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Gas, Power and Renewables | |
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 Strategy
Focus In line with changing demand patterns for cleaner fuels, BP seeks to participate at scale in the fast-growing markets for natural gas, gas liquids and solar energy. We currently hold market leadership positions in North American gas and natural gas liquids (NGLs) and significant strength in both the liquefied natural gas (LNG) and solar markets. We are expanding our LNG business by accessing import terminals in China, North America and Europe. Our result was $472 million, an increase of 23% over 2002 (73% when adjusted for the Ruhrgas divestment in 2002). The improved performance was underpinned by gross margin growth in our gas marketing businesses, including LNG. Facing the poorest trading environment in recent history, the NGLs business was able partially to mitigate the effect of reduced volumes and margins through a continued focus on cost, 98.8% availability of our plants, up from 98.5% in 2002, and the implementation of our new marketing programme. We also repositioned our solar business to be able to improve performance, which resulted in a restructuring charge of $45 million. Overall gas sales volumes rose 22%, with unit gas marketing margins stronger than we experienced in 2002. Contributing to this result were higher gas sales volumes in North America and an increase in LNG marketed directly by BP. In North America, we are the number one wholesale gas marketer on the continent with average sales of 20.6 billion cubic feet per day. The combination of a customer-focused approach and a favourable trading environment in 2003 saw gross margins improve. As we grow our business, we continue to access a wide portfolio of infrastructure across North America. Optimization of this portfolio benefits our group production and results in a lower cost of goods sold. To support our LNG presence in the US, we applied for regulatory permits to build and operate an LNG terminal in New Jersey. Completion of the facility is targeted for 2008. In addition, we and our partners have signed an initial agreement with Sempra LNG Corp. for a 20-year supply of LNG from Indonesia to markets in the US and Mexico. We also delivered to the US both the first cargo from the newly commissioned Train 3 of the Atlantic LNG facility in Trinidad and Tobago and the first cargo delivered to the Cove Point regasification terminal, which was recommissioned after 23 years. In Europe, LNG marketing activities are primarily focused on Spain and the UK. In Spain, we made the first delivery of LNG to the recently completed import and regasification facility in Bilbao, Europe's first integrated regasification and power project. To further underpin BP's market position in Spain, we signed a memorandum of understanding with Oman LNG for the supply of up to four million tonnes of LNG over a six-year period. We also announced a joint venture with Sonatrach that has secured long-term capacity rights to the UK Isle of Grain import regasification terminal. This venture is expected to allow the two companies to source and then supply LNG into the UK market, beginning in 2005. In Asia, the BP-operated Tangguh project has agreements in various stages of completion covering over seven million tonnes a year of sales at plateau. BP acquired a 35% interest in SK Power (previously a subsidiary of SK Corporation of South Korea), which has begun construction of a power station in Gwangyang, South Korea. The power station will be a customer for the gas from our new Indonesian profit centre. We also took delivery of the final two LNG ships commissioned from Samsung, the British Innovator and the British Merchant. Solar demand growth slowed slightly in 2003, compounding price and margin pressure created by production over-capacity in the industry. Our solar production capacity and revenues both grew. New technology production lines came on stream in India, the US, Australia and Spain, allowing us to cease production of non-competitive technologies. As a result of this consolidation, BP took a restructuring charge of $45 million in the third quarter, resulting in lower ongoing production costs and a more competitive product slate. |
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