,135 1,138 1,110 1,124Naturalgasproductionforsubsidiaries(millioncubicfeetperday) 7,332 7,450 7,277 7,222 7,412Naturalgasproductionforequity-accountedentities(millioncubicfeetperday) 1,069 1,035 1,057 921 1,005Estimatednetprovedcrudeoilreservesforsubsidiaries(millionbarrels)b 5,559 5,658 5,665 5,492 5,893Estimatednetprovedcrudeoilreservesforequity-accountedentities (millionbarrels)c 4,971 4,853 4,688 4,581 3,888Estimatednetprovedbitumenreservesforequity-accountedentities (millionbarrels) 179 Estimatednetprovednaturalgasreservesforsubsidiaries(billioncubicfeet)d 37,809 40,388 40,005 41,130 42,168Estimatednetprovednaturalgasreservesforequity-accountedentities (billioncubicfeet)e 4,891 4,742 5,203 3,770 3,763

a Crudeoilincludesnaturalgasliquids(NGLs)andcondensate.Productionandprovedreservesexcluderoyaltiesduetoothers,whetherpayableincashorinkind,wheretheroyaltyownerhasadirectinterestintheunderlyingproductionandtheoptionandabilitytomakeliftingandsalesarrangementsindependently,andincludeminorityinterestsinconsolidatedoperations.

bIncludes22millionbarrels(23millionbarrelsat31December2009and21millionbarrelsat31December2008)inrespectofthe30%minorityinterestinBPTrinidadandTobagoLLC.c Includes254millionbarrels(243millionbarrelsat31December2009and216millionbarrelsat31December2008)inrespectofthe7.03%minorityinterestinTNK-BP(6.86%at31December2009and6.80%at31December2008).

dIncludes2,921billioncubicfeetofnaturalgas(3,068billioncubicfeetat31December2009and3,108billioncubicfeetat31December2008)inrespectofthe30%minorityinterestinBPTrinidadandTobagoLLC.

eIncludes137billioncubicfeet(131billioncubicfeetat31December2009and2008)inrespectofthe5.89%minorityinterestinTNK-BP(5.79%at31December2009and5.92%at31December2008).

Total net proved reserves 2010a

(million barrels of oil equivalent)

Liquidsb

Natural gas 10,709

7,362

a Combined basis of subsidiaries and equity-accounted entities, on a basis consistent withgeneral industry practice.

b Crude oil, condensate, natural gas liquids and bitumen.

During2010,1,503millionbarrelsofoilandnaturalgas,onanoilequivalentabasis(mmboe),wereadded,excludingpurchasesandsales,toBPsprovedreserves(686mmboeforsubsidiariesand818mmboeforequity-accountedentities).At31December2010,BPsprovedreserveswere18,071mmboe(12,077mmboeforsubsidiariesand5,994mmboeforequity-accountedentities).OurprovedreservesinsubsidiariesarelocatedprimarilyintheUS(44%),SouthAmerica(15%),theUK(10%),Australasia(9%)andAfrica(11%).Ourprovedreservesinequity-accountedentitiesarelocatedprimarilyinRussia(69%),SouthAmerica(20%),andRestofAsia(7%).

Foradiscussionofproduction,seeExplorationandProductiononpage43.

a Naturalgasisconvertedtooilequivalentat5.8billioncubicfeet(bcf)=1millionbarrels.

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Selected financial informationa

$millionexceptpershareamounts

2010 2009 2008 2007 2006*

IncomestatementdataSalesandotheroperatingrevenuesfromcontinuingoperationsb 297,107 239,272 361,143 284,365 265,906Replacementcostprofit(loss)beforeinterestandtaxc

Bybusiness ExplorationandProduction 30,886 24,800 38,308 27,602 31,026 RefiningandMarketing 5,555 743 4,176 2,621 5,661 Otherbusinessesandcorporate (1,516) (2,322) (1,223) (1,209) (841)GulfofMexicooilspillresponsed (40,858) Consolidationadjustmentunrealizedprofitininventory 447 (717) 466 (220) 65Replacementcostprofit(loss)beforeinterestandtaxationfrom continuingoperationsb (5,486) 22,504 41,727 28,794 35,911Inventoryholdinggains(losses) 1,784 3,922 (6,488) 3,558 (253)Profit(loss)beforeinterestandtaxationfromcontinuingoperationsb (3,702) 26,426 35,239 32,352 35,658Financecostsandnetfinanceexpenseorincomerelatingtopensions andotherpost-retirementbenefits (1,123) (1,302) (956) (741) (516)Taxation 1,501 (8,365) (12,617) (10,442) (12,516)Profit(loss)fromcontinuingoperationsb (3,324) 16,759 21,666 21,169 22,626Profit(loss)fortheyear (3,324) 16,759 21,666 21,169 22,601Profit(loss)fortheyearattributabletoBPshareholders (3,719) 16,578 21,157 20,845 22,315Perordinarysharecents Profit(loss)fortheyearattributabletoBPshareholders Basic (19.81) 88.49 112.59 108.76 111.41 Diluted (19.81) 87.54 111.56 107.84 110.56 Profit(loss)fromcontinuingoperationsattributabletoBPshareholdersb

Basic (19.81) 88.49 112.59 108.76 111.54 Diluted (19.81) 87.54 111.56 107.84 110.68Replacementcostprofit(loss)fortheyearc (4,519) 14,136 26,102 18,694 22,823Replacementcostprofit(loss)fortheyearattributabletoBPshareholdersc (4,914) 13,955 25,593 18,370 22,537Perordinarysharecents Replacementcostprofit(loss)fortheyearattributabletoBPshareholdersc (26.17) 74.49 136.20 95.85 112.52Dividendspaidpersharecents 14.00 56.00 55.05 42.30 38.40Dividendspaidpersharepence 8.679 36.417 29.387 20.995 21.104Capitalexpenditureandacquisitionse 23,016 20,309 30,700 20,641 17,231Ordinarysharedataf

Averagenumberoutstandingof25centordinaryshares(sharesmillionundiluted) 18,786 18,732 18,790 19,163 20,028Averagenumberoutstandingof25centordinaryshares(sharesmilliondiluted) 18,998 18,936 18,963 19,327 20,195BalancesheetdataTotalassets 272,262 235,968 228,238 236,076 217,601Netassets 95,891 102,113 92,109 94,652 85,465Sharecapital 5,183 5,179 5,176 5,237 5,385BPshareholdersequity 94,987 101,613 91,303 93,690 84,624Financedebtdueaftermorethanoneyear 30,710 25,518 17,464 15,651 11,086Netdebttonetdebtplusequityg 21% 20% 21% 22% 20%

a T hisinformation,insofarasitrelatesto2010,hasbeenextractedorderivedfromtheauditedconsolidatedfinancialstatementsoftheBPgrouppresentedonpages141-227.Note1tothefinancialstatementsincludesdetailsonthebasisofpreparationofthesefinancialstatements.Theselectedinformationshouldbereadinconjunctionwiththeauditedfinancialstatementsandrelatednoteselsewhereherein.

bExcludesInnovene,whichwastreatedasadiscontinuedoperationinaccordancewithIFRS5Non-currentAssetsHeldforSaleandDiscontinuedOperationsin2006.c Replacementcostprofitorlossreflectsthereplacementcostofsupplies.Thereplacementcostprofitorlossfortheyearisarrivedatbyexcludingfromprofitinventoryholdinggainsandlossesandtheirassociatedtaxeffect.ReplacementcostprofitorlossforthegroupisnotarecognizedGAA