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BP Amoco Essay Research Paper British Petrochemical

BP Amoco Essay, Research Paper


British Petrochemical Corporation registered


on April 14, 1909, as the Anglo-Persian Oil Company, Ltd. It was named


the Anglo-Iranian Oil Company, Ltd., in 1935 and changed its name to the


British Petroleum Company Limited in 1954. The current name was adopted


in 1982. The company?s headquarters are in London. The Anglo-Persian Oil


Company was formed in 1909 to take over and finance an oil-field concession


granted in 1901 by the Iranian government to an English investor, William


Knox D?Arcy. (Britannica)


In 1914 the British government became


the company?s principal stockholder and over the years was usually the


largest single stockholder. Effective January 1, 1955, British Petroleum


became a holding company. In the beginning of the 1977 the British government


reduced its ownership of BP by selling shares to the public, and in the


late 1980s the government turned over BP entirely to private ownership


by selling its remaining shares of the company. In 1987 BP acquired the


remainder of the Standard Oil Company for almost $8 billion reinforcing


its position as one of the largest oil companies in the world.


Amoco Corporation formerly Standard


Oil Company, American petroleum corporation, was founded in 1889 by the


Standard Oil trust to direct the refining and marketing of oil in the Midwestern


states. The company?s first refinery, outside Whiting, Ind., produced fuel


oil, kerosene, and other petroleum products. Around 1910 Standard Oil developed


the cracking process, which became the most important method fro producing


gasoline from petroleum. In 1911 the U.S. Supreme Court dissolved the nationwide


Standard


Oil trust, and Standard Oil (Indiana)


became independent. Its headquarters are in Chicago. (Britannica)


In the 1920 Standard Oil acquired


partial interest in companies that owned Midwestern oil fields and pipeline


networks in order to add production to its refining and marketing operations.


In the 1950s Standard Oil became active in oil exploration and production


ventures in South America and the Middle East. In 1961 most of the company?s


U.S. operating activities were unified in the American oil company, for


which Standard Oil (Indiana) served as a holding company. The byname Amoco


was increasingly used as a brand and corporate name. In 1985 the Standard


Oil Company (Indiana) became officially the Amoco Corporation.


On December 30,1998, BP and Amoco


confirmed that the US Federal Trade Commission (FTC) has granted regulatory


approval for the merger of the two companies and that completion of the


deal will take place at year-end. Both companies agreed to intend to close


the transaction shortly after 2100 hours London time on December 31, 1998,


when Amoco?s stock will leave the Standard & Poor 500 and the shares


of the merged group, BP Amoco p.l.c., will be listed on the London Stock


Exchange. With a market capitalization of more than $140 billion, BP Amoco


p.l.c. is the Britain?s biggest company and one of the world?s top three


oil majors.


?We aim to play a leading role in meeting


the world?s needs for oil, gas, solar power and petrochemicals without


damaging the environment.?


BP AMOCO?S WORLD


The BP Amoco group stands out as


a complete provider of energy and petrochemicals. Every day they serve


millions of customers with products to the quality of their lives ? fuel


for transport, energy for heat and light, solar power, and petrochemicals


for plastics, fibres and fabrics. Explorers from Amoco and BP have led


the way in finding the world?s giant oil and gas fields and getting energy


to the world?s marketplace. According to Larry Fuller and Peter Sutherland,


co-chairmen, the meeting the demand of energy calls for a blend of outstanding


human and technical skills, sophisticated global organization and two-way


relationships with local communities, customers, contractors, partners,


government and employees. BP Amoco?s aim is to be successful in everything


they do by delivering outstanding performance.


Their business is about discovery


? about finding, producing and marketing the natural energy resources on


which the modern world depends. Their sales revenues, market value, and


oil and gas reserves make BP Amoco one of the three largest integrated


energy companies in the world. They operate in one hundred countries on


six continents. Each day they generate almost three million barrels of


oil equivalent production, of which sixty-five percent is oil and thirty-five


percent natural gas. They have well-established operations in Europe, North


and South America, Australia and much of Africa.


BP Amoco is distinguished by the


financial resources to operate on a global scale, the technical capacity


to seize opportunities, and a flexible management structure. The core of


their business is a world-class set of assets. In Britain they are the


largest producer of oil and gas from the North Sea and West of Shetland.


In the United States they are one of the largest producers of oil and gas,


based on major assets in the Gulf of Mexico, Texas and Alaska. In South


America they are the largest international oil and gas investors in Argentina,


Colombia, Trinidad and Tobago, and Venezuela.


BP Amoco?s transport network criss-crosses


the globe. They operate 23,000 miles of pipeline, most of it in the United


States. They also control an international tanker fleet of more than thirty-five


vessels, either fully owned or on long-term charter. Natural gas can be


used as a fuel with minimal processing, but crude oil needs to be refined


before it becomes a fuel that can power vehicles, ships and places or be


turned into heating oil for industry and commerce. The cost of running


refineries means that each of the eighteen facilities they wholly or partly


own must be highly competitive and efficient. Once refining is completed,


the different products are moved to storage terminals by ship, barge, pipeline


or rail. From there they are usually delivered to customers by road tankers.


Every day they sell or trade 4.4 million barrels of refined products.


On land, on the sea and in the air,


BP Amoco products help to keep the world moving. Each day they serve tem


million customers worldwide. Products are marketed under the red, white


and blue Amoco Brand in the United States and under the green and yellow


BP brand in the rest of the world. In the United States, BP Amoco has about


fifteen thousand service stations. They are a leading supplier of premium


gasoline in America. Outside North America they have a worldwide network


of 11,500 service stations. They operate in about one hundred countries.


BP Amoco is also one of the world?s largest marketers of aviation fuel


and a major supplier of fuels and lubricants to the global shipping industry.


Customers can call for their fueling services at more than eight hundred


ports and six hundred airports.


BP Amoco is the world?s third largest


petrochemicals company, based on a diverse, highly integrated product portfolio


and strong marketing positions in North America, Europe and the Far East.


BP Amoco operates large-scale chemicals manufacturing plants in the United


States, Britain, Belgium, France, Germany and Brazil. Thirteen joint-venture


projects in seven countries give BP Amoco a powerful platform for expansion


in Asia, including China, Singapore, South Korea, and Malaysia. BP Amoco


holds leading position is seven core products ? acetic acid, acrylonitrile,


aromatics, purified terephthalic acid (PTA), alpha-olefins, purified isophthalic


acid (PIA) and polypropylene.


BP Amoco is the world?s largest


producer of PTA, which is used to manufacture polyester, and polybutene


from which engine oil and lubricants are made. They also produce raw materials


for plastics such as polystyrene and polyethylene ? the versatile polymer


use in products from food packing to gas pipes. Another of their products,


polypropylene, is the source of a variety of everyday products. Other BP


Amoco chemical products are used for applications as diverse as pharmaceuticals,


cosmetics, detergents, packaging, coatings, adhesives, fuel additives,


cable insulation, microfilm, cassette tapes, and synthetic rubber.


WHAT THEY STAND FOR


The merger of BP and Amoco combines


the resources, skills and experience of two great companies, companies


that already share similar values and policies. According to Sir John Browne,


the chief executive officer, the formation of BP Amoco will provide an


opportunity to improve our performance by building on the track

record


and the highest achievements of each company. BP Amoco will aspire to deliver


excellent performance in every part of our business and to be in touch


with the reality of the world in which they are operating. They want to


build relationships on the basis of mutual advantage ? the needs of those


who do business with them, and the needs of each community in which they


operate.


They aim to conduct their operations without


accidents, no harm to people and no damage to the environment. They apply


their skills, technology, and know-how to the search for creative and constructive


solutions.


Their business policies are universal.


Their commitment is to use these policies to raise their own standards.


BP Amoco?s goal is to play a leading role in meeting these needs from oil,


gas, solar power and petrochemicals without damaging the environment. Innovation


will be the hallmark of the way they work with people, technology, assets,


and relationships. BP Amoco believe that their activities should generate


economic benefits and opportunities and their conduct should be a source


of positive influence. Their business policies focus on five areas ? ethical


conduct; employees; relationships; health, safety and environment; control


and finance. They are committed to respect the rule of law, develop


employment practices, create mutual advantage in all relationships, demonstrate


respect for the natural environment, and manage their financial performance.


They expect that everybody who works for BP Amoco to take responsibility


for living up to these commitments. Their measures of success are the extend


to which they meet those commitments, the long-term value they create for


their shareholders, the pride of their employees in their accomplishments,


the satisfaction of their customers and all those with whom BP Amoco do


business, and the way communities judge their activities.


BP AMOCO CHEMICALS


BP Amoco?s main activities are exploration


and production of crude oil and natural gas; refining, marketing, supply


and transportation; solar power and manufacturing and marketing of petrochemicals.


BP Amoco Chemicals manufactures and markets wide ranges of petrochemicals,


intermediates, plastics, and specialities. Each year they sell more than


25 million of petrochemicals, specialities and fabricated products worldwide,


creating an annual turnover of $9,691 million in 1998. They operate large-scale


manufacturing plants in the United States, the United Kingdom, Belgium,


France, Germany, Malaysia, and Brazil. Thirteen joint-venture businesses


in seven countries give a powerful platform for growth in Asia, including


China, Singapore, South Korea and Malaysia.


BP Amoco Chemicals holds leading


positions in seven core products ? acetic acid, acrylonitrile, aromatics,


purified terephthalic acid (PTA), alpha-olefins, purified isophthalic acid


(PIA) and polypropylene. Some of their products are used internally as


the raw materials for other downstream chemicals, others are sold to customers


for use in application as diverse as pharmaceuticals, cosmetics, detergents,


packaging, wire and cable insulation, lubricants, textiles, agriculture


and agrochemicals, electrical and electronic components, automotive parts,


aerospace and aviation and in the building and construction industry.


One of the main factors in their


success has been in developing and applying advanced technology to their


manufacturing processes and BP Amoco Chemicals owns a number of proprietary


technologies. Among these is Innovene, a gas phase manufacturing process


for polyethylene. They also have leading-edge technology for the manufacture


of polypropylene. Other includes Cativa, an iridium-based catalyst for


acetic acid, naphthalene dicarboxylate (NDC), a chemical that makes polyesters


stronger and more heat-resistant, and their acrylonitrile process, which


is used in 95 percent of the world?s acrylonitrile manufacturing capacity.


On February 17, 2000, BP Amoco Chemicals


announced that they are studying options to debottleneck production at


their purified terephthalic acid (PTA) plant at Cooper River, South Carolina.


BP Amoco is studying options for a new world-scale, 700,000 metric tonne


PTA unit that could be brought on-stream by the end of 2003. (Northern


Light, 2000)


Everybody who works for BP Amoco


Chemicals is responsible for getting health, safety, and the environment


right. Good health, safety, and the environment performance and the health,


safety and security of everyone who works for BP Amoco are critical to


the success of their business. They are committed to respecting the rule


of law, conducting their business with integrity, and showing respect for


human dignity and the rights of the individual wherever they do business.


They are also committed to respect the natural environment and work towards


their goals without no accidents, no harm to people and no damage to the


environment.


FINANCIAL HIGHLIGHTS


January – June 1999 1998


Replacement cost profit before exceptional


items ($m) 1,903 2,358


Replacement cost profit after exceptional


items ($m) 880 2,420


Historical cost profit after exceptional


items ($m) 1,459 1,632


Earnings per ordinary share on replacement


cost profit before exceptional items (cents) 20 25


Dividends per ordinary share (cents) ?


first quarter? second quarter 10.010.0 9.510.0


Dividends per ordinary share (pence) ?


first quarter? second quarter 6.16.2 5.86.0


Dividends per ADS (cents) ? first quarter?


second quarter 60.060.0 57.060.0


Capital expenditure ($m) 3,263 5,065


In the 1998 Annual Report co-chairmen of


BP Amoco described the merger of BP and Amoco as a ?groundbreaking deal


for the oil industry.? A strong second-quarter of 1999 result as merger


cost savings began to come through produced replacement cost profits for


the half of $2,128 million, before exceptional items and after adjusting


for special charges of $225 million. These profits were about 12 percent


down on a year ago. Net debt increased to $15,1 billion. The ratio of net


debt to net debit plus equity was 26%.


The exploration and production business


generated $2,435 million of replacement cost operating profit for the half


year after adjusting for special charges. This represented an improvement


of 10% on the first half of 1998, despite lower oil prices, and reflected


several factors ? higher oil and gas production, lower costs stemming from


savings and the benefits resulting from post-merger rationalization.


Replacement cost operating profit for


the half year was $956 after adjusting for special charges ? down 31% on


the same period in 1998. At $474 million, replacement cost operating profit


after adjusting for special charges was 29% lower than same period in 1998.


Chemicals production was 8% up on the first half of 1998 as sales improved.


LOOKING TO THE FUTURE


On July 15, 1999, BP Amoco announced


new targets. They will lop $4 billion of its annual costs, sell assets


of $10 billion and boost capital spending to a total of $26 billion over


the three years to the end of 2001. According to Sir John, BP Amoco will


continue to improve efficiency and intend to high-grade the portfolio with


$10 billion of disposals. They plan to invest for growth and to maintain


their gearing within a band of around 25% to 30% and to maintain our dividend


policy of paying out 50% of underlying mid-cycle earnings. BP Amoco will


continue to plan on the basis of a low oil price, driving down supply cost


to ensure the group?s robustness at $11 a barrel. Capital spending this


year should be around $7 billion and disposals $2 billion. Some $2.2 billion


of the cost-reduction targets is expected to come from the upstream business,


$1.4 billion from refining and marketing and $400 million from petrochemicals.


After the $10 billion of divestments, the group expects to see gas production


growing by 5% a year, and oil production by 8% a year.


CONCLUSION


BP Amoco is proud to be part of


an organization that does much to improve the quality of life of people


everywhere. They believe that their business should be both competitively


successful and a force for good. They seek to conduct their business in


a manner that is distinctive, responsible and forward-looking. BP Amoco


strives to be a good citizen. This is reflected in their active support


for the people and communities where they operate.


?A good business should be both successful


and a force for good.?

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