Segmental analysis

The group’s organizational structure reflects the various activities in which BP is engaged. At 31 December 2018, BP had three reportable segments: Upstream, Downstream and Rosneft.

Upstream’s activities include oil and natural gas exploration, field development and production; midstream transportation, storage and processing; and the marketing and trading of natural gas, including liquefied natural gas (LNG), together with power and natural gas liquids (NGLs).

Downstream’s activities include the refining, manufacturing, marketing, transportation, and supply and trading of crude oil, petroleum, petrochemicals products and related services to wholesale and retail customers.

BP’s interest in Rosneft is accounted for using the equity method and is reported as a separate operating segment, reflecting the way in which the investment is managed.

Other businesses and corporate comprises the biofuels and wind businesses, the group’s shipping and treasury functions, and corporate activities worldwide.

The accounting policies of the operating segments are the same as the group’s accounting policies described in Note 1. However, IFRS requires that the measure of profit or loss disclosed for each operating segment is the measure that is provided regularly to the chief operating decision maker for the purposes of performance assessment and resource allocation. For BP, this measure of profit or loss is replacement cost profit or loss before interest and tax which reflects the replacement cost of supplies by excluding from profit or loss inventory holding gains and losses^a. Replacement cost profit or loss for the group is not a recognized measure under IFRS.

Sales between segments are made at prices that approximate market prices, taking into account the volumes involved. Segment revenues and segment results include transactions between business segments. These transactions and any unrealized profits and losses are eliminated on consolidation, unless unrealized losses provide evidence of an impairment of the asset transferred. Sales to external customers by region are based on the location of the group subsidiary which made the sale. The UK region includes the UK-based international activities of Downstream.

All surpluses and deficits recognized on the group balance sheet in respect of pension and other post-retirement benefit plans are allocated to Other businesses and corporate. However, the periodic expense relating to these plans is allocated to the operating segments based upon the business in which the employees work.

Certain financial information is provided separately for the US as this is an individually material country for BP, and for the UK as this is BP’s country of domicile.

Inventory holding gains and losses represent the difference between the cost of sales calculated using the replacement cost of inventory and the cost of sales calculated on the first-in first-out (FIFO) method after adjusting for any changes in provisions where the net realizable value of the inventory is lower than its cost. Under the FIFO method, which we use for IFRS reporting, the cost of inventory charged to the income statement is based on its historical cost of purchase or manufacture, rather than its replacement cost. In volatile energy markets, this can have a significant distorting effect on reported income. The amounts disclosed represent the difference between the charge to the income statement for inventory on a FIFO basis (after adjusting for any related movements in net realizable value provisions) and the charge that would have arisen based on the replacement cost of inventory. For this purpose, the replacement cost of inventory is calculated using data from each operation’s production and manufacturing system, either on a monthly basis, or separately for each transaction where the system allows this approach. The amounts disclosed are not separately reflected in the financial statements as a gain or loss. No adjustment is made in respect of the cost of inventories held as part of a trading position and certain other temporary inventory positions.

5. Segmental analysis – continued



										$ million
										2018
By business	Upstream		Downstream		Rosneft	Other businesses and corporate		Consolidation adjustment and eliminations		Total group
Segment revenues
Sales and other operating revenues	56,399		270,689		—	1,678		(30,010	)	298,756
Less: sales and other operating revenues between segments	(28,565	)	(574	)	—	(871	)	30,010		—
Third party sales and other operating revenues	27,834		270,115		—	807		—		298,756
Earnings from joint ventures and associates – after interest and tax	951		589		2,283	(70	)	—		3,753
Segment results
Replacement cost profit (loss) before interest and taxation	14,328		6,940		2,221	(3,521	)	211		20,179
Inventory holding gains (losses)^a	(6	)	(862	)	67	—		—		(801	)
Profit (loss) before interest and taxation	14,322		6,078		2,288	(3,521	)	211		19,378

Finance costs										(2,528	)
Net finance expense relating to pensions and other post-retirement benefits										(127	)
Profit (loss) before taxation										16,723
Other income statement items
Depreciation, depletion and amortization
US	4,211		900		—	59		—		5,170
Non-US	8,907		1,177		—	203		—		10,287
Charges for provisions, net of write-back of unused provisions, including change in discount rate	355		834		—	1,557		—		2,746
Segment assets
Investments in joint ventures and associates	12,785		2,772		10,074	689		—		26,320
Additions to non-current assets^b	11,533		2,862		—	245		—		14,640


^a	See explanation of inventory holding gains and losses on page 156.


^b	Includes additions to property, plant and equipment; goodwill; intangible assets; investments in joint ventures; and investments in associates.



										$ million
										2017
By business	Upstream		Downstream		Rosneft	Other businesses and corporate		Consolidation adjustment and eliminations		Total group
Segment revenues
Sales and other operating revenues	45,440		219,853		—	1,469		(26,554	)	240,208
Less: sales and other operating revenues between segments	(24,179	)	(1,800	)	—	(575	)	26,554		—
Third party sales and other operating revenues	21,261		218,053		—	894		—		240,208
Earnings from joint ventures and associates – after interest and tax	930		674		922	(19	)	—		2,507
Segment results
Replacement cost profit (loss) before interest and taxation	5,221		7,221		836	(4,445	)	(212	)	8,621
Inventory holding gains (losses)^a	8		758		87	—		—		853
Profit (loss) before interest and taxation	5,229		7,979		923	(4,445	)	(212	)	9,474

Finance costs										(2,074	)
Net finance expense relating to pensions and other post-retirement benefits										(220	)
Profit (loss) before taxation										7,180
Other income statement items
Depreciation, depletion and amortization
US	4,631		875		—	65		—		5,571
Non-US	8,637		1,141		—	235		—		10,013
Charges for provisions, net of write-back of unused provisions, including change in discount rate	220		304		—	2,902		—		3,426
Segment assets
Investments in joint ventures and associates	12,093		2,349		10,059	484		—		24,985
Additions to non-current assets^b	14,500		2,677		—	275		—		17,452


^a	See explanation of inventory holding gains and losses on page 156.


^b	Includes additions to property, plant and equipment; goodwill; intangible assets; investments in joint ventures; and investments in associates.

5. Segmental analysis – continued



										$ million
										2016
By business	Upstream		Downstream		Rosneft	Other businesses and corporate		Consolidation adjustment and eliminations		Total group
Segment revenues
Sales and other operating revenues	33,188		167,683		—	1,667		(19,530	)	183,008
Less: sales and other operating revenues between segments	(17,581	)	(1,291	)	—	(658	)	19,530		—
Third party sales and other operating revenues	15,607		166,392		—	1,009		—		183,008
Earnings from joint ventures and associates – after interest and tax	723		608		647	(18	)	—		1,960
Segment results
Replacement cost profit (loss) before interest and taxation	574		5,162		590	(8,157	)	(196	)	(2,027	)
Inventory holding gains (losses)^a	60		1,484		53	—		—		1,597
Profit (loss) before interest and taxation	634		6,646		643	(8,157	)	(196	)	(430	)

Finance costs										(1,675	)
Net finance expense relating to pensions and other post-retirement benefits										(190	)
Profit (loss) before taxation										(2,295	)
Other income statement items
Depreciation, depletion and amortization
US	4,396		856		—	71		—		5,323
Non-US	7,835		1,094		—	253		—		9,182
Charges for provisions, net of write-back of unused provisions, including change in discount rate	352		758		—	6,719		—		7,829


^a	See explanation of inventory holding gains and losses on page 156.



			$ million
			2018
By geographical area	US	Non-US	Total
Revenues
Third party sales and other operating revenues^a	98,066	200,690	298,756
Other income statement items
Production and similar taxes	369	1,167	1,536
Results
Replacement cost profit (loss) before interest and taxation	3,041	17,138	20,179
Non-current assets
Non-current assets^b ^c	68,188	124,060	192,248


^a	Non-US region includes UK $65,630 million


^b	Non-US region includes UK $19,426 million


^c	Includes property, plant and equipment; goodwill; intangible assets; investments in joint ventures; investments in associates; and non-current prepayments.



				$ million
				2017
By geographical area	US		Non-US	Total
Revenues
Third party sales and other operating revenues^a	83,269		156,939	240,208
Other income statement items
Production and similar taxes	52		1,723	1,775
Results
Replacement cost profit (loss) before interest and taxation	(266	)	8,887	8,621
Non-current assets
Non-current assets^b ^c	61,828		123,646	185,474


^a	Non-US region includes UK $48,837 million.


^b	Non-US region includes UK $18,004 million.


^c	Includes property, plant and equipment; goodwill; intangible assets; investments in joint ventures; investments in associates; and non-current prepayments.

5. Segmental analysis – continued



				$ million
				2016
By geographical area	US		Non-US	Total
Revenues
Third party sales and other operating revenues^a	65,132		117,876	183,008
Other income statement items
Production and similar taxes	155		528	683
Results
Replacement cost profit (loss) before interest and taxation	(8,311	)	6,284	(2,027	)


^a	Non-US region includes UK $37,119 million.