Safe, reliable and compliant operations
We prioritize the safety and reliability of our operations to protect the welfare of our workforce, local communities, and to improve the efficiency of our operations. This also helps preserve value and secure our right to operate around the world. KPIs: Recordable injury frequency, loss of primary containment, greenhouse gas emissions, tier 1 process safety events.
Disciplined financial choices
We rigorously screen our investments and work to keep our annual capital expenditure within a set range. Ongoing management of our portfolio helps ensure focus on more value-driven propositions. We balance funds between shareholder distributions and investment for the future. KPIs: Operating cash flow, gearing, total shareholder return, underlying replacement cost profit (loss) per ordinary share.
Competitive project execution
We seek efficient ways to deliver projects on time and on budget, from planning through to day-to-day operations. Our wide-ranging project experience makes us a valued partner and enhances our ability to compete. KPI: Major project delivery.
Strategy in action
Periodic breaks in production for planned maintenance are essential to keep our operations running safely and reliably, but BP’s production in the UK North Sea had suffered from unplanned shutdowns from equipment failure on ageing infrastructure. In 2013 we took action to address these unplanned shut-downs through the development and implementation of reliability improvement plans. These focused on three key areas: having spare equipment available for parts that are particularly vulnerable; investing in getting our basic maintenance activities right to prevent failures in the first place; and learning from the equipment failures, by identifying the root cause and sharing those learnings across the organization. We are rolling these plans out across all five UK offshore assets and as a result, our plant reliability has improved from 70% in 2014 to more than 84% in 2015. We expect that this will not only improve production and revenue, but also extend the life of our fields.
Continued declines in oil prices have put upstream earnings under pressure across the industry. In this challenging environment we are focused on maximizing the value of our assets, improving the quality of investment and maintaining capital discipline. As part of this, we are reviewing our projects to find opportunities to improve their value. Our Thunder Horse South Expansion project in the Gulf of Mexico is designed to sustain and grow quality deepwater oil production from our existing field. We have been able to simplify our plans and reduce drilling costs by examining the project’s scope and costs and working with BP suppliers to use more of their standard offerings that take advantage of current deflation in price. Adopting newer and proven subsea metering technology has allowed the team to reduce complexity and simplify execution. At the same time we’ve further optimized the drilling sequence to increase the production forecast for this project by 10% without changing the planned start-up date. As a result the expected development cost per barrel is now more than 25% lower than before.
To enable us to respond rapidly to the unique and highly competitive operating environment of the US onshore exploration and production industry, the Lower 48 began operating as a separate BP-operated onshore business in the US in 2015. With its own governance, processes and systems, Lower 48 is better equipped to operate competitively across several basins from the onshore Gulf Coast north to the Rocky Mountains, and develop the vast resource within these large acreage positions. In the San Juan basin of Colorado and New Mexico, we are drawing on our deep understanding of the area’s reservoirs and utilizing innovative well designs to significantly improve capital efficiency and increase the number of economic development opportunities. In 2015 we successfully completed three multi-lateral wells in the San Juan basin, our first-ever wells of this type there. With multiple horizontal laterals from the main wellbore, instead of only one, we can access more of the reservoir and produce significantly more resource. Our multilateral wells are already among the most productive we have ever drilled in the basin, with an average development cost that is about 60% lower than wells we drilled in the basin just a few years ago. We now plan for the majority of our new wells in the San Juan basin to be multi-laterals, and are pursuing well design improvements like these across our extensive resource base. In addition to enhancing returns on new capital investments, Lower 48 is working to improve operating efficiency through various initiatives to reduce production deferments and lower costs. These efforts have begun to reduce production costs, which were down by about 7% year-over-year in 2015 and are expected to decline even further in 2016.