BP PLC — M&A Activity 2007

Dec 5, 2007

News Details

Ad-hoc | 5 December 2007 17:53

BP p.l.c.: BP Oil Sands/Refining Deal

BP p.l.c. / Joint Venture

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The issuer is solely responsible for the content of this announcement.

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December 5, 2007

             BP ENTERS CANADIAN OIL SANDS WITH HUSKY ENERGY

    Major upgrade planned at US refinery for Canadian oil processing

BP announced today that it is moving into the Canadian oil sands by
acquiring a half-share in the Sunrise field in Alberta, operated by Husky
Energy. At the same time Husky will acquire a half share in BP's Toledo oil
refinery in Ohio, US, between them forming an integrated North American oil
sands business. Two independent 50/50 joint ventures will be formed from
the equally valued assets to own and develop the businesses.

'Toledo and Sunrise are excellent assets. BP's move into oil sands is an
opportunity to build a strategic, material position and the huge potential
of Sunrise is the ideal entry point for BP into Canadian oil sands,' said
Tony Hayward, BP's group chief executive. 'In addition this deal will help
guarantee a supply of advanced transportation fuels to major North American
markets from Toledo which is a flexible and advantaged site.'

The Sunrise oil sands field is expected to be sanctioned in 2008 with first
production of bitumen in 2012, building to 200,000 barrels of oil a day
(bpd) by the end of the next decade with a 40 year production plateau.
Sunrise, located in the Athabasca oil sands in northeast Alberta will be
developed using steam assisted gravity drainage (SAGD), a tested technology
which heats the bitumen within the reservoir, allowing it to flow to the
surface. The bitumen will be piped to Hardisty, Alberta, from where it will
be transported via existing pipeline networks for refining. Sunrise will be
operated by Husky as a Canadian oil sands partnership, based in Calgary.

Toledo Refinery's crude distillation capacity is currently 155,000 bpd of
which 60,000 bpd capacity is currently heavy oil. The refinery is located
in one of the largest energy consumption regions of the US and, subject to
necessary approvals and permits, will be expanded to process approximately
170,000 bpd of heavy oil and bitumen by 2015. It will be operated by BP as
a US refining LLC.

'This transaction completes Husky's Sunrise Oil Sands total integration
with respect to upstream and downstream solutions,' said Mr. John C.S. Lau,
President & Chief Executive Officer of Husky Energy Inc. 'Husky is
extremely pleased to be partnering with BP, a world class global E&P and
Refining company.'

'The upstream and downstream joint ventures announced today will be
investing billions of dollars to expand North American energy supply and
enhance North American energy security,' said Bob Malone, chairman and
president of BP America. 'The result will be the development of a major new
Canadian oil field and the modernization and expansion of the Toledo
refinery to allow far greater use of Canadian heavy oil and to increase
clean fuels production by as much as 600,000 gallons a day.'

Full regulatory approval of the proposed deal and final commercial
agreements are expected to be completed in 1Q 2008, with a partnership
effective date of January 1, 2008.

BP has been advised by BMO Capital Markets.

Note to editors

• The Sunrise field in the north of Athabasca, NE Alberta, will be
  developed in three phases based on SAGD. The field has been fully
  delineated by the drilling of 650 appraisal wells. Front end engineering is
  well advanced on Sunrise with completion expected in early 2008. Joint
  investment up to 2012 is estimated at around US$3bn. Site preparation work,
  including clearing of the various development areas and the rough grading
  of the central plant site, field facility roads and well pads, is ongoing.
  The partnership will be responsible for sourcing fuel gas and diluents for
  Sunrise; and delivering product to a market transfer point at Hardisty
  where each party will take their respective production share.

• SAGD is a thermal in-situ recovery process using pairs of horizontal
  wells. A horizontal production well is located near the bottom of the
  reservoir and steam is injected into a second horizontal well placed above
  it, heating the bitumen and enabling it to flow. The bitumen and condensed
  steam, under the influence of gravity, drain to the lower horizontal well
  and are produced through the wellbore to the surface.

• Around 175 billion barrels of Alberta's oil sands are currently thought
  to be commercially recoverable. These resources are split between oil sands
  which require mining methods (about 25% of resource), and oil sands which
  can be developed using adaptations of conventional oilfield technologies
  (about 75% of resource).

• Toledo Refinery is located in the city of Oregon in northwest Ohio. It
  is well positioned to receive Canadian crudes for refining and supply into
  the US mid-west and the neighbouring Canadian markets. It is a heavy sour
  coking refinery and is highly flexible (Nelson complexity index of 11.6),
  one of the few complex refineries outside the Gulf Coast region and
  California. It can take heavy and medium sour crudes and upgrade them to
  advanced, cleaner transport and heating fuels such as low sulphur gasoline,
  ultra low sulphur diesel, aviation fuels, propane, kerosene and asphalt. It
  produces daily 3.8 million US gallons of gasoline, 1.1m gals of diesel,
  756,000 gals of jet fuels, about 0.5% of US total refining capacity. The
  value of Toledo on the books of BP Products North America Inc. as at 30
  September 2007 was US$494m.

• Joint investment of around US$2.5bn is expected up to 2015 to sustain
  and reposition the refinery to process increased amounts of heavy crude oil
  and bitumen.

• BP will initially market 100 percent of the refinery products until
  commencement of Sunrise deliveries, when Husky will have the right to
  market its share of the refinery products.

• BP operates five wholly-owned refineries in the US, located in Ohio,
  Indiana, Texas, Washington and California.

• BP is one of the world's largest oil and gas companies, serving millions
  of customers every day in more than 100 countries across six continents.
  BP's business activities are in exploration and production; refining and
  marketing; and its low-carbon BP Alternative Energy division. Through these
  businesses, BP provides fuel for transportation, energy for heat and light,
  retail services, and petrochemicals products. www.bp.com

• Husky Energy Inc. is a fully integrated energy company that participates
  in upstream, midstream and refined products business areas. The Husky
  Energy group of companies produce crude oil, natural gas, synthetic crude
  oil and a range of derivative products, for North American and
  international markets. Husky Oil Operations Limited (Husky), one of the
  Husky Energy group of companies, has a 100 percent interest in oil sands
  leases east of Kearl Lake, about 60 kilometres northeast of Fort McMurray.
  www.huskyenergy.ca

Further media information:

Out of hours

BP, London +44 (0)207 496 4076 +44 (0)207 496 5129.
BP, Calgary +1 (403) 233 1033
BP, Toledo +1 (419) 698-6475
BP, Chicago +1 630-821-3212 +1 630-640-4231
Husky Energy, Calgary +1 (403) 298 6747
05.12.2007 Financial News transmitted by DGAP

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Language: English
Issuer: BP p.l.c.
1 St James's Square
SW1Y 4PD London
Großbritannien
Phone: +44 (0) 207-496-4000
Fax: +44 (0) 207-496-4570
E-mail: ir@bp.com
Internet: www.bp.com
ISIN: GB0007980591
WKN: 850517
Listed: Freiverkehr in Berlin, Stuttgart, München, Hamburg,
Düsseldorf; Open Market in Frankfurt; Foreign Exchange(s) SWX

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