Ladies and gentlemen, and welcome to Eni's Second Quarter 2019 Results Conference Call hosted by Mr. Claudio D'Scalsi, Chief Executive Officer. For the duration of the call, you will be in listen only mode. However, at the end of the call, you will have an opportunity to ask questions by pressing star and 0 on your telephone. I'm now handing you over to your host to begin today's conference.
Thank you.
Good afternoon, and welcome to ENI's first half results. In the first half of twenty nineteen, we continue to consolidate our strategy and enhance our cash generation. Operating and free cash flow growth are the most remarkable achievements. We generate EUR 6,800,000,000 of operating cash flow, a 23% growth versus 2018 in a lower gas price scenario. With CapEx at €3,800,000,000 we generated an organic free cash flow before working capital of €2,900,000,000 almost doubling the €1,500,000,000 of our dividend needs in the period.
Thanks to this strong cash performance, we reduced our debt to below €8,000,000,000 the lowest level since 2006. This corresponds to a leverage of 15% at the end of June. Upstream production was 1,830,000 barrels per day. We continue to deliver high value production and with the ramp ups in Egypt, Ghana and Angola and the startup of new field in Mexico, we almost compensated the impact of the conclusion of the Intisar gas contract that rated for around 6%. Exploration continued to create new opportunities for future development.
During the first half, we discovered around 350,000,000 barrels of resources at an exploration cost of $1.4 per barrel. In the coming months, we plan further exploration activities in Mexico, Egypt, Norway and Angola. Gas and Power performance is robust, notwithstanding the low gas and LNG price scenarios, thanks to the portfolio optimization activity and the growth in the retail customer base. In downstream, we are continuing to improve the resilience of our operating assets with the ongoing start up of the biorefinery in Gela and the expected restart of rest in San Nazzaro. Results were impacted by weak product demand and high cost of the feedstock, in particular for medium heavy crude and maintenance activities that were anticipated because of the weak scenario.
On renewables, we are consolidating our pipeline of initiatives from Algeria to Pakistan, Kazakhstan, Australia and Tunisia, and we keep developing our Italian project. We are continuing to lower our production carbon footprint with a reduction of 2.3% of GHG emissions per barrel versus last year in line with plans. Production in the first half reached 1,830,000 barrels per day. First half twenty nineteen output was impacted by a reduction of 111,000 barrels per day for the end of Intisar Gas contract and 19,000 barrels per day for price effect and portfolio And positively for 66,000 barrels per day by startups and ramp ups like Dor better performance of some fields such as OCTP oil in Ghana and other in Nigeria and higher assets availability for 28,000 barrels per day. Production in the second half of the year will speed up, benefiting from recent startups of Mexico Area 1, Crescak in Norway and Berkin Oil in Nigeria.
The future growth will be supported by a ramp up door to plateau level and announced the contribution of cash again after the end of maintenance. Production in Q3 is expected to grow between 2.5%, percent, 3% versus Q2. For the full year, we expect production between 1.87 1.88 1,000,000 barrel per day, mainly depending on the demand for Jan Creek LNG and assuming a flat contribution of 40 1,000 barrels per day from the Venezuela. On a comparable basis, upstream EBIT grew by 5%, thanks to the increased quality of our production mix, as demonstrated by the dollar realization prices of our sales, which remained constant despite the weaker scenario. On exploration and new developments, Block 1506 in Angola continues to deliver outstanding results.
In the last few months, we made 3 main material discoveries in Agogo, Ndungo, Ajibigobo field. And yesterday, we announced the results of the appraisal of Agogo that confirms the best estimate of 650,000,000 barrels of oil in place with fiber upside in the northern sector of the field that will be tested with additional appraisals. The last five discoveries made in 1 year add up to 1,000,000,000 barrels of oil in place to the already existing resources, bringing the amount of discoveries in the block to about 4,000,000,000 barrels of oil in place. Partner development will be fast track, relying on existing FPSO in the West and East Hub, extending the current plateau production of 150,000 barrels per day at a very competitive development cost per barrel. Accordingly, we confirm the start up of the first well of Agogo by the end of the year.
Moreover, further appraisals in Agogo field could justify the development of a new standalone hub. In Egypt, we successfully drilled 5 wells of which 4 are near field discoveries. The first discovery was more that we drilled in the Q1. Then we made 2 oil discoveries in Western Desert and 1 gas discovery in the Nile Delta. In the Gulf of Suez, we found a new structure on the Sidra South prospect that hold up to 200,000,000 barrels of oil in place.
In Ghana, in the CTP Block 4, we discovered Akoma with the volume in place up to 6.50 Bcf of gas and 20,000,000 barrels of condensate. This block has further additional upside. The field is only 12 kilometers from Sankofa. And after appraisal, it will be put in production with a subsidy tie in to the A16 FTSO. Finally, in Vietnam, we proved the presence of gas and condensate in the Cairnbow prospect in Block 114, a significant potential with an estimated net reservoir thickness in excess of 100 meter that will be target for future appraisals.
During the first half of twenty nineteen, we discovered 250,000,000 barrels of equity. These results allow us to raise our guidance to more than 600,000,000 barrel of discovered resources for the full year. Eni is the 1st international company to start production in Mexico. In Area 1, we drilled 5 wells 100% success rate before submitting the development plan, increasing the oil in place to over 2,000,000,000 barrels. We fast tracked the early production phase and we achieved the start up in June 2019, less than 1 year from the approval of the development plan.
We are planning to add an FPSO production start up by first half twenty twenty one and then reach a production plateau of 100,000 barrels per day. This is only the first step in the country. We have recently increased our exploration portfolio by 6 blocks in the shallow and deep water with a stake between 14% 80%. In the second half of twenty nineteen, we plan to drill 2 exploration wells. Also in this first half, with a lower price, upstream further improved its cash generation.
Upstream cash flow from operations, including working capital, was €5,600,000,000 6% higher than last year, while gas prices were materially lower. On a comparable basis, the growth of cash flow from operation amount to 13%. With CapEx at €3,300,000,000 we generated an organic free cash flow in E and P of €2,300,000,000 Moving to mid downstream. Gas and Power EBIT was robust at €418,000,000 and in particular, GLP reached EUR 253,000,000 thanks to an effective optimization of our activity, which also benefited from market dynamics. These positive gas and power performances offset the lower contribution of LNG in a low global price scenario.
Retail delivered a result of €165,000,000 a 28% increase versus last year. Thanks to international deployment and the stronger commercial initiative in Italy. This performance confirms our full year Gas and Power guidance of €500,000,000 EBIT. The refining and marketing result was positive in a scenario impacted by the narrow differential of euros due to OPEC and the Druba pipeline contaminations. Marketing was the driver of the result with a contribution of around €250,000,000 The start up of JERA Bio Plant along with their start of HEST and the completion of the maintenance activities will allow us to capture the full benefits of IMO effects.
Finally, Versalis was impacted by the operating upset in Triolo, which returned to full operation at the end of June. In matter of this effect, Versalis would have been at breakeven despite the weaker scenario. Before detailing the financial results of this period, I would like to highlight our progress in term of the decarbonization plan. We have a strong commitment to deploying a strategy based on lower emission per barrel in upstream In renewables, we have 7 projects in 4 continents in execution, expected to be completed by the end of 2019. For an overall installed renewable capacity of 190 megawatts at year end.
Thanks to the start up of Jela, our biorefinery reached a treatment capacity of around 1,000,000 ton per year. Emission per barrel were lowered by 2.3% in the first half versus last year's and by 22% versus 2014, in line with our long term target. Coming to the financial results. Cash flow from operation before working capital was €6,800,000,000 23% higher than last year's result. On a comparable basis in terms of scenario, IFRS 16 and excluding one off negative items mainly affecting 2018, cash flow growth remains robust at 9%.
As anticipated, working capital showed a strong recovery in Q2 of more than €1,000,000,000 to the traditional gas seasonality. First half CapEx at EUR 3,800,000,000 in line with the 2018 first half and further optimization and efficiencies allow us to improve our CapEx guidance to below €8,000,000,000 Overall, in this semester, we generated an organic free cash flow before working capital of €2,900,000,000 Cash flow from operation and free cash flow are growing in line with our yearly expectations. And finally, a brief summary of our full year guidance. We are expecting better result in exploration discoveries and a lower amount of CapEx. Due to the weak scenario for oil differentials and margins, we are revising R and N EBIT to around €500,000,000 All the other guidance remain unchanged.
And now we are ready together with any top management to answer your questions. Thank you.
Thank you, sir. We will now begin the question the question and answer session. The first question comes from Mr. Clint Oswald of Bernstein. Please go ahead.
Thank you. Thank you. First question I wanted to ask please on Goliath. It's been a while since we asked about it. But looking at some of the monthly data, it feels quite erratic.
It feels like it's struggling to get up to plateau capacity. Is that fair? And are there some issues at that particular field? And then secondly, again on the upstream, please, the tax rate, obviously, quite high in the Q2, 66%. But you talked about Mexico, Norway, Algeria ramping up in the second half.
So I guess some of those are also quite high tax tariffs. Can you just talk about the tax rate evolution for the rest of the year? Should we see it go back down towards 60% or sub-sixty percent? Or is this new level potentially something we have to consider? Thank you.
Thank you. So for Goli at Alessandro Pulitti, the Head of E and P will deliver the answer and then Nassem will talk about the tax rate.
Okay. So regarding oil production, our expected equity for 2019 is 21,000 barrels of oil equivalent. That is equivalent to at 100% production of oil equivalent. Production this year, it accounts for 2 main shutdown. 1 already occurred in May.
We had 7 days production shutdown. And we will have another shutdown in September of 20 days for statutory maintenance activities. All in all, production has been affected during the year by some downtimes of our gas compressor that will be fixed during the shutdown turnaround in September time.
Okay. So Clint, let me comment a little bit about tax rate. So as you know, the Q2 tax rate has always been the highest all along the year because mainly the Italian seasonal business. This quarter, this metric has been emphasized by mainly 2 factors. First of all, the worst scenario, mainly gas, this is affecting definitely the Italian business plus the upstream business, including the gas exported from Libya and refining margin.
And together with this, what we had is a non optimized setup in some Italian plants, mainly Sanazzaro Refinery, as you know, and the Praiolo chemical plant that has been shut down at the beginning this year. Assuming in the second half of this year that the Italian assets are back to normality and Priolo is already done, Sanazza is ongoing. And the scenario similar to the one that we experienced in the first half of this year, so more or less EUR 200,000 sorry, EUR 200 per 1,000 per 100 cubic meter, dollars 66 per barrel Brent and refining margin higher a bit higher than what we experienced in the first half. So we are still forecasting $4.5 as an average full year. We confirm a full year consolidated tax rate of 60%.
So the increase in the tax rate that you notice in E and P is mainly due to the gas part of the EMP business related to the European gas price trend. But let me finally give you a quick note on the cash tax rate because in the Q2 this year, the cash tax rate has been 33%, a bit lower than the 35% we recorded last year in the same period, confirming that the tax rate increase has been driven mainly by noncash items. And the full year 2019 cash tax rate is expected is in the range of 30%, confirming the guidance that we already gave.
That's very clear. Thank you.
The next question is from Mr. Thomas Adolff of Credit Suisse. Please go ahead, sir.
Good afternoon. Two questions for me, please. Just firstly on the dual exploration model. You've announced the sale of 20% in Miracas and you don't really say how much for, maybe you can comment on it and whether these proceeds are also incorporated in your CapEx guidance? And secondly, I just wanted to ask you about 2020.
Obviously, upstream production will grow on a year on year basis in the second half of this year. But I wondered what exit rate we can expect in 2019 and likely year on year production growth in 2020? And then of course, how that translates into overall group cash flow growth at constant macro? Will there be any growth in cash flow considering you benefited in 2019 from a special dividend from your Norwegian subsidiary, which you won't be getting in 2020?
Thank you. For the dual exploration model, yes, you remarked what happened just yesterday on Miracles. The dual aspiration is clearly a consolidated model for any. We are performing in different way or by cash or by kind or swapping. So it's working very well and that is sustained by very strong exploration result.
As you remark in the 1st semester, we made the discovery big giants and we have a large stake that is continuing. For Merakes, we didn't talk about the input. Clearly, the input will be in the reduction of CapEx that sure that is not yet included because it's something that happened just now. So and that will be included in the development looking forward. And also other field that we discover where we own a large stake will support this model looking forward.
Now Massimo for the other questions.
But it's a bit difficult to give you guidance as far as 2020 because it's still premature. So what I could say that definitely, you noticed that we are benefiting from a special dividend from Norway this year. It will not be repeated for the future year, but definitely will not jeopardize the growth in our cash flow as we projected in the 4 year plan because this factor is already embedded in the projection that we presented there, in March this year.
Okay. Thank you very much.
The next question is from Biraj Borkhataria of Royal Bank of Canada. Please go ahead.
Hi. Thanks for taking my question. Just a couple of clarifications. So on the Indonesian volumes, could you just give a bit more color about the reduction at Jank Creek? Presumably, it's because buyers will prefer spot LNG given where we are in the market.
But can you quantify the reduction in production there? And the second question is on the production guidance for 2019. Can you just remind us what contingency you have left in the budget at the half year point?
Krista Senaretto, GLP. So on the Indonesia LNG sales, you're right. So the we have long term contracts signed on that field, which sees buyers actually having difficulties to uptake all the volumes given the situation of the market. And so the let's say, the joint venture has already made up some of these reduction in volumes in trying to sell tenders for selling spot LNG. So we expect a slight reduction in the sales for the second half of the year given the market condition.
So for in terms of production, the question related from cargo to production, we consider about 10,000 barrels per day on average, possible 10,000 bar per day. That for that reason, we gave a range for the final target of this year. In terms of contingency, on the Q2, we are going we are about 50,000 barrels per day. 2nd quarter, 2nd quarter, 2nd half, 50,000 barrels per day.
Great. Thank you very much.
The next question is from Irene Himona of Sachika Genarajo. Please go ahead, madam.
Thank you. Good afternoon. I had two questions, please. Firstly, Kashagan, is it back from maintenance? Is it back into production?
And what is the current capacity growth and net to E and I, please? And secondly, on R and M, where you lowered the guidance following the weakness in refining. Can you say of the EUR 500,000,000 you expect, given the performance in the first half, what is the split between Marketing and Refining? And it seems that, obviously, Refining has been loss making. What margin do you assume in the second half to reverse that?
Thank you.
Felicchi will answer for Kashagan and Pinarichi will answer for R and M and the split between R and M result.
Okay. For cash again, we confirm we are we have finished the turnaround, and it went very well because it lasted 10 days less than it was initially forecasted. During the turnaround, there was also the conversion of 2 additional wells to gas injector. And this allowed an improvement to the production performance that ramped up at 390,000 barrels of oil equivalent per day currently. Our share during the year is 64,000 barrels of oil equivalent.
Thank you.
Pinochet, Refining and Marketing. About the guidance for the from EUR 700,000,000 to EUR 500,000,000 in 2019, this is due to the weaker scenario in the first half and the fact that we have concentrated in the first half just because the scenario expected best scenario all the maintenance and the turnaround. We expect to have a big recovery in the second half because the scenario is increased, is already increased in July, and we expect to have a good margin and good spread, high sulfur or sulfur crudes in the second half because the IMO effect. In addition to this, we will have in the second half the contribution of general refinery, biorefinery in startup in these days and the startup of EST plant in San Abzaro. We could we expect those a good contribution on the marketing that in this quarter, the Q3, which is the driving season, the summer season.
And overall, we expect in the second half more than $200,000,000 of contribution from the marketing and slightly less than $200,000,000 from the refining overall, traditional and bio.
Thank you.
The next question is from John Rigby of UBS. Please go ahead, sir.
Yes. Hi. So a couple of questions. Can we just on the you referenced the scenario in the downstream behind the standardized refining margin deteriorated. And obviously, we can see that.
And you just referenced light heavy spreads, sweet spot spreads, etcetera. Are you able to give me a little more detail on the assumptions that you make around the crude spreads that get you to sort of standardized margins? The second question is, are you able to give some indication on the Abu Dhabi entry, when that will start contributing to your downstream results? I'm assuming that will go through associates in any case, but just when that is likely to start to well, when it will complete then start to deliver earnings. And just one other thing, if I could.
Can you give some guidance for 2H overall on disposal receipts? I know there's some sort of deferrals, there's some agreements that are yet to be completed, etcetera. So is it possible you just remind me what disposal receipts you're expecting in addition to the Marcus 1? Thank you.
Okay. About the spread, I saw for loss for crude, We had in the first half a very big spread of $1.4 per barrel of appreciation of high crude versus low crude. So it's very strange scenario. We expect to have in comparison with the budget. We expect in the second half in alignment with the budget.
And we have just in the last part of June, early in July, we are seeing this alignment. About ADNOC, we expected the completion by the end of this month, 31st July, 3 months in advance versus what we have expected. And I leave the floor to Massimo.
Okay. So as far as the Falta disposal in the second half, John, you noticed this morning that we sold 20% of Maracas, and we have some other ongoing small divestiture that will take place this in the 2nd part of this year. The overall amount we expect to Cushing is in the range of €300,000,000
Okay. And just to come back, just to confirm the ADNOC contribution will be your sort of affiliate pickup through the
Yes, John. We expected that when we announced the deal, we said that we expected a small contribution starting from 2019 because of the interim bids and to be distributed. The latest from Abu Dhabi is because of the scenario that is lower even in Middle East and Far East, together with a slower ramp up in the new revamped FCC part of the overall plant. Probably, the contribution this year will be 0, while we expect still the contribution we announced during the acquisition time starting from 2020.
Okay. Cool. Thank you.
The next question is from Jason Kenney of Santander. Please go ahead, sir.
Good afternoon. Well done on the exploration success year to date. I just wondered if you could list maybe the key wells to watch in the second half twenty nineteen that are going to support the additional 300 or so resource addition? And on the share buyback, I think over 50,000,000 done to date. Should I be assuming the $400,000,000 share buyback within the 2019 timeframe?
Or how am I thinking into the 1st and second quarter of 2020?
So Luca for exploration, Marcelo, for the buyback.
In the second half, we expect to drill 2 deepwater wells in Mexico. And we have another important well offshore Egypt, and we will continue drilling in Angola. So these are the key wells. Take into account that in the $350,000,000 of equity declared so far is not considered Vietnam yet, that the well is just finished, and we are evaluating the discovery. So that is in any way is a material discovery.
Thanks. Okay. So as far as the buyback, definitely we confirm the €400,000,000 to be bought throughout the from now to the remaining part of this year. While, as you know, as far as the buyback in 2020, it will be decided based on the update in our strategy that will be performed on March February, March 2020. What I could say that looking at the financial, we are projecting right now mainly the leverage that we see that today before the IFRS 16 is 15%, I would say that such results are very well encouraging towards a continuation of our buyback program even in 2020.
Okay. If I might just follow-up on that point. Do you expect leverage at the year end to be in a similar level?
We expect, as we probably detail, performing the strategy, definitely, we are going to pay now €21,000,000,000 to €2,770,000,000 because of the Ruai 20% acquisition. So based on this and based on the scenario we expect in the second half of this year, we expect the deleverage before the IFRS in the range of 20% because of, as I said, the significant amount to be paid for Ruiz.
And that's really the ceiling, yes.
The next question is from Alastair Syme of Citi. Please go ahead, sir.
Hi, everyone. Look, I just had one question actually. It was on Iraq, given that you're a relatively important player in that country. Could you just talk a little bit about the investment climate that you're seeing there? I think back in May that you might have mentioned you could invest an additional $7,000,000,000 in CapEx in Zebir.
So I assume that's some sort of statement that requires better fiscal terms than you're currently getting. So maybe if you could just talk about that and what you think the potential of the asset is, please?
Yes. In Raqqa, the our investment in Raqqa always focus on Dube because we are growing out the production. We reached about 500 1,000 barrels per day. Contractually, we have to reach more than about 800,000 barrels per day. So we have investment.
Our stake is about 40%, thirty 9 percent. And that's how the investment needed to reach this target. As I remember that we recover every quarter, we recover our investment. So there is a very fast recovery of our investment. Up to now, we don't have outstanding.
So we are recovering we recovered all the money invested until now, plus the remuneration. So at the moment, we are working on these projects. We have other opportunities, especially on the gas and oil that we are just at the level of study, nothing else.
Can you kind of clarify, is there any potential in Zubaira to raise the production beyond those sort of 8.50 target? I know originally you've been talking about 1,200,000 barrels.
So the potential in terms of reserves is there. Clearly, we are sealing with the contracts, the timing. And then we have to we have some others related to the water injection. We have to find the right balance between the production and the injection. So the oil is there and can flow, needs additional investment.
We have already a lot of facilities that can we can use to expand the investment, but it's linked to contract, is linked to water and also is linked to the internal rate of return of the investment. So it's linked also to the possibility to improve the condition of the contract.
Okay. Thank you very much.
The next question is from Christopher Kuplent of Bank of America. Please go ahead.
Thank you. Good afternoon or morning. Just two more questions remaining, and they're quite lazy because I'm asking you to give a little bit more color on guidance that I think you haven't given us so far. But you referenced without the pre order issues that the Soles was already running at breakeven. And would that be a fair assumption going into the second half of this year?
And second question, even more obscure, can you give us a little bit of color on what's happening in the other and corporate and intra group line items that seem to be quite volatile? And any hint on whether this is going to correct and more or less stay at historical levels on a full year basis into the second half would be very welcome. Sorry about nitty gritty. Thank you.
Alberto Amareta from Versalis. Thank you for your question. Yes, the second half was poor in terms of results with an EBIT negative for €28,000,000 But in this number, you have to consider that we also have some one off effects resulting from some temporary standstill on our Pergaia plant. Overall, we can sustain a breakeven in this scenario. So having said that, assuming fairly the same constant scenario for the second half, we are confident to sustain expect any major planned maintenance activity for the second half and is also with the fast improving.
Now as far as the other items, so really, we do not expect any kind of volatility looking forward to the end of the year. So the volatility we recorded in the first and second, you remember, was related to the internal gain. So internal transaction between business inside any not reflected yet towards the external market. We had some of them pending in the Q1 that has been recovered in the Q2 as expected, as announced, and we do not expect anything like this in the amount to come. As far as the other cost, corporate cost, we expect a slight decrease in such a cost, but nothing very much volatile.
That's helpful. Thank you very much.
The next question is from Bertrand Hodee of Kepler Cheuvreux. Please go ahead.
Yes. Good afternoon. So I got one question concerning Libya gas exports to Europe. Massimo, you mentioned that it had adverse tax rate effect in Q2. Can you clarify if European gas price will stay low in the next quarters, will it still be the case with adverse tax rate impact?
And can you confirm that you are making money on those gas export from Libya to Europe even as this very low prevailing natural gas spot price in Europe?
So the answer to your final question, yes. And the fact that we are recording such an effect on the tax rate because you may remember that the Libyan gas contract is the remaining one that is fully related to oil. So on the upstream side, we the gas price is related to oil, to Brent, and then the gas is sold to the mainly to the so mainly. More or less today, we are talking about 40% of our old gas production that is exported and sold to the European gas market, mainly at the up price. So that's the difference that generated part of the increase in the tax rate.
As I said, if we forecast a gas price in Italy, the EPSBU in the range of EUR 200 per 1,000 standard cubic meter. 2nd half, we do not expect any kind of discontinuity in the tax rate that has been confirmed in the range of 60%. Even if the gas price should be a bit lower, to give you an example, maybe €10 per 1,000 standard cubic meter. I do not expect any significant reflection on the tax rate.
Thank you very much. Very helpful.
The next question is from Massimo Bonasoli of Equita. Please go ahead, sir.
Good afternoon. Two clarifications left. Considering the volatile development of the net working capital over the first half, how do you see its development over the rest of the year? And the second, maybe I did not catch it over the call, if you can clarify the drivers behind the new CapEx guidance. Is it the result of the farm out maybe?
So as far as working capital, so the volatile trend is mainly related to the seasonality. So nothing special, nothing news and in line with the expectation. Now as far as June, the stock is a slight absorption of cash in the range of EUR 200,000,000. And what we expect, the same shape all along the second half up to the year end. As announced, you remember presenting the strategy, this year, we expect a slight absorption of cash from working capital in such a range, So EUR 100,000,000 EUR 200,000,000 of euros And the CapEx guidance, the CapEx Claudio?
No, no. I just want to highlight something on the CapEx guidance because as we said during the presentation, we have been able to reduce also the given a new guidance to reduce CapEx. That is really a matter of efficiency. It's not cutting. It's really efficiency.
And efficiency that is mainly driven by the time to market. When you are able to respect, not just respect, but anticipate your projects in term of time, you spend less. And that will happen. That happened in Zoa because we anticipated 1 year. That means you can be mobilized.
That is happening in Mexico because in last one in 1 year, we put in production the field, and that happened also in the Western Desert. And that is really efficiency. That is not just a mere reduction of CapEx, but in anticipation of your production. So that is one point.
And nothing to do with the dispositions because dispositions were already included in our budget. Very clear. Thank you.
The next question is from Alessandro Pozzi of Mediobanca. Please go ahead, sir.
Yes, good morning. I have two questions. The first one is on Qatar Petroleum. You found out and few licenses in Kenya and that adds to your to the established partnership you really have in Mexico and Mozambique, just to name a few. I was wondering, which is the likelihood that we're going to see meaningful production from Inai in Qatar at some point in the future?
And also on Agogo, I believe you mentioned €1,800,000,000 of barrels in place in the block. Just wondering what is the level of resources required maybe to have a new hub
in that block? Thank you.
So I gave the two answers. So QP, when? When it depends mainly on the host, not on the guest to open the door and let us step in. Clearly, we are very willing to step in and work in Qatar. We work very well.
And now it's 3 years that we work together outside Qatar. We buy gas from Qatar, so we know each other very well. Now there is this standard for the expansion of the plant. And we are working. We are working very hard, and we hope really to be able to work in Qatar for the first time and have production over there, not just production but also LNG to export.
When you say about Agora, just to make a correction because when we talk about the BRL 1,800,000,000 is related to the discoveries that we made. Gogo itself, the second appraisal confirmed the EUR 650,000,000 that we discovered but risked with the first well. Then we have the second well has been drilled 3 kilometers from the first exploration well and confirm the discovery and find additional explorations. Going to the hub, we had 2 hubs, and we made the 2 hub before discovering having about EUR 1,800,000,000, EUR 1,700,000,000 barrel of resources. And through this, also because of the dislocation and distance of the reservoir we developed to us.
Clearly, here, with the first well that we are going to tie in, in a record time, is really to test the reservoir and gives more energy to the existing hub. But the existing hub has a ceiling, as a ceiling that can be $150,000,000 $160,000,000 And with all the discoveries that we discover for sure, we want just to give an extension to existing facility. We also we want also to develop. So development must be starting in terms of wells, number of wells. But it's really likely that for the discovery, that is a supergiant discovery.
For the 4 d discovery, we will develop the new hub. But we need an additional price of 200 standard SOR and the number of wells and the final possible cost.
Thank you very much.
The final question is from Lydia Rainforth of Barclays. Please go ahead madam.
Thank you and taking the question. Two very quick ones actually on the low carbon part of the business. In terms of the CO2 emissions that you showed coming through, can you just walk through what it is that you're doing differently now versus previously? And then secondly, with Gala and AST coming back in the second half of this year, how do you expect those the margins for those plants to be compared to the wider downstream? Thanks.
Sorry. The first question I answered the first question, you asked if we are reducing if we are doing different before the cost. It's already years years, At least we started years a long time ago. You see the graphs trying to reduce our CO2 emissions. Just to give you figures, Sorry, so if you see the figures just 6 years ago, we our scope 1 CO2 production was about 60,000,000, 65,000,000 tonne per year.
Now we are 40,000,000 that are split equally between upstream and downstream. Clearly, we work and lost on the upstream because we had more space because we work on the flaring down that's been drastically reduced more than 80%. And then we work on the methane emission. And that is clearly where the target is to by 2025, to stop all the flaring and reduce the addition 80 percent of the methane emissions. Clearly, that is not now.
We are working a lot on circular economy. We are working on renewal also for that reason because we are replacing our internal gas consumption through renewals, and that is impacting the scope 1 and reducing the scope 1 than forestation. And for the downstream, clearly, the downstream is more resilient to reduce CO2 is thermal process, is thermal CCUS and CCU. That is what we are projecting and we are developing to reduce the and capture the carbon production in the downstream. We have a target, a clear target with a commitment, 2,030, to reset to offset the COP1 in the upstream.
We are working, working in progress. We hope that next year, so when we are ready, we can also disclose when we'll be carbon free also in the downstream. Thank you.
Gentlemen, would you like to make any closing remarks? There are no questions registered at this time.
No, thank you. We don't have Tinder. We touched all points, and we don't have any closing remarks. Thank you very much for your attention.