Thank you John - Good afternoon.
As John has indicated, we are here today to tell you about something different that BP is creating.
A different kind of business - the first of its kind we think - the first of its kind for us - or for anyone.
I say that because BP Alternative Energy will be the world's first business dedicated to the development and wholesale marketing and trading of low carbon power.
A Different Kind of Business
And it's going to look a little different too.
A little unusual for BP.
You might say... a little 'alternative' for a major energy company which has a hundred years of tradition behind it.
We would say... it's another important step 'beyond' for a progressive company that has a keen eye on the future of energy provision.
We have called this new business "BP Alternative Energy" for very good reason.
Because we believe, it will offer a real alternative to the world in the generation of power with low carbon emissions.
What is Low Carbon Power?
So what do we mean by a low carbon power business? What we mean is a profitable business using the cleanest, greenest ways we have of generating electricity, the ways that emit the least carbon.
That includes solar and wind - renewable energies which have zero emissions of carbon.
Alternative Energy also includes gas-fired power stations. You may wonder why we include gas-fired power. Gas produces only about half the emissions produced by coal when burned in a traditional power station; it is the cleanest hydrocarbon source for power.
And the newest form of low carbon power is hydrogen power.
To make this we take a fossil fuel like coal, oil or natural gas and we turn it into hydrogen and carbon dioxide.
We capture and store the carbon dioxide underground in depleted reservoirs - where it can sometimes be used to help push out more oil - and we use the hydrogen to generate electricity.
That power is then about 90% carbon-free.
In BP Alternative Energy, we are bringing our solar, wind, gas power and hydrogen power businesses into one team with real focus.
That team will also be supported by our power marketing and trading (M&T) capabilities, which ensure that our cleaner electricity meets the needs of local wholesale markets.
Why BP and why solar, wind, hydrogen and gas power?
John has set out the global context for why we believe this is the right time for BP to launch this new business in low carbon power.
There are a number of reasons why we have chosen to develop BP Alternative Energy with a focus on these four low carbon power technologies.
Well, we know that consumers are increasingly engaged in the environmental debate and many countries are concerned about energy security.
So demand for cleaner electricity is out there.
We also believe that material opportunities now exist in solar, wind, hydrogen power and gas-fired power to raise our game.
In other words, alternative energy is good business.
We believe that for three reasons:
First, these technologies have matured and are increasingly competitive which means there's a significant opportunity to make good returns.
They provide a pragmatic mix of new and established technologies - they need no leap of faith - but instead offer great potential for further development in driving efficiencies and lowering costs.
Second, we have distinctive capabilities in each technology which we believe we can take advantage of.
Third, demand for power from these technologies is growing very fast as John indicated.
The solar market alone grew by more than 30% last year.
All this leads us to the conclusion that the low carbon power sector is reaching a critical inflection point.
We believe we have an opportunity to create a high-growth, world-scale business in low carbon power over the coming decade, and we're hoping that by leading the way we will encourage others to follow.
This is critical since we are going to need our suppliers and partners to join us in this journey.
We know this is a long-term journey, which is why we have clear aspirations over the next 10 years and some very specific ones for the next three.
What are our aims?
Over the next ten years we aim to invest $ 8bn in those different technologies. The precise mix will depend on the market and the way in which technology develops.
Within 10 years we aim to grow the business 5 to 10 fold.
This would create a new low-carbon power business with the growth potential to deliver revenues of around $6 billion a year within the next decade
The First Three Years
We have detailed plans for the next three years.
An investment of $ 1.8 billion which will establish a business, balanced roughly equally between the four elements of solar, wind, gas power and hydrogen power.
Over those three years we'll take these products to the market - giving states, local utility commissions, and businesses a greater choice on how carbon intensive their electricity generation will be.
I'd now like to tell you about the business itself - the areas we will focus upon and rapidly grow - and the announcement of several new steps that we will take immediately or within the first three years of the business.
We will recruit several hundred new staff to the business.
We will step up the pace of our investments immediately with a doubling of capital in the first 3 years to $1.8 billion rising.
In those 3 years, we aim to grow BP's wind business from 30MW to more than 450MW
We plan to build two of the world's first commercial hydrogen power and carbon sequestration projects beginning in 2006 and 2007
We will seek to advance development and start construction on 2 new cogeneration facilities totalling over 700 MW
And we plan to increase sales of solar photovoltaic (PV) panels by at least three times from their current base of 110MW.
This is where support from our power M&T activities will be crucial since we will need to ensure the right linkages between the production of low carbon power and its market.
I'm going to look in a little more depth at each of these parts of the new business in turn, taking solar first.
Our Plans for Solar Power
The prospects for solar power have never been better. The market is growing at 30% per year.
Costs of the technology continue to trend downwards.
In our view, it is increasingly a matter of how soon - and not if - solar becomes grid competitive in many markets.
BP makes around 100MW of solar panels worldwide and we're currently in the process of doubling that capacity to 200MW.
We have manufacturing plants in Frederick, Maryland, US; Madrid, Spain; Bangalore, India (where we have a partnership with Tata Power) and Sydney, Australia.
Our solar business became profitable for the first time in 2004 after rapid growth and streamlining.
Our main markets for solar today are Germany, Spain, the US and India.
In California, BP has been offering a Solar Home Solutions package that enables customers to purchase a complete system along with monitoring equipment and access to available grants.
In Europe, we have been offering the Saturn module that is at the forefront of solar technology for power performance being among the highest power modules currently available in large quantities.
We will also continue to pursue targeted rural electrification programs that can be supported on an ongoing basis, to bring power to those without access to electricity.
As part of Alternative Energy, we are announcing the expansion of our solar manufacturing capacity by 45 MW at our plants in India and Spain.
This comes on top of ongoing expansion of plants in Australia and Spain which are adding 40 MW of capacity.
And later today, Lord Browne will officially open the expanded solar manufacturing capacity at our plant in Frederick, Maryland.
When complete, these steps will effect the doubling of BP's global solar manufacturing capacity.
The success of solar power is not just dependent on the right manufacturing strategy of course.
It also requires world class marketing to attract energy consumers to the merits of and access to solar power.
Here in the United States, we are pleased to announce a new partnership with Treasure Homes in California through which solar panels will be integrated into roof tiles enabling easy installation in customers' homes.
And we will begin to extend the global reach of this fast growing business into new markets such as China where we have agreed the formation of a joint venture with Sun-Oasis, providing access to the world's largest fast-growing market.
These are all examples of our commitment to increase sales of solar panels by three-fold over the next 3 years.
This growth plan will ensure BP Alternative Energy is one of the world's top 3 solar manufacturers and marketers.
And we aim to be a leader in the solar industry in the drive to reduce the total installed costs of providing solar energy to levels at which it can compete strongly with oil, gas, coal and nuclear in the generation of electricity - something that is possible today in some markets (California peak, Japan, Hawaii).
This is possible through continued innovation and technology gains across the Solar value chain, including lower cost panels, higher efficiency cells, and more productive 'total system' installations.
Over the next 5 years we see another 30-40% total system cost per watt improvement which will close the 'grid parity' gap considerably in many markets.
Policy will continue to be important to encourage consumers to buy and install their own renewable solar power systems - but we are committed to reducing the total installed costs of these systems as aggressively as possible.
Our Plans for Wind Power
The potential of wind power is very significant. It is growing at an annual rate of 12% today.
During the next fifteen years, wind power capacity globally is projected to quadruple to over 200GW.
If 10% of the world's energy was generated by wind it would be equivalent to replacing all the world's cars with hybrids.
In terms of wind, we are currently a relatively small player - confining our activity to the successful development of two wind farms in the Netherlands sited at the Nerefco Refinery, with a total of 22MW capacity, and our Amsterdam terminal, with a capacity of 9MW.
A similar scale project is being brought forward in the UK at the Isle of Grain in the UK.
The farms have some of the largest wind turbines in Europe and have enabled BP to gain an understanding of the technology and economics of wind power.
In particular we have learned how to build wind farms in challenging conditions presented by industrial sites.
And this is where our focus and distinctiveness will be as we scale up our investments in wind.
Large scale farms on brownfield sites - largely but not exclusively on BP real estate.
Today we are announcing our intent to enter the US wind sector with the first large site being commissioned during 2007.
We plan to grow our wind business from our current base of 30MW to more than 450MW in 2008, becoming a top tier wind power operator by 2015.
Our Plans for Gas Power
Gas fired power generation has a critical role to play in developing low carbon solutions for the power sector and for making an early and substantial contribution to the achieving the stabilization of world emissions of CO2.
The gas generation sector is projected to grow by more than 50 GW a year over the next 15 years
BP already participates in 13GW of power capacity, enough to power around 11 million homes.
These include plants in the US, Vietnam, Spain and South Korea. In several cases, BP has built co-generation facilities that generate power for our operations as well as for sale on the grid.
The plants use combined cycle gas turbine (CCGT) technology. CCGT is not only better for the environment than conventional coal combustion, but it's also more efficient.
CCGT has an energy conversion efficiency of 60% compared with 45% for the very latest coal power technologies. CCGTs are also more flexible - they can perform both base load and peaking duty while coal plants are best suited to base load duty.
A gas plant also takes half as long to build as a coal one.
Over the next three years we will seek to advance development and start construction on 2 new cogeneration facilities totalling over 700 MW.
Our Plans for Hydrogen Power
Looking next at hydrogen, let me give you a little more detail on our plans for the world's first commercial hydrogen power stations.
The first, in Scotland, plans to take natural gas from North Sea fields and convert it to hydrogen and carbon dioxide.
The hydrogen would be used as fuel in Scotland's Peterhead power station while the carbon dioxide would be injected more than three kilometers or two miles under the seabed into the Miller Field reservoir.
The power station is being designed to create 350 megawatts of virtually carbon-free electricity, enough to power up to half a million homes in the UK.
The project would also permanently store 1.3 million tonnes of carbon dioxide each year , the equivalent of removing 300,000 cars from the roads.
Meanwhile the carbon dioxide injected into the Miller oilfield would extend its life by 15 to 20 years and produce some 12% more oil than would have been recovered.
We are now exploring a second hydrogen power project in the United States that can use petroleum coke - a refinery by-product also known as synthetic coal.
Not only would the plant produce low-carbon power, it could also help produce additional US domestic oil that would have otherwise been unrecoverable.
The US has sought to develop technological solutions to climate change and recent energy policy initiatives seek to provide clear incentives for accessing clean coal and the associated carbon capture technologies.
Over the next ten years we will prove that this method of generating zero or near-zero-carbon power is economically viable as well as practically feasible and that it can be rolled out at scale.
Our Plans for Wholesaling Power
Producing lower-carbon power is only half the story.
As I've mentioned earlier, our marketing and trading business help us bring this electricity to market.
Let me explain a little about this business.
Power M&T is responsible for organizing exactly where our cleaner electricity is sent to ensure it meets the needs of the local market (we call this dispatching).
As well as providing customers with secure, reliable electricity we can also offer them innovative risk management services which help reduce the price volatility that can frequently affect local electricity markets.
For our wholesale customers interested in buying low-carbon electricity, in many markets we are able to offer a number of products, including certified green electricity, integrated solar and clean grid power solutions.
So what does that mean?
Well, in 2003 we provided our customers with more than 200 million megawatt hours of electricity and we're already among the top power marketers in North America.
And as BP Alternative Energy grows, we intend to grow our marketing and trading business with it.
So now is the time to start operating a business capable of meeting that demand.
Ready to Grow Low Carbon Power
So that gives you an overview of this new business and our plans.
I believe it is a great example of what business can do in aligning its own interests with those of society and the environment.
We can make a successful business out of doing something very beneficial, addressing one of the world's greatest concerns.
The economy of the future will be a low carbon economy.
And with the launch of BP Alternative Energy we're putting a marker in the ground saying that we plan to play a big part in that economy and in that future.
We plan to spend $8bn over the next 10 years - to build a range of low carbon assets and within 10 years deliver carbon dioxide emissions reductions equivalent to those currently emitted by a city the size of Chicago
It's a big investment. A big target. And a big commitment.
As John concluded, BP Alternative Energy is an important step towards meeting the desire of people to use energy in a way which is sustainable.
I hope I have demonstrated that this new business and its plans are a "very realistic, practical step in a new direction".
Thank you.