Afternoon and welcome to our 4th brand strategy presentation. Today, I'd like to start by showing you a short video about the nine and the results we have achieved so far that confirm the ongoing execution of our strategy well ahead of schedule. The strategy we presented in July 2014 was based on 4 key pillars: the restructuring and transformation of E and I to a fully integrated oil and gas company the consolidation of profitable growth in all our business, the turnaround of the mid downstream and the major cost efficiency program, which was already underway. Thanks to the continuous effort and the strong commitment of our people, I'm glad to report that all of these key milestones have been achieved in advance. We are now a leaner, more efficient company.
Through this action, we were able to enhance financial flexibility and create value also with low oil prices. So what is today's challenge? It is surely the dilemma between short term cash balance and long term growth. The industry needs to face this very complex challenge to reduce costs to fulfill short term financial targets without the strong long term value. Today's scenario is characterized by a gap between oil prices and costs.
Since the second half of twenty fourteen, the oil prices followed by 70%, while the costs have decreased by only around 25%. There is also much uncertainty surrounding the recovery of oil gas price. So due to this volatile situation, we have revised our scenario taking into consideration a slower recovery. How can we cope with this scenario? Well, the industry has reacted by capping CapEx by more than 35%, postponing or canceling projects.
But this is a short term solution, is not viable for the long run because it will impact our long term growth and asset values. The only solution to reconcile long and short term goals is to rapidly align cost and prices in order to continue to profitably invest also with the oil prices low. Eni is in the right position to meet the short term financial constraints and long term perspectives. Because we already have a competitive cost structure, which is based on 2 main levers. We have an asset portfolio that is profitable even in loss scenario and an efficient operating model, which aims to continuously revise contractual terms and reduce costs in the supply chain.
First, our asset portfolio. This has been founded on exploration where in 2,008 we decided to strategically invest developing internal competencies and proper lead technologies. This was the first step in building the resource base focused on conventional assets at a very low cost. Since then, we discovered a huge amount of resources, and this allowed us to have main competitive advantages such as a low cost base, limited exposure to complex projects, a diversified asset portfolio which give us the flexibility to optimize investment decisions and spending and the capability to anticipate cash flow and reduce CapEx by values in states where we have a high participating interest. This is what we call our dual exploration model.
This distinct operating model is also characterized by high level of operatorship. This puts us in a position to strictly control costs as well as the continuous optimization of our supply chain so that we can reduce both CapEx and OpEx. As a result, the average upstream cost for our new project was reduced from an already low $30 per barrel level of 20.14 to around $20 per barrel. This attractive cost structure is built on exploration cost of less than $1.5 OpEx of $7 and CapEx of $11 per barrel. Another crucial aspect of our operating model is the outstanding result in safety and the environment, which remain our core priorities.
In safety, we were the best performer in the industry for the last 3 years. Our 2014 total recordable injury rate was equal to 0.7, 43% lower than the peer average of 1.24. In 2015, we further reduced this by 37%, reaching a notable value of 0.45. These results show our commitment to improve our effective performance, targeting a zero level of injuries every year. Regarding the reduction in greenhouse gas emissions, we have defined an action plan that will reconcile short and long term goals.
This is mainly based on focus on conventional projects, which are characterized by lower emissions and increasing exposure to gas, driving down energy efficiency projects, which increased gas volumes available for domestic markets while reducing energy consumption, the green conversion of the downstream business, which also gives us the opportunity to recover profitability for weaker assets, the adoption of carbon price sensitivity of $40 per tonne on all our major developments to pursue efficiency right from the early planning stages of the project. And finally, we have recently set up the Energy Solution Business Unit, which is dedicated to identifying and implementing growth opportunity in renewable energies. In the period 2010, 2014, we reduced GHG by 27% from 59,000,000 tons CO2 per year to 43,000,000 tons CO2. In the upstream sector, we reached a level of unitary emission of 0.2 tons per tonne of equivalent production. And for the future, we are planning to further improve these levels, targeting a 43 reduction of unity emission by 2025.
And now we look at our target. The overall target is to further enhance our cash neutrality during the full year plan, where operating cash covers CapEx at $50 in 2016 and both CapEx and dividends at $60 in 20.17. To reach these targets in upstream, our production will continue to increase with an average annual growth rate of more than 3% in the full year plan. The cumulative growth rate of 30% to 2019 will be achieved despite a 19% reduction in CapEx. In exploration, we'll focus on near field and complete the assessment of the discoveries made in recent years with the target of $1,600,000,000 at a unit expiration cost of $2.3 per barrel.
In Gas and Power sector, we expect a structural breakeven from 2017. In refining, we confirm a lower breakeven of around $3 per barrel in 2018 with the existing capacity. In G and A expenditure, we increased our cumulative savings in the full year plan from €2,000,000,000 to €2,500,000,000 thanks to additional cost reduction, logistics and operating efficiency and in streamlining organization. On disposal, in 2015, we cashed in €7,000,000,000 out of the €8,000,000,000 that was targeted for the entire plan. We have now increased our full year target and will dispose of €7,000,000,000 of assets, mainly through our dual exploration model.
Now more color on the plans for the different businesses, starting with exploration. Here, a short video showing our recent discoveries. Exploration has been the strategic driver behind our low cost organic growth. Over the last 8 years, we have discovered 11,900,000,000 barrels of resources at a unit cost of $1.2 per barrel. We discovered 2.4 times roughly produced in the period, part of our average of zero trees.
So is our latest giant discovery, the 5th in the last 5 years, all of which are located in different basins and prove new pace. Out of the 11,900,000,000 barrels of resources discovered, so far we have promoted around 8,500,000,000 barrels of exploration resources to 3P reserves. Now what will exploration give us in the future? Exploration is foundation of our growth, our very low cost structure and competitive time to market startups. Our discoveries will contribute more than $500,000 per day of equity production in 2019, and we will promote around $3,000,000,000 of proven reserves.
Main exploration activities will be concentrated in North Africa, West Africa and Far East. The 4 year plan will drill 94 wells in 20 different in 25 different countries, targeting 1,600,000,000 barrels of resources. This maintains our average annual exploration spending of €900,000,000 in line with 2015. Following this strategy, in 2016, 50% of our exploration spending will be dedicated to proved basins and appraisals, while 30% will be invested in near field expirations and 20% in frontier pays. Now development.
I'd like to highlight that each single project in the Furrilla plant comes from our exploration discoveries. If you exclude Goya and Casa Grande, all the other start ups are the result of fast track development of the last 7 years of our exploration. All these projects are remarkable for a day short time to market. Examples are Angola Block 15 where we developed a deeper shore field in different phases, only 4 years after the last discovery. And Egypt and Congo, where we reached 1st production within 1 year of the discovery well.
And now some color on Dror, where we are and what we are doing. Zohr is the best example of our strategic approach and operating model. Here we discover a superjunk, a new play located in a mature area and close to existing facilities. Is a gas field or estimated 850,000,000,000 cubic meters in place, laying in about 1500 meters of water depth. We reached FID only 6 months after discovering, a remarkable result.
And we are well on track to start production by the end of 2017. We are well in advance in the procurement process for offshore longer lead items, such as umbilical, flow lines and subsea head. And we are progressing with the civil works for the onshore treatment plant. To reduce cost and financial exposure, we will develop growth in an accelerated startup phase and then a fast ramp up to production plateau. The accelerated startup phase is up to 1,000,000,000 standard cubic feet per day from 6 subsea wells that we are connected to shore to a new gas line.
The ramp up phase will reach to €700,000,000 standard to be fixed by date from 2019 to 14 additional wells. CapEx for the 2 phases is claimed to be below €12,000,000,000 Regards will mainly be sold on the Egyptian market and we have already agreed a contract price formula and securitization for sales payment. The DOR project is regulated with the PSA and at plateau it will contribute more than $400,000 per day to our equity production. We have just successfully performed the production test of those 2 eggs. The first appraisal well, which confirms excellent reservoir characteristics and has estimated deliverability and production setup around 250,000,000 scarp per day, about 46,000 barrels per day.
Let me move on our production growth and hear a short video. So all the projects that we have just seen give us a community production growth of 13% to 2019. In 2016, we will reach a production growth of more than 2% versus 2015, excluding the one off items that occurred last year and which amounted to $42,000 per day. By the end of the plan, start ups and wrap ups will contribute around $800,000 to revenues. This will come mainly from North Sea, North and West Africa and Far East.
We will operate around 90% of the new startups so that we ensure tight control of cost, timing and quality in our projects. In the next 4 years, our operating production share will remain high at a significant level up to 75%. In the long term, 12 large projects with more than 6,000,000,000 barrels of weighted equity production equity reserves will sustain our production growth. For 2016, we have already taken the FID for gold and we target a final decision also for CORAL. Furthermore, in 20 17, 2019, we will sanction main development projects in Congo, Nigeria and Kazakhstan, and we will take the FID 4 number.
As I said at the start, the strict and constant revision of the supply chain is the other key lever to align costs to pricing. Through this, we aim for saving of €3,500,000,000 in the full year plan on a total contract base of more than €20,000,000,000 euros We started renegotiating contracts in mid-twenty 14 and last year alone we achieved savings of €500,000,000 These represent a combined savings of 18% on roughly 2,000 contracts for renegotiation and tenders. Over the plan, we will accelerate cost deflation by continuing with renegotiation, bringing forward tenders and refocusing our activities. The biggest improvement area is in the deepwater project, where we have obtained major savings, not just for drilling rigs, but also for the supplier of goods and installation contracts. The daily cost for drilling rigs will be halved from $9,200,000 to $4,500,000 Further additional savings will come from services in logistics and maintenance, fast materials, a new contract strategy for APC contracts.
Based on the huge discoveries, we now have more flexibility to accelerate production while lowering expenditure. In upstream, excluding ZOAR, we reduced total CapEx by 39%. If we include investments for Dore, which substitutes more complex and expensive projects with startups beyond the 4 year plan, the CapEx reduction is around 18%. In particular, upstream CapEx will be reduced by around €18,000,000,000 2, the ongoing revision of portfolio activity, including a scheduling of projects in Norway, Venezuela, Iraq, Indonesia and the revision of scope of work for a total of EUR 14,000,000 and the renegotiation of contracts with an overall impact of new projects of €3,500,000,000 over the period. Net of the CapEx associated with the disposal program, we decreased total company expenditure by 21% versus the previous plan to around €37,000,000,000 Upstream spending will be 90% of the new total.
Now let me give you some more detail on our project breakeven, which is the result of our effort to reconcile cost and prices. Thanks to the recent new low cost exploration discoveries, synergies with the existing assets, the focus on project standardization and modularization and the strict attention to supply chain, we reach the outstanding results to lowering the average breakeven of our projects from $45 per barrel to $27 per barrel of Brent equivalent in 2016. This breakdown is follows. For onshore projects around $15 per barrel, for Shell and Deepwater projects around $30 per barrel. This crucial result is key to being able to tackle the lower scenario and be in the position to continue to grow profitability by capturing all the future upside.
And now where we are and what we have done in the turnaround of the mid downstream. The progress in the turnaround of the Gas and Power business brought us close to the breakeven in 2015, even without the contribution of gas pedal arbitration award, which is now expected in the first half of twenty sixteen. In the full year plan, we continue to increase profitability by focusing on long term contract renegotiations, improved sales channels and greater operating efficiency. Contract renegotiation will help us to complete the full alignment to market conditions. There will be a reduction in contracted volumes, which will bring more flexibility in the portfolio.
We will also exploit the true value of our financial sales channels, expanding our retail customer base by 20%, taking greater advantage of trading and benefiting from the flexibility provided by our LNG portfolio. We'll continue to be focused on rightsizing of the operating and logistics cost base, saving €350,000,000 per year from 2019 compared to 2014. CASM Sao will generate a cash contribution of nearly €3,000,000,000 over the full year plan. We will reach a positive EBIT in 2016, growing to nearly €900,000,000 by the end of the plan. That's in power, structural, breakeven is targeted from 2017.
And now refining and marketing. Our main target for refining is to lower breakeven to around $3 per barrel in 2018, maintaining the current refining capacity. Over the past 3 years, we have reshaped our European portfolio by increasing production efficiency, executing or converting loss making assets, reducing refining capacity by 1 third and rationalizing logistics. These allow us to reach EBIT breakeven in refining in 2015, 2 years ahead of plan, thanks to the reduction of our routine margin to about $5 per barrel. Downstream is now much leaner and will not be required to make further capacity cuts in the next future.
Looking ahead, we will focus on maximizing the conversion of the buyer, taking full advantage of the ENI's large technology plant in Santa Barbara, where we are progressively increasing our production level.
We
will also complete the conversion of loss making assets into sustainable green businesses, further enhance efficiency on operating costs and defend our retail market share. This will grant economic positive results during the full year plan, reaching an adjusted EBIT of €700,000,000 in 2019 and the cumulative operating cash contribution of €2,900,000,000 in the planned period. And now I leave the floor of Massimo for financial highlights. Thank you, Clavio. Good afternoon, all of you.
First of all, I'd like to emphasize both historical and prospective cost performance in our main business, the upstream. In terms of OpEx, in 2015, we reduced our unit cost by 15% to $7.2 almost doubling the original production target of 7%. This I believe further strengthens our industry leading position in this metric. In the following years, we expect to further reduce OpEx as a result of contract revisions, additional optimization in maintenance, lower energy feedstock costs and logistic rationalization. In 2016, we plan to deliver an OpEx per BOE down to $6.4 while in 2019, we are committed to keeping it below $7 notwithstanding the projected scenario recovery and the start ups of giant fees such as Cashagan and Goliath with higher than average OpEx.
On finding the development cost, we achieved a top quartile position through a disciplined approach to CapEx that as you know are devoted only to conventional assets. In the coming years, we expect a further improvement on this metric as a result of the CapEx plan just described by Claudio and the related promotion of new proved reserves that will greatly exceed the production, resulting
in a
reserve replacement of around 120% in the planned period. As a consequence, our funding and development cost is now projected to come back to the levels that we experienced in the middle of last decade. And now a quick video to introduce the update on our disposal plan. Our active portfolio management as well as cost based optimization provide us with further financial flexibility. 1 year ago, we launched a significant disposal program amounting to a pre tax €8,000,000,000 to be achieved in 20 fifteen-twenty 18 period, with €6,000,000,000 anticipated in the 1st 2 years.
Actually, we have greatly exceeded the short term target as we have already cashed in €7,000,000,000 including the cash of the now completed Saipem deal. And looking ahead, we expect further material disposals even in this weak scenario. In fact, our exploration assets remain attractive to potential buyers, thanks to their high quality, size, desirable location and competitive cost structures. Therefore, we plan in the next 4 years additional pretax disposal of €7,000,000,000 mainly through the share dilution in recent material discoveries in line with our dual exploration model. This new disposal plan is once again front end loaded with around 80% of the overall value scheduled in the 1st 2 years envisaging the positive outcome of some ongoing negotiations.
Portfolio will also include the continued rationalization of our position in both mature upstream and non core mid downstream assets. And now let me show you the overall cash flow effect of our strategy. Upstream sustainable growth, completion of the turnaround in other businesses, cost efficiency and portfolio management will all contribute to a material improvement in our cash generation. In 2015, the resilient contribution from operations as well as working capital, including non recurring actions, allow us to reduce our organic CapEx coverage to $50 per barrel. In 20 16, 2017 projecting a lower average oil price of $45 we expect cash flow from operations to be in the range of €8,000,000,000 per year versus CapEx of around €9,000,000,000 per year.
This gap will be covered by an additional $5 to $50 grant confirming the balance already achieved in 2015 without the contribution of last year's material non recurring items. This target is well below the $63 guidance we released during our previous strategy presentation. In 20 sixteen-seventeen, our disposal program is expected to generate an average of around €2,500,000,000 post tax per year. Moving to 20 eighteentwenty 19, the action we have undertaken will increase operating cash flow by 17%, ensuring the full organic CapEx coverage even at a lower Brent floor of $45 per barrel. A rising Brent price to $63 as per our scenario would complement operating cash by an additional 31%, bringing the overall improvement of cash flow from operations versus 'sixteen, 'seventeen to around 50% above our dividend coverage requirements.
In addition, we expect a further €700,000,000 per year from disposals. Uncommitted CapEx for around 40% of the overall investment in 20 seventeentwenty 19 gives us great flexibility in the event of lower scenario. On the other hand, should the macro scenario be better than expected, significant upside could be achieved, thanks to the beneficial effect of the growing production. As an example, a $10 higher average Brent price per year would improve average annual cash flow by an estimated €2,000,000,000 Regardless of the scenario developments, we remain committed to a strong balance sheet throughout the 4 year plan, maintaining leverage within our 30% ceiling. Finally, our shareholder remuneration policy.
In 2015, we committed to pay a floor dividend of €0.8 per share with a progressive distribution policy in line with our underlying earnings growth and scenario upside. Today, even in a much lower oil price environment, we confirm our commitment to pay full cash dividend 2016 of €0.8 per share, thanks to the remarkable operational achievements we have been undertaking, as well as non core disposals, thus maintaining satisfactory financial flexibility. This commitment is compliant with the 2 key conditions we assume to test our dividend sustainability, payout and cash neutrality. The payout is expected to remain higher than 100% in 2016 2017 penalized by the underlying mix scenario, but should be back below 100% from 2018. Cash neutrality has been significantly reduced from the previous plan and now is expected to be a $50 per barrel in 2016, including disposals versus the previous guidance of $60 per barrel at $60 per barrel in 20.17 excluding disposals versus the previous guidance below $75 And finally, below $60 per barrel excluding disposal in 2018 2019.
I will now hand back to Claudio for the conclusion. Thank you, Massimo. To conclude, Kenya has started a new cycle of profitable growth and has the potential to extract more value in the future. Since 2014, we have worked to increase resilience whilst fueling value growth. We have transformed any and fully integrated oil and gas company, focused on the upstream business, and we have successfully completed the turnaround of the mid downstream.
This together with the complete revision of our cost structure means we have become leaner and more resilient company. The discovery of huge amounts of resources at low cost will sustain our production growth through a pipeline of profitable projects at very low cost breakeven. This supports stronger cash flow generation, give us the flexibility to optimize investment decisions and continue to feed our geo restoration model. Thanks to our competitive cost structure, GIM is now in the position not only to succeed in this downturn, but to capture additional value, leveraging price upside in the near future. As I said at the start, the dynamics to how to align cost to price.
It is in a very good shape to do this. And our current bookkeeping is testimony to that. We are now beginning a new cycle where we will express our full potential, boost our value creation and increase profitable growth. And now before starting the Q and A section, let's see a short video about the major milestone and major steps of our full year
plan.
Good afternoon. We are now ready to open the Q and A session. So please raise your hands and take your name before asking.
Good afternoon. Thomas Adolff from Credit Suisse. Two questions please. At the start of the presentation, you talked about the importance of managing the cash cycle and returns in the short term, but also not to forget about the longer term and to take FID on projects that make sense longer term if you have a positive NPV. But as far as LNG is concerned, in this environment, if you take FID on LNG, you commit a lot of capital.
So, it's really hard to manage your short term cash flow, cash balance and your returns. But at the same time taking FID in this environment LNG project also not the best idea because the contracting environment Not
one of the best you said. It's not a good idea. It's not a good idea.
Because the contracting environment is not so good, which means from an NPD perspective longer term, you might be also leaving some value on the table. So my question really is where does Mozambique sit in your priorities? And the second question, I guess, more for Massimo potentially is, the chart you showed on operating cash flow in 2016 2017, you show an €8,000,000,000 FFO. And I wanted to understand the moving parts from 2015 down to 2016. What's included and what's not?
Is chemicals included? Is gas retail included? That's why I better understand the moving parts. Thank you.
Thank you, sir. I'll start with Energy, Mozambique. First of all, the plan we presented at FAD in 2016 and by the end of 2017 also number. LNG is not a mono dimensional picture. So the LNG depends on the upstream cost from one side and then the modularization and the phases of the old LNG.
We discovered 85 TCS. We're going to sell the first 5 or 6 TCS with the first LNG, that is a 40 LNG. From a market point of view, so upsell is very cheap, very well. Drill away in 3, 4 weeks needs very high rates. So you need just few wells, 3, 4 wells, you can cover the first production.
So, upstream very low. And from the market point of view, this is the best period to close your contract. Your supply chain is wonderful from any point of view because the yard are empty, it is not an investment. So that is the right moment. If your upstream is good, if you are able to close your gas sales on 15, 20 years, so everything is guaranteed, that is the worst the best moment to close your supply chain.
So we put in the plan for us and the FID, I say 2016. I hope that we saw June we are in the position to take it. We got approval for the POD, Nano Development. We closed probably the GSA. So now just we are in a process of internal authorization and the values above our other rate.
So it depends on there is no money mentioned, you have to look at all the dimensions inside your project. Okay. Thank you, Thomas, for your question. So as far as the cash flow, so the Chemicals business is assumed to be among the $7,000,000,000 of disposals. But in this cash flow, we assume that this position is at the end of 2016.
So just 16 numbers are included in this projection. On the cash flow point of view, I would say the contribution will be positive and should be substantially equal to the investment that we are retaining among the investment that we are consolidating here. So the final LJPM will be close to 0. So the same cash flow from operation and the same value of investment. It's inside, yes.
So to be precise, it will be more or less €300,000,000 on the cash flow from operation versus €300,000,000 including the CapEx as far as 2016. And then the assumption is disposition at the end of this year.
Thanks very much for taking my questions. This is Hamish Clegg from Bank of America.
First up, there was a
slightly sort of abnormally high tax rate last year. I wondered if you could tell us how to think about tax this year. I know there were some complications with production sharing, etcetera. I have one for you, Claudio, actually. But first, I have one for Luca, actually, just on exploration.
I wondered if
you could tell us what the sort
of nearer term exploration catalyst might be? How soon are you drilling any sort of material prospects? Are we looking at things like Portugal, as the gas guys alluded to earlier in the week or more folks in the Barents Sea? And finally for you, Aurelio. The Salas, what rough percentage of the disposal plan could that be?
And is downstream restructuring sort of basically finished now?
Okay. We can start with the tax rate with the easier one. Thank you very much. Okay. Definitely, we recorded a high tax rate in 2015 around 90%.
I've just commented about this result during the 4 quarter conference call. That said, it is due to the strong contribution from PSA that, by definition, are, I would say, much more resilient in a low oil price environment. But normally, they present a higher than average tax rate. And this effect has been combined with negative results in countries in which we retain concession with negative results in 2015 such as United States. So the algebraic effect of this positive and negative result in tax rate and cumulative tax rate came from a mathematical point of view is even higher than the highest tax rate you pay.
So that's the mathematical effect of this 90%. As far as 2016, you're seeing projecting a $40 so even a lower trend scenario. And with the lower trend scenario, the effect I just mentioned would be still present in our numbers. And we expect that the prices will be even higher than we have seen in 2015. And we forecast to be back to a normal tax rate starting from 2017 even at $50 because of the movement in our portfolio, because new projects even in TSA such as Prejagana, with a significant taxable income with a lower tax rate because the income tax rate is 35% will allow us to be back to much more normal P and L tax rate in the range of 60%.
Having said that, I would like to comment also on the cash tax rate. You remember probably during the conference call, I had the occasion to comment what we got in 'fifteen. It was a number in the range of 38%. So we expect this number even lower in the coming years with an average that will be around 25%. So this number is the ratio between the cash flow from operation before moving versus the amount of taxes really paid in that year?
Okay. Before now we have 2 questions to answer. Before I give the floor to Luca, I just want to make a general comment on our aspiration. But now we are in a situation in a position where we discover $12,000,000,000 plus other potential of $3,000,000,000 or $4,000,000,000 Now we are really moving close to our discoveries and close to our existing field to be able to work on a with a current market that is in the range of 12, 24 months. That is what we want.
So we keep costing the investment for the aspiration that any in mind that we want to do and replicate what we did until now. We saw that in the last 7 years, especially in the last 4 years, we had exploration that has been able to put in production to free our plant 500,000 barrels per day. So that is our model. Then we have also some peak somewhere we try something more risky, but we are working with the POS with the probability of success in our exploration between 50% and 80%. So now Luca is going to talk about the riskier exploration that we have in our plan.
So as Claudio explained, our exploration CapEx for Frontier Exploration has been reduced for 2016. This is mainly for the reason Claudio explained,
we have a lot
and we have to digest our exploration. We have few some few wildcats in Frontier Basin this year, 2 or 3. And we will test new plays and new basins. And also, we will honor our commitments. And this is what we will do in clear basin this year.
So well in the Barrens, well in Portugal, well in Angola. That's mainly. And then our focus will be on appraisal of the discoveries and near field incremental exploration around our facilities and our future paths of production.
If I may, to complete the answer about tax rate, the expected cash tax rate in 20 16 would be in the range of 29%. So now the last point about covering Versace's question. So what we announced in 2014 in July when we have this strategy in London It was that we want to be more upstream and oil and gas. So Versailles was one of the our main staples or milestones to became more cleaner. Then immediately also before the startup did very well because they transformed their business model, reinvested money, but after 20 years we succeeded for the first time last year to became positive in EBIT, in cash, it has clear free cash flow because we are still investing.
So we are happy about Versali. It's a very good product. It's not in our strategic view for the company we want. So we are discussing now to find somebody that is helping us to make these investments. We are going to reduce our share, limited share, and we are under negotiation as you know.
So I can't disclose more because it's a commercial negotiation. So I cannot disclose also what is the percentage of the SAI inside the 7,000,000,000. We're going I hope that we are going to disclose very soon.
Thank you. Irene Guimana, Societe Generale. I have three questions actually. Firstly, you have lowered the oil price you assume in your full year plan. You're targeting 3% a year production growth.
Can you talk about the can you quantify the positive PSC effect in that 3% from the lower price? Secondly, you show a remarkable reduction in your new project of cash breakeven, I think it's Slide 14, dollars 45 to $27 Can you say what the implied IRR is in that? And the final question, in terms going back to the asset disposals, the €7,000,000,000 target, can you talk about retail gas and exploration in that? So what can we how can we think about these two assets, let's say? Thank you.
So Massimo will talk about PSC content and the standardized return, and I'm going to talk about the rest.
Okay.
So the positive effect on production more or less arena is 1500 BOE. Per dollar. And in terms of internal interest earning in our portfolio is in the range of 15% without cash again. So if you take cash again out, the average is 15%. And as far as and I believe the defer to Claudio at the disposal, in the number I have shown, retail gas and power is not included as we are not including in that number any further disposition of certain shares.
The decision is to be taken, but the number is not 25, it will be 7,000,000,000 and I'll leave it close to Claudio to comment about retail and Just a few more about repair gas that in Versalix and has been one of the items that we mentioned in 2014 because it's not typical business very fair gas, typical business of an oil and gas integrated company. Where we are? We are trying to get the maximum value before thinking about any other step. It's not in our plan. We have enough disposals in terms of we already got a lot because in 1 year, we did practically 90% of what we wanted to do in 4 years.
We have additional disposal on which we are negotiating actually. So we are not, I hope, far to conclude on some of them. So, we think that we can improve the value. We can improve the value and also the impact on our Italian market and in turn. So we want to wait, try to maximize it.
So there
is no short term thoughts on it at the moment.
Thank you very much. Oswald Clinto, that's Sanford Bernstein. I wanted to ask a question about the 3,500,000,000 euros cost reduction for the plan. You pointed to the areas where you expect that to happen within the upstream. And you say, is that based on early conversations?
Or is that your aspiration there? And how quickly could you expect to get that number? And actually, if you do get it quickly, are you starting to think about locking in contracts at that price point for the next 3, 4 years kind of lump sum turnkey? You mentioned it with LNG, but that's something you're starting to think about more much more broadly. Then secondly, maybe just with Angola, you have quite a bit of production projects in that area.
Maybe you could just tell us if you're seeing any fiscal improvement from that country, please? Thank you.
Okay. First of all, the EUR 3,500,000,000 is not just an aspiration in our hope, it's something that we already got in our plan, talking some FID and some contract long lead items and our fleet from our drilling rigs. So when we talk about this $18,000,000 reduction, that's for which we got in a cost reduction of 39% and 3.5% is on that, that we got on 2,000 contract and then additional point in 1600 contract is something that we have our hands on. And as we said before, for the answer at the very beginning on the LNG, we are working a lot on that. We are working positively with the contractors.
And I think that is really a good moment. If you have resources, if you have projects and you want to lock in the value for the future, in the right moment, try to cause everything and to have good control for the future. Thinking that now we are really close to the minimum price or we got behind that. So I think that we still have a window maybe of 1 year, while you can really progress very positively in terms of future margin. And that's what we are doing.
We are very, very happy. Honestly, we started it was part of the initial strategy because we started doing that in June 2014 when the price was $110 we restructured completely our supply chain organization and also the contract strategy. So remember, we talked in the past about the different kind of SEC contract where we are now running in the other position of main contract. So we don't want we didn't want any more a contractor that are running different contractor with different package to have the main contractor. And what we are doing in Gabon sorry, in Congo, in Angola, in the Block 1506 and now in Egypt, the different fields, this kind of strategy.
So we are interfacing all the different packages. And that makes a huge amount of savings and help us to have a direct contact with the contractors. And that is continued. So that is in a very good period to do that. So I didn't understand that my question, I was talking about situation.
The permitting situation, Angola, just expecting to argue on that. So maybe Roberto can talk about our projects, the West hub finalization and the East hub that we can't end.
Both projects in Angola are going very well. Actually, a couple of days ago, we had the record of production in West hub with 94,000 barrels a day, which is almost the top of the FPSO capacity. We continue with a very short cycle time to put other fields into production in the West hub. Meanwhile, the Istas hub is progressing. We have drilled all the wells.
And Epicio works are very well advanced. As you have seen earlier, we definitely confirm the first oil second half Q2 of 2017.
Thank you. It's Ann Jopfel Lindgren from Mirror.
Can't hear you, sorry.
Deepan from Nomura. A number
of questions, please. Firstly, could you just give
us an update on Venezuela, your exposure there, both in terms of sort of cash flow and capital employed? Secondly, sort of linked to the question, Claudio, I guess one of the challenges or opportunities for ENI is the mix in the portfolio between non OECD and OECD.
I think we've talked about it
in the past. And I guess in some ways, you continue to sort of have great success with the drill bit, but that puts you more biased to sort of non OECD. I'm just wondering how you think about that in terms of your strategic outlook. And related to that question, just on your financial metrics, is there a level of gearing that you'd be uncomfortable to sort of move beyond?
Can you repeat that, Giovanni?
Yes. Sorry. Just in terms of the financial framework, is that I think you've talked you've given us a lot of numbers today, and that's great. I wanted to know about gearing. What's your sort of threshold in terms of peak gearing?
Thank you.
Okay. I'll talk about the first question, then the SGD and the SGD and Massimo will talk about this. So first of all, Venezuela is one of the countries where we reduce our investment, especially onshore on the Orinoco Belt and the refinery. We project very positively on Perla. Pella is doing very well, now producing about 500,000,000 scuffs per day.
We signed a very positive agreement with the government and we paid it also to for the local market and also for the experts. And so we don't have any we don't have outstanding. So we don't have outstanding payments in Venezuela. That is we don't have outstanding on the past year. We don't have outstanding on the present.
And I think we cover our position very positively for the future. Now we are producing 500,000,000. We have to reach 800 in second phase, it's cost per day, then we have to reach 1,200,000. And they are looking for gas, they are looking for gas not only Venezuela, but also Colombia. So it's a market that became a regional market
that
they enforce, they pay more, that is a relatively cheap gas for them. It's good for us because in any case, it's cheap upstream. So we have a good margin with the securitization. So the net credit from that point of view surpasses really scared that we are for the moment we are standby on the more expensive projects. Then second question of the discussion between OECD and OECD.
I think now the boundaries, it's more volatile than before. I think that is not so easy to identify ACD and no ACD, risky now risky. The last couple of years, America is a very good country. We like a lot. We have there producing more than 100 as well as equity production that each company lost money there.
And it's a super ACV country. So I think that we have to balance all the different risks and we have to balance all the different risks and different costs. When we have cost of between $12 $18 per barrel operating cost, you have to shut down your production. But that is the risk. It's not geopolitical risk.
That is an advanced business risk if you want to continue to have a cash flow. Now we have a 6 point this year we are going to have $6.4 per barrel operating cost. And if we when we show the little bottle with our technical cost and our breakeven, that is a mixture of different kind of countries. But it's clearly, if you don't add $20 per barrel technical cost and $27 average breakeven sulfur bottle, you cannot hope. You cannot absolutely you are not in the position to manage price because prices could be high, could be low.
You have to run your company and be ready for each kind of price. You have to and that is the risk because we saw what happened in the last 2 years. We had 6 good years, but remember that the high price is an anomaly, not the low price. We had low price for 30 years and high price for 60 years. And now everybody is surprised we have low price.
We live with low price. We have to be ready to live with low price. And our company has to take this situation this kind of risk. So I think that the kind of the picture between ICD, non ICD, the risk and not risky. We have to be able to have low cost.
We have to be able to live with a low price, creating value. And that's what we want to do, and that's what we achieved. I'll give you just one number, that is 0.3, but in terms of leverage, so we are not talking about gearing. And that's our ceiling in our debt structure all along the 4 year plan.
It's Marc Morab from Morgan Stanley. I must say I appreciate that you're keeping the slides relatively the same for last year versus this year, which makes it quite easy to see what's going on. So along those lines, I wanted to ask you about 2 things. If I look at the downstream guidance for last year, adding up R and M and Chemicals, it added up to a figure of $1,900,000,000 of CFFO over the 4 year plan. That number seems to have increased a lot to $2,900,000,000 now in terms of CFFO over the new 4 year plan.
I wanted to ask if
there are any unexpected positives in the downstream restructuring and basically what bridges that increase. Along similar lines, the cash flow chart, which I think is now on Page 19, shows that at a $63 oil price in 20 18, 2019, we expect to generate about 12,000,000,000 euros of CFFO. And last year, at the same oil price, it's not too easy to read off the charts, but it looked like that number was closer to $15,000,000,000 And at the same time, it's at the same oil price and the costs have generally surprised on the positive side. Why do you expect lower operating cash flow by the end of the decade?
So I think it's about downstream, then you go with the rest. Downstream is quite faster. So we got some change in the downstream. That is true. There is a scenario that is better because our oil scenario is lower, and that's a cancel to be 65%.
And the rest is something that changed in our operation. So remember that we said we wanted to reduce capacity, 50% capacity. Now we say 33% reduction, we are okay because we changed something in some of our refineries. And now we are quite sure that we can reduce the breakeven of this refinery. So we got some structural improvement.
So if you look at, you compare the 2, you can't think that 65% is linked to the scenario that is better because the oil scenario is lower, but the 35% is that achievement in terms of operating model. So commenting on the cash flow growth, yes, you're right that we said $15,000,000,000 during last part of the presentation, but you remember we had a long term oil price at $90 Now we are projecting the number $65 in 2019. So 65. So we are 65% today. So just to explain, I said that the increase from the 80% to the 12% 1st 2 years versus the last 2 years.
Around 30% is scenario from 45% to 63 and the remaining 17% that amount is represented €1,400,000,000 is industrial growth. Inside this industrial growth, €1,400,000,000 more or less half is E and P because of the production growth mainly. And the remaining part is equally split between Refining and Marketing and Gas and Power, around 300, 400,000,000. This is exactly, I would say, the 1 year additional contribution because you are right. Last time, we promised a cash flow from operations from these two businesses much lower.
So the increase, more or less, is €1,000,000,000 in each of 2, so on 4 years. So divided the 4 is around €250,000,000 €300,000,000 per year. So that's the composition of the cash flow increase in 2019.
Thank you. It's John Rigby from UBS.
Can I ask
there's a shopping list, I'm afraid? The first is on the ZOHA charts that you show. As I understood it, when you first talked about ZOHA, you talked a lot about the integration with the existing infrastructure that you had. And are you now showing, I think, a new pipeline to shore and a new gas processing plant and so on? So has there been a change of scope?
Or is that just to do with the expanded, full field development? And can you just talk a little bit about that? The second is in all the company presentations over the last year or so, I think one of the tricks that has been pulled is that of course, CapEx production outlook don't match most of what you're spending over a 2, 3, 4 year period is to do with projects that are going to come on beyond that period. So I just wondered, could you talk a little about the sort of 2018, 2019 spend and what you're assuming in terms of what you sanctioned in there? I know you talked about Mozambique and the onshore, but if there's any other mega projects in there I'm thinking about Kazakhstan potentially, I think.
And then lastly, just to pick up on something that Tipan mentioned is, I take the point about 30% and that being your ceiling. But the nature of the business is changing as well. You're becoming very much more upstream oriented. You're not don't have the reliable cash flows that you did have 3, 4, 5 years ago because you restructured. So over time, is there a thought that actually although 30% is a nominal level you talk about, your expectation would be you would run a slightly lower balance sheet than that in mid cycle conditions?
So just to comment, Valvo. Yes, your market is correct. It changes a bit of scope for work. First of all, for the volume, we try to accelerate our production. So we wanted to get between the first and the second phase of the accelerated phase as closer because we start 2017, 2019.
That means that we don't have enough capacity, enough capacity onshore and one in pipeline to accommodate practically 3 business cars a day. So we need additional 2 plants. And for that reason, we already started the civil work with overland, and we also have the contracts already done. So that is one of the main things. We are still evaluating because we have some platforms.
So the pipeline is 1 point, but we have the embedded cash. So through the embedded cash, you run all your subsea ahead, all your wealth. So now we are in this case, we put some different scenario because we are evaluating the cost to restructuring an existing platform to put the remote control within the warehouse or build a new platform from scratch. And as we said before, because that is a window of opportunity where we have a fast track platform construction and the costs are low. We are releasing and then the slide is showing that when we need faster and less costly to add a new one.
So that are the two main reasons. And the other question was for you. As far as the leverage, John, I said that 0.3 is our ceiling. So that's the maximum we can think about in projecting these numbers. So our assumption is to stay below 0.3.
Definitely what we have to do is to manage this the first mainly the 1st 2 years, which we are assuming, I would say, low oil price. And we have to manage, I would say, the short term and the medium term different points of view that Fabio explained very well in his own presentation. So that's the trick, but definitely our intention is to remain. But I would like to remember that you are starting this year from a 0 point 21 in terms of leverage. I didn't answer about the FIDs.
So in the plan, we have 12 FIDs, and we have just 2 into this year, Suzhou and the next one will be 4. And then we have a series of FIDs, and we have in Kazakhstan, in Kazakhstan and also in Kashagan. We have FIDs the first FIDs for us is in Mozambique will be onshore, the 2 trains, but we have still additional 2 flocking MNGs. So there we have a long phases, a long phases and we are tuning and we are fine tuning the LNG development also with the market. The market will be quite short in 2023, 2024.
So we are also starting that. But we have at least one additional LNG, at least the 2 trains in the quarter. Then we have Nigeria, we have Italy. What, sorry? Yes, Congo, sorry.
Congo, we have the Phase II and then the Phase III and hopefully also the Phase IV, always for the because we discovered more than $6,000,000,000 of oil in place. So we are just as for our core trying to set up. Our aim is to reduce our inactive capital. So the investment that we have in the Ferriana plant that are not related to production in the Korea plan. That is a huge really a big target for us.
We want to be fast. Now we have about 32% enough capital, why, because of cash accounting goal, and we hope to reach a 7% by the end of the plan. So we want to remain in a maximum 10% of invested capital in the plan. So we go gradually, saving the project and try to attack what we can put in production as soon as possible. So we want to have an upfront cash flow that is able to be able to give enough capital to invest without never and never touching the reserves in terms of gearing and leverage.
To complete what Carlos said about the inactive capital employed, so the work in progress we have in our invested capital. The amount is around 30% at the end of 'fifteen. It is expected to drop at 12% at 2019 because of the Shagan, Goliath and other projects, Jump Creek and other projects that will go through start up all around the 4 year plan. Thank you. The first question is on the new project Perfiven, which is very impressive in my view at $27 per barrel.
My question is by excluding Zohr, could you please give an idea of this level? The second one is on Libya. My question is, what's the role Libya is going to play in any strategy in the coming years? When I compare these business plans with the previous one, I noticed that the contribution of Libya is lower and this gives the idea of your flexibility on the one hand, but on
the other hand, it's probably justified something
that might warrant investors. The third one is, how far do you see the chance to start or restart the buyback program if you see it? Thank you. So the breakeven, I don't know if you have any idea without it. Checking and then okay.
So I'll start talking about lingo, then we the figure about the procurement without more. So for Libya, clearly, Libya is still a whole country for us. We are not investing now before, we are reducing our investment and overall in the Turia plant, we have in the last year an average production of about $250,000 per day, but remains very crucial. We are working. So far, our production is still in line with the production we presented before.
Fortunately now, we are in a much better position in terms of flexibility. We have a lot of resources. We said that in the first phase, we had $200,000 per day from those and we are going to reach $400,000 per day. So Egypt is going to give $500,000, 600,000 per day, but we have also other countries. So we need this in the process at the moment weighted a better situation.
We reduced our investment, also if we are being active in exploration because we made a discovery last year in Libya and we are developing offshore by a salon second phase that is going to give an offshore contribution. Libya has a huge potential and potential about research that we already discovered. As we said, we cannot double our production, our gas production there and condensate can other. Very also in terms of products. So it is important we are there.
Now we are moving around on all the business that we made. Clearly, it's still a strategic country for us. So as far as the breakeven, so the breakeven the portfolio without Zorro would be $34 per barrel. So from $27 to 34 and I don't know, do you want to give an answer? The storage inside, you're not outside.
Yes, not just the 2. And because we need COVID, he's there. You can remove everything, but do you want to buy back the buyback? I think that somebody has to talk about the buyback issue. Thank you very much.
I can talk about everything. So you know that buyback is by definition the more flexible tool. So we will leave any decision about this flexibility looking at the cash neutrality and the breakeven that we projected with this 4 year plan.
Sandro Potti from Mediobanca. I have a long question on exploration. Your charter has been very good since 2008, also helped by giant gas discoveries. I was wondering how do you think about exploring gas versus oil in the current environment? And also, when it comes to competitive edge on exploration, what
do you think your competitive edge is versus your competitors?
So the first question is what about discovering more gas sorry, exploring more gas than oil. So if you see in our forecast, the gas is much more than oil. And you see we have variation of that is written in the slide, but it's 1 third oil and third gas. Honestly, when you explore, you don't say I want gas or I want, it's not in the supermarket. So you go there and you want hydrocarbon.
We have been in new play with more gas bearing and we think that gas will be the future. So we think in the long term, our position is the long, long term will be in gas and renewable in the long, long term after 2015. So we think that the gas we discovered is in the right position because it's high and is in the mid range and we have additional discoveries. But we don't mind to find also oil. And we find a lot of oil in West Africa because all the main discovery in West Africa, we have some gas, but it's mainly Congo and Angola oil.
Around Golar, we still have a lot of structure because we never talk about gas, for example, that is oil that will be ready to be linked to Goya in the future to continue to have the plateau. So that is our aspiration. The second question was about
competitive advantage in exploration.
Sorry? Competitive edge. Our competitive edge in exploration is NNI. That is a competitive edge because we have, I think, the best explorer, the best strategy and the best result. You must be very lucky, but if you are lucky for 7 or 8 years and you discover 5 super giants and you see we discovered 2.4 times what we produced in the period against the other that discovered 3.
I think that because we decide to be focused on exploration. You're in a period where everybody bought reserves because they thought they were cheaper, we thought that is not true. When you discover, you discover a $1.51 last year's $0.70 You cannot buy anything. Also now you have to spend at least $5, dollars 6 per barrel, up to $10 also now. So we thought that we had to before.
When you are focused, you create your tool, your property tool, your people, you motivate your people, you centralize before we are not centralized. And you say, we have to do that and we start it. And if you want to do something, especially in an area where we have just the medium inspiration company. So we had a very big era with a lot of space, a lot of space. And you start with a big regional model, and you tell your people, you are important.
You have to be that creates a culture of aspiration. For that reason, my answer is our upside in aspiration is Thank you.
It's Lydia from Barclays. Just three questions, if I could. The first one, just a definitional thing on Slide 13 on the CapEx numbers. You talked about upstream of €37,000,000,000 and then group net CapEx net of disposals of €37,000,000,000 What adjustments are you making in the disposals? Should I be adding back the €7,000,000,000 so your group CapEx over the period would be €44,000,000 or are you just adjusting for the CapEx you would have spent on those disposals?
The second one was then coming back to the disposal slide. And thank you for the clarity, the detail on that one. But if I look at the numbers that you've got value you've got from NAM, from Galves and from others, it was about €1,000,000,000 less than you might have hoped to get in the plan last year. How are you thinking about the timing of the disposal whenever you're really maximizing the value you're getting? And then just one another number as well.
Are you able to get the cash flow per barrel of the new production either on an absolute basis or relative to the base production?
So I don't have immediately available the cash flow coming from new production, I will let you know. As far as the CapEx reconciliation, yes, so we are talking about €37,000,000,000 as far as upstream before disposals and €37,000,000,000 at the group level after disposal means that the amount that should be linked to the disposition we are projecting the 7,000,000,000 in the CapEx part will be substantially offset by the investments in business other than upstream. We are talking about EUR 3,500,000,000 more or less plus and minus. And your third question was about the difference in disposals. No, I would say as far as gas is now the amount is exactly the same.
It's just a matter of timing because the NAM disposition has been completed in January 2016. So what is missed versus the previous plan is €300,000,000 that is accounting the €7,000,000,000 we are announcing for 2016, 2019.
It's Brendan Maughan from BMO Capital Markets. Actually, just following on from that question from Lydia in terms of Slide 13, just to clarify or just
to split out some numbers and
if I can link it to your growth target out to 2019. Just in terms
of your
development or stay in business CapEx and your
assumed decline rates, so your spend on
your base business as part
of that €37,000,000,000 And just if I can understand in terms of pre FID projects such as Coles, any CapEx assumed in that $37,000,000,000 for future? And if let's say we put you sound like you're putting 100% probability that you're going to go to FID at Coral, but what sort of additional CapEx will we be looking at in the 2017 to 2019 period?
Yes, Smedes, it's on CORA. So in these 4 year plans, we have Cora CapEx. So Mozambique overall, the way Mozambique overall is $5,300,000,000 over the plan, if I remember the equity investments. That is covered in core, but it's also covering the pre IFRSO number. That is a figure that we are not completed, but what I have in mind is 5.3%.
So the Egypt is the number one country down on investment. We have Italy and then we are in Mozambique. We have Congo, so that's our country we are going to invest, but they are inside. And the maintenance CapEx is around BRL 2,000,000,000 per year, maintenance in terms of production and enhancement, production optimization.
Massimo Bonizoli from Equita. Just two questions on just on the app index. And the first is regarding gas. And if you showed the assumption on gas prices in both U. S.
And Europe, does it make sense to share with us some sensitivity on gas prices considering the fact that in Europe maybe they are decoupling versus the
oil price? And the
second question is regarding the number on Zohr. The peak production in the appendix is about $200,000 per day and you stated it's $500,000 per day.
1st phase, 200, 2017. 2nd phase, 2019 addition. So you reach overall 400 our equity.
Okay. It's not at the end of the period.
And as far as gas, I guess that's on where we are seeing the best.
In terms of expected price of gas in Europe, I would like to look at that first from which is more important from our business point of view. As already presented in our plan, our main target is to keep our cost of supply progressively more and more linked to the market of destination, to the price of macro destination. So we look more at the differential than the absolute. We look more at our ability to regain margin by the end of the period on all our supply gas. Certainly for us, this is the biggest challenge to complete our process of supplier negotiation together with the other aspect of cost of gas, which is the cost of transportation, for which we have already achieved some savings in 20 15 and we have clear target towards to complete by the end of the plan.
Then if you look more at the dynamic of gas in Europe, certainly it's difficult to predict the balance between demand and particularly because particularly because recovery of economy seems to be lower than expected. And considering the fact that we are not seeing a rapid implementation of emission control measures as they have been announced in the past year. The biggest upside will be certainly an increase in cost of CO2 emission. That will be a major swing in the midterm for the balance between offer and demand and therefore price. The power sector today basically is not playing yet a sufficient role in increasing gas demand.
We compete with renewables, but basically we compete with coal.
Giuseppe with Filipe, Fidentiis Equities. First question is again about the breakeven price for a new project. You've given us the breakdown between onshore, offshore and shallow waters. Can you give us also the breakdown between gas and oil? Second question is about the gas and power.
And in the context of the €2,800,000,000 CFFO across the plan, Is there any residual cash flow from May CapGas related to take or pay agreements within that figure? And what is that number? 3rd question is a follow-up about Libya. In particular, if I'm not mistaken, the WAFA compression project has disappeared from the plan. I was wondering if that is why that happened.
Last is about the oil down streamer. If I look at your slide, it seems that you have completed the restructuring and you're happy with the current structure. So does this mean that you exclude any further disposals on that area, typically outside of Italy? Thanks.
I am next. Okay. So the first is about breakeven. Can't tell you exactly, this is a gas breakeven and this is oil breakeven because it's also a mixture because there are lots of gas that is associated gas. And we have condensate that we are associated to the gas production.
What we can see that our breakeven is coming, for example, from Congo or Egypt. Egypt is not just Zohr, it's also other new discoveries that are producing now. They are breaking that very, very low. So they are really they are creating value in our larger package. But also when you look at Angola LNG that is mainly in any oil field, I must say to gas, is that even that is just a little above the 27 per barrel per barrel.
So it's in the range of 30, 32. So what we can say that gas is normally cheaper because in terms of treatment, in terms of pressurizing all the system and line and so it's a little bit cheaper. Our guide is absolutely the cheapest because also the volume last week. So that is the answer. But there is no very low gas and very high oil.
So we don't have discovered in the last 7 years expensive projects in terms of oil, a very complex one. Escoria is the highest we have now is below 50. And that is in production. Just to give you information, Gloria has started last 1 year, 1 week ago, but then 1 week ago, today it's producing $90,000 per day. In 4, 5 days, it's practically reaching the food production.
Food production, remember, is $100,000 per day. Then Bolivia just talked about the disappeared field. Wafaa is not disappeared, it's still there. And we have we didn't mention Wafaa now because Rafa in the south is in the south of the desert. So at the moment, we consider that it's safer to work offshore and without developing any onshore field that is there.
Then we have R and M. We have also R and M on disposal, if I remember well, is the last question. At the moment, we are not thinking. We have still some assets outside Italy. Outside Italy, we are refining and we are getting good profit from that refining, but we are and we are they are in Germany, but we have also retail also the retail in Germany and France.
So where we are refineries with a strong retailing network, we are along the chain of the value. So before selling, we have to think about. I don't want to exclude that at the moment, it's not in our program. That we had a question regarding that. Make up gas, so the remaining make up gas beginning of this year amounts to €400,000,000 It will be cash in along the full year plan.
Alex Desjardins from Citi.
Can I just come back to Mozambique and oral? Can you get an indication of what the technical barriers are for this project? And how comfortable you are with the technology, with the execution? And you mentioned the CapEx number, I appreciate that all of Mozambique sounds a pretty big number if
you gross it up in
the overall CapEx for Cora?
Roberto can answer, but how much we believe is technically in Cora.
About Coral Development, well, it's basically a few wells, subsea wells, as Claudio said earlier, and a floating LNG. And we spent a lot of time in engineering the floating LNG, you have to consider that the gas in coral is basically pure methane. So from the process point of view, it's not as complex as other floating LNG with a significant content of liquids and pollutants. So process wise, it's simple. And also in terms of storage facilities, well, LNG carriers are everywhere in the world.
So the combination of both made this project definitely a viable project from a technical point of view. And this has been proven also by the fact that the 3 major consortia who bid that for the contract actually, they increased the production capacity from 2.5000000 up to around 3.4000000 TPA. Now in terms of costs, again, as Claudio told you earlier, it's really a very good time to launch project because we were able to achieve impressive cost savings on all the different components. And to give you an idea, the floating LNG itself as a liquefaction capacity is in a range of €1,300,000,000 per MTPA, which is comparable with some many onshore projects. And this has been possible, again, thanks to the engineering effort from one side and the tendering efforts on the other side.
I don't know whether I answered your question.
Okay.
It's Neil Moffatt with Investec. Two questions, please. I noticed recently that Statoil moved to introduce a scrip dividend, and they, like you, have a large government stake. I appreciate that equity analysts tend not to like scrip dividends. But I just wondered in a depressed oil price environment, why you would choose not to have that as part of your financial toolbox?
And then secondly, on ZOAR, this may be a question for this time next year, but perhaps talk about follow on exploration either in the same license or in the neighboring blocks and whether the increased focus or the acceleration of the zone development actually makes you less likely to drill these prospects quickly? Thank you.
So just a few thoughts about script and other kind of elaborating tools to on the on our financial statement. I think that we want to be we decide last year to reduce our dividend because we want to be very clear, very linear, very readable by our investors. So, I think some hybrid, we're going to do something that then you have to go back with the buyback. You have to enter in a kind of contract with your investors. And the situation is not clear.
We want to be simple and simplicity our financial attitudes. So that is what I think, maybe not so technically as Massimo can say, but I don't want the complication in my life between me and my investors. I think that was clear. Roy, you want to On top of this, that definitely is enough. I would like to say that we are paying fully cash because we can do it.
So this is tested in our financial situation. So the overall situation, including investment and the 0.3% ceiling in our leverage, it means that it's compatible. Definitely, what we are doing, we are retaining some extra flexibility on top of this. Definitely, the 40% uncommitted CapEx I mentioned is one of the 2nd, I just mentioned that in the EUR 7,000,000,000 dispositions, there are some potential projects that are fully in line with our strategy. So we don't have to diverse versus the strategy that's been set that could be added in case of need.
We mentioned, we take a CDS, we take a some power, we mentioned additional share of Saipem. And I would say, we are not mentioning in this list some extra financial lever of flexibility such as the script or an hybrid that is something that the others have already done in respect of which we are retaining some more flexibility in responding to our commitment. So I'm going to answer about balance between developing and reduce our activity in the area. What we are going to do this year is not just developing Dora. There.
We also we are going also to drill an additional exploratory well in there. It's clear that when you discover so much gas and you put investments, you have to fast record these investments because you have to create a value and create margin what you are doing. And I think as investor is the first thing you are asking me. But because we are growing underneath, we have another possible play, we are going to run-in parallel. So we're going to drill one of these well, we are going deeper and see if there is an additional potential and then we see what we can do.
But that is inside our strategy. The last question.
Can you hear me? Just around capital allocation. The question goes back to Mozambique. We've talked about the short term cash cycle and returns and how LNG fits into that.
But I
wondered investing in Mozambique Mamba LNG at 50% equity, it's quite a big exposure as far as CapEx is concerned. So my question is, would you take FID at 50% or would you wait until you reduce the equity in that part of the budget already presented today? And as far as Zohr is concerned, the second question, is your base case post government backing rights or you're at 50% as opposed to 100%? Thank you.
No, I think that to the first question, I think that in Mozambique 50% is too much. I think the same. So that is a that we are working on that and we are progressing quite well. For both indeed, for growth, we have 100% of the second party at the moment. And I think also in this case, to have 100% of a huge amount of that additional potential is to match off in this case.
That reason that are the 2 possible fixed assets that we'd like to consider for disposal.