Derivative financial instruments (Tables)

12 Months Ended

Dec. 31, 2021

Financial Instruments [Abstract]

Disclosure of fair value of derivative instruments

The fair values of derivative financial instruments at 31 December are set out below.

Exchange traded derivatives are valued using closing prices provided by the exchange as at the balance sheet date. These derivatives are categorized within level 1 of the fair value hierarchy. Exchange traded derivatives are typically considered settled through the (normally daily) payment or receipt of variation margin.

Over-the-counter (OTC) financial swaps, forwards and physical commodity sale and purchase contracts are generally valued using readily available information in the public markets and quotations provided by brokers and price index developers. These quotes are corroborated with market data and are categorized within level 2 of the fair value hierarchy.

In certain less liquid markets, or for longer-term contracts, forward prices are not as readily available. In these circumstances, OTC financial swaps and physical commodity sale and purchase contracts are valued using internally developed methodologies that consider historical relationships between various commodities, and that result in management’s best estimate of fair value. These contracts are categorized within level 3 of the fair value hierarchy.

29. Derivative financial instruments – continued

Financial OTC and physical commodity options are valued using industry standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and contractual prices for the underlying instruments, as well as other relevant economic factors. The degree to which these inputs are observable in the forward markets determines whether the option is categorized within level 2 or level 3 of the fair value hierarchy.

				$ million
		2021		2020
	Fair value asset	Fair value liability	Fair value asset	Fair value liability
Derivatives held for trading
Currency derivatives	272	(643)	858	(694)
Oil price derivatives	2,192	(1,567)	1,519	(1,093)
Natural gas price derivatives	6,823	(8,273)	6,406	(5,489)
Power price derivatives	3,105	(2,966)	1,258	(1,037)
Other derivatives	10	—	7	—
	12,402	(13,449)	10,048	(8,313)
Embedded derivatives
Other embedded derivatives	—	(7)	1	(7)
	—	(7)	1	(7)
Cash flow hedges
Currency forwards	1	—	4	—
Gas price futures	—	—	—	—
	1	—	4	—
Fair value hedges
Currency swaps	326	(465)	2,614	(82)
Interest rate swaps	21	—	80	—
	347	(465)	2,694	(82)
	12,750	(13,921)	12,747	(8,402)
Of which – current	5,744	(7,565)	2,992	(2,998)
– non-current	7,006	(6,356)	9,755	(5,404)

The following table shows the fair value of derivative assets and derivative liabilities held for trading, analysed by maturity period and by methodology of fair value estimation. This information is presented on a gross basis, that is, before netting by counterparty.

							$ million
							2021
	Less than 1 year	1-2 years	2-3 years	3-4 years	4-5 years	Over 5 years	Total
Fair value of derivative assets
Level 1	63	25	4	6	1	—	99
Level 2	11,418	1,957	631	298	139	102	14,545
Level 3	888	600	510	416	382	2,731	5,527
	12,369	2,582	1,145	720	522	2,833	20,171
Less: netting by counterparty	(6,657)	(694)	(145)	(42)	(26)	(205)	(7,769)
	5,712	1,888	1,000	678	496	2,628	12,402
Fair value of derivative liabilities
Level 1	(57)	(28)	(4)	(8)	(2)	—	(99)
Level 2	(13,646)	(2,189)	(575)	(251)	(305)	(216)	(17,182)
Level 3	(521)	(312)	(289)	(281)	(268)	(2,266)	(3,937)
	(14,224)	(2,529)	(868)	(540)	(575)	(2,482)	(21,218)
Less: netting by counterparty	6,657	694	145	42	26	205	7,769
	(7,567)	(1,835)	(723)	(498)	(549)	(2,277)	(13,449)
Net fair value	(1,855)	53	277	180	(53)	351	(1,047)
							$ million
							2020
	Less than 1 year	1-2 years	2-3 years	3-4 years	4-5 years	Over 5 years	Total
Fair value of derivative assets
Level 1	48	9	15	3	5	1	81
Level 2	3,342	858	367	212	100	709	5,588
Level 3	739	546	552	520	493	3,548	6,398
	4,129	1,413	934	735	598	4,258	12,067
Less: netting by counterparty	(1,182)	(253)	(77)	(38)	(37)	(432)	(2,019)
	2,947	1,160	857	697	561	3,826	10,048
Fair value of derivative liabilities
Level 1	(55)	(9)	(13)	(3)	(5)	(1)	(86)
Level 2	(3,577)	(809)	(263)	(136)	(41)	(79)	(4,905)
Level 3	(492)	(414)	(426)	(404)	(407)	(3,198)	(5,341)
	(4,124)	(1,232)	(702)	(543)	(453)	(3,278)	(10,332)
Less: netting by counterparty	1,182	253	77	38	37	432	2,019
	(2,942)	(979)	(625)	(505)	(416)	(2,846)	(8,313)
Net fair value	5	181	232	192	145	980	1,735

Derivative assets held for trading fair value, and maturities

Derivative assets held for trading have the following fair values and maturities.

							$ million
							2021
	Less than 1 year	1-2 years	2-3 years	3-4 years	4-5 years	Over 5 years	Total
Currency derivatives	168	52	1	1	—	50	272
Oil price derivatives	1,544	429	167	47	4	1	2,192
Natural gas price derivatives	2,678	847	547	456	368	1,927	6,823
Power price derivatives	1,322	553	285	174	124	647	3,105
Other derivatives	—	7	—	—	—	3	10
	5,712	1,888	1,000	678	496	2,628	12,402
							$ million
							2020
	Less than 1 year	1-2 years	2-3 years	3-4 years	4-5 years	Over 5 years	Total
Currency derivatives	153	9	3	2	2	689	858
Oil price derivatives	1,159	197	90	63	7	3	1,519
Natural gas price derivatives	1,210	731	596	525	476	2,868	6,406
Power price derivatives	425	223	161	107	76	266	1,258
Other derivatives	—	—	7	—	—	—	7
	2,947	1,160	857	697	561	3,826	10,048

Derivative liabilities held for trading, fair value and maturities

The table below shows the timing of cash outflows for derivative financial instruments entered into for the purpose of managing interest rate and foreign currency exchange risk, whether or not hedge accounting is applied, based upon contractual payment dates. As part of actively managing the group’s debt portfolio it is possible that cash flows in relation to associated derivatives could be accelerated from the profile provided. The amounts reflect the gross settlement amount where the pay leg of a derivative will be settled separately from the receive leg, as in the case of cross-currency swaps hedging non-US dollar finance debt or hybrid bonds. The swaps are with high investment-grade counterparties and therefore the settlement-day risk exposure is considered to be negligible. Not shown in the table are the gross settlement amounts (inflows) for the receive leg of derivatives that are settled separately from the pay leg, which amount to $27,048 million at 31 December 2021 (2020 $33,704 million) to be received on the same day as the related cash outflows.

		$ million
Cash outflows for derivative financial instruments at 31 December	2021	2020
Within one year	1,497	2,384
1 to 2 years	1,492	1,976
2 to 3 years	2,531	2,017
3 to 4 years	2,053	3,074
4 to 5 years	5,575	2,582
5 to 10 years	8,618	15,263
Over 10 years	5,365	4,483
	27,131	31,779

For further information on our derivative financial instruments, see Note 29.

Derivative liabilities held for trading have the following fair values and maturities.

							$ million
							2021
	Less than 1 year	1-2 years	2-3 years	3-4 years	4-5 years	Over 5 years	Total
Currency derivatives	(191)	(2)	(13)	(5)	(173)	(259)	(643)
Oil price derivatives	(1,340)	(179)	(39)	(7)	(2)	—	(1,567)
Natural gas price derivatives	(4,551)	(1,053)	(460)	(351)	(282)	(1,576)	(8,273)
Power price derivatives	(1,485)	(601)	(211)	(135)	(92)	(442)	(2,966)
	(7,567)	(1,835)	(723)	(498)	(549)	(2,277)	(13,449)
							$ million
							2020
	Less than 1 year	1-2 years	2-3 years	3-4 years	4-5 years	Over 5 years	Total
Currency derivatives	(502)	(117)	(11)	(1)	—	(63)	(694)
Oil price derivatives	(1,000)	(83)	(9)	(1)	—	—	(1,093)
Natural gas price derivatives	(1,095)	(595)	(479)	(422)	(348)	(2,550)	(5,489)
Power price derivatives	(345)	(184)	(126)	(81)	(68)	(233)	(1,037)
	(2,942)	(979)	(625)	(505)	(416)	(2,846)	(8,313)

Disclosure of changes in fair value of derivative instruments

29. Derivative financial instruments – continued

Level 3 derivatives

The following table shows the changes during the year in the net fair value of derivatives held for trading purposes within level 3 of the fair value hierarchy.

						$ million
	Oil price	Natural gas price	Power price	Currency	Other	Total
Fair value contracts at 1 January 2021	191	147	(173)	5	6	176
Gains (losses) recognized in the income statement	302	410	407	(159)	1	961
Purchases	—	—	—	—	3	3
Settlements	(248)	(33)	(115)	—	—	(396)
Transfers out of level 3	(46)	10	(79)	—	—	(115)
Net fair value of contracts at 31 December 2021	199	534	40	(154)	10	629
Deferred day-one gains (losses)						961
Derivative asset (liability)						1,590
						$ million
	Oil price	Natural gas price	Power price	Currency	Other	Total
Fair value contracts at 1 January 2020	71	28	(125)	—	110	84
Gains (losses) recognized in the income statement	250	184	162	5	(71)	530
Sales	—	—	—	—	(32)	(32)
Settlements	(135)	(22)	(189)	—	—	(346)
Transfers out of level 3	5	(43)	(21)	—	(1)	(60)
Net fair value of contracts at 31 December 2020	191	147	(173)	5	6	176
Deferred day-one gains (losses)						881
Derivative asset (liability)						1,057

Disclosure of detailed information about hedging instruments and items

The tables below summarize the change in the fair value of hedging instruments and the hedged item used to calculate ineffectiveness in the period.

			$ million
	Change in fair value of hedging instrument used to calculate ineffectiveness	Change in fair value of hedged item used to calculate ineffectiveness	Hedge ineffectiveness recognized in profit or (loss)
At 31 December 2021
Cash flow hedges
Foreign exchange risk
Highly probable forecast capital expenditure	(1)	1	—
Commodity price risk
Highly probable forecast sales	(430)	430	—
At 31 December 2020
Cash flow hedges
Foreign exchange risk
Highly probable forecast capital expenditure	4	(4)	—
Commodity price risk
Highly probable forecast sales	78	(78)	—

The tables below summarize the carrying amount and nominal amount of the derivatives designated as hedging instruments in cash flow hedge relationships.

	Carrying amount of hedging instrument		Nominal amounts of hedging instruments
	Assets	Liabilities
At 31 December 2021	$ million	$ million	$ million	mmBtu
Cash flow hedges
Foreign exchange risk
Highly probable forecast capital expenditure	1	—	55
Commodity price risk
Highly probable forecast sales	—	—		(420)
At 31 December 2020
Cash flow hedges
Foreign exchange risk
Highly probable forecast capital expenditure	4	—	162
Commodity price risk
Highly probable forecast sales	—	—		(175)

All hedging instruments are presented within derivative financial instruments on the group balance sheet.

29. Derivative financial instruments – continued

All of the nominal amount of hedging instruments at 31 December 2021 and 2020 relating to highly probably forecast capital expenditure matures within 12 months of the relevant balance sheet date. Of the nominal amount of hedging instruments at 31 December 2021 relating to highly probably forecast sales 245 mmBtu (2020 135 mmBtu) matures within 12 months and 175 mmBtu (2020 40 mmBtu) within one to two years.

The table below summarizes the weighted average exchange rates and the weighted average sales price in relation to the derivatives designated as hedging instruments in cash flow hedge relationships at 31 December.

	Weighted average price/rate
	2021		2020
At 31 December	Forecast capital expenditure	Forecast sales	Forecast capital expenditure	Forecast sales
Sterling/US dollar	1.33		1.35
Korean won/US dollar	—		1,174.47
Henry Hub $/mmBtu		3.24		2.88

The tables below summarize the change in the fair value of hedging instruments and the hedged item used to calculate ineffectiveness in the period. The signage convention for changes in fair value presented in this table is consistent with that presented in Note 26.

			$ million
	Change in fair value of hedging instrument used to calculate ineffectiveness	Change in fair value of hedged item used to calculate ineffectiveness	Hedge ineffectiveness recognized in profit or (loss)
At 31 December 2021
Fair value hedges
Interest rate risk on finance debt	54	(54)	—
Interest rate and foreign currency risk on finance debt	2,565	(2,460)	(105)
At 31 December 2020
Fair value hedges
Interest rate risk on finance debt	(258)	258	—
Interest rate and foreign currency risk on finance debt	(2,743)	2,549	194

The tables below summarize the carrying amount of the derivatives designated as hedging instruments in fair value hedge relationships at 31 December.

			$ million
	Carrying amount of hedging instrument		Nominal amounts of hedging instruments
At 31 December 2021	Assets	Liabilities
Fair value hedges
Interest rate risk on finance debt	21	—	1,102
Interest rate and foreign currency risk on finance debt	326	(465)	18,880
At 31 December 2020
Fair value hedges
Interest rate risk on finance debt	80	—	4,104
Interest rate and foreign currency risk on finance debt	2,614	(82)	23,313

All hedging instruments are presented within derivative financial instruments on the group balance sheet. In 2021 ineffectiveness arising on fair value hedges is included within finance costs in the income statement. In 2020 ineffectiveness arising on fair value hedges was included within the production and manufacturing expenses section of the income statement.

The tables below summarize the profile by tenor of the nominal amount of the derivatives designated as hedging instruments in fair value hedge relationships at 31 December.

								$ million
At 31 December 2021	Less than 1 year	1-2 years	2-3 years	3-4 years	4-5 years	5-10 years	Over 10 years	Total
Fair value hedges
Interest rate risk on finance debt	713	—	219	—	170	—	—	1,102
Interest rate and foreign currency risk on finance debt	715	1,426	2,377	2,114	2,400	4,471	5,377	18,880
At 31 December 2020
Fair value hedges
Interest rate risk on finance debt	2,705	996	—	227	—	176	—	4,104
Interest rate and foreign currency risk on finance debt	737	1,056	2,039	3,175	2,804	8,587	4,915	23,313

The table below summarizes the weighted average floating interest rate and the weighted average exchange rates in relation to the derivatives designated as hedging instruments in fair value hedge relationships at 31 December.

At 31 December			2021				2020
	Interest rate swaps		Cross-currency interest rate swaps		Interest rate swaps		Cross-currency interest rate swaps
Interest rate	0.31	%	1.91	%	0.58	%	1.88	%
Sterling/US dollar			1.36				1.33
Euro/US dollar			1.13				1.14
Canadian dollar/US dollar			0.78				0.78

29. Derivative financial instruments – continued

The tables below summarize the carrying amount, and the accumulated fair value adjustments included within the carrying amount, of the hedged items designated in fair value hedge relationships at 31 December.

					$ million
	Carrying amount of hedged item		Accumulated fair value adjustment included in the carrying amount of hedged items
At 31 December 2021	Assets	Liabilities	Assets	Liabilities	Discontinued hedges
Fair value hedges
Interest rate risk on finance debt	—	(1,170)	—	(22)	(524)
Interest rate and foreign currency risk on finance debt	—	(18,837)	—	(94)	—
At 31 December 2020
Fair value hedges
Interest rate risk on finance debt	—	(4,196)	—	(81)	(775)
Interest rate and foreign currency risk on finance debt	—	(23,253)	—	(938)	—

The hedged item for all fair value hedges is presented within finance debt on the group balance sheet.

Movement in reserves related to hedge accounting

The table below provides a reconciliation of the cash flow hedge and costs of hedging reserves on a pre-tax basis by risk category. The signage convention of this table is consistent with that presented in Note 31.

					$ million
	Cash flow hedge reserve			Costs of hedging reserve
	Highly probable forecast capital expenditure	Highly probable forecast sales	Purchase of equitya	Interest rate and foreign currency risk on finance debt	Total
At 1 January 2021	12	41	(651)	(106)	(704)
Recognized in other comprehensive income
Cash flow hedges marked to market	1	(430)	—	—	(429)
Cash flow hedges reclassified to the income statement - hedged item affected profit or loss	—	255	—	—	255
Costs of hedging marked to market	—	—	—	(105)	(105)
Costs of hedging reclassified to the income statement	—	—	—	21	21
	1	(175)	—	(84)	(258)
Cash flow hedges transferred to the balance sheet	(10)	—	—	—	(10)
At 31 December 2021	3	(134)	(651)	(190)	(972)
					$ million
	Cash flow hedge reserve			Costs of hedging reserve
	Highly probable forecast capital expenditure	Highly probable forecast sales	Purchase of equitya	Interest rate and foreign currency risk on finance debt	Total
At 1 January 2020	(1)	—	(651)	(170)	(822)
Recognized in other comprehensive income
Cash flow hedges marked to market	7	78	—	—	85
Cash flow hedges reclassified to the income statement - hedged item affected profit or loss	—	(37)	—	—	(37)
Costs of hedging marked to market	—	—	—	42	42
Costs of hedging reclassified to the income statement	—	—	—	22	22
	7	41	—	64	112
Cash flow hedges transferred to the balance sheet	6	—	—	—	6
At 31 December 2020	12	41	(651)	(106)	(704)

a See Note 31 for further information on the cash flow hedge reserve relating to the purchase of equity.