AGM Statement

BP PLC
18 April 2002



April 18, 2002



                           ADDRESS TO SHAREHOLDERS AT THE

                        ANNUAL GENERAL MEETING OF BP p.l.c.

                          ON THURSDAY, APRIL 18, 2002

                         BY PETER SUTHERLAND, SC, CHAIRMAN

                          AND LORD BROWNE, CHIEF EXECUTIVE



Introduction by Peter Sutherland



Good morning ladies and gentlemen. Thank you all for coming to our 93rd Annual
General Meeting. We appreciate your presence here today.



Seated on the stage with me in the front row on my left are John Browne, Group
Chief Executive and an executive director; John Buchanan, Chief Financial
Officer and an executive director; and Robin Nicholson, Chairman of the
Remuneration Committee.



To my right in the front row are Judith Hanratty, Company Secretary; Walter
Massey, Chairman of the Ethics and Environment Assurance Committee; and Ian
Prosser, Deputy Chairman and Chairman of the Audit Committee.



Also with us on stage today are the other members of the Board, whose names are
shown on the seating plan you have been given. Unfortunately Charles Knight and
Robert Wilson are unable to be with us today and send their apologies to you.



We can now turn to the business of our meeting. Today we have the opportunity to
review the activities undertaken by the company to benefit you, the
shareholders, and to give you a picture of where we are heading. There are also
some essential items of business to be transacted.



To allow the maximum amount of time for discussion, I will begin with a few
remarks about the company's progress and prospects and we will then consider,
discuss and call a poll on each of the resolutions in the order set out in the
Notice. Before putting Resolution 13 to the meeting, I shall ask John Browne to
give you a perspective of what has been achieved over the past year and how we
are positioned for the future.



Before we begin to consider the resolutions individually, I should like to make
a few general observations on BP's performance to set the background to this
year's meeting, and the matters we are discussing today.



The past year has, of course, been particularly turbulent, and the uncertainty
continues. Although we are all relieved that the very worst fears about
international trends and the world economy have not been realised, it is still
too soon to be sure it's back to business as usual. BP's result last year
reflected the great progress we made nevertheless, following the acquisitions in
2000 of ARCO, Vastar, and Burmah Castrol.



Business conditions have been very tough, and competition is always intense. Yet
as a measure of our performance against our fundamental objective - the
enhancement of short and long term shareholder value - we have delivered a
higher return to shareholders against the industry over the past ten years than
any of our direct competitors in the energy sector.



As always, we are proud of the achievements of our staff, whose efforts lay the
foundations for our successes. Our future performance will be rooted in their
commitment and principles, for they want BP to be a company they are proud of.
In turn, BP wants to attract the best people in the world for the sake of the
future of our business. This includes being able to attract, motivate and retain
a world-class leadership team.



As I said, BP is truly international. That means we have great diversity amongst
our 110,000 staff operating in more than 100 countries. We cannot fail to be
aware of the range and complexity of the responsibilities our size and global
reach bring us. Sometimes there are particular circumstances which raise
difficult issues. It is because of this complexity that we have put in place a
very clear system of governance, based on policies set out by the Board. It is
our job as your Board to make sure the whole business operates in line with our
high standards.



In particular, we monitor closely the range of opportunities and risks facing
BP, which are all the greater now we are one of the leading global energy
companies. While we might all wish for easy answers, all too often in reality
there are difficult judgements and choices to be made. The fundamental goals
guiding us in BP are clear - no accidents, no harm to people and no damage to
the environment. This is why, for example, we have made tremendous efforts to
reduce our own greenhouse gas emissions in recent years. We hit our challenging
target for doing so during 2001, ahead of schedule.



As well as looking at the next quarter, we focus very much on our long term
results and impact. After all, our investments are long-term commitments that
will involve us in each of the local communities in which we operate, over very
many years. We put a lot of effort and investment into new technologies, which
will improve efficiency and help meet the growth in demand for cleaner energy.



However, a company the size of BP inevitably attracts a good deal of scrutiny.
It won't surprise you to hear that this can be uncomfortable. But it keeps us on
our toes and reminds us that we have a duty to try to have a positive impact on
society and on the environment, as well as a duty to aim for competitive
success. There is no inevitable conflict between these aims.



With these thoughts in mind, I will turn to the resolutions before us today.



Remarks by Lord Browne



Ladies and Gentlemen, good morning.



First I want to thank you for your continued support. We couldn't work without
the support of those who trust us with their funds, and the entire leadership
team is determined to justify that confidence.



I'd like to cover four specific things in the next twenty minutes.  First I want
to review our performance last year. Secondly to set that performance against
our strategic objectives which remain unchanged.  Thirdly to look ahead to the
prospects for this year and beyond.  And finally to talk about the actions we're
taking to minimise risk and to maximise shareholder value for the long term.



2001 was a good year for us, despite all the external events and volatility.
The world economy slowed dramatically.  Demand was weak and inventories
increased.  The world was replete with capacity.  No one could rely on prices
and so to expand returns the only option was to focus on productivity.  2001 was
also a year of transition for us.  The end of the period of mega mergers, and
the start of a period of organic growth.



Our strategy remains unchanged.  The range of products we produce is reflecting
the changing pattern of demand.  We're creating a sustainable company with
markets and resources which have the potential to deliver continued growth for
many years to come and which keep the balance of the business broadly constant.



2001 was a good year because we delivered on all our targets.  Production was up
- growing by 5.5 per cent - as promised.  Reserves were up - with 190 per cent
of production replaced.  In 2001 we produced 1.2 billion barrels of oil
equivalent.  But we booked 2.2 billion barrels of oil equivalent, all of which
came from our own exploration and appraisal work - not from acquisitions.
Reserves are the source of future production and this achievement gives us a
very secure base from which to grow further.



Unit costs were down by 4 per cent.  That means $800 million dollars of cost
savings.  As promised.  Reported profits were down, of course, because of the
weaker trading environment.  But operating cash flow was up despite the
environment because of performance improvement and working capital releases.
And underlying performance was also up - by around $2 billion pre tax at the
estimated mid cycle conditions we use to guide our planning.



And on the basis of that underlying improvement dividends were also up - with
cash dividends up by 9 per cent year on year.  That means the dividends we've
paid have consistently outpaced inflation for the last ten years.  Over the last
decade UK inflation has averaged 2.7 per cent a year.  BP's dividends have grown
by 6.3 per cent a year.



Return on capital at mid cycle was up to over 15 per cent.  And the business has
also increased in scale - with an expansion of 17 per cent in organic capital
expenditure to $13 billion.  The discipline of the business was maintained and
the gearing ratio was down to just 26 per cent.



Of course, not everything went right.  A number of upstream projects were
delayed and in the chemicals and downstream businesses there were operating
problems at particular plants.  But because of the range and the spread of our
activities, we were able to achieve our targets despite all the challenges and
setbacks.  So our strategy is on track and producing results.



That strategy is delivered through a distinctive business model.  We invest in
activities which are in line with the strategy.  We highgrade the asset base
through acquisitions and disposals to improve its quality.  We focus on the
efficiency of the capital we're investing and on the efficiency of our
operations, so that on an underlying basis returns are rising or constant.



The combination of higher capital employed and rising or constant returns
produces higher earnings.  And that in turn means higher dividends - set in line
with our long-standing policy which is to pay out around 60 per cent of
underlying earnings.  That is after taking account of the FRS19 changes.



We control cash to achieve balance at mid cycle, and we work within a
disciplined framework which keeps gearing within a range of 25 to 35 per cent.
Those figures also take account of FRS19.



That's the model, which we're applying in line with our established strategy.
We're using the advantages of scope and scale to choose the most attractive
projects - projects which are material, low cost and focused on the areas where
growth is strongest.  70 per cent of our capital employed is in the OECD.  The
rest in a limited number of selected opportunities beyond that - including areas
of rapid growth such as China.



And investment is growing.  As we indicated a year ago, our plan for 2001
involved spending between $12 and  $13 billion.  Net of acquisitions for cash
and disposals, capital investment amounted to $11 billion.  Gross and net
investment levels in 2002 will be broadly similar.



The approach to investment is distinctive in each stream.  Downstream we're
investing over $2 billion this year with that investment designed to help us
meet the changing needs of the consumer.  I hope you've seen the BP Connect
stores here in the UK.  They're part of the development of new retail business -
taking us beyond petroleum.



For Chemicals, the environment in 2001 was very difficult, causing problems
which were compounded by some operational difficulties.  The response is clear.
We're reducing costs by $250 million, we've reduced capital expenditure for this
year by a third, and we're focusing on cash delivery.



For the Upstream, the level of investment in 2002 will be the same as last year
but the balance will shift.  We'll invest more in the new projects which are
available.  We've already begun to deliver production growth at a rate of 5.5
per cent.  That growth is secure for the medium term. 70 per cent of the growth
out to 2006 comes from projects already producing or sanctioned and for the
other 30 per cent the reserves are in place with developments awaiting sanction.



The fact that we are in such a strong competitive position upstream is due to
the distinctive strategy we've held to consistently now for more than a decade -
focusing on the very best material opportunities - and using our skills to
secure large scale, low cost resources.



The business model also involves a continuous programme to highgrade the asset
base.  Selling things which don't fit or which aren't performing and investing
in acquisitions which enhance the existing business.



The acquisition of Veba is a prime example of that.  That transaction gives us a
strong position with a great brand in the largest market in Europe.  BP's retail
market share in the areas where we operate in Europe will increase to around 15
per cent, with around 10,000 sites.  We'll double our convenience sales in
Europe and we'll have 1.6 million new customers a day.



So we're increasing our investment in a portfolio which is being constantly
highgraded with a continuous focus on the efficiency of the capital we invest,
and of our operations.



We can see the potential for further improvement this year.  Upstream sustained
production growth of 5.5 per cent, with a series of new projects due on stream.
And a further reduction of around 6 per cent in unit lifting costs.  Downstream
an increase in retail fuel volumes and shop sales and a reduction in unit costs.
  And in Chemicals a significant unit cost reduction of 9 per cent and some
volume growth.



Of course, we can't predict events.  The international situation is very
serious, and we must be prepared for continued volatility.  The global economy
appears to be growing at around 1 per cent this year.



OPEC has said that it will reduce its oil output, and that appears to be
happening.  So the supply of oil has been reduced.  Oil demand is rising
slightly faster than most people had expected and so the market is broadly in
balance.  Recent events in the Middle East have added a recent speculative
premium to prices.



During the first quarter there was an overhang of product stocks and consumption
of jet fuel fell as a consequence of the tragic events of September 11th.  The
result was the worst combined Refining and Marketing margins in both the US and
Europe since 1992.  Those margins have now recovered, particularly in the US, as
stocks have fallen.  In Chemicals, capacity utilisation remains low and margins
weak.



Of course we don't just focus on the short term, or even the next five years.
We're investing for the next decade and beyond. Let me give you just a few
examples.



We're investing in the deep water of the Gulf of Mexico where we have eight
fields now under development and a series of further discoveries.  Our net
production from the area should double over the next four years.  We're
investing in Indonesia where we have one of the largest natural gas fields in
the world at Tangguh.  In Trinidad we're expanding the supply of natural gas to
the Atlantic market.  And in the Caspian where we're now beginning the
development of the main export lines for oil from Baku through Georgia to Ceyhan
in Turkey.  And we're investing in Angola, where our first field, Girassol is
now onstream and a series of further developments are proceeding.



Those investments offer enormous potential, but they also bring risks.  And our
job is to manage those risks on your behalf.



Our first priority - everywhere - is safety.  We have to live up to our
commitment to do no harm to people.  Last year we achieved a significant
improvement in our safety performance.  The number of accidents fell by a third
from the level in 2000 and has improved by a factor of 6 over the last 10 years.
That's good progress, but of course there's more to do.  We have to be
continually vigilant - in every one of our operations everywhere in the world.



Then we have to deliver on our commitment to do no damage to the natural
environment.  Again we made progress in 2001.  We've introduced clean fuels to
another 50 cities around the world.  And we've cut our emissions of greenhouse
gases to the point where we've reduced emissions to a level 10 per cent below
that of 1990.



That was our target and we've achieved it seven years ahead of schedule and at
no net economic cost. In fact we added over $600 million of value, because most
of those reductions were achieved through simple efficiency - eliminating waste
and leaks and cutting the amount of energy we use.



Oil and gas remain the major sources of energy for the world and they'll
continue to hold that position for decades to come.  We're investing in the
development of photovoltaics to generate solar power, and we're working on other
forms of renewable energy - but they are all at the experimental stage.



To meet the challenge of climate change we have to ensure that oil and gas can
be produced and then used in ways which do no harm to the environment.  So on
the basis of what we've learnt over the last few years, we've now set a new
target, which is to keep our net emissions at the current new low level, even as
we double the scale of our activity.



We'll do that through further increases in efficiency and through the
development of lower carbon products - offsetting emissions which would
otherwise have occurred.  We've learnt a great deal over the last few years in
this area, not least about how to trade emissions to ensure that any reductions
can be delivered at the lowest possible cost.  I believe the things we've learnt
will stand us in good stead as the world develops a system of credits which
encourage the innovation necessary to meet the challenge of climate change.



BP is committed to maintaining high environmental standards everywhere we work,
and we assess every potential project, particularly in environmentally sensitive
areas, to ensure that we understand the risks involved.  We only proceed when we
are convinced that we can work in ways which meet our standards and policies.



The protection of people, and of the natural environment are just two of the
things which the world expects from a great company.  Globalisation has
increased our size and reach, but of course, to some people we seem dangerously
powerful and unaccountable.  The world is watching the corporate sector, often
with suspicion, and if we're going to be able to deliver growing shareholder
value we have to demonstrate that our presence and our activity is to the
benefit of the community as a whole.  We do that in many ways.



We bring investment, employment skills and revenue to more than a hundred
countries around the world.  In every country we work to universal standards.
We tolerate no bribery and no facilitation payments.  We provide opportunity,
through the simple practice of meritocracy.  If we want people to believe in
free markets and globalisation we have to convince them, individually, that they
can share in the benefits.  We believe in diversity - the simple value of having
different perspectives and experience; the simple practice of giving everyone
the opportunity to compete for every job - not on the basis of their background
or colour or creed, but simply on the basis of merit.



There are many things we can do to demonstrate that globalisation is a positive
force.  We're not perfect.  And we never will be.  We make mistakes but I hope
we can learn from them and never repeat them.



One of the most important things we have to learn is there are limits to what we
can do.  We're a business - not a charity or an aid agency.  We can make a
contribution to progress, and give people the opportunity to shape their own
lives.  But we can't and shouldn't interfere in the political process.  We will
state our views, and argue our case openly.  We'll support the process of policy
making.  But we won't make political contributions and we won't engage in any
partisan political activity.  That isn't because politics is unimportant.  Quite
the reverse.  We need a strong, credible political process to be working in
every area in which we operate.  We need Governments with the legitimacy to make
and enforce the rules.  But we have to understand that legitimacy is built on
independence, and that is why we shouldn't be involved in the process.



I believe we can demonstrate that international investment is a source of
progress.  That globalisation can benefit everyone and not just a privileged
minority.  We believe that is the best way to manage risks and to secure the
potential for continued growth in shareholder value.



Ladies and Gentlemen 2001 was a difficult year for everyone.  It was a good year
for us because in the face of volatility and challenge, we demonstrated the
quality of the company.  That quality to me is summed by the people I meet as I
go around our different business activities.  In Egypt, in China, in the US,
here in the UK.  In total in 100 different countries around the world.
Exceptional people, doing an exceptional job.  Their ability and their
commitment is what gives me the confidence to say that the future of your
company is very strong.



As the results show,  2001 was a good year.  But the best is still to come.



Further information:  BP Press Office, 020 7496 4624/4358/4851



                                    - ENDS -



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