Petrochemicals

76 77 78 79 80 81 81

2003 performance Key indicators Financial statistics BPs petrochemicals manufacturing sites Major plant capacities by site Regional capacities by product BPs petrochemicals business

74

BP Financial and Operating Information 1999-2003

Segment strategy

Focus

portfolio on seven core products. Compete through technical superiority, operational excellence, deep customer relationships and accessing advantaged investment opportunities. Build organizational capability to increase margin capture and drive cost efficiencies and improve returns throughout the business cycle.
Segment focus

BP focuses on seven core products purified terephthalic acid (PTA), paraxylene (PX), acetic acid, acrylonitrile, ethylene, high-density polyethylene (HDPE) and polypropylene (PP) that enhance the everyday lives of consumers. Part of BPs customer-facing activity, these core products are eventually used in the manufacture of a wide variety of consumer goods, including plastic drinks bottles, computer housings, adhesives, inks, rigid packaging, pipes, food packaging and automobile components, as well as textiles for clothes and carpets. Our core products have been selected on the basis of growth characteristics, proprietary technology, leadership positions and group integration value. We have an investment emphasis in three products of the core of seven, where we have differentially advantaged positions PTA, PX and acetic acid. We also have an investment bias towards the fast-growing markets of Asia.

Petrochemicals

75

2003 performance

Petrochemicals delivered a result of $568 million in 2003, a greater than threefold increase over 2002. Our production for the year was a record 27,943 thousand tonnes, compared with 26,988 thousand tonnes in 2002. This reflected our capacity additions and lower turnaround activity. Faced with the most challenging business environment in recent years, we delivered 10% cash returns. Overall, chemicals indicator margins were similar to the average of 1999-2002, up slightly on 2002, but fluctuated throughout the year. The performance was delivered in the face of high and volatile feedstock costs, particularly the impact of a strong euro on costs, and slow growth in demand. The segments result was impacted by several non-routine items, continuing portfolio reductions and lower income from SARS-affected businesses in Asia. Throughout the year, we continued to focus on our core products. Our operational priorities were safety, margin capture and driving cost efficiency in a difficult business environment. Overall, 2003 cash fixed costs were reduced compared with 2002, while the business grew. The operations at our sites continued to be good as utilization improved. As a result of growth and portfolio management, our seven core products now account for 70% of our capital employed in this segment.
Portfolio

Importantly, 2003 also brought a realignment of the petrochemicals organization. The segment is now structured around global product lines, while retaining executive leadership in key regions of the world. This more natural alignment of businesses with strategy is intended to provide greater organizational focus and operating performance. In 2003, our strategy to focus our portfolio around seven core products led to important investment and divestment activities. We have implemented a number of structural changes that we believe should significantly enhance our portfolio. The most significant of these investment activities were as follows: We commissioned a new 350-ktepa PTA plant at Zhuhai (BP 85%) in southern China. CAPCO (BP 59%), a BP-associated undertaking in Taiwan, started producing from its new 700-ktepa PTA unit. We increased the investment in our Korean and Taiwanese joint ventures. BP acquired an incremental 9% in CAPCO to obtain a 59% holding, and we increased our ownership from 35% to 47% in SPC. BP Solvay Polyethylene North America (BP 49%) and its joint venture partners started a new 317 ktepa High Density Polyethylene (HDPE) plant (BP 25%) at Cedar Bayou, Texas, and shut down BP Solvay Polyethylene North Americas 118-ktepa of smaller and less efficient capacity at Deer Park, Texas. BP Solvay Polyethylene Europe (BP 50%) commenced full-scale production from the newly constructed HDPE plant at Lillo, Belgium. SECCO (BP 50%) is on schedule to start up in early 2005. In early 2004, construction of the 900-ktepa ethylene cracking complex was approximately 50% complete. The most significant divestments during the year were as follows: We sold our share in AG International Chemicals Company (BP 50%), a joint venture with Mitsubishi Gas Chemical Company in Japan. We exited the ethylene vinyl acetate copolymers (EVA) business at Kln, Germany. We successfully divested PT Peni (BP 75%), a BP polyethylene joint venture, in Indonesia.

We are a major producer of petrochemicals and plastics. The petrochemicals segment is also responsible for the supply, marketing and distribution of chemicals products to bulk, wholesale and retail customers. BP has operations principally in the US and Europe. We are increasing our activities in the AsiaPacific region. Our production capacity increase in 2003 reflected our Asian PTA additions, the Veba acquisition and growth, albeit slow, in market demand. Projects that were under development in 2003 included the final commissioning of the BP Zhuhai Chemical Company in Guangdong province (our first PTA venture in China), the start-up of the CAPCO PTA plant in Taiwan, progress on our Shanghai Ethylene Cracker Complex (SECCO) joint venture near Shanghai, expansion of the Chocolate Bayou olefins facility on the US Gulf Coast and new production at world-scale HDPE joint-venture plants in Cedar Bayou, Texas, and Lillo, Belgium.

76

BP Financial and Operating Information 1999-2003

Key indicators
1999 2000 2001 2002
2003

Profit and product margins Pro forma resulta $ billion Chemicals Indicator Marginb $/te Return on sales BP % Range of six competitors with major petrochemicals interests Maximum % Minimum % Plant/site reliability and productivity Plant reliabilityd % Site reliabilitye % Productivity tonnes/manufacturing manpower

0.43 114 4.6 12.7 2.9 95.6 95.0 1,490

0.55 126 4.9 11.1 0.3 93.9 94.0 1,605

(0.17) 109 (1.5) 7.0 (5.7) 95.6 93.0 1,790

0.17 104 1.3 7.6 (0.4) 96.3 95.0 1,890

0.57 113c 3.5 9.0 (1.3) 96.0 95.0 1,950

a Replacement cost profit after exceptional items, adjusted for acquisition amortization. b The Chemicals Indicator Margin (CIM) is a weighted average of externally based product margins. It is based on market data collected by Nexant (formerly Chem Systems) in

their quarterly market analyses, then weighted based on BPs product portfolio. While it does not cover our entire portfolio, it includes a broad range of products. Among the products and businesses covered in the CIM are the olefins and derivatives, the aromatics and derivatives, linear alpha-olefins (LAOs), acetic acid, vinyl acetate monomer and nitriles. Not included are fabrics and fibres, plastic fabrications, poly alpha-olefins (PAOs), anhydrides, engineering polymers and carbon fibres, speciality intermediates, and the remaining parts of the solvents and acetyls businesses. c Provisional. The data for the year is based on 11 months of actual, and one month of provisional data. d Plant reliability measures production lost for unplanned internal operational and equipment causes. e Site reliability measures production lost for unplanned internal operational and equipment causes and production lost for intrasite and utilities reasons.

Petrochemicals

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Financial statistics
$ million
Reported Pro forma result

1999

2000

2001

2002

2003

1999

2000

2001

2002

2003

Replacement cost profit by geographical area UK Rest of Europe USA Rest of World

(240) 70 502 97 429

(69) 284 529 (196) 548 5%

(305) 178 (86) 44 (169) (1)%

(265) 324 75 31 165 1%

(325) 476 205 212 568 4%

(240) 70 502 97 429 4%

(69) 284 529 (196) 548 5%

(305) 178 (86) 44 (169) (1)%

(265) 324 75 31 165 1%

(325) 476 205 212 568 4%

Return on average capital employed Operating capital employed by geographical area UK Rest of Europe USA Rest of World

4%

2,395 1,913 4,307 1,433 10,048 9,392

2,989 1,990 4,470 1,559 11,008 11,247

2,976 2,421 4,601 1,998 11,996 11,515

2,957 3,340 4,783 1,456 12,536 13,064

2,907 3,850 4,478 2,249 13,484 16,075

Turnover Capital expenditure and acquisitions by geographical area UK Rest of Europe USA Rest of World

447 238 294 236 1,215

620 112 349 504 1,585

205 917 460 344 1,926

112 173 262 276 823

116 137 291 231 775

Employee numbers at year end

18,700

17,600

21,950

17,900a

15,950

a Includes 2,400 Burmah Castrol Chemicals employees (2001: 4,150).

thousand tonnesa 1999 2000 2001 2002

2003

Production by geographical area UK Rest of Europe USA Rest of World

a Tonnes = metric tons (2,204.6 lb).

3,737 5,993 9,917 2,206 21,853

3,137 6,713 9,874 2,341 22,065

3,126 7,925 8,943 2,722 22,716

3,221 10,526 10,201 3,040 26,988

3,186 10,958 10,068 3,731 27,943

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BP Financial and Operating Information 1999-2003

13 14 37 15 20 21 3 2 1 12 6 8 11 7 5 4 18 19 28 22

16 17 27 26 25 24 23 29 39 30 31 33 32

10 9

34 35

Ethylene Purified Terephthalic Acid (PTA) Paraxylene (PX) High Density Polyethylene (HDPE) Polypropylene Acetic acid Acrylonitrile Other Manufacturing complex (Ethylene & derivatives)
38 36

BPs petrochemicals manufacturing sites

The seven core products within our portfolio are: Purified Terephthalic Acid (PTA) PTA is important as a raw material for the manufacture of polyester used in textiles, fibres and films. BP is the worlds largest producer of PTA. Paraxylene (PX) PX is feedstock for the production of PTA and
USA 1 Lima, Ohio 2 Whiting, Indiana 3 Joliet, Illinois 4 Cooper River, South Carolina 5 Decatur, N Alabama 6 Pasadena, Texas 7 Texas City, Texas 8 Deer Park, Texas 9 Chocolate Bayou, Texas 10 Green Lake, Texas 11 Cedar Bayou, Texas 12 Carson, LA, California UK 13 Grangemouth 14 Hull 15 Baglan Bay Rest of Europe 16 Trelleborg, Sweden 17 Geel, Belgium 18 Feluy, Belgium 19 Lillo, Belgium 20 Wingles, France 21 Sarralbe, France 22 Lavra, France 23 Rosignano, Italy 24 Kln, Germany 25 Gelsenkirchen, Germany 26 Mnchmnster, Germany 27 Marl, Germany 28 Mlheim, Germany Rest of World 29 Ulsan, South Korea 30 Chongqing, China 31 Zhuhai, China 32 Kaohsiung, Taiwan 33 Taichung, Taiwan 34 Kerith, Malaysia 35 Kuantan, Malaysia 36 Merak, Indonesia 37 Joffre, Canada 38 Sao Paulo, Brazil 39 Shanghai, China

is manufactured from mixed xylene streams acquired from BP refineries and third party producers. We are currently the worlds largest producer of PX.
Ethylene We produce and market the basic petrochemical building blocks, known as olefins, that are used primarily as raw material for other chemical products. These olefins are derived from the steam cracking of liquid and gaseous hydrocarbons. Polypropylene Polypropylene is used for moulded products, fibres and films. We are the second largest producer of polypropylene in the world. High Density Polyethylene (HDPE) Polyethylene is used for packaging,

pipes and containers.

Acrylonitrile BP is the worlds largest producer and marketer

of acrylonitrile, which is used in textiles and plastics for the automobile and consumer goods industries.
Acetic Acid We are a major manufacturer and supplier of acetic

acid, a versatile chemical used in a variety of products such as foodstuffs, textiles, paints, dyes and pharmaceuticals. Acetic acid is also used in the production of PTA.

Petrochemicals

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Major plant capacities by site

Geographical area Site Product BP share of capacity at end 2003 thousand tonnes a year Geographical area Site Product BP share of capacity at end 2003 thousand tonnes a year

UK

Baglan Bay isopropanol Grangemouth ethylene propylene butadiene benzene HDPE LLDPE polypropylene ethanol other Hull acetic acid acetic anhydride vinyl acetate ethyl acetate acetone other Feluy LAO PAO Geel PTA polypropylene paraxylene PIA Lillo HDPE polypropylene

106 1,075 420 80 252 165 (50% of EJV)a 307 270 339 22 781 150 274 226 71 93 330 76 1,027 509 482 135 262 (50% of EJV)a 130 372 270 70 117 143 147 222 459 105 266 187 93 (50% of Naphtachimie) (50% of Naphtachimie) (50% of Naphtachimie) (50% of Naphtachimie) (50% of EJV)a

Italy Sweden USA

Rosignano HDPE

108 (50% of EJV)a 86 199 10 97 78 (49% of AJV)b 1,506 418 709 242 1,331 1,150 1,098 31 412 (49% of AJV)b 420 454 14 174 140 51 71 562 76 531 321 491c 115c 1,222 126 92 141 (49% of Rhodiaco) 246 160 (51% of YARACO)d 406 (50% of SECCO)k 216 (50% of PT Ami) 718 (47% of SPC)e 55 (34% of ASACCO)f 230 (51% of SS-BP)g 184 (60% of PEMSB)h 64 (15% of EMSB)i 536 677 789 (59% of CAPCO)j 416 (59% of CAPCO)j 270 34,483

Rest of Europe Belgium

France

Lavra ethylene propylene butadiene benzene HDPE polypropylene ethylene oxide other Sarralbe HDPE polypropylene Wingles polystyrene expanded polystyrene

Trelleborg polystyrene Lima acrylonitrile acetonitrile other Cedar Bayou HDPE Chocolate Bayou ethylene propylene polypropylene Carson polypropylene Cooper River PTA Decatur PTA paraxylene NDC Deer Park HDPE polypropylene Green Lake acrylonitrile acetonitrile other Joliet PIA MAN TMA Pasadena LAO PAO Texas City styrene propylene acetic acid acrylonitrile paraxylene metaxylene Whiting PIB Rest of World Brazil So Paulo PTA Canada China Joffre LAO Chongqing acetic acid Zhuhai PTA Shanghai (under construction) Merak PTA Ulsan PTA VAM acetic acid Kertih HDPE ethylene acetic acid Kuantan PTA

(50% of EJV)a

Germany

BP Kln ethylene 1,095 propylene 610 butadiene 267 benzene 372 aromatics 366 LDPE 364 LLDPE 228 propylene oxide 206 ethylene oxide 291 acrylonitrile 300 other 417 Gelsenkirchen ethylene 650 propylene 378 benzene 137 butadiene 223 other 73 Marl styrene 362 polystyrene 188 expanded polystyrene 79 Mnchmnster ethylene 163 propylene 100 benzene 43 Mlheim other 95

Indonesia Korea

Malaysia

Taiwan

Kaohsiung PTA Taichung PTA Fabrication business Fabrics and fibres Total

a BP Solvay Polyethylene Europe. b BP Solvay Polyethylene North America. c Sterling Chemicals plant, the output of which is marketed by BP . d Yangtze River Acetyls Company. e Samsung Petrochemicals Company Ltd. f Asian Acetyls Company Ltd. g Samsung BP Chemicals Ltd. h Polyethylene Malaysia Sdn. Bhd. i Ethylene Malaysia Sdn. Bhd. j China American Petrochemical Company Ltd. k Shanghai Ethylene Cracker Complex.

80

BP Financial and Operating Information 1999-2003

Regional capacities by product

thousand tonnes a year
BP share of capacity at end 2003 Total

Product

UK

Rest of Europe

USA

Rest of World

PTA PX Ethylene and related co-products Polypropylene HDPE Acrylonitrile/Acetonitrile Acetic acid Other Total

1,575 270 165 781 1,839 4,630

1,027 482 4,198 1,052 618 300 4,926 12,603

2,481 2,320 2,246 1,371 490 792 491 2,221 12,412

3,363 64 184 926 301 4,838

6,871 2,802 8,083 2,693 1,457 1,092 2,198 9,287 34,483

BPs petrochemicals business

Hydrocarbon links

Products

Typical end-uses
Photographic processing, pharmaceuticals, agricultural products Emulsion paints, adhesives Solvents, coatings Pharmaceuticals

Natural gas

Acetic acid Acetic anhydride

Vinyl acetate Acetate esters

Refinery products e.g. naphtha

Paraxylene Metaxylene Benzene

Purified terephthalic acid Purified isophthalic acid Styrene Polystyrene

Fibres, containers, films

Fibres, containers, coatings

Packaging, insulation

Olefins

Ethylene

High density polyethylene Low/linear low density polyethylene Alpha-olefins Other ethylene derivatives Linear alpha-olefins Poly alpha-olefins Ethylene oxide Ethylene glycol Ethanol Ethyl esters

Packaging, pipes, containers

Packaging, pipes, containers

Plastics and detergents Lubricants Brake fluid, antifreeze, polyester fibres Perfume, methylated spirit Solvents for inks, paints

Propylene

Polypropylene Acrylonitrile

Moulding for casings, furniture, toys Textiles, fibres, plastics Isopropanol Solvents in synthetic lacquers, cosmetics, paints Lube oil additives, power cable insulation

Ethane Propane LPGs Butane NGLs

Butylenes

Polybutenes

Core products

Petrochemicals

81