Good afternoon, ladies and gentlemen, and welcome to Eni Q2 2019 results conference call hosted by Mr. Claudio Descalzi, Chief Executive Officer. For the duration of the call, you will be on listen-only mode. At the end of the call, you will have an opportunity to ask questions by pressing star and zero on your telephone. If you need assistance during the conference, please press star and zero. I'm now handing you over to your host to begin today's conference. Thank you.
Good afternoon and welcome to Eni H1 results. In the first half of 2019, we continued to consolidate our strategy and enhance our cash generation. Operating and free cash flow growth are the most remarkable achievements. We generate EUR 6.8 billion of operating cash flow at 23% growth versus 2018 in a lower gas price scenario. With CapEx at EUR 3.8 billion, we generated an organic free cash flow before working capital of EUR 2.9 billion, almost doubling the EUR 1.5 billion of our dividend needs in the period. Thanks to this strong cash performance, we reduced our debt to below EUR 8 billion, the lowest level since 2006. This corresponds to a leverage of 15% at the end of June. Upstream production was 1.83 million barrels per day.
We continue to deliver high value production and with the ramp-ups in Egypt, Ghana, and Angola, and the start-up of a new field in Mexico, we almost compensated the impact of the conclusion of the Intisar gas contract that weighed for around 6%. Exploration continued to create new opportunities for future development. During the H1 , we discovered around 350 million barrel 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 EST in Sannazzaro.
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. We keep developing our Italian projects. 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 H1 reached 1.83 million barrel per day. H1 2019 output was impacted by a reduction of 111,000 barrel per day for the end of Intisar gas contract, and 19,000 barrel per day for price effects and portfolio.
Positively for 66,000 barrels per day by start-ups and ramp-ups like Zohr, 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 start-ups of Mexico Area 1, Trestakk in Norway, and Berkine oil in Algeria. The future growth will be supported by a ramp-up of Zohr to plateau level and the announced contribution of Kashagan after the end of maintenance. Production in Q3 is expected to grow between 2.53% versus Q2. For the full year, we expect production between 1.87 million and 1.88 million barrels per day, mainly depending on the demand for Jangkrik LNG and assuming a flat contribution of 40,000 barrels per day from 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 15/06 in Angola continues to deliver outstanding results. In the last few months, we made three main material discoveries in Agogo, Ndungu, Agidigbo fields. Yesterday, we announced the result of the appraisal of Agogo that confirms the best estimate of 650 million barrels of oil in place. With further upside in the northern sector of the field, that will be tested with additional appraisals. The last five discoveries made in one year add up to one billion barrels of oil in place to the already existing resources, bringing the amount of discoveries in the block to about four billion barrels of oil in place.
Further development will be fast-tracked, 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 startup 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 five wells, of which four are new field discoveries. The first discovery was Nour that we drilled in the first quarter. We made two oil discoveries in Western Desert and one gas discovery in the Nile Delta. In the Gulf of Suez, we found a new structure on the Sidri South prospect that hold up to 200 million barrel of oil in place.
In Ghana, in CTP-Block 4, we discover Akoma with a volume in place up to 650 BCF of gas and 20 million 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 subsea tie-in to the existing FPSO. Finally, in Vietnam, we proved the presence of gas and condensate in the Ken Bau prospect in Block 114. A significant potential, with an estimated net reservoir thickness in excess of 100 meters, that will be target for future appraisals. During the H1 of 2019, we discovered 350 million barrels of equity. These results allow us to raise our guidance to more than 600 million barrels of discovered resources for the full year. Eni is the first international company to start production in Mexico.
In Area 1, we drilled five wells, 100% success rate, before submitting the development plan, increasing the oil in place to over 2 billion barrels. We fast-tracked the early production phase, and we achieved the startup in June 2019, less than one year from the approval of the development plan. We are planning to have an FPSO production start up by H1 2021, 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 six blocks in the shallow and deep water, with a stake between 40% and 80%. In the second half of 2019, we plan to drill two exploration wells. Also in this first half, with a lower price, upstream further improved its cash generation.
Upstream cash flow from operation, including working capital, was EUR 5.6 billion, 6% higher than last year, while gas prices were materially lower. On a comparable basis, the gross of cash flow from operation amount to 13%. With CapEx at EUR 3.3 billion, we generated an organic free cash flow in NMP of EUR 2.3 billion. Moving to midstream. Gas and Power EBIT was robust at EUR 418 million. In particular, GLP reached EUR 253 million 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 EUR 165 million, a 28% increase versus last year, thanks to international development and a stronger commercial initiative in Italy. This performance confirms our full year Gas and Power guidance of a EUR 500 million EBIT.
The Refining and Marketing result was positive in a scenario impacted by the narrow differential over Urals due to OPEC cuts and the Druzhba pipeline contaminations. Marketing was the driver of the result, with a contribution of around EUR 250 million. The startup of Gela biorefinery, along with the restart of Sannazzaro 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 Priolo, which returned to full operation at the end of June. Net 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 terms of the decarbonization plan. We have a strong commitment to deploying a strategy based on lower emissions per barrel in upstream, higher contribution from renewables, biomasses, and circular economy initiatives.
In renewables, we have seven projects in four 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 Gela, our biorefinery reached a treatment capacity of around 1 million tons per year. Emission per barrel were lowered by 2.3% in the H1 versus last year's, and by 22% versus 2014, in line with our long-term target. Coming to the financial result. Cash flow from operation before working capital was EUR 6.8 billion, 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 EUR 1 billion to the traditional gas seasonality.
H1 CapEx at EUR 3.8 billion, in line with the 2018 first half, and further optimization and efficiencies allow us to improve our CapEx guidance to below EUR 8 billion. Overall, in this semester, we generated an organic free cash flow before working capital of EUR 2.9 billion. Cash flow from operation and free cash flow are growing in line with our yearly expectations. Finally, a brief summary of our full-year guidance. We are expecting better results in exploration discoveries and a lower amount of CapEx. Due to the weak scenario for oil differentials and margins, we are revising our R&M EBIT to around EUR 500 million. All the other guidance remain unchanged. Now we are ready, together with the Eni top management, to answer your questions. Thank you.
Thank you, sir. We will now begin the question- and answer- session. The first question comes from Mr. Oswald Clint of Bernstein. Please go ahead.
Thank you. First question I wanted to ask, please, on Goliat. It's been a while since we asked about it. 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? Are there some issues at that particular field? Secondly, again, on the upstream, please. The tax rate, obviously quite high in the Q2 , 66%. You talked about Mexico, Norway, Algeria ramping up in the H2 . I guess some of those are also quite high tax areas. 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 60%, or is this new level potentially something we have to consider? Thank you.
Thank you. For Goliat, Alessandro Puliti, the head of E&P, will deliver the answer, and then Massimo will talk about the tax rate.
Okay. Regarding Goliat production, our expected equity for 2019 is 21,000 barrels of oil equivalent. That is equivalent to 100% production to 46,000 barrels of oil equivalent. Production this year, it accounts for two main shutdown. One already occurred in May. We had seven 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. Clint, let me comment a little bit about the tax rate. As you know, the second quarter 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 two factors. First of all, the worst scenario, mainly gas. This is affecting definitely the Upstream business, including the gas exported from Libya, and refining margins. Together with this, what we had is a non-optimized setup in some Italian plants, mainly Sannazzaro refinery, as you know, and the Priolo chemical plant that has been shut down at beginning this year. Assuming in the H2 of this year that the Italian assets are back to normality and Priolo is already done, Sannazzaro is ongoing. The scenario similar to the one that we experienced in the first half this year, more or less EUR 200 per 1,000 cubic meter, $66 per barrel Brent, and a refining margin a bit higher than what we experienced in the H1.
We are still forecasting $4.50 as an average full year. We confirm a full year consolidated tax rate of 60%. The increase in the tax rate you notice in the E&P is mainly due to the gas part of the E&P business related to the European gas price trend. Let me finally give you a quick note on the cash tax rate, because in the second quarter 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 non-cash item. The full year 2019 cash tax rate is expected in the range of 30%, confirming the guidance that we already gave. That's very clear. Thank you.
The next question is for Mr. Thomas Adolff of Credit Suisse. Please go ahead, sir.
Good afternoon. Two questions for me, please. Firstly, on the dual exploration model. You've announced the sale of 20% in Merakes, you don't really say how much for. Maybe you can comment on it, whether these proceeds are also incorporated in your CapEx guidance. Secondly, I wanted to ask you about 2020. Obviously, upstream production will grow on a year-on-year basis in the second half of this year. I wondered what exit rate we can expect in 2019, likely year-on-year production growth in 2020. 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.
Well, thank you. For the dual exploration model, yeah, you remarked what happened just yesterday on Merakes. The dual exploration is clearly a consolidated model for Eni. We are performing in different way or by cash or by kind, by swapping. It's working very well, and is sustained by a very strong exploration result. As you remark in the first semester, we made the discovery, big field, 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. That will be included in the development looking forward. Also other field that we discover where we own a large stake will support this model looking forward. Now, Massimo for the other questions.
It's a bit difficult to give you guidance as far as 2020, because it's still premature. What I could say that definitely, you notice 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 four-year plan, because this factor is already embedded in the projection that we presented 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. On the Indonesian volumes, could you just give a bit more color about the reduction at Jangkrik? Presumably it's because buyers will prefer spot LNG, given where we are in the market. Can you quantify the reduction in production there? 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? Thank you.
Cristian Signoretto, G&P. on the Indonesia LNG sales, you're right. We have long-term contracts signed on that field, which sees buyers actually having difficulties to take all the volumes given the situation of the market. 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. We expect a slight reduction in the sales for the second half of the year, given the market condition.
For internal production, the question related from cargo to production, we consider about 10,000 barrels per day on average, possible 10,000 per day. For that reason, we gave a range for the final target of this year. In term of contingency on the second quarter, we are at about 50,000.
Second half.
Second half, not second quarter. Second half, 50,000 barrel per day.
Great. Thank you very much.
The next question is from Irene Himona of Societe Generale. 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? What is the current capacity growth and net to Eni, please? Secondly, on R&M, where you lowered the guidance following the weakness in refining. Can you say of the EUR 500 million you expect, given the performance in the H1 , what is the split between marketing and refining? It seems that obviously refining has been loss-making. What margin do you assume in the second half to reverse that? Thank you.
Puliti will answer for Kashagan, and Pino Ricci will answer for R&M and the split between R&M result.
Okay. For Kashagan, we confirm we have finished the turnaround. It went very well because it lasted 10 days less than was initially forecasted. During the turnaround, there was also the conversion of two additional wells to gas injector, and this allowed an improvement of the production performance. They 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.
Okay.
Pino Ricci, Refining and Marketing. About the guidance from EUR 0.7 billion - EUR 0.5 billion in 2019, this is due to the weaker scenario in the H1 and the fact that we have concentrated in the H1 , just because the scenario expected the best scenario, all the maintenance, and the turnaround. We expect to have a big recovery in H2 because the scenario is increased. It's already increased in July. We expect to have a good margin and good spread high sulfur, low sulfur crude in the second half because the IMO effect. In addition to this, we will have, in the H2 , the contribution of Gela biorefinery in startup in these days, and the startup of EST plant in Sannazzaro.
We expect also good contribution of the marketing that in this quarter, the third quarter that is the driving season, the summer season. Overall, we expect in the H2 , more than EUR 200 million of contribution from the marketing and slightly less than EUR 200 million from the refining overall, traditional and bio.
Thank you.
The next question is from Jon Rigby of UBS. Please go ahead, sir.
Oh, yeah. Hi. Two questions. Just on the scenario in the downstream behind the standardized refining margin deteriorated. Obviously, we can see that, and you just referenced light, heavy spreads, sweet, sour spreads, et cetera. Are you able to give me a little more detail on the assumptions that you make around the crude spreads that get you to a sort of standardized margin? 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 when it will complete, then start to deliver earnings. 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, et cetera. Is it possible you just remind me what disposal receipts you're expecting in addition to the Merakes one? Thank you.
About the spread, high sulfur, low sulfur crudes. We had in the H1 , a very big spread of $1.4 per barrel of appreciation of high crude versus low crude. It's very strange scenario. We expect to have in comparison with the budget. We expect in the H2 , in alignment with the budget. We have just in the last part of June, early in July, we are seeing this alignment. About ADNOC, we expect the completion by the end of this month, the 31st of July. Three months in advance versus what we have expected. I leave the floor to Massimo now. As far the disposal in the H2 , Jon, you noticed this morning that we sold 20% of Merakes, and we have some other ongoing small divestiture that will take place in the second part of this year.
The overall amount we expect to cash in is in the range of EUR 300 million.
Okay. Just to come back, just to confirm, the ADNOC contribution will be your sort of affiliate pickup through the associated clients?
Yeah, Jon, when we announced the deal, we said that we expected a small contribution starting from 2019 because of the interim deal 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 zero, 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 H2 2019 that are going to support the additional 300 or so resource addition. On the share buyback, I think over EUR 50 million done to date. Should I be assuming the EUR 400 million share buyback within the 2019 timeframe, or am I thinking into Q1 and Q2 of 2020? Thanks.
Luca for exploration, Massimo for the buyback.
In the H2 , we expect to drill two deep water wells in Mexico. We have another important well offshore Egypt, and we will continue drilling in Angola. These are the key wells. Take into account that in the 350 million barrel equity declared so far, is not considered Vietnam yet. That the well is just finished, and we are evaluating the discovery. That is in any way is a material discovery.
Thanks.
As far as the buyback, definitely we confirm the EUR 400 million to be both throughout from now to the remaining part of this year. 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 February, March 2020. 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 EUR 2.77 billion because of the Ruwais 20% acquisition. Based on this and based on the scenario we expect in the second half this year, we expect the leverage before the IFRS in the range of 20%, because of, as I said, the significant amount to be paid for Ruwais.
Thanks very much.
That should be the ceiling. Yes.
Okay, thanks.
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 are seeing there?
Back in May, you might have mentioned you could invest an additional EUR 7 billion in CapEx in Zubair. I assume that's some sort of statement that requires better fiscal terms than you're currently getting. Maybe if you just talk about that and what you think the potential of the asset is, please.
Our investment in Iraq always focus on Zubair because we are growing out the production. We reach about 700,000 barrel per day. Contractually, we have to reach about 800, so we have investment. Our stake is about 40%, 39%. That investment needed to reach this target. As I remember, every quarter we recover our investment. There is a very fast recovery of our investment. Up to now, we don't have outstanding. We recovered all the money invested until now, plus the remuneration. At the moment, we are working on these projects. We have other opportunity, 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 Zubair to raise the production beyond the sort of 850 target? I know originally it had been talked about 1.2 million barrels.
The potential in terms of reserves is there. Clearly, we are sealing with the contracts, the timing, and then we have some hurdles related to the water injection. We are to find the right balance between the production and the injection. The oil is there, and the control needs additional investment. We have already a lot of facility that 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. 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. You referenced without the Priolo issues, that Versalis was already running at breakeven, and would that be a fair assumption going into the second half of this year? Second question, even more obscure, can you give us a little bit of color on what's happening in the other, and corporate, and intragroup line items that seem to be quite volatile? 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 the nitty-gritty. Thank you.
Alberto Navarrete from Versalis. Thank you, Christopher, for your question. The H2 was poor in terms of results with an EBIT negative EUR 28 million. In this number, you have to consider that we also have some one-off effects resulting from some temporary standstill on our Ragusa plant. Overall, we can sustain a breakeven in this scenario. Having said that, assuming fairly the same constant scenario for the second half, we are confident to sustain a breakeven in second part of the year. Consider also that we do not expect any major planned maintenance activity for the H2 , it also would pass improving.
As far as the other items, really, we do not expect any kind of volatility looking forward to the end of the year. The volatility we recorded in the first and second, you remember, was related to the internal gain. Internal transaction between business inside Eni, not reflected yet towards the external market. We had some of them pending in Q1 that is being recovered in Q2 as expected, as announced, and we do not expect anything like this in the months to come. As far as the other 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 Hodée of Kepler Cheuvreux. Please go ahead.
Yes. Good afternoon. 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? Can you confirm that you are making money on those gas export from Libya to Europe, even as this is very low prevailing natural gas spot price in Europe.
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. On the upstream side, the gas price is related to oil, to Brent, and then the gas is sold mainly, more or less today, we are talking about 40% of our own gas production that is exported and sold to the European gas market, mainly at the hub price. 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 PSV, in the range of €200 per thousand standard cubic meter second 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 thousand 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 Bonisoli of Equita. Please go ahead, sir.
Good afternoon. Two clarification 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? 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?
No. As far as working capital, the volatile trend is mainly related to the seasonality. Nothing special, nothing new, 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 million. What we expect, the same shape all along the H2 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 million-EUR 200 million. The CapEx guidance. Claudio.
No, I just want to add something on the CapEx guidance, because as we said during the presentation, we have been able to reduce also, given a new guidance to reduce CapEx. That is really a matter of efficiency. It's not cutting, it's really efficiency. An efficiency that is mainly driven by the time to market. When you are able to respect, not just respect, but anticipate your projects in terms of time, you spend less. That's what happened. That happened in Zohr, because we anticipated one year. That means you can demobilize. That is happening in Mexico, because in less than one year, we put in production the field, and that happened also in the Western Desert. That is really efficiency. That is not just a mere reduction of CapEx, but an anticipation of your production. That is one point.
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.
Yeah, good morning. I have two questions. The first one is on Qatar Petroleum, you farm out a few licenses in Kenya, and that adds to the established partnership you already have in Mexico and Mozambique, just to name a few. I was wondering, what is the likelihood that we're going to see meaningful production in Qatar at some point in the future? Also, on Agogo, I believe you mentioned 1.8 billion of barrels in place in the block. I was just wondering, what is the level of resources required maybe to have a new hub in that block? Thank you.
I give the two answers. 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. Now is it three years that we work together outside Qatar. We buy gas from Qatar, so we know each other very well. There is this tender for this function of the plant, and 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 Agogo, I want just to make a correction, because when we talk about EUR 1.8 billion is related to the discoveries that made Agogo itself.
The second appraisal confirmed the 650 million that we discovered, but risked with the first well. We have the second well is being drilled 3 km from the first exploration well, and confirms the discovery and find additional explorations. Going to the hub. We had 2 hubs, we made the 2 hub before discovering, I think about 1.8, 1.7 billion barrel of resources. Through this, also because of the location and distance of the reservoir, we developed 2 hubs. Clearly here, with the first well that we are going to tie in a record time, is really to test the reservoir and gives more energy to the existing hub. The existing hub has a ceiling. Has a ceiling that can be 150, 160. With all the discovery that we discover for sure, we want one just to give an extension to the existing facility.
We want also to develop. Developing must be studied in terms of wells, number of wells. That is really likely that for the discovery, that is a super giant discovery. For the discovery, we will develop a new hub. We need an additional project to understand the reservoir 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. Taking a 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? Secondly, with Gela and EST coming back second part this year, how do you expect the margins for those plants to be compared to the wider downstream? Thanks.
Sorry. I'll answer the first question. You ask if we are reducing, if we are seriously doing different before the past. It is already years and years, at least we started years a long time ago. You see the graphs to reduce our CO2 emissions. Just to give you figures. Sorry. If you see the figures, just six years ago, our Scope 1 CO2 production was about 60-65 million tons per year. Now we are 40 million tons. That are split equally between upstream and downstream. Clearly, we work a lot on the upstream because we had more space because we work on the flaring down. That has been drastically reduced more than 80%. Then we work on the methane emission. That is clearly the target is to by 2025 to stop all the flaring and reduce additional 80% 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. Forestation. For the downstream, clear the downstream is more resilient to reduce CO2. Is a thermal process, is thermal CCUS and CCU. That is what we are projecting, and we are developing to reduce and capture the carbon production in the downstream. We have a target, a clear target with a commitment, 2030, to offset the Scope 1 in the upstream. We are working in progress. We hope that next year 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. I think that we touch all the points, and we don't have any closing remarks. Thank you very much for your attention.
Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.