Good morning, and welcome to our Investor Days in New York. Today, we're going to talk are going to talk about the future, but we like to start from the past, the past 2 years. And we talk about the past because we want to understand where we are now and on what we are going to build our future. Less than 3 years ago, really before the big oil drop, but during a gas European gas crisis and also mid- and downstream crisis, we presented to our investor community our objectives and also our transformation and restructuring program of our company. Now that we are at the end of this first phase of transformation and restructuring, we like to present what we have done, our achievement, and especially how we cope with this period of very big transformation in the energy sector.
We can say that we presented our transformation and our restructuring program before the oil drop. And that was very positive us because we had time to be ready. And the reason why we wanted to change the business model of our company was really to be more effective and more focused on our upstream business. Then suddenly, we had the oil drop by the end of 2014. So we were in the position, well positioned, but we're in the position to accelerate our action of transformation and restructuring of the company.
So we can go ahead with the first slide. Go ahead. So we as you can see, when we started our action, it was really because of the EU gas demand and the refining margin and the refining situation. You see that in few years, we lost in Europe more than 100 BCM of gas in terms of consumptions. And also, the price went down.
And also, there's been a big shift in the hub volumes. The hub volume passed from 25% to 75% in the gas European gas market. Why this is important? Because the gas price the AB price is not oil linked. And all our long term contract for more than about €40,000,000,000 cubic meter are oil linked.
So that was that had a very bad impact on our long term contract and our gas situation. Then we have the refinery margin. And the refinery margin is not just the only problem because we pass from more than $7 per barrel to less than $3 but we lost also about 10% of the consumption. And then we have the oil price. So this scenario was particularly critical for European reason and for worldwide, the oil price.
So we had 2 choices. The first choice is to cut investment, reduce activity and lose value in our asset base. The other choice is to start, and we already started, a strong transformation program and changed the business model of our company. Now we are going to present an infographics that practically describe all the milestones, the achievement and the activity that we did in the last less than 3 years really to change our company. And then we are going to understand where we are and what is any today because it's completely a different company in respect to 3 years ago.
So now if you can go with the infographic and go through all the main steps, please. So that is what we have done. The our transformation, our process was based on 3 main pillars. The first one was the transformation of the company that was practically refocusing on the refocusing and streamlining of our organization and of our structure. The second point was the restructuring of the midstream business, so the gas business and the refining business.
And the 3rd point was to enhance our upstream model, to be more effective, to be able to cope with the low price instead of cut investment, be able to continue growing, optimizing our cost. And that's what happened. So the first point is the restructuring. That is a very schematic picture of our company, what it was in 2014 and what it is today in 2016. What we have done, we passed from a divisional organization.
That means that we have duplication, duplication in the business, duplication also in the function. And we pass from a division organization to a more streamlined and business oriented. So now we have really all the business that report directly to the CEO. This action, so reducing the duplication and streamlining the organization, allow us to reduce on annual basis and in a structural way about €700,000,000 per year. So now we have a reduction of more than about €700,000,000 per year, and that is the main result.
That is what we have done for the organization, but we had also a deep restructuring in our business model. E and I before was more similar to a conglomerate because we had different kind of activities. We have the there's now Retegas that was in charge for transportation, storage, regasification. We have Saipem that was in charge for engineering and construction. We had Galp.
We had other participation. We changed drastically this model. So we disposed in 2015 of Snarete Gas. We disposed our GAAP. And we and in 2016, we deconsolidate Saipem Debt.
And that means for us this transformation of our business model meant for us about €10,000,000,000 that we are able to cash in. After So next slide, please. So after the restructuring of the of our organization, also our business model, we go through the restructuring of the mid downstream. The mid downstream had, as I told you before, problem in term of quantity of gas, volume of gas, price of gas and also the fact that our long term contract was linked to oil price, and the harbor not linked to the oil price. So we had to start a deep phase of renovation of our gas contract.
And not only that, we have also to recover the take or pay that we accumulated starting from 2011. And we have been able, as a first step, to renegotiate this contract for with Gazprom, for example, and we recover immediately in 2015 €1,600,000,000 coming from the recovery of the take or pay. Then we work on the supply chain, and we had an objective to reduce about €350,000,000 of costs in the supply chain. That is mainly the transportation and the storage. And we recovered already €200,000,000 from the transportation side.
This morning, we announced a very important result because we finalized the renegotiation of the Sonatrack contract, aligned this contract to the to our Italian hub, and that is very important result that will allow us to get the breakeven for Gas and Power as we schedule and as we promised in 2017. And that is a very important achievement, and I'm very happy that just today here in New York, I'm able to announce this big important agreement. So in Gas and Power, we started this restructuring, and we have been able to go back to a breakeven. In refinery, I think that was another big problem because we for more than 8 years, we had a we got a negative EBIT and also negative cash flow in the refinery. So we made a big effort, 1st of all, to reduce our breakeven because as you see, in 2008, we had a breakeven of $7.00 per barrel with a refining margin, market refining margin of $4 so we lost money.
And we had 2 megabit efforts to reduce this breakeven from 7.5 to 4.2. That has been made through a restructuring in term of capacity. We reduced our capacity by about 30%. We shut down a plant. We built and we are under construction 2 plant, 2 green refinery.
We increased the efficiency of our refinery from 65% to 95%. That helped tremendously to increase to reduce our breakeven price. And starting from last year, for the first time after more than 8 years, we have been able to reach a positive EBIT and a positive cash. So now the refinery market in our more than a breakeven term of EBIT and they have a positive cash flow and they are self financing. The same restructuring has been done in the chemical business.
The chemical business has been negative for more than 20 years. We have been positive just for a couple of years in the past. So we made also in this case a very important action of restructuring. On the efficiency of the plant, that was the first point that we started immediately, but also on the product. So we passed from the intermediate product to the specialties.
So increase our specialty up to 40% of our product. That means that we are able to reach we can reach the we can stay on this on the value chain up to our customers. And you see the result. That was our AB EBIT in 2013, and that is our EBIT now in 2016. If you look at this sector, so the mid and downstream, if we can change next slide, please.
So if you look at this sector from a cash point of view, you can appreciate the fact that 2015, 2016, a business that has been negative in the last years, now it's back to the profit. We have we produce a cash of about €5,000,000,000 And overall, if you compare the previous 3 years and these 3 years, we have an increase of about €9,000,000,000 and that was a very important point to counterbalance the very the low price impact. So if we go to the next slide, we pass the 3rd pillar. So we talk about the transformation in terms of organization and business structure, then the restructuring of the business of the it has a midstream business. And now we talk about the upstream.
The upstream, clearly, we had already very strong upstream, but we had to fight and counterbalance the very low price. So we work on the process. We had to be more effective in the delivering of our production. We had to be we had to increase our exploration efforts, not just in term of finding reserves, but in term of time to market. Exploration, from our point of view in our model is really is part of our production.
We look at the exploration reserves like in really in relation to the next production. Just to give you a value, in the 3 years, the exploration production, we can say, represent 25% of our growth. And what we got in the last 3 years, you see, in term of production is exceptional, in term of value as well. We increased our production starting from 2013 of about 15%. That means more than 250,000 barrels per day on average.
So we have been able, in a period where we cut our cost of about 30%, so reducing our cost of 30%, we have been able to increase our production of more than 15 percent, 250,000 barrels per day. And that is the volume that is important, but we have to look at the value. So if we compare the 2013 and 2016 operating cash flow, so we use the same price of 2013. So we can normalize. We can compare the 2 operating cash flow.
We have an increase of cash flow of 30%. And if you look at the cash per barrel, that is another important parameter, all without the same condition, we have an increase of 20%. So clearly, that is a very important result. It allow us to pass from 1,000,000 And that's come And that's come from the change of our upstream model. We are in the next part in
the next part of the presentation, we're
going to elaborate on how we have been able to increase so rapidly the production. But now we talk still we still talk about the value. We saw that we increased production, but we increased the value of each barrel. And that has been possible because we improved the cost structure of our asset base. If you look at what happened in this period, the breakeven of each of the average breakeven of our project passed from $45 per barrel to $27 per barrel.
So we reduced our breakeven price, average breakeven price of 30%. So how we that has been possible? First of all, because our asset, our production, our exploration pass through an organic growth. So we start from the exploration. And our exploration cost is lower in the industry.
Just to give you a figure, last year, our exploration unit cost was €0.50 per barrel. And the average in the last 8 year is $1.2 per barrel. That is between the 15% 20% of the unit exploration cost average in the industry. So our breakeven starts from a very, very low level. Then we add the development cost that represent about that has a value account for $11 per barrel.
And then we have the operating costs that are now about $6.4 per barrel. So we have a technical barrel that is well below $20 Then if you add royalties and taxes, you arrive at the $27 per barrel average. And that is one of the reasons why each barrel got a much higher value than in 2013. And that happened in less than 3 years. If we go ahead, please.
Then we see the cost optimization. That is another important point because not only we increase production, we restructured our businesses, but we have been able to reduce all our cost structure. From a group CapEx point of view, we reduced our cost of about 33%. In the upstream, as I told you, we reduced our OpEx. We already had the lower level of OpEx in the industry, but we have been able to reduce our OpEx of about 23%.
And the G and A that I presented before with the restructuring of the company of 33%. And so the overall action produced a saving of €10,000,000,000 in the period, so in these 3 years. So that is important point because we have been able to reduce this cost, reduce the CapEx, OpEx and G and A, increasing our production. And if you look at the next slide, please, we have the I think the ultimate goal of our action and the more impressive one. You see that, that is our cash neutrality.
In 2013 and in 2016. When we talk about cash neutrality, we talk about the capability to cover with your through your operating cash flow, your investment. And in 2013, our cash neutrality was about was of $127 per barrel. It's very it's a huge number. But the industry in 2013 reached really the maximum of the inefficiency with a very, very high cash neutrality.
So we were not alone with this high value. But what happened that we had to really to change completely the big transformation we made through the cost cutting, through the cost through the increasing production and reducing the exploration costs, reducing the production costs, we have been able to reduce more than in less than 2 years, to reduce more than 60 percent our cash neutrality. So now our cash neutrality is $50 So that means that $50 we are cash neutral. And on the other side, you see another very impressive result. If you compare the cumulative operating cash flow in the 3 years period, what we add in these last 3 years, 2014, 2016, dollars 64 per barrel, we got €34,000,000,000 of operating cash flow.
That is absolutely in line with the cash with the operating cash flow that we got in the previous 3 years, but at a different price, at $110 per barrel. So we have been able with the effort on the cost because we increased the production and we increased the value of each barrel to compensate at the end the oil price. So we practically we more than doubled the value of each barrel that are oil and gas. Clearly, we are talking about oil and gas. So that is, I think, the most remarkable, and that's also the ultimate result.
And describe, as I told you before, we'd like to start from the past to understand where we are and who we are. It's clearly, we are a different company. And all this restructuring and also the transformation in our organization are structural. So these results in term of cash neutrality, in term of OpEx, CapEx are structural. We have to maintain them, but are part of our organization or our business structure now.
Now I'd like to elaborate a little bit more on the upstream side that has been the base of this big result, talking about the 2 main legs of this business that are the aspiration and the development. So if we can start with the aspiration. I'd like to talk about the our distinctive model because we have been so successful in the last 7, 8 years. And also, the reason why we've been successful, I think, is also because of our strategy in the exploration. I think you see the yellow small fish that is going in a different direction.
That means that you and I took a different direction. We have been unconventional because we went back to the basis, and we decide to go toward conventional asset. Conventional asset means for us assets that are shallow water, onshore, that are in a conventional lithology, that are in a that are less risky in term of drilling, in term of costs, so give you less exposures. So typically, our choice was to go back to the mature area. And most of the cases then we are going through and we're going to present really mature area, where mature means that the relinquishment of our company, where other company drilled already a lot of wells that happened in Angola, Congo, in Ghana, in Egypt, in Libya, in Indonesia.
So it's not just a single case. And look for a different kind of target. Which kind of target? For example, we went back to this area, and we tried to explore the deep pre soil target, deep internal reservoir, not the water depth. We try to instead to go to look for structural traps, we went to more risky trap, stratigraphic traps that are most risky in terms of closure, in terms of finding oil.
But we developed we started developing proprietary technologies really to be able to process, to make a deeper process interpretation of the oil seismic. So we use oil seismic. We use new technology, and we use also new interpretation models. DOR came from a new idea that we took from what we discovered in Venezuela, in Kazakhstan and Libya. And we put together, we create a new model, and we discover Dor, for example.
And all the other discovery in West Africa came from a presold that has been neglected or not considered in the past or gas that has been left behind because maybe 20 years ago was not commercial, and now it is a product that we can sell. So we went with a different model. This different model creates also our cost base, our cost because we are conventional, because we are close to our facilities, existing facilities because we are in a mature area, because we are close to our field, existing field, sometimes in the same block, in the same area. So it means that we already have a contract. We can recover immediately the cost.
So we are immediately a positive cash flow because we are in the same license. That creates this big advantage. And if we go next and we look at the result, the results are quite impressive. If you see what happened starting from 2,008, we discovered 13,000,000,000 barrels of resources, inspirational resources. So a very huge number.
If you consider this €13,000,000,000 represent in the period 2.5 hour what we produce in this period. So 2 50 percent of what we produce in the period. If you look at the average of the industry, the average is 30%. So the other company in the same period had an average 30%. We had an average 2 50%.
So we discovered 2 50% what we produced. That is quite important for our future. But also that is quite important because it gave us a big flexibility. So when we think about the cost, when we think about that we have been able to increase our production of 15% and reduce our cost of 30%. Why that happened?
Now that happened because we have been we have so many new resources in very easy situation, conventional situation with very low CapEx, very low OpEx. And also the time to market is shorter because we can you can use your facilities or existing facilities that you can increase your production and shift your investment in projects that are less costly. And so you spend less and you get your production faster. So that is the reason. So Inspiration not only gave us a huge amount of reserves, but it gave us also the flexibility to reduce cost and increase production at a lower price at a lower cost.
And if you see in the other part of the slide, we have this reserve that we discovered in the last 7 years. And we already gave value to 15% of these reserves. We have €1,500,000,000 already transforming through an FID in P1 reserves. We have already the gray part portion that is €2,500,000,000 already disposed. So we already anticipate, we already got value from that.
So we saw, we farm out clearly with a big, a huge add value. But that is so we can consider that 50% of what we discover, we already extract value in terms of disposal or a part that is under disposal. The rest are already 2P and 3P reserves. So the characteristic, the kind of reserves allowed us so conventional one allowed us to be very fast in dispose our reserve, have enough ID and transform the rest of the rating to in 3P reserve, 2P and 3P. That means that we are very close also for the red side to go to FID in the last couple, 2, 3 years at very low cost.
If we go ahead, I think we have an infographic. Say, we have an infographic for Zohr, too, that is an example of this successful exploration effort. So we show Dor as a last example, but if we look at the map, we discover we have been discovering more than 10 different place and so different regions. And in the same condition with Zohr, Zohr has been discovered in a block in a big block where in the past, other companies already drilled 11 wells. And we went back with the same kind of idea I told you before.
Doris is a deeper target, is a carbonate, as you saw. And that was not really well seen by the previous seismic interpretation. So we use the same seismic while we reprocess. We reprocessed this seismic through with our proprietary technology. And we saw something that Ara didn't see.
But Zohr is an example where we close to Zohr, we discover in the same period that was July August 2015, so really a few months ago, we discovered also Nourous. And nobody talked about Nourous. Nourous has been discovered with Dorr the same day, the same week. Nourous is already producing 160,000 barrels per day. So we discovered in August 2015, it's already producing 160,000 barrels per day.
Why? How we can do that? And that has been a big contributor in the 15% growth rate we had. Because Niurus is close to our facility, used practically a gas plant that was half empty, the same pipeline. So we just had to drill well and tie in using the pipeline, the flow line, the plant.
And the time to market was practically 0 because after a 2 1, 2, 3 days, we could test the well and tie in and produce. So that is an extreme example, but very significant. Nobody talked about that because Zohr was so big that the poor Nourous has been neglected, but is there with a very huge production. And in this period, we have the possibility because of Dor and before Dor to renegotiate our gas contract in Egypt. So we increased the gas price.
And after we increased the gas price, we discovered no rules already in production in Dor. But we have other kind of big discovery. 1 is Marine 12. Marine 12 is oil. It's in Congo.
The Block 12 has been a very, very old block that we got just to have gas for the power plant. And we discovered the Chincholi that's a field and Nene that is not a field. And overall, we discovered 6.3000000000 barrels of oil in place. That has been done in 1 year. And after 11 months, Nene was in production.
It came to market 11 months. But the same reason, conventional asset that is pre sold, so not easy to discover. But if you add the right technology, you can do that. But it has been discovered, and after 11 months, that for different reasons, because we use a standardization and modernization in our engineering, so the design to cost was really very effective. But we put in production the Block 1506, the same.
The Block 1506 is a linkerment of the Block 15, that block where we are with the external operator that we took and we discovered 3,200,000,000 barrels of oil. And it's deep offshore. And in spite of the deep offshore, from the last well, this exploration well and the production, we had less than 4 we got less than 4 years. And then we are producing constantly, and we already reached 100,000 barrels per day. We are everybody knows coral because it's very famous.
Mozambique is a big gas discovery. That is a greenfield. So it's a different kind of situation than the other. But then we have John Creek in Indonesia, Merakes, the same kind of stuff there, relinquishment that our company will discover. In this case, the globe the total of discovery is about 70 CF.
But it's good because we have facilities there. LNG very close. Bontang, close to our facility. So we have just to invest in the upstream. The midstream is right there.
The breakeven price is very low. And then we have other bit discovery because we discover in Ecuador exploration again in very old blocks. And we discover more than 400,000,000 barrels of oil.
We have
discovery in Gabon in the same situation, presold, the same kind of structure of of Nene. And we discovered about, in this case, €1,000,000,000 oil equivalent gas and condensate. There's Sankofa in Ghana. The Ocasper is not our discovery. We made Statoil, but it comes from a geological model that is a Golar geological model.
So that is really what happened in these few previous years that allow us to reduce our cost, be conventional and immediately use this exploration to start production. It's all due 25% of this 15% production growth was coming from this exploration. So next, the development. So we talk about the aspiration, and then we have the development. That is the second part.
What we have done in terms of model, we apply the design to cost model that normally we use in the development also for the exploration. So the exploration has been practically linked to the development. What that means? Means that the selection that we made of when we select our prospects, we select the prospects that are really that allow us not just to be less costly, but that allow us to reach production very fast. For that reason, it's a design to cost it's an exploration design to cause.
That maybe is quite new because nobody talk this kind of language because it's really for the development. Our aspiration start, and now I show you start with the development. We had different cases, but what happened? This is a standard way. So we have a sequential way.
We have the exploration, the reservoir studies, engineering and then the procurement and then the first oil. But very, very huge time to market. That is a traditional way to reduce risk, but you are very slow. And there is no iteration and overlapping of the different parts. That is our model.
That is a full design cost model. So when we are exploring, we have a first well, we have a second well, we are already making the reservoir study, we are already making the conceptual, the conceptual engineering model, and we start with the procurement. So we overlap the 4 phases. That is quite unusual. I'd say, but how you can be you take a risk when you make these 4 phases together?
No, you are not taking risk. You are gaining timing. You are you make a shorter your time to market. What is happening that there is an iteration? Every time I have a well, I run my reservoir model.
I update my conceptual engineering model. I also update my feed, so the front engineering. And then I start with the procurement. Zohr is a typical example. Then we see we did Banuroz, we made the same thing.
Nene, we made the same thing. Sarcopha, we made the same thing. The Block 15 or 6, Jan Creek. So we applied this new model in the last 3, 4 years. For that reason, we really we have been able to have very good time to market.
We could increase production in 2 years. What happened, for example so it's very peculiar because you know that this year, we had initial in Valdaga. Valdaga is an Italian field. Maybe you don't know this field. It's a good producer, about 80,000 barrels per day of oil and other 10,000 of gas.
And for environmental reasons, then we solved the problem. We had this field stuck for so closed for 5 months. So we lost it. With this field and with Nigeria, about 55,000 barrels per day. And we have been able, through our exploration effort, to compensate so respect our budget, compensate 55,000 barrels per day in 2016.
And that's because we use this kind of different kind of model. If you I'll give you an example immediately with Zohr again, if you can if I remember well, we had Zohr, yes. That's an example, but we can replicate and for other projects. So we discovered Dor in August 2015. We drilled the first well successful.
In September, we already made up the plan of development. In October, with 1 well, we start we went to the authority, we got the approval for the plan of development, we start the procurement, we start the second well. And once we got the result of the second well, it was January, we tested. We saw the production that was exceptional because the production was about 250,000,000 scuff per day, so very, very high production. We took the FID.
So we had the FID from August, discovery February, FID, 5 months, we took the FID of the door. Everybody said, but with 2 wells, you are crazy. How you can get how you can be sure about your reserves? And everybody said, no, it's not possible. So we could do that because we own 100% of the block.
And for that reason, we try to have in aspiration, because we are successful, a larger stake, not only because then we want to apply our dual model and sell, but because we want to be effective. If we were with other 2, 3, 4, 5 companies, it was not possible to apply our process, our procedure. That is ours. And we have to wait for 2, 3, 4 years. Normally, when you drill a well, you drill with the appraisal, the exploration, you wait 2, 3 years to get the FID.
And you are very happy because I'm sure I'm safe. There is a big maturation of the project. And you are losing money because you put money in your aspiration and you wait 3 years to have your FAD. You are losing money. We are losing money.
Our investors are losing money. So for that reason, we say, in aspiration, we want to have a high stake. Why? Because we want we are quite sure that we are successful. We take these risks.
We give value, then we sell. But especially because you want to go very fast to the FID, I don't want to sleep. I want to get I want to go to the first dog as soon as possible. I want to use our procedure. So that is the reason why.
And you can see us back to back, we drill our other 6 wells, 7 now we are we drill 7 wells. Each well is an appraiser. And as I told you before, each well go back to the reservoir model and try through iteration to improve your feature, your model and your engineering model. And that now what we are going to do is probably in 2 years, 2.5 years, 2.3 years to get the first production. So our effort is to reach next year, by the end of next year, the first production of Dor.
And that is a first production that is not a full field production. That is another things that we apply in our development. To reduce costs, we try to avoid to have all the costs upfront and then wait 7 years, all the developments, super wonderful development, you put EUR 10,000,000,000 EUR 12,000,000,000, then you start recovering. Now what we are doing, we are doing all our project by phase. So we start with a phase.
In this case, the first phase, we have our cash flow. We start being cash flow positive. And then we have the 2nd phase. So we reduce our upfront investment. We increase our internal rate of return.
We increase the NPV of our project. And we reduce the risk because during the first phase, we can fine tune the model and we can optimize the investment for the 2nd phase. So it's practically is in a full iteration that continue and continue until we are not in a plateau situation for the field. So that is what happened for Dor. And then we can see I already mentioned some of these projects.
These projects for this project, we practically use or we use the same kind of model. So designed to cause from the started from the exploration. And here we have the result. We have for the from the discovery to the FID on average 2 years. So the standard of the industry is 3, 4 years.
And then we have from the FID to the start up, to the first production, 2.5 years. So we have an overall average that is, I think, much better of the average industry of 4.5 years. That is meant from different kind of project is an average. Not all these projects are supergiant, but I think that this project sorry, this project that I put on these slide as our Giant. And that is the difference with respect to where we are in the past.
So we change completely. So we improve the Upstream. We improved in terms of cost, but in terms of time to market and discovery, and we link together the full all the process. If we go ahead to the next slide, looking at this the project I mentioned that is just a small part of our package, but the more relevant in term of dimension of the field of the reservoir. You see, that is the what they are going to produce as a cash flow in the next 2 years, so 2017, 2018.
So at the plateau, these projects are going to produce about more than, sorry, 500,000 barrels per day. That is practically onethree of our production. And with this price, so that is our budget price. This year, we have 43.5%. It's not the real price.
The real price is higher, fortunately. Then we have in 2017, dollars 50 in 2018, dollars 60 So in 2018, this project at $60 they are going to produce, sorry, 4,300,000,000 of operating cash flow. And cumulative, we have €7,700,000,000 But with this profile price profile, that is very low. And if you look at the cash per barrel, we have at $60 and that is very important, we have a $60 per barrel of cash flow. So each barrel value is $30 We have to think that our $110 we had about $28 per barrel.
So before so the old Annie at $110 had a cash flow per barrel of $28 And now at $60 this project has a $30 per barrel. So we improve. We double the value of each barrel, what I told you at the very beginning. That is the reason. We can go to the next.
Okay. That is what I said. Here, we talk about for the first time, we talk we give a projection outlook for 2017. You see what is going to happen. That is our CapEx profile.
We are reducing our CapEx. That what is the value of 2016 that is close to €8,000,000,000 And then we have 2017, we're going to reduce further our investment. And this investment in 2017 is before the disposal. So there is no door disposal, But we are increasing the production. So in 2017, we are going to have an average production of 1,840,000 barrels per day, that is very close to our record production ever, but it will be the average, with a CapEx that is in strong reduction respect to the 2013.
So that is the value that we wanted to create. We wanted, really, in this difficult period, to be able to reduce our investment, because you must reduce your investment if you want to be cash neutral. But we wanted to increase our production, to increase the value of our asset. And that's what happened. But and from the other side, that is not an important KPI.
They came from the exploration and from the what I told you before. We have been able in this period, but especially in the last couple of years, to increase drastically our replacement ratio, reserve replacement ratio. You see, here we put that our official data, what happened to the merger in this period. The merger cut investment to reduce costs, but they reduced the activity, so they reduced the capability to replace the P1. You saw that we increased 250,000 per barrel, but we increased our P1 of €1,500,000,000 with our expirations organically, and that is the result.
We have a range. We are going to range also in the future between 120%, 130% of replacement ratio. And that is a very important parameter that give the healthy of the company. And that is imparting the balance sheet, but it's imparting also the capability to grow. And we have to remember that we still have with what we found, we still have €7,000,000,000 that are 2P, 3P that in the future will truss for in P1.
Now we are we reached the conclusion of our presentation. I want just to give you an overview of our portfolio and the value that we unlocked through the 2 main the main tool that we have really to our portfolio management and disposal. 1 is the transformation. So we transform our business. We want to be an integrated oil and gas company, a pure integrated oil and gas company.
So we have a lot of value inside us. Had already expressed in this first phase some value €10,000,000,000 because the consolidation of Saipem and then disposal of GAAP is done, produce €10,000,000,000 that reduce our debt and improve considerably our leverage. And then we are and that is structural and is not finished. And then we have the dual exploration model. The dual exploration model is what I didn't explain during the presentation, but it's quite clear, is the fact that we are successful in inspiration.
We are specialized in inspiration like a pure explorationist. And so we take big stake. Stake means 80 percent, 100% of the blocks. And then we give value, and then we reduce our participation. We keep at least 30%, 40%, 50% in the operatorship, the ownership of the development.
May give a lot of value. So these structural legs and the structural model already gave us in the last 2.5 years, 3 years, €5,400,000,000 so more than $6,000,000,000 And that are mainly made with Mozambique, first phase already done. We have a second phase under disposal. And or that in 2 months, we finalize with BP. And sorry, we announced yesterday with Rosneft, they got 30% plus an option 5% that can get in by the end of 2017.
So that is our model, and it's something we promised and something that we got. And we are absolutely satisfied that we are being able to finalize before the year end. So the conclusion, here you see the practically the picture of what we Eni was in 2013 and what Eni is now. The figures are very good, but there is a strategy, there is a transformation, there is a structural model and especially a new kind of model you saw for exploration and for development and then for production and for the cost efficiency. That are the figures.
But what I'd like to tell you that we I said at the very beginning that we have the 1st stage. We still have a lot of things in front of us. From a structural point of view, so we have to really to continue to fine tuning and create value from our structure, so becoming an oil and gas company. We have other things to do, and that will be done in the next couple of years. But we have still to fine tuning our Design to Cost model.
We just started 1.5 year ago with this Design to Cost model with aspiration and development. And I think we can improve. We can improve. And we want to continue to grow organically. We want to continue to have asset management on the exploration through the new exploration to create value, to increase anticipated value, not just through the FID, but also to getting money and cashing in before the production.
Mozambique cash money 7, 6 years before the production. That means that we never be cash neutral during the development. We reduce our exposure, we reduce our risk, And that is very important fact. So the dual exploration model is not just a way to cash in money, but it reduces your financial exposure. You reduce your country risk.
And that is really a part of our model. We have to, I think, work again and work for a while because we learned a lot in this period because we maybe we have been defensive in term of cost efficiency. And I think that the cost efficiency became a skill of our company, not just a defensive attitude, but be a skill, so you can really survive or more than survive also very low cost. So I think that we are ready with this model to improve our $50 cash neutrality. So that is something that really I want we want to do in our company, not just me, but all our top managers want really to be able to reduce this $50 We were at $127 now we are at $50 We want to be still more robust and have a lower value.
And that is what we are going to do, and I hope that we'll be ready to present in 2017 a more challenging target. And that is very important because it means that we can cope with a very low price because now we know that the price can be lower than 50, than 40 maybe. And we must have a company that can really challenge this kind of price and stretch the dollar, stretch the barrel and be able to make money also with a lower price. But with this kind of structure that became permanent structure, you can really get all the value when the price is higher. So we are working on that.
The first phase, I think, showed very excellent results. And now we work for the future. We are ready now for the Q and A. We have still an infographic just to show you the future projects, and then we start with the Q and A. Thank you.
With the Q and A. Just a few instructions before, okay, together with Claudio, there will be the top manager ready to answer to your question. Massimo Mondati, the Chief Financial Officer and Massimo Montovani, Chief of Mystream. After collecting the question from the floor, we will have a session with a few questions from the phone. And then I will leave the floor to Erika Mandarffino, who is the Head of Media Relations, to have the question time with the journalist.
Thank you. Please state your name before asking. Thanks.
Great. Hi, there. It's Mark Hoefler from Jefferies. Thanks for the presentation, Claudio. I just had two questions.
Can you you referenced the €7,000,000,000 BOEs of resource, it's still 2P and 3P. Could you maybe give a bit more color about what those resources, which projects they relate to? And any timing around FIDs and moving that closer to production? And then I just wanted to come back to your comments on Zohr and how you anticipate that to be cash flow positive at each of the subsequent phases of production. Can you talk about how long you might expect it to take to recover those costs from Phase 1?
Okay. So the €7,000,000,000 that we mentioned about 2P and 3P are mainly in we have in Congo. A huge part of that are in Congo and in Mozambique. Why Congo and Mozambique? Because Mozambique, now we are going to sanction CORAL.
CORAL is more a portion of all the big reserves that we already have there. We are in a most of that are 3P. So these cohorts with studies, with tests, but are still 3P, and that's a huge amount. Also in Congo, we discovered, as I told you, euros 6.3 €1,000,000,000 What happened? Euros 3,000,000,000 And we just started we are just 2 phases of NENE because we are working on the gas treatment.
We don't want to flare gas. So we are working on the gas treatment storage in Mundi that is onshore. So we are going to inject gas in Mundi, and that is a project. And we will be able to increase production and so transform these reserves in the 3rd phase on NNA in P1 and repeat. Then we have also the Ghana project where we start with the oil, but we have also the gas project.
The gas project will be start after 6, 8 months. So we still have 2 peers served there. And then we have Nowruz. Nowruz, we so we have all the projects. Nowruz, in a small percentage, it's still 2P project 2P reserves because we developed the offshore.
Now we are pricing the onshore where we have still 2P reserves. Then we have on Casper where we have a 2 peer reserve because we don't have the FAD yet. So that are the and sorry, and also John Creek, part of the Indonesia. The 7 Tcf, there is a part, I think, twothree that are still 2P and 3Piercer. So that more or less is how they are distributed.
For door, I said that so what about DOR? DOR, in term of in absolute terms, so not for us, as maximum exposure in by the end of 2017. Then we start producing 1,000,000,000 scarp a day. And so we start our cash flow. We start recovering our cost.
And that is the maximum exposure done. They've gone down. And I cannot tell you precisely, but it's with this kind of contract, it depends on the oil price because in Zohr, we have a gas price that has a is linked to the oil, but it's an interval. We have a floor and ceiling. So it depends.
With a higher price of oil, we can recover faster because it's a PSC. And I think that in 5, 6 years, we can recover completely all the costs. Our point is different because we practically, we don't have a negative cash flow because we already cashed in much more the money we spent and reduce our capital profile for the future. With this money, we can reach, we can cover, we can bridge the 2017 arriving to the new investment with cash flow but without negative impact on our cash.
Peter McNally with Kingpin Capital. Doing all the exploration and subsequent work in parallel as opposed to sequential, can you envision a situation where you're constrained by the number of people you have or the industry services if all these activities are going on at the same time? And then a second quick follow-up. Does your 2017 guidance contemplate any OPEC curtailments?
So no, that is a good question. Also, the first one was good, but otherwise, my investor. No, it's a good question. All your questions are good. I say that.
No, that is true. That is true. And it's clearly now we had a very good period because we have been probably one of the few company that has been engaged with FAD, new projects. So we are developing, investing everywhere, lower cost, and we have contractors queue, a long queue of contractor ready to work. We changed something that I forgot before, but we change our model from a development and a contractual strategy model.
So we have much more people. So we change our development. We're insourcing people so that while the other we're outsourcing to reduce costs, we're insourcing people. We don't cut any heads. So we still have the same kind of number of people, more than we had in 2013 because we thought that we need people to run and to have a strong grip on our project.
So what happened? We changed the EPC contract. You know that in EPC contract, you have the main contractor that is a 3rd party, is a contractor. Then you have the different packages, so subcontractors. So what we have done is wind source people.
We create a very large engineering base, And we have 2 big groups in Milan, 1 in Rome, 1 in London. And we are working as main contractors. Particularly in all these contracts. We have the main contractor is Yeni. So we have our people there.
So that is a partial answer to your question. Also, if we increase the number of projects, we are in different market situation. The main contractor would be Yeni because we want to have a grip on the cost and on the time to market. So also in that, we are unconventional. We went in a different direction and say, you are too expensive.
No, we are not too expensive. You are too expensive when you delay your project 10 years or 5 years, and you are overpaying and spending. There you are expensive. And the people is a small percentage and people of your company with your know how, with your culture, with your attention of the cost efficiency, and that's what we have done. So it's a partial answer because you cover just the part.
Clearly, you must really run-in advance and try to have good contractors. But when you work on the reservoir modeling, my people. When you work on the on the field is our people, concept for our people, the detailed engineering is not complete with our people, and the construction is not complete with our people. That we can have a bottleneck. And there, where we have to be very effective, efficient in the contractual strategy.
So I think that the OpEx impact will be very marginal for us because we is regarding just Kazakhstan. And for Kazakhstan, for what I saw is a question of 20,000 barrels, Kazakhstan has a huge production, different fields. I don't think that they are going to reduce production in cash again because KMG side is with us and we are really we need to recover money. So I think that in the other part, we in Libya, where we produce a lot, there is no restriction. In Nigeria, the same.
We are not in Russia. We are not in Russia. We are not in Saudi Arabia. We are not in Kuwait and the Emirates. So it's really marginal.
Okay. Someone else?
Natalie Trujada with UBS. So just as a follow-up to that question as well, can you remind us what your CapEx plans are for next year? And in general, what the CapEx trend looks like in the coming years? And as you look to obviously, you're counter investing versus some of the other companies in some of these projects. Have you been able to take any advantage of lower cost in this cycle as you look into CapEx going forward in addition to OpEx?
Yes.
For the I cannot be very precise about CapEx next year and the following years because we'll be one of the main subject of our strategy presentation in March. So I can anticipate something that I have to present first to my Board, not yet presented. I just gave you a figure that is going down. You saw that it was close to 7 something, 7 point something. That was 2017 with an increase of production.
And what I can say that is before disposal. I cannot tell you, but you can get very quickly what is the impact for us for our disposal in term of CapEx 2017. So that is the answer there. For the supply chain, yes, we got some advantages. So when we remember that we talked about 33% of cost reduction in the last couple of years, Our 25% of this 33%, more or less 10%, is due to the supply chain.
Within that so we got very good conditions and discounted prices in the drilling, offshore drilling, deep offshore drilling. And the service is much less. It's 10%, 15% of discounts in the vessel, good discounts. In the project, not so much also because our people is running the project. So but I think that, that is the figure, 25%.
I think now is that plateau. I don't think that we can much, much more than that. Also considering now the OPEC cuts and the production that is growing. So what I imagine that some not all projects, but some project is going slowly to start up again. Okay.
Someone else?
Shay Oberzon from 1919 Investment Counsel. To what extent do you think this opportunity to leverage kind of brownfield infrastructure around the world and create these very quick time to market projects? How much running room do you have to continue doing that in the next few years? And to what extent do you start exhausting those opportunities and need to start focusing more on true greenfield the full sense?
Thank you for the question. First of all, our so greenfield or package percentage is 30% now. So we have 70% of the brownfield and 30% on the greenfield. We are moving to a 40% in the next year because we reloaded our exploration, so we have more greenfield. I we touched just a very small percentage of our existing facilities because if you look at what we have done, it's really Congo and Egypt.
So we still have Nigeria that has a lot of facilities, a lot of infrastructure where we can really get profit. We still have Libya. We have Algeria. We have Italy as well. So we have Indonesia or Pakistan.
So we are running inspiration in different countries. We are running aspiration. And not only where we have facilities, but where also other company has facilities that are empty or underutilized, that they for them is good because if we have production, they can reduce their operating cost. And in Egypt, we have a huge amount of facility. The grid is very big.
We are using synergy in the next future with Israel because we have at least 2 fields, 1 Israel and the other in Aphrodite and Cyprus, we are discussing, where they can use the existing facility Asia. So I think that there are a huge amount of opportunity, not just for us, for everybody, think about this facility to create value. It's clear you must be successful in exploration. You must have some gas or oil to put in this facility. But really, we just cover a small part of the high potentiality that we have worldwide.
Half a question on help, half a question on a problem. Do you think Tillerson and the Secretary of State, knowing the industry really well, being a peer, would be helpful in lowering tension in certain areas of the world where any operates? You think that will be of help? And the other question is on a possible obstacle. Eni has had to deal with many Italian governments and another one just changed.
The Italian government is part of Eni. Do you think has that been an obstacle on your model on applying your new model?
I talk first about the Italian government. And I think that if you look at the result we got is there is no obstacle because that is really an operating model. And we I report to my Board. I report to all my investors the same way. And if there is strong obstacle and something that I cannot do, I change.
So I want to get profit, and I want to be 100% responsible of my activity, to answer to my investors. But I can tell you, look at the results we got that are absolutely, I can say, very positive. Also, compared to the past, we don't have obstacle. We have I think that everybody help us and follow us. But not just in Italy, all our investors, also analysts.
I think that our position improved a lot because I think people appreciate what we have done. Talking about Rex, I think Rex is very experienced. He's a very good listener, very good negotiator. I know him very well. And for cash again, also for other reasons, we have a lot of activity in Nigeria, in Angola, in the U.
S. I think that it can give value Everywhere, he knows everybody. He's very respected. And I think he's a good character. He's a good listener.
So he's a person that can find compromise. And because he creates so big value in the past, that means that he's able to find solution and not create problem. So my answer, yes, I think that will be very positive.
Okay. I will collect just a few additional questions, and then I will open the calls from the phone, if any. Okay. So if there is some calls from the people who is attending by
That is the question. I didn't understand very well.
Sorry, the first question, conference call, comes from Thomas of Tufts. Good morning, Piri. I have questions, please. First, I guess, on your 3rd party gas front, you started to be more upstream focused, and you had expected gas to be part of Future IX. And I want to explain the strategic model to these supply contracts and where you can see the scenario about the 3rd gas contracts will replace the entirety of Quiti gas.
The question I have is on the Smart Track renegotiation. This will move you structurally into breakeven. Would it still be breakeven without having to renegotiate the contracts with Statoil in Gazprom in a rising oil price environment?
No. Unfortunately, I well understood the second question. I cannot answer to the second question. The first question, I didn't understand anything. So I just say something about Sonae, but the first question, I didn't understand because we I know if somebody in the room, the audience understood what we said.
So I answered to the SonaTraq question, then if you are so kind to repeat the first question. SonaTraq, no, I cannot tell you the value of the SonaTruck renegotiations. Clearly, it's a very good one. It's something that for 2017, by the same condition, can be translated and put until the end of this contract, that is 2015. Meanwhile, we are discussing with Sonatore.
We started a discussion with Sonatore for the what is going to happen after 20 19. So there is really a very good dialogue with them. The breakeven is not made just by the Sonatore contract, but also by the, as I said, the logistics cost. We are working on the logistics cost, that is storage and transportation in Italy and abroad. And we still have €150,000,000 that we have to recover.
So the overall package, SonaTruk, plus that, and we can add some add value also when the logistics with the Statoil contract will deliver the breakeven. That I can tell you we're already in our pocket. And if you are so kind to repeat the first question, please.
Okay. Let me try again. So you said in gas and power, gas retail is noncore, but your 3rd party gas supply contracts to be part of the future. So my question is perhaps you can explain the strategic rationale to hold on to these supply third party supply gas contracts. And the other question around that is whether you can see yourself in the future replacing all these 3rd party gas contract with Equity Gas?
Thank
you. Thank you. So now I understood. So the supply the 3rd party supply contract are long term contract. So we have a contract and we have to respect the contract.
Clearly, my objective is to really work just with our equity gas. We are a large position in gas. And that is done in Italy and through our LNG, by Nigeria, by Angola, like Angola and in other parts of the world. That is the trend, and that's what we want to do. And that surely is where we can get more profit and margin.
For the other for the 3rd party contract, we have a gas tariff that is going to finish. And then we have Algeria 2019. In Algeria, it's a 3rd party, but we are producing gas. And we are so we have part of these gas in MLA Kafka. And I hope in the future also in the tire gas, that is part of our gas.
In Libya, it's fifty-fifty. So it's our equity gas. So we remain with Statoil and Gazprom, but that are long term contracts. So I'm obliged to work and rework to align this contract to the hub. We got it for a period.
Now we see if we can really change the structure in this contract and permanently have some link, close link to the harbor or continue to renegotiation. What I can tell you is that I cannot stop this contract because there are contract that last for other 10, 15 years.
Okay. We could take another one.
Next question
Yes. Good afternoon. I have two questions, please. First, can you just talk about whether you see the right interest in Zohr for development? And what do you think the new partners Ross Neft and BP bring to that development?
My second question is just if you could give an update on Mozambique please, particularly in terms of project financing, but also a sell down in the stake. And then thirdly, as we look into 2017, could you talk about the role of Saipem in the ENI group? Thank
you. Thank you. So the role of Rosneft, MVP, before buying these or acquiring these stake and share, they run a deep due diligence, months of due diligence, special VP, more than 1 year of due diligence. So they know exactly everything about investment, future investment, and they accepted all the program of investment in terms of development and in terms of aspiration because we have some huge upside in the internal of aspiration. So I don't think that there is any problem from that side.
Saipem role. The Saipem role in 2017 will be what it has been in 2016. We are a shareholder. We own we deconsolidated that, so we don't have any more control on Saipem. We have the shares.
We have still a huge value because we have more than 30% of shares of Saipem. So that is they are there. At the moment, we don't think really to touch this share because we think that is big value, big value that is growing. It's already growing now, but it's growing with the oil price. It's growing also with the new organization Saipem, with the kind of new project that they acquire.
So Saipem, the same role in 2016, what I think more value in 2017. Then Mozambique, an update on Mozambique. You want to, Massimo, give an update on Mozambique? Thank you.
For an update on project financing of Coral, what I can say that the project is quite ahead. We are finalizing the agreement with the banks. We are talking about a huge amount of project financing that will be in the range of €5,000,000,000 So probably the bigger we have made in our history. And the agreement should be finalized, I guess, by January. In the meantime, we are waiting for the finalization of the internal process authorization process of the other partners.
The Mozambique party already gave is okay. And we are waiting for the Chinese, the Portuguese and the Korean. That's expected in the weeks to come.
Just 2 other more.
Hi, thanks for taking my questions. Hopefully, you can hear me. The first one was just a quick one on the financial framework. What oil price do you need in 2017 to cover both CapEx and dividend? I think you said before $60 but it looks today like your CapEx guidance has come down a little bit.
So an update on that would be useful. The second question, just going back to Mozambique. Can you talk about why it makes sense to do coral as a separate development to the joint onshore development? And whether you can give any specifics on or just remind us about the CapEx guidance for Coral?
So first question, I don't talk now about the $60,000,000 because that is another issue that will be disclosed and which we are going to elaborate in March during our strategy presentation. But it's clearly we increased production and we are reducing CapEx. So that means that we are in a better shape. For Coral, so when you start a green project, a green country, and you have to create a gas market, you start small. You cannot start with big investment.
Otherwise, you can't be stuck. So what we prefer to do, because it's a greenfield, to develop offshore, so we don't have any big problem onshore. That is more difficult because there is no synergy at all, so you can be faster. And secondly, you have to create your own market, and we succeeded. So a first project in a big LNG project is really and it's not a part of that, it's not a part of that, but it's really a break ice.
Break ice and create value, give credibility to the country, to the market. BP made a very long assessment, more and also in this case, more than 1 year from a technical point of view, contractual point of view, talking with the authorities. So you have to establish the right environment for the big investment. And that is the reason why we prefer to start with Cora Offshore and not with the big problem. As I said before, because we want to go phase by phase and want to have big upfront investment.
That is the whole model that create $127 for the industry was $110,000,000 $150 cash neutrality.
Okay. The last one, please.
We have no.
No more? Okay.
Okay. So thank you. I finished. Yes. Thank you very much.
We will now move to the next room for the buffet. And I leave the floor to Erika for the question time with journalists.
Okay. Thank you very much.