So dear shareholders, dear friends, welcome to this year's AGM with BP. I hope you liked the film. I think it gives a good presentation of BP and its various businesses. I am Karl Henrik Svanberg, and I'm your Chairman. It is great to see that so many of you have turned up today, and I recognize a lot of familiar faces.
We have 24 resolutions to consider here today at this meeting, and I would first like to formally propose them. We will discuss all these resolutions during the meeting, and at the end, we will vote through a poll. It is now 4 years ago that I, for first time, had the honor to address you here at the AGM of 2010. There's much that have happened since then, both inside and in the outside world. In the wider world, we have seen the Arab Spring, we have seen the conflict in Syria, we have seen new negotiations starting in Iran about the nuclear weapons and now lately also the crisis in Ukraine.
And during the year, we also saw evidence of a troubled world in the murderous terrorist attack in Algeria, the facility there. And our thoughts remain with those that died and their families and friends. The strong economic growth in this world continues in the developing world, but albeit at a little bit slower pace. And while we, in the developed world, we are cautiously starting to see growth again. The world of energy, which is our world, continues to change.
Rising populations and prosperity continue to drive the growing demand of energy. And this is particularly true in the emerging markets where billions of people are striving to reach the standard of living that we enjoy. This is a long term trend, and it's likely continue for many more years to come. The energy landscape is also evolving, and sometimes even in unexpected ways. You take, for example, in the U.
S, the shale gas and oil gas revolution. Before the end of this decade, America will shift from being a net importer of energy to being a net exporter. This will make a major difference to America, and it will have impacts across the world. It promises to deliver lower energy cost to American households and to American industry, making the country much more competitive. It will bring to America greater energy security, and it will also lower the carbon emission as America switches from coal to gas.
For all energy companies, we do recognize that there are those that question whether the business model for the large energy companies actually works, whether it has had its days. Some 15 years of mergers and acquisitions have generated little of the promised growth in shareholder value. Many feels that the super majors have spent too much for too little return, and the world is simply no longer applauding growth of volume and wants to see proof of value creation. Bob and his team were the 1st to recognize this and seeing that a new approach was needed. And in addition, the incident in the Gulf of Mexico led us to think through our fundamentals.
Our strategy is now about value over volume. These words might sound simple, but they do make a dramatic difference. Over the last year, the Board has worked over the last years, the board has worked closely with management on the strategic direction of the company, putting these three simple words into action: value over volume. And that is not an easy task. It is not a small task.
We have come to question every aspect of what we do and how we do it. And from that, we have carried out a major transformation of our business. BP is now a smaller company, more efficient and clearly focused and focused on how the greatest value can be created. We have committed to limit our capital expenditure to $24,000,000,000 to $26,000,000,000 for years to come and grow value from that. And to do this, we need to make the right choices, choices that play to our strength, and we need excellence in our execution.
And after now divesting some $38,000,000,000 of assets, we now have a quality portfolio that we believe play to our strengths. And this, we believe, will help us differentiate from the pack the rest of the pack. Efficiency is vital if we are to grow value. So the Board is keeping a sharp eye on how projects are selected and how projects are executed. We are also ready to release value from our portfolio by selling down assets that we have retained early if we find new assets or work them in a different way.
And an example of working differently is the U. S. North American gas that we are now putting in a standalone unit. And we do it with a task to develop a different model for a different kind of business. All of this, we believe, is starting to bear fruit.
We are now a safer, stronger, better company, and our performance is steadily improving. Before I move on, while I have focused a lot now on the future, let me also say that the Board has continued to oversee the ongoing litigations in the Gulf of Mexico. We will continue to meet our commitments to those that are affected, but we will also continue to counter all unfair claims for compensation. Our relation with you, our shareholders, is also evolving. Investors, both large and small, as well as society, expect more from companies today, and all your voices are heard.
Our industry is a long one, and our decisions often reach over several decades. There can inevitably, at times, be a natural tension between our longer term time horizon and shareholders sometimes wish for earlier returns. And this is a balance that we as a board need to strike. And given the challenges that we face, it is therefore vital that your Board has the right executive team and amongst its nonexecutives has the right people with the right skills focusing on the right issues. We have a diverse mix of talent around the boardroom, and they're all here today to answer your questions.
There is a deep knowledge about the extractive industry, but also about business from business, finance, industry, military and academia. And these different backgrounds makes and their backgrounds and perspectives makes us stronger. And we will continue to enhance the breadth and the depth of our talent as the board is being refreshed over time. The role of the Board itself is also evolving, evolving in terms of the task it has to undertake and also about the time that it takes to undertake them, evolving so that nonexecutives have fewer appointments and spending more time with each of these appointments. It is often said that the task of the Board is to support and to challenge, and this in itself requires respect and maturity from all concerned.
But it's more than just support and challenge. It is also to interrogate, to understand and embrace the strategy. And it is to debate the culture and how the culture should be best developed to support the strategy. I'm pleased to say that I believe that this Board has come a long way in getting this balance right, and I'm proud of the progress that we've made so far. I also spoke about the expectations from society.
This is also part of our task. It is how we, as a company, play our part in meeting the world's growing needs for energy, including those from those that still live in poverty. It is about operating safely, and I'm pleased to say that we make that we are making substantial progress in that area. It is also about playing our part in the wider debates on energy and sustainability where we continue to recognize that climate change is a serious issue. The world's growing energy needs, they will require a mix of energy sources.
Alternative energies still need to further mature to be competitive on scale. And for just some time, the growing need for energy will primarily be met by fossil fuels. And there is this delicate balance between affordable energy and growing emissions that political leaders around the world has to strike. This is not an easy task, and this is why we argue for greater energy efficiency. This is why we argue for putting a price on carbon, and this is why we argue for switching from coal to gas as the most efficient way to impact emissions.
Gas is substantially cleaner than coal, and a switch on a global level from coal to gas as the one we've seen in the United States lately would help to pave the way for the energy landscape that we all would like to see. So now given the vote, later in the meeting, I would like to touch on our remuneration policy. The energy industry is truly global. We compete in a global market, and BP must ensure that we are able to attract and retain the best people. Executives must be rewarded according to the company's success, particularly in progress towards the strategy.
This is a long term this is why our long term schemes only reward executives if the company does consistently well over time. Their awards are not just based on financial performance. They're also reflecting progress in safety, in reputation, in operations. In other words, if our executives are being well paid, that should be good news for every shareholder in this room. This year, the dividend has increased.
We have a share buyback program in place, and the share price have been steadily improving. Our long term approach is the result of the policy that our remuneration committee has operated now for the past several years. We want to renew this policy today, and we are therefore also now seeking your formal approval here today. So to sum up, the pace of this of change in this world will just continue to increase. Boards must ensure that we are well equipped to respond, and I believe that BP's strategy and activities are well matched to a changing world.
Today, we are pleased to report that your company is emerging from the difficulties in 2010, and we are all working hard to create a brighter future. So before I move on, I would like to thank all of you, our shareholders, for your continuous support. And I would like to thank Bob, his excellent team, the Board, my Board colleagues and all of our employees for their hard and dedicated work. And I'm now pleased to hand over to Bob Dudley, our Chief Executive, who will describe what our strategy of careful choices of careful investments and excellent execution, what that means in practice. Thanks a lot, and welcome to Bob here.
Well, thank you very much, Karl Henrik, and good morning to everyone here today. Thank you for your support of BP, the company in which all of us here have an interest. And thank you for coming. Like all companies, BP is on a journey. And the message you will hear from all of us on this platform today is that 2013 was a year when BP again moved forward.
We made a whole series of new oil and gas discoveries. That's what we do. We started up a range of new high value projects. We made key strategic choices that strengthened the value of your company's portfolio. And in short, we continued to build an even safer, stronger, better performing company.
And as you've just heard from the Chairman, our strategy for delivering energy to the world is to stick to a clear sense of priorities, to actively manage and maintain a high quality portfolio of assets and to leverage our distinctive capabilities as a company. We do that by using the know how of what we do best to deliver the value you want as shareholders. And I want to spend a few minutes now saying what that looked like on the ground in 2013, and then I'll take a look at the road ahead for your company. Of course, no journey is ever without its risks, as BP well understands. Tragically, 2013 started with a shocking incident when terrorists attacked the Anamides gas facility in Algeria, murdering 4 BP employees and 36 colleagues working for our partners.
Our thoughts remain with the families and the colleagues of all of those who lost their lives in Algeria. In recent years, we have worked hard to learn and apply the lessons, continue to be conscious about the safety aspects in all we do, not only in routine daily matters, every bit as much when the risks are clearly the highest. And I think that generally that discipline shows. The trends in our safety performance are going in the right direction as this slide shows. It shows how the number of major incidents has been falling, what we call Tier 1 events in the dark green.
You see here how in the Downstream, we actually had the best record in the industry. We experienced fewer serious safety events and had a lower recordable injury frequency last year, and you can read more about our other improving safety metrics in the annual report and the strategic report, copies of which are available to you here today. I see some of them on chairs. It is so important not to become complacent on this. There is always more we can do on safety as well as reliability, which we and BP hold to be two sides of the same coin, both driven by day to day discipline in our operations.
You improve 1 and you improve both. So our safety record goes hand in hand with our record on reliability and reflects the momentum we see throughout the business. In our BP operated upstream operations, plant efficiency reached 88% last year, which was up from 80% just 2 years ago. You can see this on the top right. That shows the proportion of time the facilities are available for use.
And in the Downstream, our refining availability, which is a similar measure, hit a 10 year high of 95.3%. We also maintained a trend of improving the delivery of projects, big projects, to the point that on average we are now completing these multi $1,000,000,000 multi year global projects within 5% of the cost target set when the projects were approved. And in some cases, they're coming on stream early. A decade ago, overruns of 50% were not uncommon in our industry. We are maintaining that strong balance sheet with a rigorous grip on capital discipline and our debt.
We remained within our capital expenditure limits set last year with investments of $24,600,000,000 and also stayed within our 10% to 20% band for gearing for the company. This level of performance is setting a high bar for us in the future, but we are in good shape to strive for even better, and we can achieve even more if we apply this competitive strategy to a portfolio where the watchword is quality, which matches high quality performance to high quality assets. And that is why we have divested non strategic assets and have invested in those that have the quality to grow value year after year. As many of you know, we have completed a $38,000,000,000 divestment program after the past few years. While building a portfolio that will allow us to play to our strengths in exploring for energy, working in the deep waters of the world, developing and producing gas value chains, and running high quality downstream businesses.
You saw the result of this approach in 2013 as BP participated in 7 oil and gas discoveries with great commercial potential, and that's the best record in almost a decade. And this helped us to improve our reserves replacement ratio to 129% this last year and to within a whisker of 200% when combined with our Russian portfolio. Building on earlier we also started up 3 major upstream projects and we've seen 3 more start up already this year and we have more to come in 2014. And right at the end of last year came our announcements on 2 very important long term gas projects. One being the Kazan project in the Middle Eastern nation of Oman and the other, which you can see here, being the second phase of the really giant Shat Deniz project in Azerbaijan.
The pipeline we and our partners are planning will take the gas from Chardanese. This pipeline will run for 3,500 kilometers from the Caspian Sea of Azerbaijan into Italy, with some of the new supply agreements for the gas field now taking us up to the year 2,048. So these projects are expected to deliver value for shareholders for decades to come. Meanwhile, we transformed our Downstream businesses, including a huge program of work to modernize our Whiting Refinery just outside Chicago in the U. S.
It is now one of the most sophisticated refineries in the world strategically located to take the advantage of heavy grade Canadian crude into the U. S. And as such, we expect it to deliver an additional $1,000,000,000 a year of future operating cash flow. By the way, you can read more about Whiting as well as Chaudh Denise, Aman and other topics in the latest BP Magazine, which I believe is also available for you to take home today. And we will continue to actively manage the portfolio, including a further $10,000,000,000 of divestments planned through this year and next year.
And all of this work on the portfolio, plus our emphasis on safety, capital discipline and project execution is making us, I know, a safer, stronger and better performing company. But there is one more important element to our strategy because none of this would be possible without BP's distinctive capabilities. Value comes not just from what we do but from the way that we do it, and this starts with the quality and the expertise of people who work at BP, and I'm very proud of the fact that BP is seen as one of the most sought after employers in the world. It means we can attract the best people and keep hold of the best people. We've also had a long history of developing strong and productive relationships across industry as well as governments and other organizations.
And we also have a history of pioneering advanced technologies. We have recently sharpened our competitive edge at a range of technologies, including new processes for the production of petrochemicals, a wider application of our enhanced oil recovery techniques and in seismic imaging, which is the key tool in finding oil and gas. We have supported our seismic teams by building the world's largest supercomputer for commercial research in Houston to process the vast volumes of data that are generated in the seismic work. Now let me update you on 2 important areas, which are the developments in Russia and the legal proceedings in the U. S.
We do have a unique position with Rosneft in Russia, a position that gives us a 5th of the world's largest publicly traded oil company, operating in a country with a massive reserves and massive potential in energy. Clearly, the situation in Ukraine is currently the focus of much world attention. We will seek to pursue our business activities, mindful that the mutual dependence between Russia as an energy supplier and Europe as an energy consumer has been an important source of security and engagement for both parties for many decades. That has got to continue, and I think we play an important role and a bridge. Turning to the Gulf of Mexico.
We are very aware of the 4th anniversary approaching later this month of the Deepwater Horizon incident. BP has looked to be fair and consistent throughout those 4 years. We have looked to do the right thing by those who were affected by the accident and the spill, but also to do the right thing by our investors when it became clear that the system for compensating claimants was subject to a considerable number of unfounded claims. We have consistently maintained, supported by the findings of the various inquiries, that the accident was the result of multiple causes involving multiple parties. We have a dedicated team within BP looking after the legal proceedings, while thousands and thousands of employees can focus on safe and reliable high quality operations every day and not be distracted.
We remain very committed to BP playing a major role in the future prosperity of the Gulf of Mexico region. That's where we invest 1,000,000,000 of dollars. We employ about 2,300 people and we support tens of thousands more jobs in other businesses in the region. And with that in mind, we're pleased to be the apparent highest bidder on 24 of 31 leases for exploration in the Gulf of Mexico just last month. It's the first lease sale following our agreement with the U.
S. Environmental Protection Agency to lift the suspension and debarment and allow us to contract with the federal government. Our explorers are looking forward to returning to the Gulf as we pick up the momentum for 2013 and we forge ahead as an even safer, stronger BP in search of the best value opportunities around the world. We know what we are good at. We are clear about focusing the company in the areas where we can create the most value.
I've outlined our strategy and within it there are 3 particular keys that will unlock more value. First, we are committed to maintaining capital discipline, that means spending money wisely and efficiently. 2nd, we will continue to manage our portfolio to maintain its high quality, so you'll see change in the portfolio. And thirdly, we will focus on execution, which is to do what we say we will do by completing these multibillion dollar projects on time, on budget and to achieve continuous improvement in our operations. That adds up to a company in good shape, but not at all complacent.
BP is a more compact company and a resilient company. It does have a clear direction and it can respond quickly to opportunities. In short, it's a reenergized and refocused BP filled with great people, and I see their abilities and commitment up close every day. And that's why as I look forward to 2014, I do it with great confidence. And as the owners of BP, I hope you all do too.
Thank you very much.
Thank you, Bob. Thanks again for all that you and your team have done through the past year. So let's now move to the formal business of the meeting. As I've already mentioned, all of our voting is by way of poll. There will be an opportunity to discuss each of the resolutions, and I would like to ensure that all of you that wish to ask questions are able to do so.
I'm sure that I can rely on your support and assistance to move through the resolutions in a business like way. The notice of the meeting contains the text of each of the resolutions. There are supporting notes, which I give which I believe give clarification and background. Resolutions 22, 23, and 24 are proposed as special resolutions. A special resolution needs to be passed by a 3 quarter majority of those voting on the poll.
All other resolutions are ordinary resolutions, which will require a simple 50% majority. Before we take the first question 1st resolution, let me say how I would like to take questions. We have 3 question points that you can see here, A, B and C, here at the front. Only shareholders, proxies or corporate representatives may ask questions. And to do so, you need to go to one of these question points.
And I want to remind you that you give your name to the attendant at the question point, and the attendant will also ask you about the topic that you want to address. When I ask you to speak, please begin by giving your name and your status. Please can you also make sure that the question relates to the item under consideration, under discussion. In the interest of time and given the number of people that are here today, I will be seeking your help in grouping questions around the different themes and hopefully giving one answer. In this way, I believe we will get through the order of business systematically.
As in previous meetings, where appropriate, I will ask some of my Board colleagues also to assist me. In particular, I would like to take questions on remuneration under Resolution 23 rather than under this first resolution on report and accounts. And I would also remind you to ask questions and not to make speeches. Many of our shareholders are unable to be here today, and they will participate by voting on the resolutions by sending a proxy. We will show the proxy votes when we have received on slides behind me after the discussion of each of the resolutions.
This will be updated after the meeting with the poll votes here. And final vote results will be available as soon as possible on our website. So ladies and gentlemen, let us now discuss Resolution 1, the annual report and accounts. That is our report on BP in 2013. I've already made my comments, and you've heard from Bob.
So ladies and gentlemen, I would now like to take questions on the annual report and accounts and on the business of the group generally. I think we have the first one from point A.
Thank you, sir. Thank you. Janice, your name, please? Yes.
John Farmer, Chairman, shareholder. I understand we're beginning with remuneration, is that correct? [SPEAKER JEAN FRANCOIS
XAVIER BOUVIGNIES:] No, remuneration is next one. It is not this one. All right. So we take another question and we hold yours for a little while.
C? Chairman, my name is Richard Greening. I represent the London Borough Visitington Pension Fund and also the Local Authority Pension Fund Forum, which owns 1% to 2% of most FTSE Companies. I'd like to ask you about your comments on sustainability, which you made during your speech. And you talked about the emergence, but not yet commercial availability of more sustainable forms of energy production.
Pension funds have a long term view of this. And I'd like to ask what plans you have to make the company over the next 10 to 20 years more sustainable and what you're doing to realize the opportunity moving from carbon based energy to other forms?
Well, let me first say that, as I said before, we need to realize that in the next, say, till 2,050, this world's GDP is likely to triple, and the world's energy needs is likely to double. And there is no way that we can satisfy those energy demands without a mix of fuels. And in any scenario you see from anyone, fossil fuels will continue to play a large role. But equally, this world cannot satisfy the energy needs through only fossil fuel. And I think we all agree that if the world we cannot burn all the fossil fuel that we now have available, That we have said for numbers of years and continue to say.
And that is why we argue from our side on energy efficiency. We have come much further in energy efficiency as a world than I think most people thought years ago. We are arguing for putting a price on carbon because today as the carbon is free, there is not really any incentive to reduce carbon. And we can see what an increased energy price means to push for energy efficiency. The same would happen with the price on carbon.
And thirdly, because gas is half the emissions of coal, if we switch from gas from coal to gas as soon as we can, this will give us time and pave the way for the energy landscape we wish. We are also investing in alternative energies, and we are investing in the areas which plays to our strength. And that's why we our investments are pretty substantial, for example, in wind and in biofuels. Solar, we realized that we didn't really have much to add to the area because this was more competition about manufacturing glass panels in China. We're also monitoring our greenhouse gas emissions in all of our operations.
And for that matter, every single project that we take decisions on, we also factor in the $40 per ton CO2 emissions and carbon price on CO2 so that we make sure that we are prepared for when we hope a price on carbon is getting introduced. I don't know if you want to say anything more, Bob, on what we do on sustainability than our projects.
No, I think you've answered it well. Energy efficiency right at the top of the list and should be for everybody in this room anytime they use energy. There's no question, as the Chairman said, the world will need all forms of energy, all forms of energy to grow with population growth that we've just crossed the $7,000,000,000 mark. We're going to 9. I would say not only the work that we're doing in alternative energy today, but I would also keep in mind these big gas projects that we do, natural gas has half the emissions of coal.
And that in itself is going to help mankind go through this long wavelength transition to low carbon energy.
Can I ask now if there's any other question around climate? Otherwise, we'll consider that. We have dealt with it and move on. All right. So let's move to the next question, A.
Let's
see.
Good afternoon, Chairman. My name is Mike Porter. I'm technically a corporate representative because I have an ASO. First of all, can I congratulate both the speakers, yourself and Bob, on excellent proposals? They were very clear.
My questions relate to the legal input on 2 aspects of the business. Firstly, on Horizon spill legislative issues and secondly, on contracts with 3rd parties for shared work in the past and the future. There was obviously an overlap between the 2. In each case, can you please confirm that the BT legal team gave advice, which was followed and whether outside legal advice was also used to confirm that provided by your legal department. I must also ask a further question if you reply in the affirmative as I anticipate, which is why was the drafting so poor to enable so many disputes over the interpretation of the cover provided on compensation, briefly mentioned by Bob.
We are also aware of the prestigious nature of Americans, but was what has been reported as successful claims are unbelievable, a point of loose wording in the drafting, obviously, to allow challenges and some successful. On 3rd party contracts, we obviously did not make these tight enough, resulting in BT taking almost total responsibility for the leak. More importantly, our revising such contracts for future contracts of the nature to avoid such lack of responsibility? And finally, have all or any internal or external legal advisers been sanctioned for their lackness? Thank you, Chairman.
Thank you. Any other comments on this matter? All right. So anything on this matter? Yes, you have to come forward to the speaker's point.
Please.
John Farmer, Chairman, shareholder. The board, as a continuing entity, has, through carelessness over the Gulf of Mexico spill and with a history of further explosion and loss of life at the Texas oil refinery disaster has largely, through the Gulf of Mexico spill, on its own admission, wasted $47,000,000,000 of shareholders' funds, with a further €9,000,000,000 provided for and a lot of avowed uncertainty depending on the legal outcomes. In view of that, should the Board not be more contrite and frank in admitting that these assets were presumably acquired when they were for the perceived commercial return from them. And it's really not good enough to argue that with a Perforce slimmed portfolio, you're actually doing better because the remaining assets are the best of those you formerly had.
In other
words, the company has weakened itself by these asset sales, And this year's profits are swollen by a once only revenue from the TNKBP sale of $12,500,000 And accompanying all this, you have a miserly total shareholder return. One aspect of these asset reductions is that they would cause BUG BP carrying its own insurance. Is that perhaps a lesson for the future? Should you revise that? Because you've obviously incurred a massive diminution of shareholder assets.
And will you please be a bit franker between with us over what you are doing to make better, use of a bad job. I'm not so much querying that you've what you're doing operationally, but it is worrying that you seem to have a strategic complacency about the havoc you've caused to shareholder funds. And though I don't want to get onto that at this stage, this seems to be reflected in a blithe unconcern over the amounts that you're paying directors through your remuneration policy? Thank you, John.
Well, the last part, I'm sure we'll come back to. Let me then first start with the question about the legal support. We have worked with 2 law firms, 2 principal law firms, WilmerHale and Kirkland Ellis, throughout the crisis. And we have other firms as well supporting us there, but they are the big ones. The Board takes its own advice through Gibson Dunn and Freshfields here in the U.
K. I believe we have in this extraordinary situation, I believe we have had good sufficient support throughout the whole process. It will forever be debated whether we could have signed a stronger deal on the business economic losses. I think there was nothing wrong. We believe in the Board.
There was nothing wrong with the agreement we struck. But we were taken advantage of, and this is another story how the legal system works. But I would remind you that the most important part, which is the matching where you prove your losses, where payments were made without proven losses, that we won in the appeals court in Louisiana. So I don't think there was something wrong with the deal itself. But it is a challenge.
The U. S. Class action and claims legal side of the system is a challenge for anyone. On 3rd party contracts, we have gone through that in great detail. Maybe, actually, I should leave that.
Why don't you talk about subcontractors,
Bob? Yes. We I think you're referring to subcontractors where we've had an accident working with subcontractors like drilling rigs. I think that's what, John, you're referring to or Mike. I think you're referring to the way our industry works, and I'm going to assume it's the drilling contractors.
No one will drill a well for any large oil company in the world if they are not released from a majority of the liability. The companies are too small. And so those that language has historically been in our industry. We have clearly changed the language of our contracts to tighten up our expectations on their management of safety, their operating systems, the inspections, the quality of people to make sure that they have obligations to work with us in ways that fit our own standards. And the whole industry is moving in that direction.
I'm going to assume that's what you're talking about. 3rd party contractors with our legal firms, they are some of the best legal firms in the world, and I would just add to what Karl Henricks has said that if you write an agreement that has language that's pretty clear, very clear English, and someone decides to interpret it in a different way in a court, you have a fight. And that's what we are fighting in the U. S.
Let me just add to John here before we leave that. Of course, we are very sad for the accident that we were involved in. And of course, it's still ongoing litigations or court cases about what caused it and to what extent it was ours, how we acted through the whole thing. And we are obviously sad for what this has meant to shareholders. But I would say that there is one thing when you talk about that we become smaller and we become safer.
These are it is not so that we try to become safer by being smaller. These are 2 different issues. We are becoming safer through all the work that Bob has talked about, through our functional organization, working through standards, changing the even corporate values, the way we remunerate, the whole way we operate is all aimed at making us a safer company. It's another story about selling off because that has to do with what I said in my speech. That is to do with the business model to make sure that we create the biggest possible value for shareholders.
And therefore, we are selling things that we think has higher value to others than to us and therefore bring us value rather than hang on to them and make sure that every decision we take is done with a focus on value. That is why we have been shrinking. And you can see that I think soon every single oil major are now following our example. Before we move on, let me say that Helen Wildsmith, I think, has a question on climate. Make sure when we have questions on topics that anyone that wants to follow on with questions on that comes along, so we can move from topic to topic.
But I'm glad to take a question from Helen.
Thank you. I'm Helen Wildsmith from CCLA, the Church and Charity Mutual Fund Manager. I'm also here representing the largest members of the 13,000,000,000 Church Investors Group and the local authority pension fund forum as well as some of the other mutual fund managers in the city. We're all long term BP shareholders and we very much welcome the ongoing open engagement we have with you. And we're here to be supportive through the long wave transition to a low carbon economy.
We very much welcome your public stance about a price on carbon and your active approach to portfolio management. I have specific questions, one around the international negotiations carbon disclosure project. On the carbon disclosure project, we recognize that the current one size fit all approach has its limitations and we very much welcome their move to a sectoral methodology starting with an oil and gas pilot. But we do remain disappointed that BP has a relatively poor performance band within the CDP system compared to the other oil and gas supermajors. Only Total also scores a C in the A to E performance spending.
So my question is, will you continue to engage with your long term investors and CDP in order to disclose the actions necessary to reach a B on the CDP metric? And also, would you join Total in thinking through what leadership position integrated oil and gas companies can take to the UN Secretary General's Climate Summit in New York in September? Thank you.
Well, let me first say, Helen, that we equally appreciate and enjoy the discussions that we have together. We will and are engaging with our long term shareholders on all the issues that relates to social responsibility. We are disclosing information and data about our activities to you as we feel appropriate. We're not it is not possible for us, or we will not communicate particular ambitions on scores. There are many activities from many bodies around the world, and we don't take a stand on each one of them.
But as I said, we do appreciate our discussion, and we are working. We are looking very careful now to U. N. And international organizations on their programs for climate change. There is a summit in September, and that is an important one, and we are watching that carefully.
We have not just received the invitation there, but we will, of course, participate if we think we can if it's meaningful for us and for the meeting. All right. Should we go to C?
Good morning. My name is Stan Grierson, and I'm here as a private shareholder and as a proxy for the German nation with just under 2,000,000 shares to vote. I'm also the Chairman of ShareSoc, a United Kingdom company which supports the private shareholder in every respect. This is a small question. It goes back to sustainability and lack of it in relation to wind farms.
I notice on page 3 that you claim the installation of 15 90 megawatts of capacity. Finally, on Page 37, and I would comment that your annual report is an excellent piece of obfuscation, almost the best in a very competitive market. That you have had this entity up for sale. First question, have you sold it? Secondly, you quoted capacity.
What would the utilization have been, bearing in mind that the figures for the U. K. And Europe are around 21%. How does that compare with the United States? We have about 3,400 of these things in the United Kingdom.
Even our Prime Minister knows that land based turbines are a waste of money. Could you confirm that you've sold it? How much money did you make or lose on this investment? Thank you.
Well, let me first say that wind we have been involved in wind for quite some time. When you look at wind turbines, it is a very, very long term business. You put up the wind turbines, you own them for a long time, you seek long term contracts, and you want to make sure that there is also long term existing subsidies. But it becomes like a bond. It's like investing in a bond.
It's not necessarily something that plays to our strength. And in thinking about how we can best use shareholders' money, your money, whether we should do it in a wind farm or we should do it in other activities, that is where we think we probably can find other activities that place more to our strength. That's why we offered it. It did not go through. There were no buyers for it.
It's still an okay business, and we're keeping it. But I'll leave the details to Bob here. 21%, what did we do?
Well, so we're doing much better than that in the U. S. We do have 16 major project wind farms in the U. S. In 9 U.
S. States. It's more than 1,000 large wind turbines spinning. It is an efficient business, and it actually generates operating cash flow for the company. So the reason we chose the United States is because its scale, it can be done on very large scale, and projects that can be done on that sort of scale across land actually are profitable in North America.
We did, as John Farmer very eloquently talked about, we had to take actions to look at our portfolio because of some of the events in the Gulf of Mexico, and we chose to investigate possible sale of that wind business in the U. S. We did not receive bids, and we received 17 bids, none of which we felt were acceptable for the shareholders to sell. What we did sell is our land bank, which could have expanded to further the business. So we still retain that business.
It is a profitable business for us, and the utilization rates are very high, far higher than the 21% that you They're up in the 80% to 90% range for us in the U. S. I think you mean the utilization of the turbines themselves with wind.
Thank
you. Thank you. You don't agree with it, I think you can tell.
Let's go to B.
Okay. Pamela Collison, our shareholder. In the last week, both Samir Brickhoe of AMEC and Keith Cochrane of the Weir Group as well as the Oxford Economics Group has said that the business implications of Scottish independence would create numerous costs and uncertainties. How does this affect BP?
Well, let me first say that the referendum in Scotland is obviously something for the Scottish people, and it's an important one. We don't have an ambition to try to advise one way or the other, but I would assume that views from business leaders active could add value to that discussion. It wouldn't have, I would say, any major implications long term, but anything that creates uncertainties will always mean more caution from business investments because one would know how it's going to play out. I think that's all one can say, but our commitment to the North Sea certainly continues. I don't know if you want to say something.
We have probably said enough on Scotland.
Yes. I think I would say, I mean, it is important to BP and we're very deeply committed to the North Sea. We have a 10 £1,000,000,000 program of investment over the next 10 years in the North Sea. And so therefore, uncertainties do make us think carefully about issues like currency and other things. So we are, in fact, keenly aware, and it does create uncertainty.
So we're not going to try to guide the direction. But we, like the other businesses, have major questions about uncertainty. And if it were separate and joining Europe or not, these things do affect a company who plans to invest 10,000,000,000
dollars So I think we go to Station A. And if I'm right, I think we're going to talk about Russia. So I'll just encourage you, if you want to make questions about Russia, to take opportunity here after Mike here.
Mr. Chairman, ladies and gentlemen, I do have a question about Rosneft, and my name is Mike Everett from Standard Life Investments. We're a long term investor in BP. If you would allow me before my question though, I'd like to make a small comment about our engagement on remuneration as well.
Can you why don't you come back and do that?
Are you sure?
Yes. Because my question is to do with Rosneft.
All right then.
For a number of years, we have either voted against or abstained the remunerate on the remuneration related resolutions. At last year's AGM, we urged the remuneration committee to raise its gain and to make improvements to address our concerns. We specifically asked for the remuneration policy to be strengthened by reducing the potential for significant rewards for achieving unchallenging performance targets. Over the last year, we have engaged with the company about our concerns, and I would like to place on record that there have been some improvements. However, although we recognize these improvements and the general direction of travel, the journey is not yet complete.
In light of these improvements, we have decided this year to support the remuneration resolutions, but I would like to make clear that the importance we place on the Remuneration Committee exercising its discretion diligently and effectively. This is essential to ensuring that the levels of award are commensurate with not only improvements in underlying financial performance, but also the broad experience of shareholders. We will continue to hold the remuneration committee to account in this regard. And then closing my question, I note the financial statement in the financial statements that BP believes it maintains a significant influence over the operations of Rosneft, thus allowing it to account for its holding on an equity basis. This assessment was obviously difficult, causing the senior statutory auditor to visit Moscow on 3 occasions.
Against this background, we were a little uncertain about the BP's assessment of significant influence. And other than Mr. Dudley's position on the Board of Rosneft, could you give some concrete examples to the significant influence you have over its operations?
Thank you. Let's see if we have more questions on Russia here. Si?
Thank you, Mr. Chairman. My name is Louise Rouss, and I'm a shareholder. Given the recent events in Ukraine and Crimea, it's quite clear that the best that could be said of the Russian political environment is that it's unpredictable. Given the Russian state's significant influence in Rosneft, what information can you give us about how you are navigating those difficult, unpredictable political waters to ensure that, for example, Vladimir Putin does not decide one day to annex BP's share in Rajneft?
And secondly, given that the imposition of international sanctions at a more stringent level could directly impact on BP's operations in Russia and indeed Mr. W. Own position on Rajnev, for example, have you made any representations to the Foreign and Commonwealth Office with respect to the sanctions that the British government may seek to impose?
Let's first have B here.
Right. My name is John Dawson, and I'm a shareholder and VP. Right. How much oil and gas does the U. K.
Get from Russia? And given the recent hostilities, and this is in relation, largely, to what Bob Dudley said, because you seem to be in favor of big investments in Russia. But given the recent hostilities in the Ukraine and in particular the Crimea and the European Union countries saying they would like to impose economic sanctions on Russia. If we are too heavily dependent on Russia, say we get 20% or 30% of our gas or oil from them, we're in Putin just laugh at us saying that we'll impose economic sanctions on them, and he could just turn off the oil and gas for the U. K, and that could do us more harm?
Isn't it very naive to invest too much in Russia? Can we not get more of our oil from friendly countries like Norway?
Right?
Yes. Thank you. See, I think then we have to answer a little bit here.
Okay. Hello, Mr. Chairman. Charlie Kronick, shareholder. Thank you very much.
I want to follow-up on the question from the gentleman from Standard Life. My understanding of the original deal with BP and Roche Neft was that there would be in fact 2 seats on the Roche Neft Board that Mr. Dudley would have 1 and there would be another BP representative as well, because obviously very concerned about the potential to have oversight over a company that's responsible for more oil spills than all the rest of the oil companies in the world put together. And recent news reports haven't shown at least obviously to any to a casual reader that there is another BP representative being considered beyond Mr. Dudley.
So just wanted to ask if in fact there was going to be a second representative on the RocheNet Board.
Let's take one more and see if we can get to a comprehensive answer.
From B? Yes. Good afternoon. My name is Robert Barrett, and I'm an ordinary shareholder. This issue of Russia and the operations of BP in Russia do concern us.
I think that it is a very significant part of BP's activities in both volume of production and perhaps of our hopefully of our profits. However, this issue of high risk concerns me particularly, and I no doubt think that many shareholders think so as well. I wondered what impact the pipeline that runs from Russia through Ukraine and then into Europe has on BP's activities. And I also think of another risk is what is the prospect of should something turn terribly foul, should Putin and his comrades get on the wrong side of the United Kingdom and its allies? What the risk is of perhaps of them nationalizing the operations in Russia of BP and the huge financial impact it would have?
Let me start by answering this, and then I'm sure that Bob will help to fill in also. Let's, 1st of all, agree that Russia is the biggest oil producing nation in the world on par with the U. S. And Saudi Arabia and increasing. It has probably the biggest reserves in the world.
It's an important area to be in. And today, you will find that all of the oil majors are now involved in projects or upcoming projects
in Russia. Let me
also say, just so we of feeling for the balance of the matter. We have €15,000,000,000 invested in Rosneft, but that's equal to what we have invested in Azerbaijan right now. And we have more coming up in Shrachtennis, the gas project, Shrachtennis 2. It is equal it's equal to what we have invested in just PSVM in Angola, far less than we have in U. S.
So just to give you a feel for proportion here, I think all of it is a troublesome situation and we're following it very, very closely. We are in close contact with political leaders in different parts of the world, but of course, here at home in the U. K. We all history, I believe, shows. And remember now that, yes, we are in Russia, but we are also producing right now in Egypt, which is in a very difficult situation, and we were on our way into Libya with our exploration team right when the civil war broke out.
We are in Iraq where we are producing. We are in Angola, which had civil war 10 years ago. I think we have to understand that the hydrocarbons aren't necessarily always in the countries that are close to us and we know well of and have different political systems. But let me also say that we have, with the exception of Libya, in history only seen not seen examples where the oil and gas industry gets jeopardized by difficult situations. This is, for these countries, a lifeline.
So they will do anything they can, as they right now do in Egypt, for example, to keep almost in very difficult situation to keep it going. And I would think for Russia, and we feel they are very keen on keeping all the relationships, the business relationships. Ideas of expropriation and so on would be will hit themselves dramatically. I can't see why that should happen. We have the question on influence and seeds and so on.
Maybe you should go on there, Bob.
Okay. Thank you. I'd just reinforce something that the Chairman has said as investors and BP. There are few industries in the world that are longer term than the oil and gas industry and the mining industries and very long investment cycles. And we have a century of history of working through and during sometimes where there's conflict between nations.
We don't get involved directly in those. But right now, with Rosneft and the work that we're doing with Rosneft, it's sort of day to day business as usual. There are recommendations. The Board is functioning. It has an impact of things daily.
If I and the examples Carl Hendrik said about Egypt and Iraq, we've worked in Egypt for 50 years. We've been working in Iraq. That is part of what we do as BP, and we've done it well for decades decades. To your question about the integration, business as usual is occurring. I am on the Board of Rosneft.
I joined the Board a year earlier. The agreement actually said 2 directors would begin in June of 2014. So I was asked to be on the Board a year early, and I'm on the Strategic Planning Committee of the Board at Ross Neft. I'll be traveling. I've traveled there frequently.
I received no compensation. I've elected not to receive any compensation for being a member of that Board. And we'll see in June about the 2nd selection of a Director. I don't think that is actually the indicator of something there are other world experts that BP might ask to be on that Board as well. In terms of influence, we are discussing and have discussions with them on expertise and people around engineering.
BP, you need to step back on Russia and think about TNKBP, which was a really good investment for the shareholders of BP, an investment of $7,000,000,000 made that, in the end, was sold for 26 $1,000,000,000 and had $19,000,000,000 of dividends during that period. Now that company is now represents about 35% to 40% of the value of Ross Neft as in a combined entity. And 700 of the top 1100 managers coming out of TNKBP are in Ross now. So many of the business processes that we worked with over a decade in Russia are, I think, very well reflected inside of Ross now. I applaud Ernst and Young, our auditor, who made 3 trips there.
I think that's a good thing to do. There's one of the largest mergers in the history of corporate world occurred, and I think they were diligent in just making sure that the processes were in place as BP closed its quarterly results, that they were there to make sure that the RossNet processes matched up with the BP processes so we could accurately, in a very timely way, provide results. Personally, I think it's remarkable because when we started TNKBP, we couldn't close the books on a quarter for 6 to 9 months. And so that has occurred very, very quickly. And I'm surprised it only took 3 trips to make sure, and it's worked very, very well.
And I could give you lots of other examples of expertise and planning and that we're having with Ross now. Robert, I'll move around. Louise, your point, there is a lot of tension and there's a lot of look at this. I can only tell you that right now, none of us know what can happen in Ukraine. Ukraine is a very complicated country and always has been.
It has people from definitely from different backgrounds in the country. Well, let's see what the country resolves itself of. But we have a view. TNKBP, at one point, was the largest investor in Ukraine. We have a good sort of intuitive feel of how complicated that country is.
Robert, your question about volumes, the production, the Ukrainian pipeline, it doesn't really affect us. There is more than one pipeline from Russia into Europe. There's multiple pipelines, but there's a very big one that goes into Ukraine, supplies gas not only to Ukraine but some of the European countries beyond that. I think Russia has not stopped the flow of gas through that pipeline because they don't want to stop the flow of gas into Europe. But the gas also hasn't been paid for, so they raised price on the gas, but they weren't getting paid for the gas anyway.
So I think it's more complicated than what you read in the headlines on this. But Europe let me restress again. Europe and Russia are integrally linked in the energy markets of electric power, gas. And you just can't neither side can, and I believe will, just turn this off. It will be a big problem for everyone.
And in terms of supply to the U. K, there is probably some natural gas that comes over because Europe's Russia supplies the majority of gas into Europe. Some of that will work its way through the interconnectors and come into the U. K. From time to time.
Norway is also a big supplier. Algeria is another big supplier to Europe. That's connected mainly by pipelines with some liquefied gas. Oil is a more global commodity. It moves around the world on ships, and I think that will continue to happen in any case.
Anything, Brian, that you want to add on the auditors? Or are we?
Yes. I mean, to Mike's specific question, I think Bob's covered it. It's an accounting standard requirement in terms of significant influence, and I think Bob's covered the salient points. And just to sort of finish, that gets reviewed by the Audit Committee on a quarterly basis in terms of the equity accounting, but we don't have any issues in terms of equity accounting as of now.
All right. So let's now move to point A.
My name is Salim McRobert. I am a private shareholder. I would like to inquire about BP's commitment in Northern Ireland. They are now the last quality petrol supplier left there. And in fact, they aren't even in the whole of the province.
It's mainly North Down and up towards the North Coast in the eastern part. I and some other people I've spoken to find that BP's Petrol does much better at MPG than, for instance, supermarket Petrol or some of the other sort of strange brands like Go and Tulp and Star, we don't know much about. Could someone please let me know if you do have a commitment to remain there? And Shell and ESO have left several years ago. Thank
you. I think, first of all, we can certainly agree that BP Petrol is the best. But let's move to Ian Korn here.
Well, thank you, Alan. I mean we are committed to the U. K. Market, and we're committed to many parts of the U. K.
Market. We are concentrated mainly in the southeast of the U. K, the southern belt of Scotland, motorways and parts of Northern Ireland. Our focus is on quality, and so your points about fuel are correct. And our focus is also on quality in terms of the offer we make alongside the fuel.
I can't give you a long term commitment to any part of the U. K. We review our portfolio all the time, but it is currently being invested in. It is growing both in terms of profit and in terms of customer base. And as long as it does that, we'll be committed to it.
Thank you. All right. We go to C.
Thank you. My name is Grace Smith, the shareholder. And my question is a reprise of a question that was raised last year. When you were asked if BP was a living wage employer and if all employees and those of your subcontractors
And I would
also say that Mr. Dudley did not know the reply to that last year, so I'm hoping he's had time to find out. And the second part of my question is what monitoring systems do you have in place to ensure that similar principles are read out globally?
All right. Let's see what Mr. Dudley, if you spent this 365 days wisely here.
Well, Grace, thank you very much. I did go back after the meeting last year and asked and I have asked again. So following your question last year, I can confirm that we do pay this rate our workers here in the London office. So absolutely, the answer is yes. To the second part of your question, as BP is a global organization, we do not have a U.
K. Specific policy on the global wage but rather have standards which apply to our operations and where we work in the communities and where we work that help us act consistently with our values. But we don't apply that globally. But we will continue to talk with you. And let's have some further discussion around this.
Okay. Subcontractors because it's not unusual now for large corporations and local authorities and public bodies to write this into their tendering process when bidding for contracts?
Well, we do have it with our subcontractors in our London office. I can tell you that. And you've asked me another question I need to go find out about, which is do we put them in our tenders for subcontractors? I can't actually commit to you that we do that in our contracts, but I will find that out. We can be in touch with you before the next AGM, but you could also ask me next year as well, and I'll have the answer, I promise.
All right. Let's go to B.
Chairman, I'm Doctor. Basu. I'm a shareholder. Let me take you to the deepwater explorations in the Indian Ocean, something about that you discussed last year, but you haven't mentioned anything about BP's exploration in Indian Ocean. I understand there is enormous quantity of gas and oil reserve is around Bay of Bengal and right across to the offshore site of Myanmar.
Now I understand BP has got a right to explore productivity right there, but I understand more than 60% of the productivity right is given to 1 single man, the Mr. Ron Bani of Reliance Industry in India, the richest man in India. Now what proportion of rights or exploratory rights the BP has got in that site? And is that a profitable activity with respect to BP? Could you tell us, please?
Yes. We did acquire 30% of the Reliance Gas business some time ago. The problem in India is that it has a gas price set by the government at I think it's $4 now. It's $4 while they are dependent on imports because they haven't been using their own resources as they could, which means that they buy import at the level of $15 to $20 and sell it on in India for 4. That big subsidy cannot continue.
That is not the way it can work. Everybody agrees on that. A decision to raise it to the double has been taken. Now it's been put on hold till the middle of next month, waiting for the elections results to come through to not be part of the election debate. This is very important in order to make India to start up exploration and production projects in India.
But we have made 2 big discoveries. You should tell us more
about it. Doctor. Vaz, we have good news. The gas price is maybe not the best news, and it is really important policy for India or else the industry won't grow like it has a potential, but we've had a discovery in something called the Corvary Basin down towards Sri Lanka Offshore. That's one.
And the second one was underneath the what's called the D6, D1, D3 complexes in the Durabat Basin. We've had a deep gas discovery, and we've drilled 2 appraisal wells right underneath the facilities there that are very, very promising. And Reliance, as you mentioned, is one of the oil and gas companies in India. There's, of course, ONGC, which a much bigger national company that also has discoveries of gas around in that area. So I think India has been a good long term investment.
It has been a disappointment in the short term because of the approval processes have taken longer and then the gas price must move. But assuming those things begin to happen, we have found the resources that will be quite profitable and could build a much bigger business over the next 2 decades. And India needs every molecule of energy it can find because it's importing all this expensive natural
gas. So if
you have any influence, please pass on the message.
Thank you.
Thank you. Thank you.
Name, please. My name is Ken Mahany. I'm an ordinary small shareholder. Good afternoon to all. Best of luck for our 105 Annual General Meeting.
Best of luck to everybody. Although when I read the report, I get various question in my mind. 4th quarter losses, dollars 1,000,000,000 write downs in Brazil. I heard you and your Chairman speaking about energy and so on. But are you you doing research in this field?
Are you doing research in sectors and sex, sexuality, and sex, are you doing research in sexes?
I'm not sure we understand the question here.
What I'm asking you are you doing any sex?
BP Back Sexuality Research. As to the question, I'm not sure.
BP backed security in research. Do you do back research in sexes?
Why don't the 2 of you try to figure out the questions so we can get it right. And then in the meantime, we go to Steve.
My name is Samantha Hurley. I'm a member of West London Citizens and here as a proxy for Timothy Forster. We were very pleased to have met with David Jackson and Emily Carey recently after attending the AGM last year asking to discuss the living wage for staff employed by BP or on BP premises. We'd like to thank the firm for engaging with us at senior level and for opening the conversation. Please could you confirm that the company will maintain an open
dialogue with West London citizens on this issue?
Thank you. I think we have been on this issue? Thank you.
I think we have been addressing the question before, but we can confirm that. So should we now see if we have did we get any question there? All right, next one. We go to B.
Good afternoon. My name is James Grant. I'm a private shareholder. I want to ask the Board to consider a name change for the company because the name BP is synonymous with British Petroleum, and that, I think, has been detrimental to our interests. In the last 4 years, BP has paid out 1,000,000,000 of dollars to the Americans because of Deepwater Horizon.
I contend we would have paid out less if more people understood that BP employs 1,000 of Americans. In Russia, Mr. Putin is quoted as saying that Britain is a small country that no one listens to. There's a very strong case, therefore, for dropping the name BP and adopting a name from BP's past, such as Atlantic Richfield, Amoco or Castrol. Will the Board consider this, please?
Well, let me say, I have a we haven't debated it, but I have a quite clear own view of this. First of all, I think if we were to be or are considered as British, I think it's a strength. I think we should be proud of our roots, and I think we are and I think we can sometimes when we look at what we've been through in America, we could see or feel that we the British companies seems to be harder treated than, for example, American companies. I don't think we, when we look at it in a broader scale, America see that because the biggest fine last year was for JPMorgan, dollars 13,000,000,000 and Adarco just recently paid $4,000,000,000 for pollution and round sites in America. I think it might seem like that, but I think the American government and the system have stepped up their treatment of business in various ways, but I don't think it's been directed to us.
But I think that our heritage of having been having operated around the world and seeking to learn about cultures and evolving in the countries where we are, I think it's been an advantage. But we will keep your question in mind. A? Can you introduce yourself, sir?
Captain David Hawker, ordinary shareholder. Our tanker fleet is something we should be proud of, shouted from the rooftops, especially as seafaring and science were what made Britain great. We are told that young British people are falling behind in the study of maths and science, and there are consequent skill shortages. Surely, television programs telling about the life of and in our ships and the importance that they are to the nation could help to inspire young people in the importance of studying science and the very worthwhile career opportunities. We could compare the size of the British tanker fleet with the size of the Royal Navy.
And I believe such a program could do more for the public relations of BP than any number of advertisements.
Thank you, sir.
Thank you. I think we might have another question on the same topic. All right, Captain Hawker. I'm glad that you spoke this time because every time when I read my briefs for the AGM, I've learned that we have 197 ships of which 2 are double hulled. But you've never asked about it, so I'm not sure the number is correct anymore.
It might be different.
Any view there, Bob? Well, I think Captain Hawk are great. I mean, your enthusiasm for BP Shipping is fantastic. It is a very important part of the company. We believe to understand the movement of hydrocarbons around the world, we need to have a direct experience in shipping.
Your idea of a program is an interesting one. We'll take it back to John Ridgeway, who runs our shipping organization. Katrina Landis, who's also responsible for it there, we'll take that back as an idea. You are absolutely right. One of the greatest threats to our industry, and I think Britain's competitiveness is making sure that the STEM cells of science, technology, engineering and math are progressed and that young people very early on realize that these are very important components of a career.
So I appreciate your comments very much.
Thank you.
Thanks of all. We go to C.
Hello. My name is Richard Solly. I'm a shareholder. And my question concerns litigation, the costs of litigation around the company's former operations in Colombia. In the mid-1990s, a BP subsidiary called BP Exploration Colombia Limited managed the construction of the Ocensa oil pipeline.
Since 2007, this project has been the subject of a legal subsidiary in 2010, I understand that BP is still responsible for the financial costs of this legal claim. The case is due to come to trial in London later this year. Given that BP has previously settled cases related to the Ocensa oil pipeline and the amount of legal expenses that the company must be incurring in over 7 years of litigation. Can you confirm that the decision to litigate this case at great expense as opposed to entering into a settlement has been signed off by the whole BP Board?
So should Brian, are you interested in giving a first comment?
No, I'm sorry. I'm not familiar with the specifics of the case you've talked about.
I've got either Richard. We'll certainly bring it forward. But our recent experience in settling things, leads often shows that it doesn't actually settle things. So if our organization has made the decision to litigate it, that would seem like the natural course for us to be taking.
I know the case a bit because we there was a previous case where we actually settled because we did agree that we'd had some impact on the case. On this one, we litigate because we don't think it's right.
And I think it's scheduled to go to a trial in October, and I think we like you said, we do believe we have a strong
advantage.
Phil Clarke, shareholder. On Page 236 of the annual reports and accounts, looking at underlying replacement cost profits, pre interest and tax, I note that profit has fallen from €32,000,000,000 in 2010 to only €23,000,000,000 in 2013. I know there are a lot of factors in there such as production costs, refining margins, but also, of course, the fact that the company is a lot smaller now or as Mr. Dudley put it more compact. I was looking at the sustainability review on the website, so unfortunately I can't give you page references for that last night.
And I note the total number of employees of the company has increased from 79,700 to 83,900 in the same period despite profits and the size of the company going down. And the cost of those employees has risen from 12.5 £1,000,000,000 to £13,700,000,000 Also, even more astonishing given the company is smaller, group leadership has increased from 482 in 2010 to 530 now. Now there's possibly a whole host of questions there, but can I just restrict it to this please? Given the company is 25% to 30% smaller, why has group leadership increased by 10% from 482 to 530? And secondly, can you please provide us some assurance that the company hasn't become significantly more bureaucratic and over managed following Macondo and we're still focused on delivering profits for the shareholders?
Thank you.
Yes, it's a good question, and we appreciate it. And we spent a lot of time on it. We discussed it as late as an hour ago. Let me hand over to Bob and the number of employees. We should just know that when we are selling, which we have done, a lot of the projects we've sold has been aging projects, and these aging projects are almost written off and therefore have a high profitability, although the cash flow is no different from any other wells.
So when you sell them off, although they may not last for much longer, it actually hits the profit significantly. But I'll let Bob take you through the number of employees here.
Phil, yes. I've got well, we've had the same debate as the management team as well as with the Board about the number of people. We've actually recently completed a pretty in-depth review of our employment around the world and why, and it really is due to one single simple thing in terms of why the numbers have gone up. And that has been the significant investment that we have made in Brazilian biofuels, which is an agricultural activity that has brought with it 5,000 people into the company since the numbers that you quoted. So it's the commitment in alternative energy that is the primary projects with people, but we've also been investing in these big projects like the Shandinese project in Azerbaijan and Oman, which come with a lot of people are now building these new projects, but it's primarily the biofuels.
The number of group leaders, I just checked those numbers, were down to, I think, 505. Mean, it's not an objective of ours to reduce the group leadership. But as part of the portfolio in alternative energy, we have brought in people in areas in alternative energy that have increased those numbers somewhat. That's the primary reason. It's a good question.
We are a smaller company. We are working very hard to make sure that the overheads of the companies and the things which affects many things. It even affects sponsorship and many things that we're having to shrink down that are good to do, but we need to shrink this down to fit the more compact size of the company here, an active effort on it because it is your money. It is the shareholders' money.
All right. We'll go to C and then back to A.
Mr. Chairman, my name is Catherine Baird, and I'm here as a representative of ShareAction, which is a shareholder. I understand that the company is a member of a policy group called the American Legislative Exchange Council. As I'm sure you are aware, a number of FTSE 100 Companies have ceased being members of ALEC because of certain controversial policies it supports, particularly linked to gun control and violence in the U. S.
I'm sure BP does not agree with these particular policies, but given that the company is still a member of ALEC, can you give us examples of ALEC policy positions which you do support, which would justify the company's membership?
Thank you.
Yes. And I'll hand this over to Bob on this specific question. But in general, we obviously do not participate in party politics or so. But lobbying is also an important part in educating our political leaders about the facts. It's an important part for us, and it's an important part for the political life.
And we will do so when we think it's the right thing for BEP to do so. Do you have a comment on ALEC?
Well, I actually I don't. We are involved in a variety of trade organizations. The U. S. Is where we have more employees and more capital invested than any other country.
And we I'm going to look into it. That's I'm going to just give you that commitment. We are involved in many organizations to a degree, some of which have very broad industry segment issues, and sometimes those trade organizations are divided. I'll find out. I think it's a fair question.
We certainly don't support some of the things that you mentioned, but many of these trade organizations are very, very wide.
Thank you. Okay. My name is Jean Archer. I'm a long term shareholder of BP in my own right and through various family trusts. This is the first AGM I've been able to come to since the Gulf of Mexico problem.
I spend a great deal of time in Louisiana where I got an investor's visa, and I can tell you that BP is a laughingstock. Louisiana is the most officially the most corrupt state of the union, and making claims against any organization is a game there. I mean, for instance, if you're driving after dark, people stand just in front of the traffic lights. And when they go green, they walk in front of your car, all the cars, in the hope that one of them will knock into them so they'll be able to make a claim. And when a bus has a crash, everybody in the vicinity climbs on it so they can make a claim for being damaged.
And even friends of ours in Louisiana doubled the size of their house. They're very well off, but they doubled the size of their house on the strength of obviously fallacious claims against FEMA and Road Home. And so everybody who could conceivably write a letter claimed against BP. And just to take up the point that was made by somebody earlier, the fact that it is British Petroleum did make them think that it was even fairer game than it would normally be to make a fallacious claim. I heard that you had recently started to contest some of these, but I'm afraid that you're trying to shut the stable door after the horse has bolted because tremendous numbers of people are laughing all the way to the bank on the strength of our shareholder money.
Well, I think you have I think you have the you're describing the atmosphere there very well. I can tell you that we have stopped quite a lot.
Steve? Good morning. Good afternoon, Chairman. Robert Muriel. Chairman, as you are responsible for the board, I admire the way you've chosen people who have great backgrounds for this board.
And I am concerned, except perhaps for one person, but other than that, I am concerned about the amount of outside activities these people have. And that extends beyond the actual Board we see today into even the executive team. Now how does the executive team dealing with the complications and size of a company like BP managed to have outside interests and do a proper job for BP, and that must apply in some ways also to the Board people. One of the other things on the Board that surprises me, you have a director for downstream, but you don't have a director for upstream. That is very surprising.
And then when it comes to the American directors, there are 5 of them. 4 of them are on this Gulf of Mexico committee. We talk about what's happening in terms of claims, but I just don't understand why the Americans representing a major British company can't go to the government and say it's high time that this business of aiming as a sport, frankly, to take as much money as they can from British companies should at least be disencouraged, if that's the word, stopped in some way? Thank you.
I'm not sure there is so much to comment on it because I understand where you your feelings about the whole matter. But let me just say that, for example, our American representatives on the Board have been incredibly helpful and a huge support to BP through this whole thing. What we might not realize is that the American Constitution is such that it leaves a lot of freedom to the individual states. And even the American president, he may weigh in with his personality, if you like, but each state have their right to run their own legal system, and he cannot instruct people in when, for example, it comes to the business economic losses and so on. But we have had I would say throughout the process, we've had not only tremendous help from all the Board members and our American representatives, but also from number 10 and the Prime Minister and everyone.
Everyone has pushed in this matter. It's a big complex matter. Maybe we should just answer the upstream and downstream, and maybe I should say something because you're part of it. The business is from a financial point of view, the Upstream is a big dominating part. 2 thirds or more in numbers of people, the Downstream is the big part.
But in the upstream and because of the importance of it, Bob has been the upstream head himself. And now we have a Lamar Mackay is now heading up upstream, but he's not on the Board because Bob is there. So but you can be sure that upstream is taken care of well.
The background and all these other jobs that directors have, how do they find time, especially the executive team, how do they find time to concentrate on BP?
Well, let me say on that thing, the breadth of the Board here, we have half of the Board has experience from the extractive indices in various ways, not just spending time have been worked only there, but in different parts. We have gone through I'm sure we're heading to 100 board meetings now since the Gulf. In an absolutely remarkable way, this board has stood up and been through Gulf. In an absolutely remarkable way, this board has stood up and been through everything. I think maybe every year, 1 or 2 has missed 1 board meeting because they've been called with sometimes with hours notice and spent a lot of time on it.
I think we can probably conclude, and I'm not saying that to brag or boast or anything, but I think this Board is probably the most educated and knowledgeable Board in our industry today for, of course, all the wrong reasons. But it's been remarkable how everybody has come together, executives and non executives. And I think that is the way the reason why we, I believe, were the first or were the first to recognize value over volume and that we needed to take a new approach as an oil major. And that was because we've had all that intense debate. And sometimes it's even easier for outside Board members to actually see where how an industry is perceived by shareholders than the industry people themselves because they work in it, take a lot for granted.
So I think it's been a very mutually beneficial discussion.
But should the executive team itself have all these outside obligations?
Well, we only have one that has an outside obligation. That's Jan Korn that is sitting on has been sitting on Rolls Royce Board and now on BT. I think actually for executives, it's not a bad thing to have an outside position because they can then see how it's they can better understand how the relationship between the Board and the executives actually best work on it
as you wish.
Thank you.
Hello, Chairman. I'm actually asking a question on behalf of Mr. Navalny who, apologies as he's just recently recovered from a having difficulty speaking.
So I'll ask his question for him.
His question refers to an article that was published in the Financial Times in February of this year, which states that BP is backing a global study being carried out by the New York based Center For Talent Innovation into the challenges faced by Lesbian, Gay, Bisexual and Transgender employees in multinational companies. The article states that BP has declined to comment on its backing from the research. And Mr. Navalny just wanted to know could we confirm that BP is backing this research and any other comments you might have?
Very good. Thanks a lot. I'm glad you did this. Bo?
Blair, thank you for clarifying it. That was good. I think we are involved in a number of global organizations who are looking at diversity and talent and what we want to do. We do want to encourage more diversity of women in the company. We have some real targets on that.
So there's a center there that I believe we have some involvement in. I really can't comment on support for a particular study that that center is doing. And I will ask, but I think we have some involvement with the center, but I don't know about a particular study that an organization may be doing. And that's kind of the best I can do with your question.
Thank you. And thank you for the QD because I had a stroke. This is my first meeting after late stroke. You see, doctor told me to go in the meeting and ask question. You see, that's why I'm here.
Thank you. Thank you.
Thank you very much.
Very well done. We're glad you did that. And come many more times. So thank you for your questions. The votes now we're into voting.
So the votes received from shareholders not here today are now shown on the slide behind me, and we have 98.7 percent for. So let's now turn to the next one, which is our remuneration report. Our report this year reflects the U. K. Regulations on directors' remuneration, and so it's divided into an annual report on remuneration and a separate policy report.
The annual report on remuneration sets out and explains the outcomes of various elements that make up the 2013 total remuneration. This is resolution number 2. The policy report explains our proposed remuneration policy for the next 3 years, which is subject to approval by your shareholders, and it will come into effect at this AGM, and this is resolution number 3. The aim of this policy is to ensure that the executive directors are remunerated in a way that reflects the and All these resolutions both relate to remuneration, and I would like now to take all the questions on both the report and the policy together. So any questions?
C.
Peter McKerran, a shareholder. I'm not representing anyone, though you might think I should be representing the simple minded. A question to each of the directors. By what multiple of the average BP salary does each director consider it reasonable to be remunerated by, including salary, pension, bonuses and so on?
I think this is a question that is a it's a question for our whole societies, and it's not an easy one. We are living in an open competitive world, and the energy industry is more open and more competitive than almost anyone. And you can see that executives are easily moving around in the industry, and we have an American executive for an example. So what is right and what is wrong is a more difficult one. We have to make sure that we, on one hand, pay competitive salaries and financial packages to attract the best people.
But meanwhile, we must be sure not to spend 1 extra cent or $0.01 of shareholders' money. So this is a tricky balance to strike, and we're trying to do our best. But let's move to now take a few questions here.
John Farmer, Chairman, shareholder. Firstly, quickly, a response to your own response to my earlier question about asset reductions. You implied, I think, that I was suggesting that BP had retrenched on fewer assets to increase its safety record. That was not my point. It was more that it was a fire sale.
Secondly, you did not respond to my suggestion that you might consider insuring against catastrophic risks. Do you want to respond quickly on those points before I address the substantive remuneration question?
I think the question on insurance is obviously both a financial one and a practical one. If you want to take an insurance on this, it may be that premiums are so when you take catastrophic events, the premiums get so high. So it doesn't it isn't meaningful either. And that's why you often in operations like this self insure that. I don't know, maybe Brian, have you
Yes. No, look, we I mean, after the Horizon incident, we did look at we gave a better look at the policy on insurance. There is no way out there there is anybody that would give you anything like a reasonable premium or indeed any premium to insure against a $42,700,000,000 liability that we sit with today. So frankly, at very best, you may be able to insure up to $10,000,000,000 And even at that level, the level of premiums you pay would actually make no economic sense.
And let me also say, so we don't forget your other question about the fire sale or maybe that was just a statement. Some of it in the beginning was a fire sale. But I must say, even when we look back, it wasn't the fire sale that led us to cheap bargains for others. But more importantly, we learned through that sales process, which we set up to be a target $25,000,000,000 We learned that this is actually a situation where others may see bigger values in our assets because it fits their portfolio or their areas of strength, which meant that we then stepped up to 38,000,000,000 euros And now it's actually part of our strategy to from always look at our assets and see if there is opportunities to increase value for shareholders by divesting them. So that's how we got through that process and what we learned.
But let's go to your question now. Alan. Concerning remuneration, Chairman, I suggest we refer to Annual Report, Double Page 84 to
5. My suggestion is that the amount of BP remuneration is inappropriately high given the catastrophic record of the company. And I stress the amount and not the metrics because remuneration committee Chairman Anthony Bergman's set of metrics has a sort of speciousness about it. You are arguably addressing plausible things. But there was a Friday 7th March City AM headline.
BP more than tripled Chief Bob Dudley's pay last year to £5,200,000
And
my question fundamentally is, do we really have to do we really imagine that one individual is making that much difference to the company. Just as an example, the 3% salary increase for him was about U. K. Average earnings. And the U.
K. Is still one of the richest countries in the world. Are you seriously suggesting that the chief executive, the other executive directors and, by extension, the senior management are proportionately making enough difference to the company to justify these huge multiples of the average earnings of 1 of the world's richest companies. In other words, the competition, remuneration argument, as I suggest you, overplayed. And even if you don't accept that argument, I strongly suggest there is a case for, the executive directors and perhaps some of the senior management foregoing some of their remuneration.
For example, look at Page 84. Overall group in green, overall group outcome about for bonus was 1.3x target level. Heavens above, Chairman, If you look at the remuneration report graph on annual report Page 92, it shows shareholders receiving, what, a miserly 10% over 5 years. Shareholders are not benefiting, to the extent that the Board seems to be. And arguably, too, such remuneration as you have paid out is for performance against a catastrophically low base.
The Gulf of Mexico spill threatened this company's survival. And this is one of the country's indeed, one of the world's largest companies. And as I said in my earlier question, you seem to kill and spill all over the world. There was the Texas oil refinery in 2006. Have you not spilled oil in Alaska?
If we're going to have a major crisis every 6 years, Chairman, that perhaps leads on to my next point, which is that instead of fiddling around with bonus schemes, which are on a 3 year basis, should you not be taking a longer view? The chief executive himself said earlier that this industry has one of the longest investment time frames of any. So should you not be introducing remuneration schemes with a 5 year or perhaps even a 10 year metric? And would you tell us more about what clawback provisions you have? Because it seems to me that people could come and go in 3 years, and they'd probably fit neatly between one catastrophe and the next.
And although you admit in relation to performance shares that only 40% were expected to vest
and the
main shortfall was on the total shareholder return metric, Does that not actually reinforce the point? You're living in a sort of cloud cuckoo land where you imagine it's important to pay everyone very comfortably. And you seem to have forgotten, firstly, that even the U. K. Governance code says you should not overpay for the purpose and secondly, that your prime role is to generate a return from for shareholders, not through lack of oversight, have a catastrophic oil spill, which nearly tears the company apart.
And as a prelude to what I've just said, there was the, to some extent, encouraging comment from Standard Life that for years in Standard Life's view, you've been paying out for performance against undemanding targets. I suggest you're still doing so. And we'd welcome your comments, please.
Thank you. C?
Thank you. I'm still Stan Grierson. I would very much like to thank Mr. Hunter for doing most of my speech and therefore I will not repeat it, but I will certainly underline everything that he has said. On Page 92, we see Mr.
Dudley's salary has gone from €9,000,000,000 to €13,000,000,000 in the year that is on that page. The shareholders amount, of course, has gone up by about 10%. In relation to that, you spent $8,000,000,000 in one part of the report, dollars 5,500,000,000 in another part on share buybacks, which are loathed by every investor I know with no exceptions. They seem to be a special scam to save institutions from paying tax. Had you appreciated that if you had spent about €3,000,000,000 more on the dividend, you would have replaced the 36.43p of 2000 and 8 9 and still had $3,000,000,000 which you might as well have placed in the biggest hole that BP can dig for all the good it will do to the British economy.
I note that you list the buyback in shareholders' remuneration. I think it's on the same page. I'm not sure how the shareholders can spend that money to improve the economy of this country. That's it, sir.
Thank you. Let me just make one quick comment, and I'll hand it over to
all right. Mike Porter, again, I'm afraid, very briefly. The TSR on Page 92 shows the company performing well below the FTSE 100. In other words, if we had invested £100 5 years ago, we would have had £17.08 return as opposed to the FTSE, £88.41. I'll rest my case, the directors have had quadruple or more than that.
Why?
All right. Let me first just say, so that when we talk about the increase in the executive pay and Bob's pay, let's just remember now that since the accident, the whole team has sat strong and worked incredibly to get the company back on its feet again with every all the changes that has had to be made. And that meant also that we've hardly had any variable payout for the last 3 years. And I can assure you that these gentlemen have continuous offers from elsewhere. But let me turn to Anthony Bergmann's.
Yes. Thank you very much, Chairman. Let me first say that someone said I'm representing the simply minded people. Let me express some sympathy with you because I know that in general, the sort of amounts which you see in these remuneration reports, not only for the BP company, but also for other companies, seem very high to you. And I can understand that.
But let me also remind what the Chairman just said. If you look at the oil industry, it is being characterized the people who work in that as people who work incredibly hard, they tend to be highly educated with an engineering background, although some lawyers and accountants work there as well,
I must
say. But they're engaged in highly complex, very often very expensive multibillion dollar projects. And this industry just demands talented people, not only BP, but also our competitors. And nowhere else is this being manifested more than in the oil capital of the world, which is probably Houston. It's a very, very competitive market.
And if we want to be active in the Gulf of Mexico, where we are being confronted with one of the most challenging geologically complex situations, we need these people. And in this industry, if you need good people, you have to pay. And this is why pay levels in this industry tend to be high. We need talented people, we need people who are prepared to work very hard and we need people who are prepared to take on the highest challenges. And this of course not only starts at the bottom, but finds its way at the top as well.
Now let me specifically address a few issues. One was unchallenging targets. Now how do we get to those targets? The strategy is very the remuneration strategy and policy is very much related to the strategy of the company. Now Bob and his team laid out a strategy, which was called the 10 Point Plan, a while ago and discussed this with the investor community with you.
And he promised, for instance, a number of targets which he would reach in 2015 with cash flow, but also with other elements. These targets were sort of discussed with you. I wouldn't say agreed with you, but there was a challenge over and to the management and back again with the investment community. And in the end, we settled with that strategy and we settled with report. So I would dispute that these targets are not challenging.
He promised to double cash flow by 2015. That's in the plan. He knows. He's promised this publicly and we've taken that target and put it in the plan. If he misses, no payout.
It's as simple as that. Now the other thing example I would like to give you is the other, more softer subjects, let's say safety. As a result of the Baker Panel investigation, which took place after the Texas incident, there was an investigation in the United States, and it was called the Baker Panel. And the Baker Panel challenged BP to become a leader in safety within its industry. And we're setting targets which will lead BP to become a leader in its industry with regard to safety.
And let me give you one example. One is Tier 1 events. These are events which are potentially very dangerous, and we count them very carefully. And each year, we add them up and we see whether we have a progression which goes down. This, of course, is checked thoroughly with the Safety Committee, which we have, and we set targets to the extent that we become leaders in safety.
So I would say that we are setting very challenging targets. And I'm very happy to report to you that last year, the Tier 1 events figure which we reached and achieved is in the top quartile of this industry. So we're well on our way to satisfying that demand. Now the other issue is, of course, in general, the long term plan, which we have, which we call EDIP, has paid out very poorly over the last 10 years. And that is because of 2 events.
1 already mentioned, Texas City and the other one also mentioned, which is Macondo. These events have caused the share price to be depressed. As a result, the EDIB plan, the longer term plan, which we give Executive Directors, has paid out extremely poorly, with one exception last year, because last year happened to be a very, very good year. For the first time in many, many years, we can say that last year was a very good year. And it's still not paying out to its 100%.
It's only paying out to 40%, 39.1% to be precise. But before that, it played out between 0% and 7%. But because we are making progress, we are now not paying our executives poorly anymore. We are now paying them much better because the results are coming in. And that is the long term element.
The short term element, you can say, well, how can it be 1.3? And that is on the annual plan. On the annual plan, of course, we compare 2013 with 2012 on a number of operational measurements. And actually, in terms of safety, but also in terms of value, value items, we have done very well. We have met them all and exceeded some.
And as a result, the factor was 1.3 compared to 2012. There's been significant progress. Now when we look at that as a remuneration committee, we see that the pay of a number of executives have gone up significantly. And we say, does it feel right? Is this right?
Have shareholders benefited? So we've looked at this very carefully. And what do we see? We see that indeed dividends have gone up last year. We've started a massive share buyback program, and the share price, to a certain extent, has recovered compared to 2012.
So we felt that these 2 were in line, and that is how we judged the outcome. And as it was explained in the report. So Chairman, I hope I've addressed most issues there. All right.
Maybe I think still it's appropriate to make one comment here. I, as Anthony, understand the matter of the delicate matter of what is high, what is too high. And we are spending a lot of time and Anthony with the remuneration committee to make it right. But let me just say again because I think it's important that we remember this. We were best in class last year in safety when we measure what we call Tier 1 events, what is so critical.
The 4 large projects were all delivered on time, and we're talking seriously big projects here. We had significant improvements in the underlying operating performance in partly due to a lesser of unplanned deferrals, partly due to an excellent refining availability. We had an excellent year in exploration, probably the best since the '90s. And we mustn't forget that we generated $12,000,000,000 of profit in the sale of our T and K activity in Russia where obviously Bob played a huge part. Anyway, so with that, there's no more questions.
I think we continue and go to the votes. So the slide behind me now will show the votes that we have received today, and we can see that on the remuneration report for today, we have 84%. And on the binding vote, which is Resolution 3, we are seeing a 96.4% support. We are now turning to
resolution.
I wonder if I've lost my paper here. So We now move to the election and reelection of directors. And all of the directors up here are offering themselves for annual reelection. So Resolution 4 to 16 are all the directors other than myself. I will share these resolutions, and Anthony Bergwans will share the resolution for my reelection.
In the notice of the meeting, there are detailed biographies of each of the directors. Contributions made by individual directors have also been considered and are described in the notice. All of the nonexecutive directors who are subject to these resolutions are considered by the Board to be independent. The Board's performance report in our annual report sets out in detail the work of the Board and the committees during the last year. I've commented on this in my earlier remarks, and I would again like to thank all my colleagues for the work they've done this year.
So let's now take questions on reappointments of any of the individuals other than myself. No questions there. The slide behind shows now the votes on Resolution 4 to 16. And I'm now I will now ask Anthony Bergmas to chair the meeting for the discussion of Resolution 17.
Yes. I am pleased to put the next resolution to the meeting, namely the reelection of Karl Henrich Svanberg as a Director. Are there any questions on the resolution? If no, you will be able to see the votes already received on this resolution on the slide behind me. Thank you.
All right. Thank you, and thank you, Anthony. Now thanks a lot. Very encouraging applause from there. Now we come to Resolution 18, the reappointment of Ernst and Young as auditors for the company until the conclusion of the next meeting.
Any questions or comments on that? Two questions here. Please, we go to A.
I'm Alan Smith, a Private Shareholder. It seems to me, if you read the notes to Resolution 18, I'm not actually against the resolution as such. What I am talking about is the words in the notes. They are talking about changing it. This is in the light of changes to U.
K. Corporate government code and proposed European Union regulations, which we've all heard about. And there's a certain amount of disquiet about reappointment of auditors year after year after year and the effects that that can have on shareholders as well as on directors. Little fiddles can go on the side and so on. So it seems to me that what's actually being proposed here, the going out to tender in 2016 and actually making a change in 2018 is a bit of a relaxed schedule.
And it seems to me that we could quite easily move that forward by 1 year. It's relaxed to meet the existing policy, the existing policy of having new auditors every 5 years. And so from 2013 when they were last appointed, we then go to 2018. Now it seems to me we could easily we could ask them easily to change that to go out to tender in 2015 and have a new set of auditors in 2017 rather than the 2018 that's being proposed at the moment.
Any other questions here? We have one more on
A. Harry Bransdale, Old New shareholder. My question is similar to the last one, which is how many years have BP worked with its present group external auditors, please?
Anything else? I'll hand it to Brandon, please.
Okay. Thank you, Chairman. With respect to the first question, the Audit Committee did consider all the options open to us in terms of the possibility of doing a tender earlier than the time that we are proposing. But in arriving at the decision, we take into account the quality of the service that is provided by the external auditors and seek to take a position that we believe is actually in the best interest of both the company and its shareholders. And hence, we came to the conclusion that both those interests would be best served by allowing the existing lead partner to complete his term and then put the audit out to tender as we proposed in 2016 for a new appointment to take effect in 2018.
With respect to the longevity of E and Y's relationship with BP, in fact, we did look back as far as we possibly could find records, but it does go back some considerable time and probably well in excess of 70, 80 years. So it is probably one of the longest audit tenures in the United Kingdom. But please rest assured that the Audit Committee does take this extremely seriously. The effectiveness and quality of the audit is under regular scrutiny, and it was only after that, indeed, in-depth scrutiny did we come to the position that we took.
I think it's important that you change auditors regularly, as my last colleague has said, and I would suggest that after 70, 80 years, your auditors must be asleep.
We noticed that comment. Yes?
European guidance from the shareholders groups in Europe is that the auditors should stay for a minimum of 10, but normally a maximum of 15 years.
That is correct. Any other questions or comments? All right. The slide behind me now shows the votes already received. And we will now turn to Resolution 19, which is to approve the renewal of the BP Executives Incentive Plan.
The plan is a framework which allows the Board to use the company's shares to reward Executive Directors. Formerly, it was renewed every 5 years. Now we have a binding vote for an remuneration policy. We're seeking a renewal of this plan for a 10 year period as the authority for the use of these shares that will in the future come from remuneration policy, which is approved for 3 years. Any questions or comments?
All right. We will now turn to our Resolution 20.
Yes? Chairman, I have a question for you. The long term incentive plan allows for a maximum number of performance shares equal to 5.5 times the CEO salary and 4 times the salaries of other executives. Don't you consider that to be excessive, particularly bearing in mind the LTIP's nature, which they can certainly and have certainly led to rewards for failure in other companies.
Well, we thank you for the comment. I don't think we have anything more to add. I think we've been through that. Do you want to say anything, Anthony?
Yes. I can only assure you that we have carefully considered this. And of course, it's very much in the relationship to the sort of targets you set. And if the targets are demanding, I don't think it is excessive. I think it's reasonable.
And the targets have been quite demanding because we've seen that over the last 10 years, this component has hardly paid out, with the exception, of course, of 2013. Thank you. We go to C.
I wanted to ask what Duncan Reed shareholder, I wanted to ask what the policy of the Board was on the age of nonexecutive directors or executive. What age do they retire at? I don't myself agree with directors going on beyond 70.
There is no such age limit. We have in the Board agreed on the guiding principle that at the age of 73, up till the age of 73, we don't have we should explain why people get off the Board. After 'seventy three, we should explain why they stay on the Board. That is the sort of understanding we work on. Thank you.
All right. Anything else? The slide behind me now shows the votes already received from those that are not here today. We will now turn to Resolution 19, and that is to approve the renewal of the BP Executive Incentive Plan sorry, that was we've done that, sorry. We will now turn to our discussion on Resolution 20.
This resolution seeks approval for an agreed and aggregate limit on the remuneration of the non executive directors. Article 93 of the company's Article of Association sets the upper limit on the amount that we can pay our non executive directors. This is for the aggregate. This amount is currently CHF 2,500,000 and was set in 2004. We're getting close to that level.
We're now at CHF 2.3 The resolution before us seeks to increase that aggregate limit of CHF 5,000,000 It is not an ambition to increase the fees accordingly. This is just the room in which we can maneuver. It is set at that level so that we can have plenty of headroom within which to pay our non executive directors and also it should increase the number of non executive directors. Any questions or comments? All right.
The slide behind me shows the votes that we have received here today, 97% 4%. We'll now turn to resolutions 21, 22. The full text of these resolutions are contained in the notice of the meeting. The resolutions give the directors authority to allot shares in 2 specific circumstances, which are subject to limits, which meet the best practice guidelines in the Association of the British Insurers. Any questions on these resolutions?
Now we see the slide behind me. We should see that 91%, 90.9%. Percent. We will now turn to Resolution 23, seeks approval for the repurchase of the company's shares up to the limit described in the notice. We started our current share buyback program in the March of 2013.
Today, we have returned some SEK 7,000,000,000 to shareholders. In October 2013, we announced that we will divest around SEK 10,000,000,000 of assets before the end of 2015 to use the proceeds predominantly for distribution to shareholders by bias of share buybacks. Any questions on this resolution? Yes?
John Farmer, shareholder. There seems to be an unsought symbiotic relationship with the fellow shareholder who spoke earlier from Point C querying the wisdom of share repurchases, the amounts involved are large, and in current year, I think some $5,000,000,000 about what you've paid in dividend. To what extent, particularly given your declared enthusiasm for capital discipline and careful use of resources, have you quantified, if at all, the total shareholder return benefit of this considerable expenditure on share repurchase? And if you have not, why not? And why are you spending the money?
And I do stress I'm talking about total shareholder return and not just earnings per share, which is not a part of total shareholder return, only a means to an end. There is, of course, opportunity cost in this expenditure. And against the background of asset disposals mentioned earlier, this looms large. And I'm faintly surprised in that connection that it seems to have dawned on you concerning asset disposals that sometimes it might pay you to be preapproactive about this. 1 would think it would be part of your normal activity to keep under review your asset portfolio.
But the trend is surely has surely been since the Gulf of Mexico spill and loss of life to vast asset disposals. And arguably, by not spending this money on share repurchases, you could have kept some of those assets, presumably, as I said earlier, bought whenever they were bought for the perceived profit opportunity from them. And as regards future share repurchases, you could likewise, by not making them, deploy the money onto profitable assets, acquisitions or retentions even if they are not top quality. There is bound to be a gradation between the value, the profit value of a portfolio, the constituents of a portfolio of assets. That's well understood as axiomatic.
Finally, Chairman, on this subject, as the earlier shareholder intervention said, there is a widespread perception that the well understood theoretical justification for share repurchases is not is often not borne out in practice. In other words, by taking some shares out of issue, the share price based on a presumed rigid price earnings ratio will rise. I refer you to Annual Report, Page 274, where, and I suggest, as an improvement for the future, you might also show year end prices, I would put to you that the range of share prices has not actually increased dramatically since, say, 2012. I mean, if you look at the first part of that tabulation, you've got a 2012 range of high of 5.12, low of 3.89. And latest figure is roughly £4 to £4.60 What evidence have you that the share repurchases so far have actually benefited shareholders as opposed to being just a sort of act of faith or perhaps caving into institutional investor pressure, which I'm aware exists, but does not seem to be logical.
And will you reassure us that you will exercise discipline over this in the future? Thank you.
Yes. Well, I can assure you that we will execute discipline on this in the future as we've done as CEO also, sorry. I'll be back.
Thank you, Stan Grierson. This must be the biggest collection of private shareholders you see during the year. I invite you to take your courage in both hands and have a show of hands on this particular item.
Let me comment on share buybacks. First of all, there is a as you're well aware, there are different views on whether buybacks or dividends are the way to go. And obviously, there are many large investors that advocate strongly for dividends, and there are others that advocate for buybacks. Among normal shareholders, me, myself being 1, the appreciation of dividends is clearly there. We and I think also that we all know that when it comes to buybacks, if you use it as a normal routine, the company as some companies do, you tend to have bigger buybacks when the company is doing particularly well.
So you buy your shares when they're expensive, and you don't buy them when they are cheap because then when the company doesn't do as well. That's why I think it's probably the biggest critique for buybacks. But at the same time, I think it's undisputable that if this company today had 10% more shares outstanding, the share price would be 10% lower. So the question is more the timing of your buybacks. We have not taken a new strategic decision on distribution to balance back and forth between these as we find the best.
What we're doing is that we are right now going through a resetting of the company, and we have sold off a number of assets and therefore have one time income. And in that process, we have found it to be right to as we shrink the company to also shrink the shareholder the share base. We are also, of course, considering where we think the share price is. And if we thought the share price would be overvalued, it wouldn't be a smart thing. But with the uncertainty around the company, we have come to the conclusion to do so.
And we are considering doing it again when we have one time asset sales going forward, as you know. But we have not taken a principle to favor that versus dividends. Dividends are important for us, and you should know that you could rely on a steady and progressive dividend stream going forward. So anything else?
Yes. I just put to you the reverse of what you've just said that as you have a smaller company, you've reduced the equity. Part of what I said was that you could have kept the company a bit larger if you'd not bought back the shares.
That is also true, but we have discussed that. I don't think it's part of the buyback dividend policy. I think we answered before here on the strategy on that. All right. Should we then look at the votes behind me for that resolution?
And we have 99.7% support for that. Now finally, Resolution 24. This resolution seeks approval for the company to call a general meeting other than the annual general meeting on a 14 days notice. This is intended to enable the company continue to enjoy the shorter notice period for calling such general meetings as permitted by the Companies Act and enabled by the European Shareholder Rights Directive. Any questions around that?
All right. Now we see the vote, which is 86.76. Ladies and gentlemen, thank you very much. This concludes our discussion today. I explained earlier that our company articles of association provide us that we vote by a poll on each of these resolutions.
I will ask the company secretary to now explain the voting process to you. Dave Jackson?
Thank you very much indeed, Chairman. You will have received your voting card at registration. Only members, their proxies or corporate representatives and ADS holders are entitled to vote. Could you please cast your votes now by completing the following parts of your voting cards? Mark either the box for or against each resolution.
Please note that a vote withheld is not a vote under English law and will not be counted in the calculation of the proportion of votes for and against a resolution. Please fill in your name, sign the card and indicate whether you are a shareholder, proxy or a corporate representative. Place your card in one of the poll boxes located outside the auditorium. If you need help with completing your card, the registrar's staff will be very, very pleased to hear to help you. And the poll will close half an hour from now.
We have appointed Capita to tabulate the polls and have asked PricewaterhouseCoopers to act as scrutineer. As soon as we have the final count, we will announce this on the BP website. Thank you.
Thank you, David. Finally, may I thank you for your attendance and also for your patience while waiting for asking questions on this meeting here. We are now serving refreshments, as usual, in the cafe area. Your lunch vouchers is at the bottom of your poll card, and Bob and I and the rest of the Board will be walking around after this meeting. So we have some interesting displays of BP's technology for you to see, and we will be very happy to meet and talk to you all.
So thanks a lot for your continued interest and for your support of our company. Have a safe journey home. Thank you.