We met our first voluntary target: to reduce GHG emissions from our operations by 10% below 1990 levels in 2002.* Reductions came mainly from ending the venting of natural gas at oil production facilities. Our focus now is on meeting our second target: to keep these emissions 5% below 1990 levels by 2010.

Finding reductions to offset the rising emissions from our changing portfolio is getting harder. The amount of energy needed for us to produce each unit of oil or natural gas is already more than 50% higher than in 2000. It will continue to rise as our fields age and as more of our production comes from heavier oil and oil sands. Producing more low-sulphur transport fuels will help reduce our customers’ CO₂ emissions. However, they increase our direct emissions, since more refining energy is needed to make them.

Up to now, we have succeeded in offsetting these higher emissions. In 2006, facilities we operate emitted 98 million tonnes of GHGs, about seven million lower than the previous year and more than 20% below 1990 levels.

The reduction since 2002 has been achieved mainly by reducing continuous flaring. For example, since 2000, the SPDC joint venture in Nigeria, has invested more than $3 billion in equipment to capture and use gas previously flared. SPDC accounts, on average, for two-thirds of our continuous flaring.

In 2006, our total flaring worldwide dropped. This was mainly because of cuts in production due to major security problems in Nigeria. However, operational changes to increase associated gas recovery in Oman and new equipment installed in 2005 to reduce flaring in Gabon also helped.

Improvements in the energy efficiency of our refineries and chemicals plants have further reduced our GHG emissions. Our refineries have boosted their energy efficiency by 3% since 2002, as measured by the Solomon Associates Energy Intensity Index (EII). Our chemical plants have become 9% more energy efficient since 2001 based on our Chemicals Energy Index. These gains were made by operating our plants closer to their full production capacity, by having fewer shutdowns, and by running our EnergiseTM

energy efficiency programme and Business Improvement Review process at most sites. Energise and Business Improvement Review have reduced our GHG emissions by nearly 1 million tonnes a year and saved us more than $70 million annually at our refineries and chemical plants.

In 2006, we missed our annual EII target, partly because we had underestimated how much extra energy would be required to produce more environmentally friendly lower sulphur fuels and partly because of unplanned equipment shutdowns at several facilities that required extra energy to start up again. Our chemical plants made their target despite several unplanned shutdowns.