Select Committee on Environmental Audit Minutes of Evidence

Annex 2

Memorandum by BP to Treasury Committee as part of its inquiry into the Pre-Budget Report



  1.  BP is the United Kingdom's second largest retailer of petrol and lubricants in the United Kingdom. Our market share is some 18 per cent, and there are around 1,528 BP branded sites within the United Kingdom. Some 800 of these are company owned. We have two main refineries—Grangemouth in Scotland and Coryton in Essex—and thirteen terminals.


  2.  BP started selling ULSP as "BP Cleaner Unleaded" at 18 sites in and around Edinburgh during February of this year (2000). Our refinery in Scotland—Grangemouth—was where the fuel was manufactured.

  3.  In April 2000, BP commenced the roll-out of Cleaner Unleaded into London, at all 164 BP sites within the M25 area. This roll-out was completed in June. Our refinery at Coryton supplied our London sites, which means that both our UK refineries are now manufacturing ULSP.

  4.  Cleaner Unleaded has replaced the regular Unleaded 95—it has not been introduced as an additional small volume grade, so many motorists may not realise that they are already receiving ULSP. It is dispensed through the same pumps which were used for regular Unleaded 95.

  5.  So far as the rest of the UK is concerned, BP planned last June to extend coverage from 1 October onwards. During October, we distributed ULSP more widely from the terminals already able to supply the fuel and added this capability to further terminals. We now have 775 (out of 1,525) sites in the BP network receiving ULSP. This accounts for about 60 per cent of BP's unleaded 95 volume, and is equivalent to about 2.3 billion litres per year. Current indications are that the remainder of our network will supply ULSP by April 2000, but from now on we are heavily reliant upon third parties. In the locations still to be covered, we share facilities with competitors, and cannot convert until they also convert. Ultra-low sulphur diesel is available at all our sites.


  6.  The additional manufacturing costs of ULSP have been absorbed, and the introduction of the fuel has not affected our pricing policy. For example, when the duty break of 1 pence per litre (ppl) was introduced on 2 October, prices at ULSP sites were reduced by 1 ppl simultaneously. We estimate that our incremental manufacturing costs of ULSP are between 0.05 ppl and 0.25 ppl, depending upon whether the refinery is Grangemouth or Coryton. We have committed to reduce the prices on ULSP by 2 ppl when the further reduction in ULSP duty takes effect.

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