AGM Statement

BP PLC
24 April 2003


press release

April 24, 2003



                     ADDRESS TO SHAREHOLDERS AT THE ANNUAL

 GENERAL MEETING OF BP p.l.c. ON THURSDAY, APRIL 24, 2003  BY PETER SUTHERLAND,
              SC, CHAIRMAN AND LORD BROWNE, GROUP CHIEF EXECUTIVE



Introduction by Peter Sutherland



Good morning ladies and gentlemen.  Today I would like to welcome you to our
94th Annual General Meeting.   We appreciate your presence here today.



Seated on the stage with me in the front row are John Browne, Group Chief
Executive; Byron Grote, Chief Financial Officer; Ian Prosser, Deputy Chairman
and Chairman of the Audit Committee; Judith Hanratty, Company Secretary; Robin
Nicholson, Chairman of the Remuneration Committee; and Walter Massey, Chairman
of the Ethics and Environment Assurance Committee.



There are some new faces on the platform this year.   I would like to introduce
the three new executive directors who joined the Board earlier this year.
David Allen, who as Group Chief of Staff is responsible for strategic planning
and control; Tony Hayward, who is in charge of Exploration and Production and
John Manzoni, who is looking after our Downstream activities.



Also with us on the stage today are the other members of the Board.



Before turning to the business before us, I would like to pay a special tribute
to John Buchanan and Rodney Chase, who have both retired from the Board
recently.   As Chief Financial Officer for six years, John Buchanan played a
pivotal role in the mergers and acquisitions that took place during that time.
During his eleven years as an executive director, Rodney Chase headed both the
Upstream and Downstream businesses, and more recently as Deputy Group Chief
Executive played a defining role in a number of key developments and
negotiations - most recently our new Russian venture.   Both John and Rodney
served the company for more than 30 years, and we are indebted to them for their
efforts on our behalf.



Although we will miss Rodney and John, we are fortunate to have exceptional
strength and depth in our executive ranks.   This is important for a long-term
business such as ours.   We compete for the very best talent.   We must ensure
that we are able to retain people of exceptional ability, able to exercise
sustained leadership in a global environment.



The Board pays particular attention on your behalf to succession planning and to
the development of our leaders for tomorrow.  We have in John Browne, himself a
product of our systems, a world class leader.  The non-executive directors have
the greatest confidence in him and in the new generation of young executives who
now make up his team.   They have exceptional ability as leaders, and are
seasoned in BP values, enabling them to drive performance and deliver returns
for shareholders in both the short and long term.   The Board will continue to
work with them to bring on the next generation to ensure the Company's continued
success in the future.



BP has a strong performance ethos.   It is only through clear and focussed
long-term objectives that we can ensure our business will deliver an outstanding
performance in a sustainable way.



For example, we first became involved in negotiations in Alaska in the 1950s.
We have since invested over $20 billion there  - it is now the Group's largest
single source of known oil and gas reserves, and we are continuing to invest in
this important asset.  Today we are also beginning our investment in exciting
new areas that have a similar potential for the long term future.   John will
say more about those opportunities later.



It is a measure of our long-term performance that we have delivered a higher
rate of return to shareholders against the market over the past ten years than
any of our direct competitors in the energy industry.



We have been able to increase the dividend once again.   The trend has been one
of steady and sustained increases over the past ten years, reflecting a
continuing underlying improvement in our performance.   This was maintained in
2002 despite the highly volatile economic and political circumstances.



We have been giving a lot of thought to the best ways to communicate some of our
key messages to you, our shareholders.   Some of the messages we have given may
have focussed too much on extraneous areas and obscured the key picture on value
and risk in our business.  So let me reiterate - our strategy, portfolio and
business model are strong and soundly-based.  You will hear more about this in a
moment when John talks about our performance last year, and our potential for
the future.



Before we go further into the agenda, I would like to make a few general remarks
about the international background to this meeting.   It is an understatement to
say that these are troubled times.  The changing nature of international
relations and the increasingly prominent threat presented by global terror
networks leaves us all apprehensive about the outcome of events in the
international arena.  We think particularly at this time about the war in Iraq
and the tensions that will remain in that region for some time to come.



This is not a war fought over oil.   I want to state for the record that we have
consistently argued both that there should be a level playing field in respect
of anyone seeking to invest in Iraq, and more importantly that that can only
exist when there is a legitimate Iraqi government, chosen by the Iraqis, and
recognised by the international community.   The oil industry has considerable
expertise which we fully expect to see employed as a driving force in the
rebuilding of Iraq and its economy, as that country returns to its place as a
major and disciplined participant in the global energy industry.  Whether or not
BP will have any involvement in Iraq remains to be seen.  It is not part of our
current strategy, and what I will say is that there will be no involvement
without the support of an Iraqi government recognised by the world community and
the Iraqi people.



Any conflict or disruption in the Middle East region clearly affects the oil
industry.  This can be seen in the oil price, which has fluctuated over the
course of the last 15 months from a low of $19 a barrel to a high of $34 a
barrel.  Such a fluctuation provides a tremendous challenge to our executive
management, and it is to their considerable credit that, despite this
volatility, we have maintained an excellent record against the FTSE 100 over the
past ten years.



We cannot fail to be aware of the range and complexity of the responsibilities
our size and global reach bring us.  As a major international company we also
come under intense and varied scrutiny in the societies in which we operate.



But let us be clear.  We are a UK registered company, and of course many people
here today will see the world from the perspective of the UK.   But BP today is
also a truly international company with a global spread of activities and
responsibilities.  Many of our shareholders far from these shores will not
attend this meeting, but we listen to them and promote their interests.  There
is great diversity, too, among our staff of more than 100,000 people operating
in more than 100 countries where we do business.



For all these reasons, our policies and management processes are vital.  We
place great emphasis on the role of our independent non-executive directors in
ensuring that value is delivered to you from the funds you have entrusted to us
- so we remain focussed on our objectives, and bring benefits to all communities
in which we operate.



The role of the non-executives on Board committees is easily overlooked.   They
review business processes, and challenge, encourage and support the executives
as they engage with the difficult situations and areas of judgement that are
crucial to the continuous progress and improvement in our performance.   By way
of example, these processes of challenge and encouragement have helped us
achieve one of the best safety records in the industry, with a 94 per cent
reduction in incidents since 1987.



But the role of our non-executives goes beyond that.  They test the effort and
investment that goes into developing new technologies, such as those to improve
efficiency and meet the growth in demand for cleaner energy and to manage
greenhouse gas emissions.   And, of course, they play a very important role in
monitoring and receiving assurance on the systems that ensure that we have
strong and transparent financial processes and controls.  This is but a snapshot
of the governance activities they undertake on your behalf.



Having non-executive directors with a broad range of experience outside the oil
industry is very important.  It is necessary for them to have sufficient time in
office to gain the experience that comes from participating in this industry
through its long cycles.  They also need to remain in office long enough to use
that experience for your benefit.



We welcome the emphasis that has been given to recent corporate governance
developments on both sides of the Atlantic.  As a global company to which so
many entrust their funds as shareholders we expect to account for how we
operate.   The continual review and evolution of our governance systems over
many years means that we believe we will not be required to make any significant
changes to our practices following the introduction of recent regulatory
initiatives.



Regulations may be necessary to provide minimum standards but we do not rely on
regulations alone to define the way we operate.  Practices are constantly being
honed and improved, and processes developed to ensure accountability throughout
the organisation.



We recognise that high standards in governance and outstanding performance go
hand in hand, and we are committed to achieving both.  Our business is important
to you, our owners, and for all those across the world who rely on us to bring
them the energy essential to their daily lives.





Remarks by Lord Browne



Ladies and Gentlemen good morning.  I'm delighted to see so many of you here
today including so many old friends and colleagues.  We all very much appreciate
your support and loyalty.





Let me begin by giving you an overview of 2002 which was a challenging year
given what was happening in the world, but despite all that, a very successful
year for us.



I'll then talk briefly about the current operating environment before describing
our strategic thinking for the medium and long term.



I'd then like to finish by explaining how all this ties back to delivering value
to you, our shareholders.



Let me start with the achievements of 2002.  First, our safety record improved.
Fewer people were hurt while working for BP.  That is a measure we take very
seriously, and an issue which is the top priority for every manager throughout
the company.  Our performance is in line with the best in the industry.



Secondly, our financial performance was strongly competitive with our peers.  In
a world of significantly lower gas prices and refining margins than in 2001 we
delivered $8.7 billion of profits.  Our return on capital was 13 per cent.  Our
gearing dropped by 2 per cent to below 28 per cent.



In underlying terms, that is against a set of standardised, so-called mid cycle
assumptions, our performance improved substantially.



As a result of that improvement, the Board have increased the dividend by 9 per
cent in dollar terms.



We replaced 175 per cent of our production, compared to a range of 40-135 per
cent for our major competitors.  This is the tenth consecutive year of reserves
replacement through exploration of above 100 per cent.  That's very important
because it gives us an inventory of growth options for the future.



We completed the acquisition of Veba, giving us the largest oil products' market
share in Germany.



Operational and political events, added to in the fourth quarter by developments
in Venezuela, gave us production growth for the year of just under 3 per cent,
rather than the 5.5 per cent we'd aimed for.



That was a good performance compared to our major competitors but we take missed
targets very seriously - and we've responded by reviewing very thoroughly
everything we're doing and the way we're doing it.



Turning then to 2003.  This has been and may very well continue to be a year of
volatility and uncertainty.  As well as the impact of the war in Iraq, economic
prospects remain uncertain with low growth rates particularly in Europe.
Current events have clearly damaged consumer and business confidence.



Crude oil prices started the year strongly. But that strength was predominantly
driven by exceptional events: the strike in Venezuela and the fear of the impact
of war with Iraq. Oil prices have now returned to levels closer to the 2002
average and the outlook remains uncertain.



For natural gas, the US market is fundamentally strong, which is helpful given
our position as the largest producer of gas in North America.



The market facing businesses, Refining, Retail and Petrochemicals, have been
affected by both weaker economic growth and rising feedstock costs.  Both these
effects might reduce during the coming year, but it looks unlikely that margins
will exhibit sustained strength.



All in all, this is a difficult and unusually uncertain trading environment, and
that is why we manage the business on a set of very prudent assumptions.



In uncertain and volatile circumstances a company's strength comes from the
quality of its strategy.  I want to describe to you the main strands of that
strategy - taking each of the business segments in turn.



Our upstream strategy has been unchanged since 1989. Simply stated, it is to
create, build and produce material businesses in some of the world's most
prolific hydrocarbon provinces.  The creation of material new profit centres by
accessing a disproportionate share of the world's largest and lowest cost oil
and gas fields is one of our most important competitive skills.



The tests of success are the number of giant discoveries and reserves added
through exploration, along with the finding cost per barrel.  Our track record
over the past five years is good.  We've made more giant discoveries, and
replaced more reserves at lower finding costs per barrel than any of our major
competitors.



That gives us the resource base from which to choose only the best opportunities
for development.



The best opportunities that we've found have been selected for development into
new profit centres.  We're now developing five new material profit centres in
the deep water Gulf of Mexico, Trinidad, Angola, Azerbaijan and Asia Pacific
LNG.



I cannot stress enough how important this moment is in the long history of BP.
For us, this set of moves is analogous, in terms of both capital and reserves,
to the development of the North Sea and Alaska 30 years ago.



Over the next five years, we expect that more than 50 per cent of the entire
capital allocated for investment in the upstream will go into these five new
profit centres.  In 2003 we intend to invest around $10 billion in the upstream.



The Upstream profit centres I've talked about are some of the most attractive,
accessible hydrocarbon provinces in the world.



But, of course, there is one other area that falls into that category.  Probably
the area with the greatest potential of all - Russia, the world's largest oil
and gas producer.



We established an initial base in Russia in 1997 with the purchase of 10 per
cent of Sidanco, and having learnt a great deal about doing business there we
now feel the time is right to do more.  We were delighted to announce in
February that we'd reached agreement in principle with Alfa-Access/Renova (AAR)
to merge our interests in Sidanco and TNK, and to create a new company which we
will call TNK-BP.



TNK-BP will be Russia's third largest oil producer.  This is the first time in
the last 86 years that any Western company has achieved such a significant
involvement in Russia.



BP will purchase a 50 per cent share in TNK-BP subject to legal and regulatory
approvals.  That will provide us with a profit centre which should contribute
around 13 per cent of our global production with around 30 per cent of our oil
reserves at 2002 levels.  As part of the agreement, AAR will retain its 50 per
cent interest in TNK-BP until at least the end of 2007.



We project that, even at standardised assumptions - $16 Brent oil prices -
TNK-BP will generate sufficient cash to fund its investment programme and will
need no additional capital from its shareholders.  This is important because it
gives our shareholders exposure to Russia through a self-financing company.



This transaction is a major step in support of our overall strategy.  TNK-BP
will become the sixth new profit centre and in common with the others it offers
enormous long-term potential.



Now I would like to move on to talk about our other Business Segments, starting
with our Gas, Power and Renewables business.



The role of Gas and Power is to maximise the value of the Group's gas resources
through marketing and to grow the value of our natural gas liquids business
(NGL's) by conducting activities which are complementary to our other business
segments.



We're the number one marketer of NGLs in North America with roughly a 13 per
cent market share, and globally we supply in the region of 6 per cent of the
whole market, which is substantial at around 8.5 million barrels a day.



We also aim to develop a material and profitable Renewables business and we
continue to focus on solar, where we currently have a 17 per cent share of the
world market.  In terms of sales we're number two behind Sharp of Japan.  While
this business is an investment in the future we'll continue to watch the bottom
line very carefully.



The Downstream refining and marketing business has experienced a period of
dramatic growth as we've assimilated the assets and markets that we've acquired.
  We now have a powerful platform with opportunities for growth.



We have built a track record of constant or expanding underlying unit gross
margins.  This has been achieved by portfolio choices, and by driving
productivity, and we aim to continue to do both.



Our approach is now to keep capital employed broadly flat over the next three
years while focussing into four specific areas:

  • Convenience markets
  • New markets, such as China
  • Refining investments for clean fuels or operating improvements
  • On our brand, to drive unit margins and volume growth



In Petrochemicals we have a similar strategy.  Our capacity is focused in seven
core products for which we have strong market segment shares, and in many cases
a distinctive technological advantage.  By 2006 we estimate around 90 per cent
of our capital employed in Petrochemicals will be associated with those seven
products.



We intend to continue reducing our operating costs and to add selectively to
capacity, while keeping the total level of investment and hence capital employed
broadly flat.



Let me now explain how this strategy aims at value for you, our shareholders.



We start from the premise that value isn't measured by any single target or
number.  We have to take a balanced view of all the factors which work together
to create value.



The main indicators within such a framework are return on capital employed,
costs, cash flow and returns to shareholders through dividends and share
buybacks.  Taken together they represent the outcome of the judgements taken by
the Board and management to maximise shareholder value for both the short and
long-term.



So with this in mind, how can the strategy I've described today create value?



Since 1999, we've been in a phase of significant mergers and acquisitions, and
developing opportunities for the future.



Now we are in a phase which is about making choices and about allocating capital
and revenue investment to assets and markets based on their value potential and
risk.  Those that do not merit an allocation, we consider for divestment.



At the same time, we scan for growth opportunities and take up those where we
can create value by integrating new activities in a cost-effective way.  So we
invest only in distinctive assets and markets.  That's the first step.  Then we
control the rate of investment within a disciplined financial framework to
balance cash generated with cash used over the medium term.



There are many sources of productivity of which technology is one of the most
important.  Productivity controls costs where we have a good track record but
where there is more to do.



The investment in distinctive opportunities and careful attention to
productivity is designed to increase cash flow and earnings.



This doesn't happen year on year because in reality the trading environment
changes.



It is also important to remember that investment precedes revenue.  So capital
employed may rise until it is in service and generating income.  But that is a
timing issue.



So that's the business model.  From that model flow the returns.



Our aim is to produce, on the basis of the standardised assumptions I've talked
about, a balance of stable returns - with growing capital employed in a
distinctive set of assets and markets.



This balance results in gearing in the range of around 25 per cent to 35 per
cent and that suggests that we're positioned to continue to achieve a growth in
results per share significantly above the growth in demand for the principal
products we produce and sell.



Our aim is to deliver value to the shareholder through value growth, through the
dividend and through the repurchase of shares.  Cash flow is expected to remain
strong and increasingly, at or above standardised assumptions, to be in excess
of presently perceived needs for reinvestment.  If the reality of the day
supports this statement, and gearing remains under control, the Board will
consider how best to use these funds.



A priority, but not the only one, will be the repurchase of shares, building on
the track record of $4 billion of shares repurchased up to the end of 2002.



And it is on this basis that we announced in February that we had decided to
repurchase $2 billion of our shares subject to market conditions, and your
continued support.



This action reflects the confidence of the Board in our present financial
condition, including our success in divesting certain assets and in our future
cash flows.



The Board sets the dividend on a balance of factors.  They consider not only
present earnings but also long-term growth prospects and cash flow.



They also consider our competitive position and examine the payout which broadly
corresponds to around 60 per cent of sustainable earnings calculated under
standardised assumptions over a run of years.  Of course, this isn't a
mechanical calculation.  The Board judges the balance between all the factors
and all the options available.



The track record is that our dividends, which are set in US dollars, have
increased by 17 per cent between 2000 and 2002.  Over the long run, 20 years,
they have increased by an average of 4 per cent a year above inflation in dollar
terms, and by an average of 3 per cent a year above inflation in sterling terms.



Of course, maximising value isn't a mechanical process.



All our experience over the last 95 years since the company was established is
that value is created through understanding and meeting the needs of all those
with whom we do business.



We depend on the satisfaction of consumers with our products, on continued
access to capital markets, on the safety, motivation and skill of our people, on
good relationships with governments and communities in which we work and, of
course, on our ability to judge the right response to the ever-changing
circumstances of the world.  We cannot neglect any of these issues.  We cannot
concentrate on one alone, because if we did we would risk endangering them all.
It is a matter of maintaining a careful, dynamic balance.



Let me give just a couple of examples of what that means.



I mentioned safety. In 2002, we managed to reduce the number of accidents that
cause injury.  Our goal is to continue that trend and, most important of all, to
reduce fatalities to zero.  That's an objective we're determined to achieve.



Then on the environment.  In 2002 we announced a new approach on climate change.
  Having already lowered our emissions of greenhouse gases by 10 per cent, we're
now committed that net emissions will be at these reduced levels at the end of
decade.



For a growing company, that is a considerable challenge which we intend to meet
through a combination of energy efficiency, flaring reductions, production of
lower-carbon products and through emissions trading.



In dealing with the broader issues that affect our business, we believe that
long-term relationships founded on trust and mutual advantage, and underpinned
by ethical behaviour of the highest standards, are the key to our business
success.



We believe this is the right strategy - a distinctive approach to the
development of a global market.  We believe it is a strategy which will allow us
to continue to deliver an outstandingly competitive performance and to generate
value for you - the people who trust us with your investment.





Further information: BP Press Office, tel: [phone]





                                    - ENDS -




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