Good morning and welcome to AIMI's strategy presentation. Today's agenda is divided in 2 parts. In the first part, Marcin and I will give you an outlook on our 4 year plan. And in the afternoon, Amy, top manager will give more details on the business plan. In the first part of this morning, this presentation, we'll describe how we transform our company to make it structurally resilient at a lower scenario.
Then we move to our full year plan. And after this, we'll give more space to our sustainability plan and the capitalization strategy. Finally, Massimo will describe the financial plan and the distribution policy. Let's start with a look at the structural changes implemented in the past few years that are the foundations and the drivers of our future. Immediately after my appointment in May 2014 and before the price collapsed, we made a decision to change certain fundamental elements of our business and corporate structure.
Firstly, we transformed EME into simpler, more compact organization, more concentrated on core businesses. 2nd, we increased our focus on exploration and changed our development model to fast track our discoveries. 3rd, we restructured our mid and downstream businesses to reach positive results. And finally, we carry out a strong cost efficiency program in all our businesses and corporate functions, improving our underlying financial resilience. Through these actions, in less than 4 years, we have set a company that now can grow in a lower scenario, enhancing the value for our shareholders.
In upstream, we introduced 2 major innovative elements, the dual exploration model and our new approach to development. This has generated major results. Since 2013, the dual exploration model has generated $10,300,000,000 of upfront organic cash flow. Moreover, our integrated development model allow us to value around 40% of the 4,400,000,000 barrels discovered over the last 4 years, generating an NPV of around 8.8 $1,000,000,000 The new development model accelerated time to market and increased control on execution through sourcing of new competencies, a fully integrated and fully integrated exploration, development and production phases, changing our contractual strategy and optimizing our supply chain. The last 3 years seen impressive results and we have delivered most of our startups high scheduled and on budget.
The 4 main projects of 2017 had an average time to market of 2.7 years, a record for deepwater and nearly 3 times faster than the industry average for similar projects. Our integrated model of exploration and development has been a major element of success and we reached a record average production of 1,816,000 barrels per day last year, while reducing our E and P CapEx by 40% versus 2014. As a result, our upstream capital cash neutrality fell to $45 per barrel, less than half the level of 4 years ago. While we were strengthening our E and P business, we almost completed a full turnaround of our mid downstream. Gas and power has already achieved an underlying positive result.
We have progressed significantly on the renegotiation of long term contracts and have almost fully recovered our take over pay. We continue to work on reducing logistic and operating costs. On the other side, we set up a new platform for growth, a dedicated company for the retail gas and power business in Gazelouch and the stronger integration between gas and power and upstream business to successfully develop international LNG. In refining and marketing, we announced efficiency and optimization of our crude supply, having refinery breakeven from $7.8 per barrel in 2013 to less than $4 today. Also chemicals business has improved beating its best performance ever over the last 3 consecutive years.
Overall, the turnaround of these businesses has generated an aggregated increase in operating cash flow of €12,000,000,000 in the past 3 years. To conclude this first section, I'd like to emphasize our outstanding financial achievement. In the first in this period of low prices, we have not only increased upstream production and brought more than 30 major projects, we have also succeeded in reducing our gearing to 18%, the lower end of our 3 year group. Overall, and thanks to structural cost and capital savings, outstanding growth and mid downstream turnaround, we have our all in cash neutrality from $114 to $57 per barrel. And considering the organic contribution of our dual exploration model, our cash neutrality was further lowered to $39 per barrel.
Any reaction were very effective, starting before the price dropped. Our strategy was not defensive based only on cutting cost, rather it was proactive involving our organization, all the businesses and all our industrial model. We emerge from this difficult period stronger with all the tools to improve our performance and fit to grow even in a low scenario. And now let's move to our 2018 2021 strategy presentation. Our 3 year plan is based on the foundations and the drivers that successfully transform our company to grow in any scenario.
And now we are moving towards the expansion of all our businesses based on 2 key levers, integration and efficiency. 1st, a deeper integration in terms of competencies, assets, processes and businesses and integration with our stakeholders. This financings the synergies in our operations and unlock all the value along the chain, reducing uncertainties in our upstream growth as we did with growth, while increasing our equity LNG volumes as was the case of John Creek in Indonesia. Reinforcing our global downstream footprint and implementing our distinctive renewable model. And secondly, efficiency.
That means financial efficiency through a rigorous discipline, technological efficiency leveraging an increased digitalization, and finally, carbon efficiency with a strong action on the carbon footprint. And now I present how these concepts are translated into targets for the full year plan. Let's start with the upstream. The brand scenario for this plan is very similar to the one we adopted in the previous plan. In the upstream, our project will deliver an improved production growth of 3.5% per year versus the previous plan.
Exploration will continue to provide fuel for future development and we are targeting the discovery of 2,000,000,000 barrels of new resources. Upstream growth will continue to add new higher margin barrels. We expect the pricing need to cover our CapEx to fall at around $40 per barrel starting from 2018. And finally, we will generate around €22,000,000,000 of accumulated free cash flow from the upstream at any scenario. These figures all these figures include the impact of the deal we announced this week, the entrance into Abu Dhabi upstream and the disposal of 10% share in draw.
Zohr. Now some details on the deals closed on Sunday in Abu Dhabi. We were awarded a stake of 5% in lower zakum and 10% in moon shaped nuts, acquiring more than 300,000,000 barrels of crude Q1 reserves and $1,000,000,000 of resources. Both concession will last for 40 years with a rising production profile. In lower ZACON, ADNOC is targeting production growth from 400,000 barrels per day to 450,000 barrels per day.
In Nunchayef and Nasser fields, production will more than double from the current level of 300,000 barrels per day. This is a major milestone to enhance our positioning in the Middle East, further diversifying our portfolio in a country with a great potential. At the same time, we also sold a 10% stake of Zohr to Mubadala, bringing a new strong financial pattern for Zohr Development. The net cash effect of this transaction is positive and this further demonstrates the value of our dual exploration model. Overall, as a result, these initiatives and oil dilution, AIM's production will benefit from an additional long term contribution starting from 2018 with a material upside potential.
For exploration, we are entering now in a new phase of our strategy. During the downturn, Plutonomy succeeded in finding 4,400,000,000 barrels, but we have also been able to increase in an impressive way our exploration net acreage, which now stand at 400,000 square kilometers, almost 3 times the level of 2013. We are now ready to start a new cycle of the exploration campaign. Our unblued exploration portfolio today stands at a total of 10,000,000,000 bottle of net risked resources and has a vast range of exploration opportunities, which provide us with a high level of stability in selecting the best prospects. Our strategy is still focused on conventional plays and mainly concentrated in offshore Mexico, West and East Africa, the East Mediterranean Sea, the Middle East and Far East.
We are already familiar with most of these bases in terms of geology, contractual structure, operation in fiscal terms. We will continue to target large exploration prospects with a short time to market, low development operating cost, a high cash flow generation. During the 4 year plan, we will spend around €900,000,000 per year, targeting about 2,000,000,000 barrels of new equity resources at about $2 per barrel, drilling 115 wells in more than 25 countries. We are exploring with high equity stakes in order to continue to fuel our newer exploration model. Now production.
New project start ups and ramp ups will account for around 700,000 barrels per day by 2021, including also, so add in, 200,000 barrels a day of production optimization, we will deliver production growth of 3.5% per year up to 2021. In 2018, we have raised our original guidance after the conclusion of Abu Dhabi deals to 4%, including the effect of 10% of the disposal. All our growth will come from projects that are already sanctioned or that will reach FID this year. We will deliver 15 major startups and will operate around 80% of our production. In terms of geographical split, the contribution of North Africa will drop from 39% in 2017 to 33% in 2021 to the advantage mainly of Asia Pacific and Middle East, whose contribution growth to 12%.
Our asset base allow us to target an annual average growth rate higher than 3% in production also for the longer term to more than 2,300,000 barrels per day in 2025. And now some of our key projects. They are mostly giant fields with long life high plateau and which drive a shift in our underlying upstream cash flows. Even more remarkable is that most of these projects come from our aspirations performed in the last 5 years. And thanks to our integrated model of development, they started or will start up production with a very competitive time to market.
These projects will contribute around 400,000 barrels per day of equity production at the end of the plan out of more than 700,000 barrels per day of all the main ongoing projects. More detail will be delivered by our senior management this afternoon. In addition to driving growth, our project will continue to push the value of our overall portfolio significantly higher. 2017 startups have increased the value of the legacy barrels by 3 dollars per barrel. And looking forward, our new project has decreased breakeven of less than $30 per barrel.
We will generate a material incremental value reaching more than $25 per barrel by the end of the plan at the flat Brent price of $60 This effect together with the legacy asset contribution will deliver a cash flow of $18 per barrel. This will grow to $22 per barrel in the case of a $70 brand. Upstream cash flow will continue to grow. In 2018, it will be above €10,000,000,000 up 10% from last year at the same scenario. By the end of the plan, this would continue to grow to more than €11,500,000,000 at $60 rent with an upside to €13,600,000,000 at $70 Upstream free cash flow will more than cover our dividend during the planned period, even at $60 scenario.
Coming to our mid downstream, here is a quick overview of our key business targets. The figure here presented are the sum of Gas and Power, R and M and Chemicals. So we expect operating income from our mid downstream to grow to €2,000,000,000 at the end of the plan and generate an aggregated free cash flow of around €4,700,000,000 In detail, our gas and power will grow on the base of the following actions: Focusing on Equity Gas and Energy Marketing, leveraging integration with the upstream with Equity Gas, improving profitability of our European gas portfolio and adding volume to any gas and nuclear retail business by growing the customer base in our core countries by 25% to 11,000,000 and expanding extra commodity services, leveraging on digitalization and analytics. This will allow us to remain structurally positive in the future. We will grow EBIT from €300,000,000 year per year in 2018 to around €800,000,000 at the end of the period, and of which 60% comes from the retail.
The accumulated free cash flow from Gas and Power will be €2,400,000,000
during the plan.
LNG will play a crucial role in creating a stronger gas and power. Looking at the future, we have a positive vision on the evolution of the gas market. In the last 3 years, gas consumption in Europe increased by about 70 BCM, recovering about 60% of the major loss between 2,008 2014. Asia confirmed the growing trend over the last decade, driven mainly by China that in 2017 increased its gas consumption by around 15%, supported by ambitious target for gas in the energy mix. Therefore, there will be needs for new LNG projects and this will present a major opportunity for our gas assets.
We are accelerating the ramp up of our LNG portfolio, and now we expect to reach 12,000,000 TPA of contractor volumes in 2021, also of which 8 MTPA from equity production, mainly from Africa and the Far East. This way, we will capture market opportunities through the flexibility of our upstream portfolio. LNG volumes will further increase to 14,000,000 ton per year by 2025, an improvement versus the 10,000,000 ton per year of the last plan, putting us amongst the top players in the market. In refining and marketing, we will see strong EBIT growth to around €900,000,000 by the end of the plan, based on a flat margin scenario of $5 per barrel. More importantly, over the trend, this business is expected to generate more than €2,000,000,000 of free cash flow.
The main drivers for these results will be the optimization of our refinery process to maximize yield of midyear distillate, the restart of our F plant in San Agaros set for the end of this year, growth of our green capacity with the conversion of the general refinery well underway and expected to be operational by year end. And second phase of Venice to come on stream by 2021. In marketing, we plan to consolidate our leading position in Italy, targeting to maintain a market share of 25%, while increasing our focus on wholesale. Importantly, we expect positive contribution from innovation and sustainable mobility initiatives to sell such as LNG and new products. And now Versalis, our chemicals business.
In 2017, we delivered record results. The transformational plan allow us to make the most of the federal market conditions. But for the future, we consider a more conservative scenario. Assuming tighter market conditions, we are targeting an EBIT around €400,000,000 at the end of the plan, in any case an improvement versus last year's results netting the 2017 scenario effect. To do this, we are moving along 3 guidelines: enhancements of our European operations through integration and efficiency while upgrading our portfolio with differentiated products.
International development, strengthening our presence in Asia, with LTE and expanding our international commercial network, especially in the Americas and the Far East. And bio based chemistry, where we are developing new industrial platform for renewable and supporting the market potential of these new intermediates. And now renewables, an emerging reality that is becoming for us an industrial business, which thanks to integration with existing assets and core activities create new business opportunities and add value. Our distinctive model consists in replacing internal gas consumption of our assets with solar or wind power. This way we leverage industrial, logistical, contractual and commercial synergies to create extra value in our projects.
This approach allow us to reduce energy costs for our facilities and makes more gas available for local consumption or export, increasing our unlevered average incinerator return of our solar and wind projects to around 10%. We are also developing a number of projects not related to our assets that deliver clean energy to the domestic grid in the countries where we operate. We've already identified an ongoing project, about 65 projects. We will add around 400 megawatts of new power capacity in the next couple of years. We will develop 1 gigawatt of new capacity by 2021, investing €1,200,000,000 and up to 5 gigawatts by 2025, mainly in the countries we operate in.
Another key drivers of our plan is digitalization and the continuous focus on innovation. We are developing more than 150 projects that cover our entire value chain. To reach physical assets, we are creating a digital twin that will enable us to predict and control our operations in advance in order to improve safety, preferences and reduce emissions. The core of our digital model is our green data center, where today we can call on 22.4 petaflops of computing capacity, one of the top 10 supercomputer in the world. Our first priority is our safety of our people and asset integrity.
The widespread application of sensors, devices and advanced algorithms will have a very strong impact on HSE, efficiency, time to market and cost. In particular, by the end of the plan, we will reach a 7% reduction on production cost, thanks to advanced upgrades to ensure the reduced asset downtime and higher production rates and the predictive analysis system based on big data, which allow us to optimize maintenance, logistics and well operation costs. The 30% decrease in non productive time from 7.5% to 5%, thanks to the implementation of advanced machine learning algorithm in all operated wells and a 15% reduction in the operational phase from asset acquisitions to the end of the delineation activities. Let's have a look now at another key lever of our plan, the decarbonization strategy. Our path to decarbonization has 4 main drivers that concern both our core businesses and new energy perspectives.
The first is to lower CO2 emissions in all our operations. Secondly, we will continue to expand our low cost and low carbon portfolio. 3rd, we will keep on developing renewables. And finally, R and D will play a key role in our decarbonization strategy. On carbon footprint, we have already reduced our direct CO2 emission from our stream by 40% since 2007, improving all our performances and indices.
By 2025, we target 0 clean gas trading and a reduction of our percent versus 2014 to reduce overall upstream unitary GHG emission by 43%. In the long term, we rely on the strength and resilience of our low cost portfolio. With an average breakeven price of less than $30 per barrel, our projects will remain competitive under all carbon price scenario. In addition, the increasing role played by natural gas in our portfolio will make it stronger. Any applies to carbon prices sensitivity of $40 per ton of CO2 in real terms that implies strong revenues in all our projects for emission optimization.
Even under IEA sustainable development scenario, our portfolio confirms its resilience with a reduction of internal rate of return just around 0.8%. Our decarbonization strategy is also based on the development of green businesses. And overall, we are investing more than €1,800,000,000 in these initiatives in the 4 year plan, including R and D. In the downstream, we are already producing bioproducts from our facilities. Thanks to our patent, we were the first to convert the traditional plant into a bio refinery in Venice.
And we will complete the JELA conversion by year end. Together, we will produce 1,000,000 ton per year of green diesel by 2021, making any one of the top producer in Europe. We have also launched a series of green chemicals projects such as Intelligate from vegetable oil and the experimental guayula from crops to produce natural rubber. Finally, as already said, we will grow our new energy business to 1 gigawatt by the end of the plan. Overall, total fuel savings is around 28,000,000 tons in the full year plan, which include direct and indirect emission.
And now I leave the floor to Massimo for the financials.
Thank you, Claudio. Good morning all. So in coming years, we will continue to focus our financial discipline and sustainable growth aimed at further strengthening our business portfolio as well as accelerating the generation of shareholder value. Financial discipline means CapEx selection, efficiency and cost control. CapEx remains unchanged versus the previous plan and we retain material degree of flexibility in case of a sudden shift in the scenario.
As always, OpEx control remains central to our model. Sustainable growth is a consequence of our financial discipline combined with the quality of our portfolio, delivering not only production growth, but also reserve replacements, rising margins and mid downstream expansion. These outcomes will be achieved through projects that are already well advanced thereby derisking the plan. The reduction of our cash neutrality on one hand and the remarkable amount of cash to be captured in higher scenarios on the other show how resilient as well as cash generative our portfolio is. Shareholder return is our core value.
It is the ultimate objective of our relentless financial discipline and sustainable growth, making our progressing remuneration policy now a reality. As I said, we have held our CapEx flat versus the previous plan at less than €32,000,000,000 While in 2018, we are reducing our CapEx guidance to €7,700,000,000 to reflect the recent transaction in Abu Dhabi and Egypt and further optimizations. More than 80 percent of the planned CapEx is dedicated to upstream with $15,500,000,000 budgeted for our integrated development model, dollars 8,300,000,000 for production optimization and maintenance and around $2,000,000,000 for exploration drilling. By the end of 2018, we will FID in additional 5 key projects that together with the ongoing ramp up will entirely underpin production growth by 2021. This further strengthens and derisk our plan by locking in CapEx at the bottom of the cycle.
We will also continue to invest in our R and M and chemicals with an aggregate expenditure of 3,500,000,000 dollars and an expected ongoing project IRR in the range of 10%. The same unlevered returns expected from our renewable projects with CapEx in the range of €1,200,000,000 over the next 4 years. This is almost double the previous plan and we continue to identify new opportunities in line with our development model, the one that Claudio just described. Focusing on the upstream, around 65% of the overall new development CapEx is related to 14 main projects, some of them has been commented really by Claudio, the most important one. These projects are expected to contribute 500,000 GAE of plateau production by 2021, becoming material drivers on net cash flow growth during the planned period and beyond.
These projects are already free cash flow positive. Thanks to the proceeds from the dual expression model And by the end of 2025, they are expected to generate more than $24,000,000,000 of cumulative cash. In addition, this project offers significant upside to our expenses. At $70 Brent, the IRR is 18 percent without including the upfront cash inflows from the U. S.
Pressure model. Our portfolio is not only material and valuable, but also resilient. The $2,700,000,000 of equity reserves pertaining to these 14 major projects at the CapEx per barrel of around $12 and an average breakeven of less than $30 per barrel. Our underlying cash generation is growing over the next 4 years, even a flat scenario, and it will be further announced by the oil price recovery. In 2018, we expect underlying cash flow from operation before working capital of more than €11,000,000,000 1,000,000,000 higher than 2017 at a cost of $70 scenario.
This increase will be driven by all businesses, with upstream contributing 1,000,000,000 and mid downstream contributing $200,000,000 partially offset by other costs including renewables. The 2018 reported cash flow from operation is projected at 12,000,000,000 dollars benefiting from working capital contribution in the range of $400,000,000 as well as the cash in of the deferred price of $500,000,000 related to the 2017 Zohr disposal to BP and Rohrnet. Overall, at $70 in 20.18 cash flow from operation is expected to cover 1.6 times yearly CapEx. In 2021, at cost of $60 per scenario, underlying cash flow before working capital is expected to increase by more than 2,000,000,000 versus 2018 to more than €13,000,000,000 Rising production and margin expansion will generate an additional 1,500,000,000 Cushing from upstream, while the mid downstream growing businesses, including renewables, will contribute the rest. Under $70 per barrel scenario, the underlying 2021 cash flow from operations will increase by further 2,000,000,000 Cash neutrality is a different but powerful way to read the cash flow projections.
Cash neutrality means by our definition, the Brent price and the euro dollar exchange rate needing to fully cover all OpEx, G and A, interest and CapEx supporting both the production growth and the mid downstream expansion as outlined in our 4 year plan. In 2017, we achieved cash neutrality at $57 Brent with 1.13 eurodollar exchange rate. In 2018, we are projecting our cash neutrality to decline to $55 despite the devaluation of U. S. Dollar to 1 point $1.7 And it will fall further to $50 per barrel by the end of the planned period, thanks to our sustainable growth, margin expansion and capital discipline.
This is the most important metric we can use to measure how resilient as well as cash generative our portfolio is. We are approaching now the end of our presentation. And before detailing the distribution policy, I would like to compare the main 20 seventeen-twenty 2020 targets set in the strategic plan versus the previous one. Thanks to the 2017 performance and the ongoing effort reflected in this plan, we are now in a position to announce the majority of them. As far as the industrial metrics, while we confirm our outstanding exploration expectations backed by the long track record of discovery made so far, we expect the production grow rate to be slightly higher than 3%.
Furthermore, we are lowering the already competitive project breakeven by a few dollars and increased by 40% LNG volumes to market by 2025. In terms of organic cash flow generation, we announced all of our targets, while CapEx remained flat. Finally, on top of the 40% disposal not included even the original target, We have already completed around $4,000,000,000 of additional sales and we are targeting a farther than $1,500,000,000 by 2020, mainly from our recent exploration discovery, so again applying the dual exploration model. In so doing, we have significantly strengthened our balance sheet while diversifying and enhancing our portfolio. And now let me focus on our remuneration policy and more generally our cash allocation priorities.
The progress we have made in consolidating, integrating and ultimately expanding our businesses is well advanced. And the effects are already visible in our 2017 actual numbers. Looking ahead, this strategic plan targeting a material sustainable growth and margin expansion is solid and further derisked. On this basis, we are pleased to announce an increase in our 2018 dividend by 3.75 percent to €0.83 shares, in line with our commitment to a progressive remuneration policy linked to our underlying earnings and free cash flow growth. While dividends are our favorite way to remorate shareholders, share buyback remains a flexible way to return to shareholders the cash in excess of the leverage target.
And now I leave the floor to Claudio for his final remarks.
Thank you, Massimo. To conclude, in the past 4 years, we have transformed our company, setting a strategy that 45% any both operationally and financially, as we saw. Now we are entering a new renewed phase of industrial expansion and announced shareholder returns, driven by deeper business integration and the Reliance's focus on efficiency and capital discipline. We will deliver the low risk, high margin organic growth in the upstream, a sizable diversified and competitive LNG, a further upgrade in all our mid downstream businesses and overall a long lasting and growing portfolio. In a world that is demanding a lower carbon footprint, we believe that our low cost resources, our global exposure to clean natural glass and our unique business model in renewables will be a distinct competitive advantage.
The dividend increase we announced today in line with our commitment to a progressive remuneration policy is a result of the business and financial improvements achieved so far as well as our confidence in further value growth. With this, we conclude our presentation. Now we have a video that gives some summary of what we have said, to figure then we can start Q and A with Massimo and our staff management presence in the room. Thank you.
I think that now we are ready for the Q and A. Just to remind you in the afternoon, we will have the breakout session with the senior management. So you will have a further opportunity to ask additional questions specifically for each business. Before starting, please for the benefit of video, stand up and state your name before making your question. We are ready.
John?
It's John Riggi from UBS. You highlighted the change in distribution policy, particularly with regards to the buyback, albeit that you've also increased the dividend, you sort of then passed over it a little bit. So I just wonder whether you could go into a little bit more detail about the process that will encourage you to start, the conditions that need to exist and how long you would expect to be wanting to buy back stock to make it worthwhile to launch into a program in the 1st place, so something around about the scale, etcetera? And one other just little point on the outlook you were giving for Chemicals business because of the margin, some of the cash flow contribution from the mid and downstream is quite important. I just wonder what encouraged you to assume that conditions actually deteriorate from 2017.
I mean global economic growth is pretty good. I just wonder whether there's anything in your particular chemicals mix that makes you a little bit more conservative of a view or should we regard that as upside? Thanks.
Thank you very much. Now just a few more about the dividend policy and the share buyback. I think that we have we open up and we gave the conditions. The conditions related to the level of our leverage. And if we are below this level, the level was 20%, 25%.
And if we are below the 20%, we can start the share buyback. We don't discover at this moment the timing and the conditions. The main issues today were to announce the increase of our dividend. And then that we will also explain that we have a figure to be able to open up also on the chart by that. But there is no more
0.2, 0.25, that 0.2, 0.25, that is the same target we announced in the previous occasion. So to start up the buyback, we would like to see our leverage below stable below 0.2%. This is something that we can figure out looking at the number of the plan. And in this case, buyback would remain an option to be to be considered.
Okay. On chemical, many others will answer their question.
Yes, John. On the Chemical business, we are particularly confident as ambition in terms of growth will continue to be favorable. But we have banks in our plan, a couple of elements. First of all, there is a big U. S.
Wave of crack based on ethane that are coming on stream between 2018 2019. And this is about roughly 10,000,000 tons of new polyethylene capacity that will be put onto the market. This will clearly go to Asia, will clearly go to South America, but a lot will come to Europe. And we already saw that during quarter 4 and quarter 1. The second part is a lot of export we do to Asia in terms of ethylene, which didn't happen in the past and is happening now for the next couple of years, but Asia is gradually becoming independent in terms of cracker as well.
So, benefiting these 2 elements in spite of a reasonable growth of demand for our product, we needed to be more conservative. Okay.
Thank you.
Hello. It's Tithan Joffalingam from Exane BNP. I had a few questions, please. Firstly, just could you come back to us in terms of you labeled the point around CapEx flexibility. So I wanted to understand or have a recap in terms of where that CapEx flexibility now is within the full year plan.
And in particular, for 2018, what do you incorporate for Mexico because you still have a high stake? For Mexico. Yes, please. The second question comes down to comes back to also portfolio. You didn't necessarily sort of increase the plans for disposals.
And you also highlighted a reduction in North Africa. So I wanted to understand whether going forward you see more when we think of portfolios, asset swaps rather than outright disposals?
Thank you. So we're going to answer your first question in terms of flexibility, 2 of us. 2018, we're going to partially finalize all the FIDs that will guarantee the growth. Most of the FIDs already done. And so for the 2018, we have a small clearly, it's more flexibility, but the level of 2017 E and I CapEx is a little over $7,600,000,000 and it will reduce further our upstream.
For the rest of the plant, we have a flexibility more or less about 50% of our CapEx in terms of adjustment in the case of worst scenario. Mexico, as we said, the FID, I hope in the second quarter. So the investment is incorporated already in the plan that we delivered in the second half and first and beginning of 2019.
So to give you some more number about the flexibility all along the plan. As Claudio said, in 2018, we're going to take the FID that will allow us to reach together with the ramp up of staff already existing the production growth by 2021. So it's a crucial year and I would say all this CapEx are really considered committed because it's not it would be not realistic to assume that we can still move our plan. So in our more or less 35% uncommitted CapEx all along the plan 2018 is considered already committed By the end of the plan, so 2021, this level of uncommitted is in the range of 50%. And just a comment about the disposal.
So now disposal is not something that we consider we must do, we never consider as a must. But definitely it's the right way to match the project in which we had 100% and in order to derisk to have a better shape in our project, a sort of dilution without losing the operatorship is something that is reasonable. And the possibility to have a swap instead of a cash in as we substantially demonstrated through the latest transaction, it could be definitely a reality even to shape a little bit the portfolio and to move the portfolio towards the direction which we believe it should be.
Oswald and then Rob.
Mexico, I thought you.
Mexico, CapEx, we are including. So Mexico, the partial dilution of Mexico is part of $1,500,000,000 additional dilution we are figuring in this plan. Let me say that in specifically in 2018, CapEx for Mexico are not a huge number because we are still waiting for the final approval from the government. That is expected in weeks, but we are in March.
Hi. Thank you. Also, Clint at Bernstein. I just wanted to ask 2 questions about the slides. The first on Gas and Power, the EBIT is quadrupling by the end of the plan, but biggest chunk looks to be in retail.
But in the rest, in the LNG parts, and you're also talking about expanding quite aggressively within LNG. But I wanted to know, can you talk about that LNG portfolio? What is the long are these all long term contracts? Are you restricted in the profitability of your LNG portfolio? Can you optimize it better and maybe unlock some greater LNG earnings power from this growing portfolio?
That's the first question. And then secondly, just on the digital solutions and initiatives, the 7% OpEx reduction, the kind of 30% non productive time reduction. Are those numbers all within these cash flow targets by 2021? Okay. So firstly, a general introduction for LNG
when you talk about flexibility. So our model is really the model towards getting all the equity gas covered by our LNG portfolio. If you look at our target in 2021 of 12,000,000 ton per year, 8,000,000 would be equity. So clearly, that is not just giving us the possibility to be along the chain and getting all the advantages to be along the chain, but also having a strong grip on the upstream to give the flexibility. In the upstream, give you the flexibility during the commercial phase, because you talk about the gas that you are going to produce and you are sure about your production.
Otherwise, when you sell gas that you are not producing, you cannot be sure. So you can't really guarantee your buyer. And for the buyer, we saw in different states, but the last one, 15 years in Pakistan with the LNG our LNG from John Creek, The fact that our production was in our end and we have the flexibility to be able to give our production or leveraging other production was essential also to lead this country. So I think that overall, strength of being altogether is absolutely important. First of all, because upstream is more in more than 60 countries, Well, we know we are in a legacy position, so the Gas and Power can take advantage.
And secondly, because from a commercial point of view, we get we give us a strong flexibility. We don't have a particular reduction using this model. We have an increase of our margin. That's clearly because we are in the upstream. If nothing we want to complete and give some additional details about the growth.
The only thing is that I can underline is that there
is no specific restriction.
If you saw the slide before, we were considering 30% of equity production in 2017 and we are going to 2017 unrestricted later on. And that is fundamental. In addition, we do have an advantage of having a geographical diversification in LNG and we are already using that quite a lot now. And we do see improvement in actually
the system which we did.
So digital now, we are
Yes, yes, digital, digital. Because it's
not following, it's not my fault. So digital digital is included or partially to the realist of some value. Clearly, we can add some more advantage because we are accelerating the phase of sensors and the digital what we call digital thing. Digital twin that became essential for operation really for our predictive maintenance and also for asset integrity. That is a crucial issue for us.
So it's included by risk, I think that we can have some upside potential because we are growing faster than what we thought in terms of sensor and also algorithm that and creating a centralized control. So the answer is yes, but we can have some of that. Now it should be
Hello, Rob West from Redburn. Thank you for the presentation. I'd like to ask about North Africa, if I could. First, the details you gave us were for a shift away from that region. I think
you said 39% to 31%. 32%.
32%. 32%. Yes. What's behind that? Why are you shifting away?
And is that simply what's in the plan as you've communicated it? Or is there anything that could change in that region in terms of the projects you have access to or stability or terms that could make you want to accelerate there?
Thank you. Thank you very much for the question. I don't want to create any kind of ambiguity and we are not running away, we are not skipping away. What is happening that we are increasing production in the Far East. And in North Africa, overall, Libya is reducing the rate, production rate.
Remember, Libya, we have a rate that was above $100,000 per day. Now at the end of the plan, this rate will be about $200,000 per day. So it's going down Libya. Why it's going down Libya? Because for 8 years, we had a very good rate that we did invest in new projects.
We just invested in HFC and asset integrity. That's all. No production optimization, no new project now. We have started developing new projects. We have one project that is starting now in offshore.
But we were so I think that we already got a very big result in keeping the production steady. And now after this big period, the business went down. So we are not shifting away or running away or pull out. We are increasing Far East Indonesia especially we are increasing now with the new entrance in Abu Dhabi and Libya is going down. Clearly Egypt is going up, but that is the more or less the situation in terms of figures.
Ian Reid from Macquarie. Just a couple of things on LNG, Claudia. Firstly, 5 FIDs, did that include Namba this year? Exxon were very positive about it last week. So maybe you can update us on the current plans on that.
And just coming back to Egypt. You've clearly got an unused LNG export facility there and you've got a lot of gas in Egypt. When are we going to see you start that up? And is there any impact on what's going on in Spanish utilities in terms of your plans on that? Okay.
So yes, excellent size 2019 is right by the end, we are very happy and excellent in charge. Is the operator onshore, the LNG or the midstream. So we are following them. Clearly, all the packages are almost ready. So we already got really made in this period everything.
We are just discussing for a possible upgrade of the content of each train. So what I can say that about our calculation, that will be 2018 or 2020, nor later because we have to really to capture the good window of opportunity for LNG that is growing dramatically. So I think that it is 2019 and we are very happy about and we fall down 100%. In Egypt is a possibility, is a reality. I think that is something that is going to happen.
Why? Because Egypt is not that door. You saw that 2 days ago, we issued a press release about Murus and Rusd, the field that we discover with the ore at the same time that now is producing 1,200,000,000 scarp per day. So it's really a huge improvement. Time to market, few weeks, 1 month because we are using our existing facilities.
Now we're going to upgrade and give more space and it's improving, improving. So between Zohr and Luz next year, we can add overall, yes, 2019, we can add overall 4 business cards a day. So that clearly, we are absolutely overcoming the internal consumption and having Egypt this big opportunity to have good cash flow from LNG. They have about 17, 18 cubic meter of LNG experts. I think that by the end of 2019, I think that we can start so in the second half of the year, we can start exporting gas per meter.
Irene?
Irene Simon, Societe Generale. I had two questions, please. So first, you retain your CapEx plant over the plant, although your oil price assumption, I think, rises
Very just a little.
Yes.
The oil price rises a little bit to $70, $72 I wonder if you can talk a little bit about industry cost inflation and perhaps what you assume in terms of ENI's cost inflation because clearly you have a new development model and we'd be interested to hear about that. Secondly, in the context of the 3.5% targeted volume growth, you've had some operational issues in the last couple of years at Golgi, Goliath. I presume that is a risk 3.5%. I wonder if you can talk a little bit about the contingencies that you allow in that plan?
Thank you. Okay. So the first question about Jose, I think you asked Roberto to give some light.
Yes.
In terms of cost reduction due to contractual negotiation and contractual activity, just to give you an idea, last year we were able to achieve almost $300,000,000 of cost reduction. And that means almost $1,000,000,000 in a full year plan, thanks to renegotiating some 450 contracts and the re tendering activities. Overall, we are talking about 900 contract. So what we have seen in the market is that services continue to be in the low side. Materials and equipment are increasing their prices, because basically the steel is increasing.
So overall, it's not as a couple of years ago, but I would say that drilling rigs, weeks, logistics services, etcetera, are still in the low side.
Yes. And we have a 4% more or less inflation in our CapEx that is not very dissimilar anyway from what we projected last time because the scenario we have in mind this year is more or less dissimilar scenario we had last time?
So the level of contingency, we have about overall demand about 3% of our full production that is a contingency from 2% or 3%. So that is an average. Talking about Valdagri, we're really seeing that the problem is behind us. So the product right now is a month and month and month, so that's producing without any problems, sorry. For Gorgias, I think it's the same.
The downtime of Gorgias was very high. Now after the last stop that we had in the 3rd November, the production is steady. So from December, all the production is steady. All the discussions with the stakeholders and with the authorities are absolutely in line with the expectation. We have a maintenance schedule for end of August, September.
So that we have a couple of 3 weeks that is in Mandarin and that's a maintenance program. But also for Goyet within this province behind that.
It's Thomas Adolff from Credit Suisse. I have three questions. First one is really around the positive as well as the negative surprises you saw in 2017 in running the company. The second question is on benchmarking. As you benchmark yourself versus peers, but also versus other industrial sectors, what are the areas where you can still see significant improvement within E and I?
And I guess the third question is, being a CEO, you're very busy. I wondered how you manage your job as a CEO and having to go to court related to the Nigerian issue? Thank you.
Okay. So 2017, the issue of 2017, I think that has been our operational issue that we are just mentioned and that we have been able to compensate, accelerated in making, I think, in time of production or M and A or new projects, so not just existing production, new projects, we compensate and we have the best cash flow ever. So just can jump into the last question. I've been so occupied on that that I don't think one second to the Nigerian case. Otherwise, I couldn't do what I did with my people with me, and I can do what I'm doing for the company.
So one single service design, so relaxed about that because I know what we have done. And now we have the possibility to explain because it is a drive. So all the space is for production, for projects, for our shareholders. I don't think about me. Me, I think about me as a company.
That's all. Upside potential. I think that the upside potential in what is new and for the first time during the starting presentation has been amplified as a more vocal and more elaborated. That is the digitalization, is the renewable, is the carbon, is the low carbon assets because we think that in this case as a big advantage. First of all, because we started as soon as it arrived with the renewables with a very strong model, that is not just giving us 10% of return.
The 10% of return that we signed for the renewable is very good. But what is giving us is a strength present in our legacy country because now we are giving a different energy mix because we are developing in our facilities or in outside our facilities, but in the country where we operate, we are giving wind power, we are giving renewable power, we are giving through the renewable water. We are making free gas that before we use a huge amount of gas because we are consuming more than 4 gigawatts for our internal consumption. So gas that's used to run turbine or pumps or other kind of equipment now begin to the domestic market. Clearly, it's good for us.
We are disinco. That's good because we changed the engine mix. These guys are going to replace what coal biomass they are using. And that is killing people. So I think that the 10% is nothing with respect to the big improvement in terms of relationship.
And it's developing very fast because we are signing projects we signed projects in Ghana, in Nigeria, in Tunisia, now in Angola, in Congo, then in Mozambique. So, countries that don't have energy. And that is a good way to give a good energy instead of giving or let them die using the biomass. So I think that is a big side. But the other upside that is more technical is digitalization.
We are going so fast. And this also as a 10% is nothing for the renewable in terms of return on return. Also the reduction of when we talk about the reduction of CapEx or OpEx to the digitalization or the improvement of the time to market for exploration, it's nothing to expect to work for what we are giving to our people and our projects. We are already in the top level for ATC, but using and we saw that, we saw that using drone, using robotics and using other tools to manage and work on the installation, we are really reducing drastically the risk for our people and we reduce drastically the risk to have a shutdown to have a corrosion or to have any kind of stuff in our treatment. And there, that is an upside potential for us, for everybody, but it depends on the activity and on the focus.
And if you believe in it, you believe that you have to change your energy mix, You believe it is just a fashion. You believe that digitalization is just a fashion. We think that we need it is not a fashion. And that is our upside. We believe in that.
It's Mark Kopfler from Jefferies. I just wanted to ask a quick question about the dual exploration model and how the board thinks about that. And I suppose really the competing interest around production growth and cash flow growth. What's driving the policy in that sense? And how significant is the 3% plus production growth in the long term?
Yes. So what I understood your question is if there's any competition about your expression model and our growth and our reflect ratio, for example. There is no. There is no NBR figures because in the last 3, 4 years, we sold, I said, dollars 10.3 $10,300,000,000 $10,800,000,000 of dual exploration. And we add an average replenishment ratio 130% in our sales.
Without that, we can have 200 maybe. But the concept is we are not damaging our resource base because we are replacing more than 100% our production with these assets. This clearly is a strategic choice and there's a choice to acquire 100% stake in the asset. Mexico is a clear example. We were discussing before, we are 100%.
We start with the tech and FID, we start producing, we have a good asset to swap and diversify our presence. What happens now, Zohr, where we did exposure, now we diversify. So you create a dynamic that you can use to imagine your business. It's not damaging as the countries really need much more value. Clearly, you have to start from a high stake.
And when you start from a high stake, you have to be able and ready to take this risk. And why you take this risk? Because you invested before to be ready to take this risk. Too easy to change. It's not something that you can start overnight.
I started talking the first time in London in 2011, 2010 about the idea to be explorationist inside of this company to really to use this model. And I'll say all the companies, more companies that are fewer explorationists than us do. So I think that
is something that has been built.
It's giving good fruit and good results. But there's absolutely no competition. The 3.5% is very robust one. It's an improvement of 3% respect of the previous plan. And it's an improvement based on organic growth.
It's just 4% this year because we have this 45 average production for
the right 1,000 barrels that
are coming from Abu Dhabi. But there is absolutely no way they are working together exploration, development and production are absolutely overlapping and that is our model.
Biraj Borkhataria, RBC. Two questions, please. The first one is on the geographic mix again. And a lot of your exploration success in some of the recent growth has been from Egypt. So I was wondering how you think about that over the medium term.
Is there a level of production or capital employed relative to the group you would be uncomfortable being in one country and just some thoughts around country risk specifically? And the second question, I think I heard you Martin saying, in addition to the growth as an element of production optimization, that's going to come through in the volume numbers over time. Could you just explain what exactly that is and quantify that?
First, I gave the floor to Massimo. But I want just to tell you that all our exploration is not coming just coming from Europe and from Egypt. Our situation is coming from really a diversified number of countries. And all these big figures of exploration is coming from Asia, from Kazakhstan, from Norway, from the U. S, Gulf of Mexico, from Congo, from Angola, from different countries.
So that is yes, that's I'm talking about the past but also for the future. So it's really coming from Far East, Middle East from the 25 countries. So it's not easy. So there is a good distribution of our investment. If you want to maybe to elaborate on the distribution of our capital, so exposure, but the same.
So in terms of
exploration, based on this figure, you can understand the discretion on CapEx are very well spread. The same, I would say, looking ahead, because if we take a look at the most important CapEx projects we have in front of us to get the increase. So thinking about Coral, thinking about Zoho, thinking about Mexico, thinking about junk Creek and Naraka in Indonesia, they are very well spread. These are the production coming from the new project. While from the, I would say, what we call the maintenance from the number I already gave to you.
So we spend more or less $2,000,000,000 every year in maintenance and production optimization. And the overall contribution to the production growth is in the range of 200,000 vehicles per day by 2021. You remember, Claudio said 700,000 vehicles per day coming from project start up and ramp up. On top of this 200,000 coming from the production optimization.
Thank you. Chris Kooplin from Bank of America. Two questions please. On your dual exploration strategy, do you think Goliad could qualify as a potential opportunity for farm downs now that uptime has stabilized as you said? And also wanted to hear whether you can give us any more detail around the running time at Goliad, what it is today, considering you sound like you're happy with the performance there now.
And the second question is I've noticed throughout your 4 year plan, you're using the same standard refining margin assumptions. Does that mean that potential upside from IMO is something you wouldn't expect, you would expect to see to come on top? And should we then expect, if that upside occurs, to be returned to the market via buybacks? Thank you.
Thank you. So, you call it is not in the inspiration phase. It's all Gynum. And so it's not really something that we consider for an M and A. Now the uptime is good and so the downtime is very low.
So there is no downtime in the last 3 months, so it's very good. Respiration is to have something around 5%, 60% that is a normal average considering the what we schedule as the maintenance. So for refinery, we want to answer not just the question if IMO is included now, why we have the same kind of full return. It's not true. The R and M is increasing.
So it's increasing. You see R and M is increasing because at the end of the period, it's going to deliver almost EUR 1,000,000,000 R and M, both together fifty-fifty more or less. So that means that considering starting from now, that is less than 100,000,000 is increasing. And clearly, it's increasing because annual is included. And we think that from our point of view, annual is very, very advantageous for us because we have all the refinery that can cover this kind of low sulfur content.
You ask if you want to increase you already increased today. So I think that we are incorporating iron today in the regulation process.
Alessandro Pozzi from Mediobanca. I think you presented a slide on the cash flow by key when you're reducing significantly to almost $50 per barrel again of the plan. I guess production growth is the main driver, but probably that's also supported by downstream and midstream. So I was wondering if you can provide more color on those those elements. And also the second question is going back to CapEx.
I just wonder if you can provide maybe geographical breakdown, probably Mozambique, Mexico as well are going to be a large chunk of the CapEx in the next 4 years? Thank you.
I'm going to give me some time to
And then after on the cash flow per barrel.
Okay. So as far as cash flow per barrel, the decrease is mainly related to the upstream and is related to the unit margin per barrel that Claudio shown in his presentation. So you have seen the margin growing up. And if you compare that line with the line that we showed last time, you can see an upside. An upside that would be even in the 1st year and then projected by 2020, 2021.
On top of this, we are projecting some contribution from the digitalization. I would say some because digitalization to us and probably for the world today is like a fast car, so it's very difficult to take a picture. So anytime we discover additional application of this digitalization. So the number that we are showing right now is just what we can see now in terms of application, in terms of spreading around the techniques. So definitely, every month, every quarter, we will see an increase in this number.
And this is what we are showing today is the picture we can see right now that is quite comfortable because $50 per barrel by 2021 something that leveraging basically on an upstream portfolio is something that we consider definitely outstanding. In term of breakdown, this is very, very high. So, okay. So we are talking about the total investment. This is the developing investments.
Overall exploration to development, so exploration plus development, but this is not the total.
Right? No, I can answer. I can answer. So it's
too long. Total, this is a
So in terms of the 4 year plan, you can go to make your calculation. So the main investment will be clearly now reduced. The first is Egypt, clearly. So the third debt is the first investment. Then we have investment that is in the tail that is in Ghana, because we are finalizing and we are going to put in production gas, the gas portion in June.
Then we have Indonesia, not large investments, but we continue to invest in the increase that's now we are going to invest to World Bank. And then we have investments that we're going to have investment in Norway because in the free of term, we start the own clusters and that is an investment where we have a stake and it's very important one. We are investing in Libya, as we said, because we are going to invest in Rafa, in the offshore because we have to at least the new investment, what we are going to happen with the investment, they're going to fight the depletion because we have a larger depletion rate there. Then we invest in Algeria, then we invest in Alaska after the deal we are doing well and we hope that we can tie in. So there is a plan for these investments.
And clearly, the big investment in Egypt is Kora. Cora in Mozambique because we are developing Cora. Now we have reduced because we have 25% of a big big acreage 25%. So we can say that we have investment in North Africa, Egypt, East Africa, Mozambique. And then we have Far East, we have Middle East, a little bit later because we have to double the production of the fuel we acquired.
And we have Kazakhstan, we have Norway and we have sub Saharan Africa. And Mexico, Mexico that is not a super investment because we sell the water, but it's investment that can be about $100,000 a day. So that is the map of our investment.
Right now, I didn't pay, so I can provide the details properly.
We send by mail, yes, in 2, 3 weeks, they will arrive.
It's Lydia April from Barclays. Two questions, if I could, partly coming back on digitization. And if I look at the cash flowchart, again, it is the legacy barrels that actually seem to be higher cash margin than they were a year ago. Is that where you're seeing the bigger benefit of digitization in the legacy barrels versus the gross barrel? And then related to that, you've given the target of 7% reduction for production costs from digitization.
Is there a similar target on development costs as well on that?
So I'll answer your answer, I'll answer. I'll give just the first part of the answer. That is on OpEx because in the development cost, all the digitalization of the new projects is already incorporated. So it's in the $12 per barrel that we got that Massimo told you before. So in the new projects, it's incorporated all the sensors, all the algorithms, all the centralization and control on rigs equipment and pipes is already there.
So it's not included for that reason. We talk about the operating in operating cost. On the legacy assets, clearly, what is impacting is operating cost and maintenance. We have some I think that we can have some improvement because we are going to replace pumps or pipes or all this kind of stuff and that will be optimized in the future. That is not included in the cost reduction of the assets.
Yes. And definitely, on top of this, what we can project now is already included in the numbers. It definitely is reasonable to expect something in the range of half a dollar in terms of OpEx reduction applied definitely on the operating activity right now because what we are doing is you see our target to start from our activities now 50% towards 100% by the end of 2021 or even before the date.
Massimo Bonizoli from Equita. A couple of questions. One regarding your current setup of businesses. Following a few years of restructuring and downsizing of the mid downstream, your exposure to that business has been reduced materially and now is lower than the average peers. And you presented today a CapEx plan in which the upstream takes more than 80% of the CapEx.
So do you feel confident with the current setup of the and the exposure to the mid downstream given the fact that reduce the volatility of your earnings compared to the trend in the oil price? And the second question is for Daniele on Versalis. A few over the past few months, there were a few rumors on the eventual acquisition in the business. I don't want you to comment on those rumors, but just on the natural evolution of the business in the chemical space, considering what you have reached in terms of restructuring supply?
So going to the first question, it's not true that now we reduced our capacity in downstream and now we are smaller than the others. We have been always much, much, much smaller than all the other peers. Now we arrange about 500,000 barrels per day, the other 2 or 3 or 4 3 to 1,500,000 dollars per day of return capacity. The only difference is that we are not losing money. That is the only difference.
Then now is more, but it's making $1,000,000,000 So it's a little bit that is the difference. So we improved. The question is, are you happy? We're going to improve it. No, I'm not happy.
When we discuss that, that is a phase of expansion because we restructured. So we know what we have in our end now and we can't expand, especially outside. I think that is the next step. So we are not everything that we have to increase, but increase in a very rational way, not buying, not everything must be linked. When we talk about integration, I want to have any kind of refinery before I'm going to have additional refinery.
We are working in non Naju or in Angola, but working to help and link our oil to the existing refinery. The model is integrated. If I were to find it, I must have also the upstream production. So that is really the business integration. And Rene?
Yes. I mean, in terms of the Chemical business, you know pretty much the story. This business was broken. We had to fix it. We did it.
We went from a massive loss of $400,000,000 $500,000,000 per year into the results that you have seen today. What is the next step now? It's to grow the business through 3 leverage for the next release. First of all, to benefit of the integration. So any hydrocarbon stranded opportunity we have around the world together within the group will do it.
Algeria is an interesting example. We have signed an agreement to explore this kind of integration altogether and there will be more of that. The second one is leveraging our technology on an international basis. We have clearly over 290 proprietary technology left from the past that we continue to leverage. Lotter is a classic example to be present in Far East.
And the third one is the specialization in our existing assets. If you want to compete, we are in Europe, we are strongly present in polymers, automotive, electronics. They always require new polymers and new technologies and the product has to evolve. Otherwise, we remain on the last of the supplier line. So that's the 3 lever that we have to grow this business.
Thank you.
I think the last few questions, Lucas, that was probably waiting for a while.
Yes. Thanks very much. It's Lucas, Deutsche. And maybe it stays in some ways with Massimo's question around the downstream, but it's actually about the structure of cash flows and the way you think about the structure of cash flow in the upstream because in some respects In the downstream,
in the upstream.
In the upstream. I'll come on to it. In some respects, you are disadvantaged relative to peer and that the cash flow that comes from sizable downstream operations for others is more material than it is for you. That obviously provides an affordable support with dividends. In the upstream, your business historically has also been more conventionally biased.
And I can see that the shape or the duration of the portfolio is improving as it all comes through and as to West Libya Gas Pipeline and the deal you did with Abu Dhabi. But Claudio, when you think about the portfolio going forward, and this is not short, this is long, how do you want the shape of cash flow in the upstream business to appear? How much duration, to use that term, would you like to see relative to where you are today to give you, let's say, better protection comfort through the kind of market volatility we see in commodity over the last 2, 3 years?
That's what we have done in the last 4 years. That was really to be more focused on our E and P, to create an E and P that is 80% of our business that also on hand, protect the company for a downturn. And that's what happened because now with the new target to reach $50 cash neutrality, you know, that's a $30 safe, dollars 37, dollars 38 for the upstream. The work for really the work that we have done is on the assets, on the development model, on the production. So everything that became very powerful, very strong, but that at the same time is reducing your cost and create a longer life for your assets.
Because for us, really the advantage is really to have a long life to be able to increase the margin and that is our defense. We work on that. We continue to work. And meanwhile, we work on the R and D and chemicals. They are really now good partners of the upstream, not just good partners, they work together.
And that is an additional defense or part of our resilience looking forward. I think that during the presentation, I mentioned something that is very important and is very good for the future. During the downturn, we have been able to find 4,400,000,000 but we have been able to increase 3 times our acreage. And that we have been done that very quietly without big noise because when if you make some noise on that somebody else is going to compete and increase your cost. But increase of 3 times expected 2013.
And that means in term of the potentiality of an un drilled risk equity of reserves, 10,000,000,000 barrels. So that is an additional big potential that's aiming at because we can start a new really new wage like we did in 2011, 2012 or 2013 when we start a new wage, but our acreage was less than now. Now we are really good acreage and 3 times more. And that is a really strong defense because now this flow of exploration is coming in a structure that is ready to get in these new assets in a situation that is much, much better in terms of robustness and readiness. So I think that so that's just when we say we are looking forward and we are looking at the future in a different way, really in a more aggressive way with a lot of discipline, but a lot of good positive weapon in our cash flow.
The last one to Martin.
Yes. Hi, hello. It's Martin Radzon with Morgan Stanley. I wanted to ask you 2 things. First of all, I wanted to ask you a bit about your macro thoughts.
In the sense that about your macro thoughts. In the sense that at the back of the slide deck there, there is a time series which shows oil prices going up to something like 70, 72 by the end of the selling period. I think Karim also pointed it out. But at the same time, we talk to a whole lot of oil companies and breakevens are falling everywhere and rising prices and falling breakevens. I mean the divergence, particularly by the end of the planning period gets rather enormous.
So I was wondering how you see that playing out. Are we eventually going to look at an industry where perhaps these very low breakevens will not be able to be maintained or perhaps some of these higher oil prices ultimately a little stretched? I'm just wondering how you see that divergence between rising prices and falling breakevens? The second thing I wanted to ask a little bit following up on Chris' point on the IMO. There is also an emerging view that the benefits of IMO will ultimately not accrue to the refiners, but simply to the people supplying the crude with sweet crudes going up an awful lot and sour crudes going down an awful lot.
Shouldn't you put that benefit that you put in your upstream business in your downstream business, shouldn't you put the IMO benefit into your upstream business?
Thank you. So you can answer about IMO just in here. The macro scenario, you saw that in this strategy, we didn't highlight our scenarios. We say, we treat the scenario as something that every day is because we have to run calculations for the future, but we run all our tests at $60 just to show the robustness and the strength of our asset base. I think it's up for the industry.
What I can say that the choice we made in the past in terms of asset base is our strength. So what I mean that our cost, if you ask me, can you keep this cost also the price going to $100 per barrel? I can say that looking at the split of our investment for the future when we have the flexibility to or we don't sign yet a contract on FID. So we are still CapEx that has to be closed completely in the contract. I think that we have absolutely the possibility to keep our breakeven very low.
So our breakeven trend is now linked to the oil trend. At least there is a it can be linked about 20%. The 80% is linked to the strength of the asset and the cost of the asset. And now much more than before And every age is better because the structure, as you said, this new aspiration is really to be inserted in the structure that is very robust now. And in terms of processes, in terms of equipment, in terms of modernization, standardization.
So there is really a certain line, but also an insourcing of competence now because all the engineering that is really a peculiarity of A and I. All the engineering, all the practically all the fees And we are the main contractor and we make all the main feed to the front engineering at home. We are in the Italian engineering. We put people in the commissioning. For that reason, we are really stretching the time.
We are squeezing the time, sorry, and we are reducing the time to market. So that is the quality of the asset and the strategic choice about the exploration and the determinant that are really the 2 distinctive elements of our macro profile may have so strong there. So that means that the price is going out. We are very happy for the margin, but we are happy every day to preserve our cash neutrality. And we have all the tools to do that.
May I complement your answer to Martin? Just to qualify that Martin, you're right when you say that the cash breakeven are going down for everyone in the market. But because of the difference we have just commented in our portfolio, our drop in the cash breakeven is something different because we are leveraging 90% on our E and P asset in reaching the $50 we just announced. While for the others, you know better than me, the contribution from business other than E and P is significant and it will be even more in case of an additional drop in the oil price. So comparing the 2, what I would say that we are clear about the quality of our E and P, that means that whatever will be the price, our E and P would be in the condition to compete better than the others portfolio.
About IMO.
Okay. About IMO, IMO is a strong opportunity for a refining system that use especially high sulfur heavy crudes. And our system is based on more than 70% of crudes like this. And also for a refining system with high conversion plants With the rebuilding of our EST technology in San Azaro and other plants what we have in Tallant in Milazzo that summarizes more than 4,000,000 tons per year of deep conversion capacity. This will permit to produce 0 bunker oil within 2020.
This put a good advantage for our system. Notwithstanding this, our scenario is with the flat margin for refining for all the plan. And so the ground that we have introduced in the plan that doubled the EBIT in 4 years from €500,000,000 in 2017 to €900,000,000 more at the end with the flat margin. It means that we have a further upside in our plant because of the efficiency of the integrations and of the pushing the bottom of the barrel conversion.
The question was a little more articulated because it was also for the upstream. So why maybe the upstream that have the good oil, maybe they can catch this margin. The issue is that it's not always very possible. So you have to be also well equipped from a downstream point of view to be able to treat this oil that is around. So there is a true what you are saying.
There is a double good returns for the company that they have the right downstream to treat heavy oil because we have to be in excess of that oil. So they come to you, you can get a good price. And from the opportunity that they have the oil that is free of sulfur and then you can get additional margin. So I think that you
Anyway, we didn't assume any advantage in terms of margin. So in the differential in the upstream, we didn't take into consideration this potential upside that in case would be an upside for us much bigger than the advantage we can get from our refinery capacity. Correct, correct.
Okay. Thank you. And I will leave the floor to the press conference. We will re meet in the 2 meeting rooms with the top management for the breakout session at around 2 Thank you very much. Thank you.