Afternoon. Welcome to Unai Results for the 1st 9 months of 2020. It is a pleasure for me in my first appointment with the investment community as CFO of Unai to introduce our new business segmentation. As you know, we set out our ambitious and detailed decarbonization strategy along with a new operational and financial framework at our announcement in February July. Today, we are reporting for the first time along the lines the 2 new business units.
In Natural Resources, we included Upstream Oil and Gas, CCUS and Forestry, the Global Gas and LNG and the environmental remediation activities of any REWIND. In Energy Evolution, we grouped our downstream renewables CCGT and Retail Gas and Power. We are making good progress against the new strategy. It plays to ENI's legacy strength, which give us immediately scale in the new energy side of the business, an environmental reporting record that positions us to attract new SG investment and finally, balance sheet strength, further enhanced by strong investor appetite for the perpetual bond. Coming now to the results.
In the 1st 9 months, we produced 1,740,000 barrels per day. The reduction versus last year was mainly driven by the impacts of COVID-nineteen, including OPEC plus cuts, lower gas demand mainly in Egypt and the effects of contractual triggers on Force Majors in Libya, partially compensated by positive portfolio price effects in PSA and the ramp ups. Exploration results continue to confirm ENI leadership with the main discovery in 5 countries that we will detail later. Since January, we have discovered 300,000,000 barrels of oil despite the significant reduction of activity that we have implemented since the Q2. Global Gas and LNG delivered a resilient performance both in term of EBIT adjusted and in term of free cash flow generation.
And finally, we are accelerating the CCS with diversified portfolio of projects in Italy and in Europe. Energy Evolution is continuing to grow and deliver strong results even in the current volatile environment with an overall EBIT of around €320,000,000 25 percent of ENI overall results. In detail, retail GMP proved to be robust with an EBIT of more than €200,000,000 driven by commercial actions on the customer base and the contribution from the sale of additional services. R and M was good, thanks to the resilient marketing and the strong biorefineries contribution. The Power segment posted positive results and benefited from asset optimization.
While in Renewable, we are reaching the target of 300 Megawatt and we are positioned to grow further. Turning to financial. EME remained free cash flow positive with cash flow pre working capital up €5,100,000,000 Pro form a leverage was reduced to 29% including the €3,000,000,000 of the hybrid bonds. Before entering into the industrial performance, I would like to focus on our ESG performance. Over the past 6 years, we built a business model that now integrates the 17 Sustainable Development Goals in all our decision and we design a clear path for decarbonization.
This strategy is well rated by the ESG Agency as MSCI, CDP, Sustainalytics, Bloomberg ES and the Transition Pathways initiative that evaluated ENI as a leader in different ratings. This recognition comes also from specialized research institutes such as Carbon Tracker, which ranked the ENI 1st among peers for the competitiveness of its unsanctioned portfolio, emission reduction target and for a medium long term price scenario among the most conservative in the sector. Moreover, we are confirming the FTSE for good development market and this year in the ESG iTRACS index. Finally, for the 2nd year in a row, E and I is among the top 10 performer company for sustainability reporting according to the World Business Council for Sustainable Development. The strong ESG performance not only which we will look at in the future.
Let's now move to natural resources. Both upstream and global gas and LNG showed a resilient performance in this exceptional 2020. Upstream production guidance is confirmed and we can now order the range to around 1,720,000,000 to 1,740,000,000 barrel of oil equivalent per day. Upstream EBIT in the 1st 9 months was €750,000,000 The reduction versus last year is all mentally explained by the scenario that includes COVID accounting for €5,100,000,000 while €800,000,000 is due to volume and mix effects. Global Gas and LNG EBIT was €400,000,000 up by €200,000,000 year on year.
The result was driven by the optimization of our portfolio, which counterbalanced the lower PSV PTF spread and the weakness in LNG demand related to COVID. In terms of full year 2020, we expect the global gas and LNG to deliver an adjusted EBIT in the range of €200,000,000 and a free cash flow of €300,000,000 due to lower optimization opportunities in the Q4 as they were mainly realized in the 1st 9 months. CCS is a key pillar of our strategy of decarbonization. It aims to reduce emission in order to abate industrial segments, decarbonize final products and reinforce the role of gas in power generation as a backup partner for renewable energy. We have already identified the 2 main geographic hubs in Southern and Northern Europe.
The first hub is in Italy in the Ravenna Shore and the IATIC Blue is the 1st ECS project in the Mediterranean, one of the biggest in the world with a storage capacity between 300,000,000 500,000,000 ton. We are exploiting a unique opportunity thanks to the combination of depleted offshore gas fields, operational infrastructure already in place and proximity to our onshore power plants and other industrial sites. This coupled with the scale of this project will allow us to keep costs very competitive and have a faster time to market. We plan to have a demo start up already in 2022 followed by a potential industrial start up in 2026. The second up is in the U.
K. With 2 main projects, 1 in Liverpool Bay, where we plan to repurpose our depleted reservoirs and infrastructures to stall third party CO2. This month, we have been granted a 6 year license to conduct feasibility studies including GNG and FEED. We plan to take the FID by 2023 with a start up planned by 2025. The other project is Net Zero Teaside in the Northeast of England.
The initiative was launched in 2017 by the OGCI of which ENI is a member. In addition, we are continuing to invest in forest Evert plus project. The main ongoing activities are in Africa, Latin America and Far East. For 2020, we expect 1,500,000 tonne of CO2 equivalent sequestration, mainly thanks to our conservation activities in Zambia. Exploration continues to deliver strong results.
Even in a difficult year, we have successfully discovered oil and gas in various counties. In particular, in Egypt, we recently announced 2 new gas discovery in the Great Nowruz area in the conventional water of the Nile Delta, about 10 kilometer north of the Nowruz field. The recent discovery performed in the area indicates that the gas in place for the overall Great Nowruz area is now in excess of 4 Tcf. In Mexico, the Sasquen well led to an and 300,000,000 barrels of oil in place. It was the 6th consecutive successful well drilled by E and I in the Surete Basin.
In Vietnam, the Cairn barrel drilled in Block 114 has confirmed a significant hydrocarbon accumulation. Preliminary estimate of the Cairnbow accumulation provide a range between 7 to 90 CF of raw gas in place with 400,000,000 or 500,000,000 barrel of associated condensates. In Sharjah, Emirates United Emirates states, the Mahani-one was drilled and tested with flow rates up to €50,000,000 standard cubic feet per day of lean gas and associated condensates, just 1 year after the signature of the concession agreement. The size of this discovery will be further assessed with additional appraisal. Expedited time to market of this discovery is around 1 year with start up expected in the coming months.
In Angola, thanks to Agogo 3 wells, number 3 wells in Block 15, GRU-six, we increased by more than 50% the size of the recovery, now is 1,000,000,000 barrels of oil in place with further upside to be tested in the northern sector of the global structure. Thanks to this track record, we confirm our 2020 guidance to discover 300,000,000 barrels of oil at around $2 per barrel this year. Let's now turn to Energy Evolution. This new business group had a positive result showing an EBIT of more than €320,000,000 representing 25 percent of the group EBITDA results. In Enigasalucia Power and Renewal segment, EBIT in the 1st 9 months was €333,000,000 almost 60% increase year on year.
In more detail, Enigasalucia delivered the outstanding result of over €200,000,000 an increase of 37% in the period, driven by the growth of the customer base and the high contribution from non commodity activities. Customers grew by 120,000 compared to the end of 2019. Power and Renewables results doubled year on year on year, thanks to higher dispatching contribution, optimization and strong installed capacity growth, plus 60% versus year end 2019. In R and M and Chemicals, EBIT in the 1st 9 months was substantially at breakeven, thanks to the resilience of marketing activities and bio businesses, while traditional refining and Versalis were strongly impacted by the weak margins and lower demands. We expect Energy Evolution to contribute over €300,000,000 in term of EBIT in 2020, confirming retail and Versalis performance whilst reducing R and M from €350,000,000 to €150,000,000 as a result of the weaker scenario and assuming a sum of $2.7 per barrel in the 4th quarter.
Let's see one of our energy transition levels. ENI has been the 1st mover to convert a traditional refinery into a biorefinery using the ecofiling proprietary technology and the results are now becoming material. Porto Marghera in Venice, the first plant conversion in the world started up in 2014 and has a capacity of 360,000 tonne per year. From end of 2023, our further upgrade is set to boost capacity to 560,000 tonne with increased feedstock diversification from food production waste, animal fats and other advanced byproducts. The Jela Biorefinery in Sicily became operational in August 2019 with the capacity up to 750,000 tonne and is able to process a wide variety of feedstock after pretreatment unit startup by the beginning of 2021.
Our biorefining system will become palm oil free in 2023 with 80% of second and third generation feedstock by the end of 2023 versus 20% today. The biorefining activity has proved to be profitable with a contribution of 60,000,000 euros in the 1st 9 months of 2020 and is expected to have an IRR of 15%. In addition to the current biorefining activities, we are also advancing on other 3rd generation biofuel technology After launching in 2019 a waste to fuel demonstration plant in Gela, in July, Eni Rewind finalized the feed for our 1st industrial scale plant at Porto Marghera near our green refinery in Venice. The plant will switch up to 150 ton per year of organic waste, equivalent to the quantity generated by 1,500,000 people and yield by oil that can be used directly as low sulfur fuel for shipping or refined to create high performance biofuels. Cash generation before working capital was robust at €5,100,000,000 in the period.
Excluding scenario and COVID, our cash flow would have improved year on year by €1,700,000,000 9,000,000 cash flow more than covered our CapEx of €3,800,000,000 in the period and generated €1,300,000,000 of free cash flow. This is a further proof of the capability of our company to react fast to minimize its financial needs in this difficult period. For 2020, we confirm our cash flow from operation before working capital guidance in the range of €6,500,000,000 at $40 Brent. Turning now to the successful placement of our first hybrid bond for a total of €3,000,000,000 I would like to highlight that the placements brings us a number of strategic benefits. It added a new layer of investment to support our transition plan, significantly strengthened our balance sheet with a pro form a leverage at the end of September now down to 29%, supports our strong investment grade rating and further enhance our liquidity position, which is currently around €20,000,000,000 almost 5 times our short term debt.
We have achieved a great result with our first hybrid bond issuance with demand 7 times higher than our original offer. This demonstrates the capital market confidence in high financial robustness and our new energy transition strategy. And finally, the optimization of our portfolio. It represents an ever present level to generate growth capital and strengthen the balance sheet. As part of the transformation, we are designing, we will dispose of noncorrupts TRIM asset, which no longer fit within our portfolio, pursue the optimization of our non upstream portfolio, including infrastructure and logistic asset, consider replicating the Var Energi model where we merged our asset with another company to create a dedicated independent entity able to grow and compete nimbly.
Thanks to this activity, we are working on agreeing gross disposal for around €1,000,000,000 within the end of the year. To sum up our 2020 guidance, notwithstanding the difficult operating scenario and the pressure demand, in natural resources, we confirm our production guidance up to 1.72 to 1,740,000 barrels per day and for exploration to discover more than 300,000,000 BOE. In addition, we expect the global gas and LNG to deliver an adjusted EBITDA in the range of €200,000,000 Our mid downstream in the 1st 9 months improved the year on year despite the COVID pandemic. And for 2020, we see Energy Evolution EBIT at over €300,000,000 At company level, we confirm an operating cash flow before working capital at $40 of €6,500,000,000 versus net CapEx confirmed at €5,200,000,000 Furthermore, we expect to complete on the gross disposal plan of around €1,000,000,000 in the coming quarters and to keep our leverage pre IFRS 16 below 30% by year end. In summary, we have been resilient in the face of the great challenge of 2020.
While we expect a recovery in the energy markets in 2021, we are prepared for continuous uncertainty. We have a high level of efficiency in our operation, flexibility when it comes to CapEx and a strong balance sheet with high levels of liquidity and comfortable level of leverage. And now together with ENI top management, we are ready to answer to your questions.
Ladies and gentlemen, we will now begin the question and answer session. The first question is from Michele Della Vigna of Goldman Sachs. Please go ahead.
Thank you very much for the presentation and congratulations on the very resilient results. I had two questions for you. The first one is about buybacks. At the moment, the share price of Eni is very depressed, as is to be fair the rest of the sector. You have strong leverage, especially after the hybrid bonds.
I was wondering why not take advantage of these circumstances to start perhaps earlier than expected the buyback program that would be highly accretive at this level of share prices? And then secondly, going back to your slide on the carbon capture project, you clearly have a wealth of opportunities here. I was wondering, do you think that the existing regulation and carbon pricing is supportive of good returns on those projects? And what kind of dollar per ton do you expect would be required for good returns as these projects going to full scale? Thank you.
Okay. Thank you, Michele. I will leave the second question about CCS to Alessandro Pulitti. On the first one about buyback, you know that we prepare the company for these 5 phases. This phase is, I say, an uncertain phase.
We adopted our distribution policy to a variable element related to scenario and we consider the buyback above a certain level of pricing. So what we are working is working within this framework. We are working substantially to a larger the optionality within the company to ensure that we are able to pay the fixed component of our dividend at a lower price as much as possible. So to work further in optimizing the company performance, the company perimeter, the company efficiency, We work also in additional optimization related to portfolio. We announced today this, let's say, advanced stage of disposal plan and we reinforced the balance sheet as we mentioned before.
So we were working on creating a company that's stronger is stronger to manage the complexity and the flexibility. All these parts are part of what they say the management judgment in term of dividend and distribution policy. For the time being, I continue to refer to the original plan and to the original remuneration model that we presented to the investment community last summer. And now I leave the reply to Alessandro Pulitiv for the CCS.
Good afternoon. Clearly, the economics in this area are all about comparing the cost of the emission and the cost of the carbon capture and storage facilities. Regarding the current situation, we can say that with our project that are leveraging on existing reservoirs, depleted reservoirs and utilizing at least partially existing facilities, the cost of the storage can be considered compared with the current value of the carbon certificate. To this, we need to add the cost of the capture. And clearly, this is subject to an additional cost that can be covered with the future increase of the cost of the carbon certificates or a cost that can be incentivized by the different governments that are interested in putting in place carbon capture and storage policies.
Thank you.
The next question is from Oswald Clint of Bernstein. Please go ahead.
Thank you, everyone. First question, Francesco, just coming back to biorefineries and strong performance in the quarter. I think you talked about in the release about satisfying strong demand. I just could you quantify the sort of demand growth you're seeing for those biofuels just math or at least numerically? And is that that's being sold into transportation or kind of into fuels market and that's been blended with transportation fuels.
Is that correct? And then even in your retail marketing, I note your sales were back up to 2019 levels. Is there anything going on there in retail marketing in terms of incentives? Or it's just the lack of lockdown in the summer and then people driving again? And then my second question is just on Mozambique.
It seems like the consortium is going back again for some lower costs on Mamba and ultimately delaying that FID. How much more do you think you can get off the CapEx of this project? And when can we expect an FID, most likely 2022 at this stage? Is that right?
Okay. Thank you, Oskinte. I forward your message or your question, the first one to Richie and the second one to Puliti.
Hello. Good afternoon. About the increase of the biofuels demand, we say that the strong demand is driven by the ambitious decarbonization mandate of Europe due to the rule of RED-two that foreseen in the year the increase of the renewable in the transportation. 100% of the bioproducts are used in the transportations. And we expect the further growth in the demand in the next future because of the recent announcement by the European Commission confirmed by the Parliament to increase the GHG saving targets to 2,830.
That in part will be attributed to the transport renewable components. Just to do an example, we see that in the last year, the HVO, the hydrogenated vegetable oil demand in Germany, only in Germany, increased 10 times.
Okay. Regarding Mozambique, in this new environment, the operators are optimizing the development plan, maximizing synergies with Area 1 and exploiting every opportunity, including the potential cost reduction related to the current lower cost market situation. Therefore, the FID that originally was expected in 2020 is postponed. And an updated project and the new FID date will be defined based on the results of this cost optimization phase. And probably in the next strategy, we can be more precise when this exercise will be concluded.
Understood. Thank you.
The next question comes from John Rigby of UBS. Please go ahead, sir.
Yes. Hi. Good afternoon. A couple of questions, please. The first is on the what the old Gas and Power segment, I realize it's being broken down now.
But I think you're retaining the sort of the legacy guidance. But it seems to me is that in the 1st three quarters, you hit that guidance. So implicitly, you're saying no money to be made in that business in aggregate in the Q4. Just to confirm that's correct. And just then to sort of follow on to say, well, if LNG markets, as they look to be doing, are improving and historically, seasonally, 4Q is typically better.
Could you just walk me through what changes into the 4th quarter that would generate the worst quarter for EBIT from those businesses for 2020, which would look quite unusual? The second question, I wonder whether you could sort of pick apart or give a bit more guidance on the €1,000,000,000 of disposals that you're now looking at. I think you seem to say in the presentation that you link that to some sort of green growth agenda partnership etcetera, if I heard correctly. Is that right? Thanks.
About the Gas and Power results and LNG, everything is clear. I just would like to understand better your last question. I missed what you were referring to.
Yes. I mean, if you're able to just go back in a little bit more detail on the €1,000,000,000 that you've identified for disposal, just to clarify that in a little bit more detail. You did talk about it, but I just wondered whether you're able to give a shine a little bit more light on what's happening there and where that's likely to come from?
Thanks. I answered to the disposal question. And then about the Gas and Power, I can confirm that we kept the same guidance and you are correct in saying that we have achieved already in these 9 months the results that we are planning for the year. I would then I will leave to Christian to answer to the last quarter performance we are expecting and also which is potentially the upside eventually that could be linked to the LNG evolution. Coming back to the disposal, clearly, we were referring to a €1,000,000,000 let's say, plan of disposal.
It's actually a negotiation activity or a tender activity that is in a very advanced stage. You have already probably seen in the news something related to Australia, but also there are other assets that are under discussion and therefore we are decided to disclose this plan. Clearly, disposal optimization and focusing of our portfolio will be a material part of future plan of E and I. We have to, let's say, to move our positioning from certain area, non core areas to growing opportunities to the transition businesses and therefore this is the kind of activity we are targeting various upstream assets and that is part of the future plan. About the LNG and the gas for the Q4, now I leave the floor to Christian.
Thank you for your questions. So on the Q4, I think the most relevant issue that we have to face is the fact that in the 1st 9 months, we have been able to capture most of the value out of our optionality. So we front loaded our, let's say, options capturing. And so in the last quarter of this year, we have actually less opportunity to be captured into the market. And if you add on top of that the fact that the spread PSVTTF, which is an important element in our, let's say, capturing opportunities, is fairly depressed and is expected to be depressed in the Q4.
This actually adds to my explanation. On the upside side, it's true that the LNG prices have been increasing in the last actually days. And yes, we are capturing part of that upside, but also you have to understand that most of our, let's say, sales are already, let's say, locked into long term agreements. So we have some spare opportunities, but there are not yet many. And if you sum up, let's say, all these elements, we think that the guidance of around €200,000,000 should be, let's say, confirmed.
The next question is from Erena Haimone of SG. Please go ahead, madam.
Yes, thank you. Good afternoon. I had two questions, please. So firstly, thinking about working capital movements in the Q4, I wonder if you can give us some guidance on that. And secondly, in the downstream, your new guidance includes ADNOC pro form a.
I wonder if you can let us know what is included in that guidance for ADNOC so we have the, let's say, EBIT as reported on a like on like basis? And also in the Downstream, can you tell us what EBIT your marketing business generated in Q3 please? Thank you.
Okay. About the working capital movement, you remember that last quarter in the second half, we announced an exchange and expected, let's say, absorption of working capital in the range of 600, 700. Actually, we are now assuming a lower performance. The lower percentage is mainly related to the downstream business. So, downstream mainly referring to refining and chemicals clearly are suffering of let's say lower pricing and therefore lower value or what you are planning and lower demand and therefore your capability to absorb working capital lower.
You made a question about ADNOC. The performance of ADNOC in the 3rd quarter is minus 70. This is including both the refining and trading. About the contribution instead of marketing in the retail marketing on the 9th month, you can consider something just a bit above €400,000,000 in terms of EBIT.
Madam, has your question been answered?
Yes. Thank you very much. Thank you.
The next question is from Massimo Bonestalli of Equita. Please go ahead, sir.
Good afternoon, and welcome back, Francesco. I have two questions. 1, regarding Libya, if you can give us an update on that country, what are the operating condition of your facilities there? And how much of the Libyan production is included in your volume guidance for 2020? The second question is related to the CCS projects in UK.
If you could elaborate on the CapEx related to those projects and if they were included in your CapEx plan presented in summer?
Thank you, Massimo. I leave the answer both to Alessandro Politi.
Okay. Situation in Libya. I will firstly give you the numbers. So Libyan production, it accounts for around 170,000 barrels of oil per day equivalent in our 2020 guidance. And regarding operational situation, we are operating, I would say, in a normal manner all our gas fields.
And the situation on the oil fields that were subject to the blockade is certainly improving. On the 22nd September, NOC announced the lifting of the force majeure and the production of Guatefel field were started on the 19th October and the field restarted on October 26. So now all the fields in which we have an interest in Libya are in production. Regarding the CCUS in the UK, we have been recently awarded by the license. And in our for the time being, we are carrying basically capital only for studies.
As long as the project will be defined, then we will be defined the capital amount necessary for the transformation of our Liverpool Bay assets and depleted reservoir into CO2 storage reservoirs.
The next question is from Martin Ratz of Morgan Stanley.
Yes. I only have one left. And I recognize, it might be a little bit of a tricky one, to be honest. Last quarter, we spoke, of course, a lot about the dividend. And I do remember at the time, the indication was very clear that the floor dividend was sort of contingent on sort of $45 Brent.
And I wouldn't expect to see a major revision already sort of so soon after the previous major revision, but we're not at 45 percent. And frankly, we may not be there for another couple of months or couple of quarters to come. So I was wondering how you would suggest we sort of think about that comment that the floor dividend is dependent on 45. And over what time would actual oil prices need to sort of divert from that before you would start to think about the dividend again?
Martin, I think this is a very good question. I think that what is important for us, we are now in the center of a crisis that I say values runs. And we cover the 1st runs, now we rent in the 2nd runs, etcetera. But what is important for us is to exit each runs faster and stronger. So what we did in the past months was substantially to equilibrate the company.
So the cash needs was rebalanced. To reinforce the balance sheet with the hybrid bonds, we added an additional layer, so we kept the leverage under control. And we are opening now additional flexibility. We have portfolio opportunities. We have additional CapEx flexibility.
We have cost opportunities reducing and slimming the company in certain segments and certain activity also taking into account of the new opportunity of working that is related to the smart working. So there are various segments that we are working on that. So from that what we consider is that the 45s reference, these 45s can be lowered is in our let's say plan in our efforts to lower this level even further. We have an additional capability or flexibility to reduce eventually if necessary CapEx postponing FID and we have a larger flexibility in term of liquidity. We have €20,000,000,000 of liquidity.
So I think that in the current situation even in our crisis is longer, we have a lot of tools in our hearts that could be used to defend the 30 36 and to bring this 30 36 sustainable even at a lower price.
Okay, wonderful. I appreciate that. Thanks, Francesco.
The next question is from Alastair Syme of Citi. Please go ahead.
Hi, Francesco. Thanks for taking the question. This is not really a 3rd quarter question, but it's just more strategy. E and I has been NE has been pretty bold in the last couple of years on the energy transition. And one of the things that's happened in recent months is the markets got very excited by hydrogen.
And it's not something you guys have really said a huge amount other than perhaps what you're doing in the refining system. So I guess the question is, do you think the market is getting ahead of itself? How do you think about this business opportunity and how you can compete?
I think that I will pass this answer to Massimo, who is clearly in charge of all the activity related to energy transition and as I say, the information the right information about the hydrogen trends and expectation.
Hydrogen, for sure, would be a quite important new product in our future, mainly thanks to the CCS opportunity that we have that has been already commented by Alessandro because today, throughout this ECS, definitely, we could generate hydrogen decarbonize hydrogen at a very, very competitive price versus the green one. So and we see such an application potentially in Italy. We see the application in UK. And that's where in the world, looking forward, in which we could replicate the same scheme that we are applying in Italy and the UK. So maybe production of gas, gas to hydrogen with CCS for a sale of totally decarbonized hydrogen.
This is really important also in term of timing because we see certainly and we are working on the green hydrogen, thanks to our significant expansion in the renewable. But definitely, we see the blue one coming first, opening up the marketing. And so the green hydrogen, when it comes, definitely could benefit from the work that has been done on the regulation, on the demand creation in the different markets.
Massimo, can I ask, when you speak to regulators and politicians in Italy, in the U? K. And in Europe, do they understand that sort of blue hydrogen has to come first and that green hydrogen is longer down the road?
But discussion is discussions are taking place because, as you noticed, it's a brand new item on the table. So we are passing some information to them based on our own experience as the other are doing. So but I'm really confident that we can get there because like on like, it would be a quite similar process that took place when the renewables took place. So the necessity some way to create a new market, to create a new regulation, In this case, it could be a bit more complicated because electricity could be transported throughout the existing grid, while on hydrogen, maybe you would need specific transportation asset, Unless, as it could be the 1st stage, the 1st companies taking benefit from the Blue Hydrogen would be close to the production itself of this hydrogen. So I'm thinking about the hard to abate sectors that definitely would be the 1st beneficial counterparty of this new product.
The next question is from Thomas Adolff of Credit Suisse. Please go ahead, sir.
Good afternoon. I have three questions, if that's okay. Just firstly on the refining business. When you presented your strategy at the start of the year, you've mentioned that your refineries in Europe, your plans are convert them into green sites over time. Now obviously, the refining cycle has turned and refining margins are in this depressed territory and probably going to stay there for some time to come.
Are there any plans for you to perhaps accelerate that process of converting refineries into bio sites, maybe selectively one maybe earlier? And just kind of linked to refining still, obviously, you made a very big investment 1.5 years ago in the UAE by mistake in ADNOC. And we've generated another loss this quarter, a very big one, minus SEK 77,000,000. I'm not sure if your views have changed on refining more recently. We've seen some of your competitors lower the refining margin estimates and taking a big impairment charge.
Is this still an asset where you say you paid a fair value? And then my final question is just on the disposal plan, the SEK 1,000,000,000 that has emerged out of the blue, if you kind of compare what to compared to what you've said in the past. What do you first mean by gross disposal? What is the meaning of growth? And then secondly, is there anything else in the hopper that you're looking to monetize maybe in 2021, so we can expect additional disposals?
Thank you.
Thank you, Thomas. I will leave the question about the refining to Masimo, I will answer to the disposal. In terms of growth, we think before taxes, mainly before taxes. So substantially that is the value of the asset that we are selling and that each one could have a different clearly fiscal component. On 2021 disposal and future plan, clearly we are preparing, we are working on the future plans And therefore, we are not yet ready to announce to disclose also because it's part of a more wider strategic, let's say, program.
And sure, there will be many, many opportunity to dispose. You know very well that M and A portfolio sometimes works with, let's say a trial and error approach that you are a various asset, various opportunities, some are let's say achieving the results within the timeframe. So that is the plan for the disposal. About the refining business, the conversion to biorefining and the EIU investment, I will pass the word to Massimo.
Talking to the biorefinery, the answer would be yes. So we announced a 5,000,000 ton of capacity target capacity by 2,050 without specifying any interim result. But considering the very good result that we are achieving, plus the significant market that we see is going to be open up, including the Biogen opportunity that could come in the very next years. Certainly, the idea of the transformation could be accelerated. On this regard, I would say, next strategy Talking about ADNOC, I would say, the negative result this year has been driven by 2 main results.
First of all, you may remember that ADNOC suffered an accident at the FCC plant in 2019 that keep on recording effect negative effect in 2020. So the first cause of the negative result is this one. And second, definitely, is the deep, significant downturn that is touching the worldwide refining system. Having said that, we remain convinced that the Adelogne Refinery is a very strong, healthy facility with the capability to resist in a normal in an ongoing condition better than other assets. So definitely, we are making the difference between the European capacity and so the conversion to the biorefinery versus such an international, I would say, Far East investment that is benefiting from more positive situation.
So we are convinced, and we see the possibility the high probability to recover very, very soon and to resist to this negative wave to be in the condition to turn to a positive result as soon as the demand will return to a more normal situation.
Lastly, obviously, 3Q was a quarter where the FCC was operating normally, and it was just industry refining margins being weak in the quarter. In that context, did ADNOC actually lose more money in absolute terms than your European refining business, which is obviously has a lot more capacity than your equity stake in ADNOC?
On this, maybe we can give you additional detail, but the Q3 has been absolutely the worst. So this is, I would say, I wouldn't say that this is a source for changing our mind on this. I confirm what I just said in terms of potential prospectivity forward.
The next question is from Peter Low of Redburn.
Hi. Thanks for taking my questions. Firstly, just on the 2020 CapEx guidance, you seem to be annualizing well below the 5 point €2,000,000,000 guidance, especially looking at the run rate over the last two quarters. Is there any reason why CapEx should step up meaningfully in 4Q? Or is there a good prospect to come in below that level?
And then the second was just another follow-up on the biorefineries. You've talked about the strong performance, but utilization is still quite low. It's just 53% in the quarter. Is there any reason why they're not running at higher utilization levels? Thanks.
About CapEx, I think that it is not you could not extrapolate a linear model. I think that is part of the activity, FIDs, postponed activity. You have to consider that the second and third quarter were extremely light in terms of activity because of the COVID. Remember operation, we stopped the drilling, we stopped exploration. In the Q4, you could have a partial, let's say, recover of activity at the end of the year.
So cannot be considered, let's say, on a quarterly basis. The second question, sorry.
Yes, it was just you've talked about the strong financial performance in the biorefineries, but their utilization level has been quite low, which is 53% in the quarter. I was wondering why you weren't running them at a higher utilization level if the demand was there?
Thanks. This is I will leave it to Pinarichi, mainly related to the ramp up of JLab and Venice maintenance, but I will give to him the answer, the returns.
Thanks, Francesco. In fact, in the 3rd quarter, we had the maintenance the planned maintenance in both the biorefineries. And this is the reason because the service factor has been so low. In the Q4, we expect to increase the service factor up to 80%. We have to consider that general refinery is still in ramp up and the production done in the 9 months, the overall production done in the done in the 9 months is more than 500,000 tons per year.
That is 60% more than last year. And we expect to have a continuous increase in the ramp up up to the maximum capacity.
The next question is from Biraj Borkhagarya of Royal Bank of Canada. Please go ahead.
Hi. Thanks for taking my question. I just had a follow-up on the biorefinery. I recall the cost of the JAILA conversion was about €300,000,000 or I think 750,000 tonnes. As you look forward to the next wave of conversions and the expansion you're talking about, can you say anything about how you're expecting costs to come down relative to the initial conversions?
Or are those sensible figures to use for the expansions going forward? Thank you.
Pino, sorry, you have to reply again.
The cost of conversion of refinery is very low because what we have done in Beni Sinjarra is in the average of in the range of $400, dollars 500 per tons of capacity of investment just because we are we have transformed existing refining reusing existing asset. And in case of a full term investment, it depends on the type of investment that we will do. We expect to follow both solution, brownfield or greenfield, depending to the condition and the area where we will realize the new biorefineries.
The next question is from Bertrand Horden of Kepler Cheuvreux. Please go ahead.
Yes. Hello, everyone. Thank you for taking my question. I have one left. Can you give us a feel of how your unit OpEx in Upstream are trending so far in 2020?
If I go to the 2019 level, it was around $6.1 per barrel. And wondering if you can disclose what level you are over 9 months or in Q3? And could you expect some further decrease? Or on the contrary, because of portfolio mix or COVID events, it is a bit different? Thank you.
Yes. Thank you, Bertrand. In term of unitary OpEx, you have to consider that the portfolio mix with the acquisition or with the contribution of Norway has been improved in term of increase in term of OpEx. The current level of OpEx is in the range of $6.5 $6.6 per barrel. Have to consider that also the reduction of production has, let's say, a negative impact because it is adding a fixed component that is worsening the unitary element the unitary value.
The trend was to increase to 6.8 due to the COVID, so to the lower production, but we were able to contain in this 6.5% to 6.6% range.
Thank you.
The next question is from Lucas Hermann of Exane.
Question on Zohr and Egypt, if you don't mind. Can you just remind us where production is at Zohr now? How it's profiled to date and what your expectations are as we go into next year assuming that export markets for LNG book or continue to say they continue to appear more robust than might have been the case 9 months ago? Thanks very much.
Thank you, Lucas. I leave now the answer to Alessandro Pulic.
Okay. So Zohr will average in 2020 at the level of 2 Bcf per day in terms of production, while in the 3rd quarter, the average is 2.2 bcf per day increasing. We see an increasing demand from the export side in Egypt. Clearly, this is linked to the winter time. So we expect production in the near term for Zohr to further increase.
And where's capacity at the moment now? Are we up north of 3 or
The price? The price of the gas price for Zor, you mean?
No, no, no. I'm sorry. I meant what's the production capacity?
The production capacity, a full production Zohr can produce 3.2 Bcf per day.
Okay.
And do you want to make any comment on when you think you might be running at capacity?
Running capacity, we require a full recovery of the demand in Egypt and also an improvement of the export capacity. So I my we can see it in a couple of years ahead of us.
Okay. That's lovely. Thanks, Massimo.
Okay. I think that we are finished. I don't know if this is the last question. Otherwise, thank you very much. And let's see what's happening in the near future.
All the best to all of you.