Ladies and gentlemen, this is Maria Victoria Singone, Investor Relations with Repsol. On behalf of our company, I would like to thank you for taking the time to attend this conference on our annual results. The presentation will be conducted by Antonio Ruffao, our CEO. Other members of the Executive Committee are joining us as well and will be also available to answer your questions. Before we start, please, I invite you to read our disclaimer note.
We may make forward looking statements, which are identified by the use of words such as will, spec and similar phrases. Actual results may differ materially depending on a number of factors as indicated on this slide. I now hand the conference over to Antonio.
Thanks, Maria Victoria. Good day to you all. Before going into further details on our annual performance, please allow me to go over some of the 2010 events where we made important progress towards achieving the objectives set in our strategic update last year. Let me recap on that. In upstream, production and reserve figures were both in line with our planned targets.
Our production recorded 3% organic growth with a better production mix, reaching 42% in liquids versus 40% in 2,009. Reserve replacement ratio for the year achieved 131%, almost all organic. In downstream, we continue to make progress toward the start up of the Cartagena and Bilbao refining projects, set to come on stream in Q4 2011. At year end, we had spent 71% of the total investment budget. Both projects continue to be on track and will be on a stream below budget.
In YPF, local prices for liquids continued its trend towards international parity. Dollar increases reached 14% in gasoline and 19% in diesel over the year. Moreover, we proved that oil decline could be contained with the right economics in place, Even though BOE production declined 5.4%, it was only 1.6% in crude oil versus more than 5% in the previous year. These two improvements in product prices and oil volumes explain how what we call the hidden value is flourishing and positively impacting our profit and loss account. Gas Datura Altenosa continued working on the objective set in 2010 2014 framework.
Not only the company made progress in reducing the net debt, but also in enhancing its financial structure and in extending the debt maturities. On the arbitration process between Gas Naturals, Tenosa and Sonatrack, the Swiss Federal Court suspended it until the court decides on the appeal filed by Gas Naturale. Now with understanding this statement, Gas Naturale has included the estimated impact on its results. Regarding portfolio management, we made great progress in improving our portfolio mainly through: first, the Repsol Brazil capital increase, fully subscribed by Sinopec. Net valued Repsol's assets in Brazil at $10,700,000,000 and ensures the self financing of the investments required to develop our major discoveries in Brazil.
2nd, the advances in reducing our YPF stake. In total, we reduced it by 4.2% at an average total company value of $15,600,000,000 In consequence, we increased our equity by €150,000,000 due to current accounting rules. Our vision to dilute remains unchanged, and we plan to keep a majority stake. Once the SEC approves the submitted F3, authorizing the sale of up to 15% in YPF, more stock will be placed among institutional investors in the first stage, adding retail investors in the 2nd phase. 3rd, the disposal of our 30% stake in the Brazilian refinery, REFA, for an enterprise value of 850,000,000 dollars sorry.
This transaction represents the culmination of Repsol's non integrated downstream assets divestments process in Latin America. All of the above has improved Repsol's financial significantly. Our net debt, ex gas natural, at the end of 2010 was only EUR 1,700,000,000 was 65% lower than at the end of 2,009. The free cash flow generated during the year and the strength of our balance sheet due to, among other things, to capital increase in Brazil allowed us to redeem $725,000,000 in preferred U. S.
Shares, which will improve our average financial cost. To sum up, we were able to advance and achieve set goals in all business lines and continue to be fully committed to the long term growth. Let me now go through the main operational highlights of our core businesses during 2010. At the upstream level, 2010 has been another important year in positioning ourselves as our respected upstream operator and explorer. Accordingly, exploration success was in line with the positive trend initiated back in 2,008.
6 exploration successes in the year, 2 in Brazil, Creel Via and Piracucatu 2 in Venezuela, Perla II and Perla III 1 in Colombia, Calamaro and 1 in Sierra Leone, Mercury. These achievements allowed an addition of 750,000,000 BOEs to our contingent reserve base, taking into account the 40% dilution in Brazil. In the last 2 years, we have been able to add more contingent resources than our proven reserve base. In addition to these wells, we also achieved good results in a deeper formation of the current producing structure in Rio Grande, Bolivia. That could hold 1 Tcf and which could be developed rapidly since the facilities are already in place.
We also continue with a seismic intensive campaign and are adding exploration acreage in the Gulf of Mexico, Norway, Canada, Indonesia and Peru. At the beginning of 2011, we were also awarded 3 exploration licenses in Angola. Regarding our upstream development operations, let me share with you the status of the different projects. In Brazil, partner discoveries were made in 2010. We reported to the A and P the presence of hydrocarbons at Curial B within the Albacore Leste block in Brazil B Offshore Campus Basin.
Nevertheless, another well will be required to better assess volume, extension and production capacity of the field. In addition, the Guadalajara, Carioca and Piracuka appraisal wells were drilled successfully, each confirming the enormous potential of these three fields included among the growth projects in our strategic update. In Peru, we continue with the appraisal activities in the Quinta Roni field. In January 2011, Kintaroni 2 proved positive and enlarged the initial resource estimations. A second applied shale well is scheduled this year and progress is being made so that the first gas production comes on stream in 2012 as originally planned.
The award of Carabobo in Venezuela is strategically important since the access to this large reservoir secures heavy oil supply for our Spanish refining system. The project is progressing as expected, and the consortium is working on a plan to accelerate production in this scenario. The first oil from this field could be on stream in 2013. Also in Venezuela, the Ministry of Energy and Petroleum approved the Carbon 4 appraisal plan. Perla 2 and 3 wells were drilled in 2010, and Perla 4 also proved positive and extended the field north.
Recovered on resources are estimated at 90cf, although after this well, further upside is expected. The first gas production will come on stream in 2014. In Bolivia, the final investment decision for the first phase of the Margarita project was made in 2010. Incremental volume production will be exported to Argentina at a price linked to oil prices. The first gas output of Phase 1 remains to come on stream in 2012.
In the Gulf of Mexico, the drilling of Bagskin II appraisal well was suspended after having drilled 125 meters. The resumption of back skin drilling has not been authorized yet, despite the fact that the moratorium was lifted in October. In Shenti, we were able to restart drilling operations, but only for water injection. We believe that Shenti's average production through this year will be slightly below to that of Q4 2010 due to the delay of planned development wells. In the meantime, we are completing our review of operating procedures and management system to comply with the new legal framework.
On February 8, we presented the first exploration plan to the authorities. In regard to LNG, Peru LNG, the second of our growth projects in this business line, successfully started operations in the month of June. Since then and until December, 20 cargoes were shipped from the liquefaction plant to different locations. As a consequence, Repsol's LNG volumes and earnings increased. Repsol and CoGas have recently signed an LNG supply agreement that will involve the shipment of 1.9 Bcm of gas equivalent to Korea.
We will ship the LNG from the Peru LNG terminal, where we have the entire offtake rights. Also, Repsol's role as an LNG supplier to Argentina continued, providing a total 8 cargoes during the year. Stream, our GB with Gas Naturale, also increased volumes by 40 percent activity increases in volume, commercializing 6.3 BCM in the year, mainly from Trinidad, Tobago and Peru. At the downstream level in refining, during 2010, we continued making progress on the Cartagena and Bilbao projects. The refining and marketing integrated margin at $5 per barrel reflects our strength and is one of the highest margins in the sector.
The performance of the marketing business has been rather strong over the year, offsetting a 3.2% drop in sales in our service stations in Spain. The chemical business was one of the activities that suffered the most from declining global demand during the worst of the economic crisis. This activity finally rebounded in 2010 and started an upward trend that concluded in adjusted operating results above the economic breakeven point. The recovery in volumes as well as higher margins drove this improvement. At YPF, on top of the 2 drivers, palm prices moving to import parity and crude oil decline mitigation, I would like to highlight from the operational standpoint 2 significant events that supported the progress achieved in Argentina.
On the one hand, the reserve replacement ratio has been the highest in recent years, with oil replacement fee reaching 100%, due to the effort aimed at improving the recovery factor. A one point of increase in the crude oil recovery factor implies around 250,000,000 barrels, more than 2.5 years at current production level. On the other hand, the progress achieved in relation to non conventional resources, let me elaborate on this topic. On the typecast side, we concluded a 4 well program that enable us to assess a 4.5 Tcf resource base in Loma de la Lata field. We are developing the 1st phase based on a contract signed with Vale do Rio Doce.
Vale will initially invest up to USD 150,000,000 and will have the right to receive sharing operating costs, 50 percent of the 1,600,000 cubic meters a day estimated production. The company could also acquire almost all the of the remaining volume at a reference price between USD 5 6.5 per 1,000,000 BTU under current market conditions. This is an example of how YPF is creating value by developing non conventional resources. On shale oil and gas, we have drilled several vertical wells as part of the exploration work to prove the existence of this type of resources in the Neuquen province. The 3 fracture wells revealed that the Vaca Muerta formation presents similar conditions to shale oil and gas of those found in Bakken and Eagle Ford Basins in the United States.
We are currently drilling a horizontal well to gather additional data and evaluate final potential of a production well while estimating final recovery. The records obtained in the drilled wells make us optimistic, and the progress achieved is encouraging. All the drilled wells have been vertical ones so far and production levels under natural flow. We will start another well this week. To finish with unconventional resource potential in Argentina, In late November, we were awarded the 13 available licenses in the Neuquim province tender round.
The interest of the aforementioned potential in the area was confirmed by the fact that some of the major players in the sector, Total, Apache, Exxon, etcetera, joined us in all the areas. After this review of the achievements in our strategic plan and the main highlights of the year, let me now focus on our earnings performance. Net income, including inventory effects and nonrecurring items, reached EUR 4,700,000,000 mainly due to the Sinopec transaction. CCS adjusted net income was EUR 2,000,000,000, 57 percent higher than 2,009, while 4th quarter was €499,000,000, 107,000,000 higher. In 2010, we reached a CCS adjusted operating income of €4,700,000,000 71 percent higher than the year before, while 4th quarter reached EUR 1,000,000,000, 41% higher year on year.
The improvement in all variables explained the good performance, both for the quarter and for the year as a whole, compared to last year. Higher international oil and gas references, a stronger dollar against the euro, superior integrated refining and marketing margins, better results in the Chemical segment and an overall improvement in Argentina. Let me go now into the main effects in 4th quarter and twenty ten results business by business. In Upstream, adjusted operating income was EUR 361,000,000 versus EUR 225,000,000 in the same quarter of 2009. The increase in our oil realization prices has been in line with the increased international references.
Furthermore, our gas realization prices in the year increased 17%, more than the 10% increase of header hub prices. This had a positive EUR 122,000,000 impact on operating results year on year. At the full year level, reaching almost €1,500,000,000 upstream adjusted operating income was 67% higher than the €884,000,000 posted last year, mainly as a consequence of higher average oil and gas prices and higher volumes. Moving to LNG. Enhance performance was mainly driven by higher LNG margins and volumes following the start up of Peru LNG.
In the downstream business, CCS adjusted operating income was €164,000,000 in the quarter, 73% up year on year. Refining margins were $2.9 per barrel in the quarter compared with $0 per barrel in Q4 2019, a particularly difficult period. The company's wider refining margin, coupled with the rise in distillate volumes in the Spanish refineries, had a positive impact of EUR 106,000,000 on the refining activities operating income. The utilization rate of our refining system in Spain also increased in Q4 2010 to 76% versus 65% in Q4 2019. For the 3rd consecutive quarter, the recovery of managing ton volumes in the chemical business drove operating income above breakeven, EUR 42,000,000 more in comparison with the same quarter a year ago.
For the entire year, CCS adjusted operating income in the Downstream business as a whole reached EUR 977,000,000, 51% higher than a year ago, mainly explained by the higher refining margins due to the wider spreads in light and heavy crudes and in medium distillates as well as by the recovery shown in the chemical business. Moving on to IPF. Adjusted operating income in the quarter was EUR 3.71 1,000,000, higher than the EUR 331,000,000 posted in Q4 of 2009. The most significant variations continue to be driven by higher domestic prices in dollar terms and higher interventional prices. Higher gas volumes and prices, particularly in the industrial segment, also had a positive impact on operating income.
Overall, production was 2.5% lower than in the same period last year. Production of liquids was down 5.7%, mainly due to the impact of the oil workers' strikes in December. Meanwhile, gas production increased 2.1%. Excluding the strike impact, total production would have been 1.2% higher. This labor strike made it necessary to increase purchases of oil and liquids so as to maintain sales volumes.
The 19% year on year increase in operating costs due to greater activity and higher prices affected the P and L as well. For the whole year, adjusted operating income at YPF reached EUR 1,600,000,000, 1 106% higher than last year. This growth was driven by higher pump and international prices in dollars and partially offset by the rise in operating costs. In gas natural, operating income in the quarter was 60% higher than in the same period in 2,009. The increase is mainly attributable to the cold weather in Spain in 4th quarter.
The better results of the power distribution businesses in Spain and the greater contribution of Latin America gas distribution activity. For the full year, adjusted operating income at Gas Naturale was EUR 849,000,000 in comparison with EUR 745,000,000 posted a year earlier. The 14% rise is mainly due to the inclusion of 100% of the immuno tenorcel results as of 30 April 2009 in the results of Gas Naturals SDG. After this analysis of our earnings performance, let me focus now on shareholders' return. Repsol's Board of Directors agreed on a gross interim dividend of EUR 0.5 to EUR 5 per share charged to 20.10 earnings and a final dividend for the same amount.
This dividend, pending of AGM approval, represents a 23.5% increase compared to the previous year. This dividend increase reflects the positive development in the company's earnings through 2010, and it's in accordance with our policy of financial discipline combined with appropriate shareholder return, as laid out in our company's strategic plan. During 2011, we will devote our efforts to continue the development of the growth projects in our strategic plan. Exploration activity will be one of the focus. We will be drilling between 25 30 wells and investing more than $900,000,000 Brazil remains an area where we plan to carry out intensive activity.
We will drill 8 wells, 6 in the pre salt and carry out extended well test for each of the CURA and Caryoka discoveries. These activities will deliver information to enable us to assess the quality of the reservoirs and determine the optimum development plans for these fields. Outside Brazil, other exciting exploration drillings this year will take place in U. S, Norway, Guyan, Liberia, Morocco, Cuba and Bolivia among others. Overall, we will maintain our exploration activities in line with last year's efforts.
Let me now briefly elaborate on some updates on our key projects in Apsley. It is worth mentioning that our projects are positioned in the main hotspots of the industry, such as Brazil, and that they all offer returns well above the cost of capital, among the highest in the sector. In general, all projects are being executed as planned with some performing even better such as Perla in Venezuela and some projects in Brazil. In Perla, after drilling 3 wells, we have exceeded size original. The increase in size will mean higher total investments, but lower on a per barrel basis.
The ministry has assigned a US3.69 dollars per 1,000,000 BTU price, securing a good return on our investment. We have also upgraded expectations on Guadalaj, where the consortium has already contracted the FPSO and the project remains on schedule to be on stream in early forecasted in last year presentation. 1st, Albacoraleste Deep or Creel B discovery, a project that will be adding production during the strategic period since tests will be performed in 2013, 2014. 2nd, the 2009 Lovina Montanato discovery in Spanish waters as a new key project. Despite the reduced size, it is a very profitable project due to oil quality, existing facilities and the fiscal framework in Spain.
We are currently in the process of obtaining authorizations. Therefore, I can affirm that the regional production targets of 3% to 4% compound average growth per annum for the period 2010, 2014 and reserve replacement ratio greater than 110% could be achieved despite the dilution of a 40% stake in our Brazilian subsidiary. Looking ahead, consolidating our LNG position is just a matter of doing what we know best, applying operational efficiency and optimizing to these assets. To achieve these goals, we will leverage our trading and marketing strength, the quality of our assets, our know how fleet and stream GB to give us privileged access to premium markets, Korea, Mexico. Flexibility is the key regarding LNG, and we could benefit from our position as a global operator and privileged market access.
Our main goal in the Downstream business is to finish the projects on time and consolidate our leadership position by marketing the additional upcoming volume from these investments. The continued recovery in macro conditions and the widening of the differentials will support the start up of these projects. Under current refining margin conditions, with these projects on a stream, we would have increased the company refining margin by $2 per barrel. The three targets for the business stated in our strategic update remain in place: increasing distillation capacity, improve the middle distillate yield by 25% and increase the conversion index by 47%. The conversion projects will enhance Repsol's position in the European Downstream.
Once the 2 projects come on stream, we will run 1st position in the European Union in middle distillate yields. Therefore, the downstream business will be a net cash generator and will support the growth of the company. In Argentina, strategically speaking, we will focus on the one hand on nonconventional resources and on the other, on conventional crude oil production by further improving in the recovery factor, while managing the P and L and cash generation. Provided that we have achieved a sound financial position and we are now more comfortable to face next capital requirements, we could consider Gas Naturale as a long term value. Not only this investment provides a good dividend yield, but also enhances our LNG business through the synergies between the two companies.
Regarding new energies, we are working now on the development of the business unit strategic plan based on 5 potential areas: bioenergy, renewable generation, mobility, CO2 and energy efficiency. We will keep a smooth but continued pace investing in research and becoming involved in risk controlled projects. Although we believe that the challenges we faced in 2010 will remain in place in 2011, this will be softened by the continued global recovery. In relation with our CapEx plan, we plan to invest ex gas natural around EUR 6,000,000,000 in 20 11. Corporate tax in 2011 is estimated at around 41%, and the final figure will depend on the evolution of macro variables and on performance in the different business and countries where we operate.
In terms of cash flows, 10 months ago, we were expecting to generate in the 20 ten-twenty fourteen period an after tax operating cash flow of EUR 35,000,000,000 divestments for €4,500,000,000 and a CapEx program of €28,000,000,000 Let me stress that we look forward to exceeding these expectations. Divestments, including the Brazilian capital increase, will be higher, reaching EUR 7,800,000,000 The CapEx program will be at EUR 27,500,000,000 since the Brazil dilution is partly offset by the new projects and by the expansion of existing ones. Therefore, provided that the macro assumptions we have considered take place, we will be able not only to finance the CapEx plan, but also to maintain the growing return for our shareholders under a strong financial position with debt as quite at quite low levels. In April last year, we put in place a strategic plan with 3 main ideas: growth, portfolio optimization and financial discipline. The results obtained in 2010 further secured the delivery of these commitments and enhanced total shareholder return and value creation.
2011 will be the year to lay the groundwork for the next stage of the growth process to which we are committed up to 2014, with an even better outlook beyond the point due to the existing projects pipeline. To finish, let me say a word on the Libyan situation. We have made sure that the personnel are not exposed to unnecessary risk, and we will take the necessary operational decisions until we see how the situation unfolds. On Tuesday, we announced the production in the that the production in the country had been partially disrupted. Let me highlight that our exposure in North Africa and Middle East is limited to approximately 40,000 barrels per day in Libya and 9,000 barrels per day in Algeria, which accounts for 14% of our upstream and 5% of our total production.
And now I'm pleased to answer any questions you may have.
We'll have first question from BPI, Bruno Silva. Bruno, please go ahead with your questions.
Good afternoon, everyone. Thank you for taking my questions. I have 3. Actually, the first one starting with the refining project. I think that your goals were to have start up in the Q3.
Looks like there is a delay of 1 quarter. I just wonder what could be the impact of that or the reasons behind that and if there is risk of further delay. And therefore, just to conclude, what would be the time when should we start seeing $2 improvement that you have just mentioned? When should we start seeing that impact in your account? The second question, going back to North Africa, the impact you have already mentioned and also considering your subsidiary issues with Sonatrack, you have also mentioned that in case of Gasnatt is now perceived as a long term investment considering the synergies and LNG.
My question is actually trying to understand after diluting your provision in Brazil for the reasons you presented at the time, if gas nat is perceived as a priority project for yourself and therefore you would never sell it and would rather prefer continuing to dilute your exposure in some areas of the E and P business? And the final question, I was looking at maybe it is my fault, I didn't quite follow the explanations for the evolution in the quarter alone of the downstream business that despite the increase in refining margins that the performance, the EBIT adjusted is significantly lower quarter on quarter? Thank you very much.
Okay. Bruno, in relation with your first question, it's the startup of the projects will be in the 3rd quarter, and they will be fully in operations in the Q4. Therefore, we our targets remain the same. The first day of Q4, they should be working at 100% capacity. In relation to your second question about gas nats on a drug North Africa, we are not saying that we will never sell gas nat.
What I'm saying is that gas nat is a good stake for us. We don't have a financial pressure today. It's good to think that we keep that stake that can be liquid in a very short period of time. But at the same time, since we don't need it, it could add a lot of value to us in terms of LNG, in terms of synergies, etcetera, etcetera. Obviously, the dilution in Brazil has nothing to do with keeping or not keeping gas net.
Dilution in Brazil was a priority for us in order to not to concentrate too much capital employed in one single region. And remember that thinking ahead from now with all the discoveries, we were talking that the total dollars 18,000,000,000 gross in our case, provided that we kept 100%. Therefore, with the deal that we did with Sinopec, what we provided to our company is that Brazil will not require 1 single dollar of CapEx from now on to the end of the well, not to the end, for the next 10 years. Therefore, we feel very comfortable with the value created in Brazil, which will not require any type of capital investment. Nothing to do with Gasnab.
Gasnab, we will have to decide about GAS NAT at a given moment if we have other alternative, etcetera. I'm saying that and you see the point maybe there. I'm saying that Garnet is a long term value. I'm not saying that is a long term asset. It's a long term value.
Therefore, that means that in case of being needed, we may be able to do things with NASDAQ. But today, for us, it's a good asset to be kept. Financially talking, it's a good asset. We have a very good reward. We don't need that cash.
We have the synergies through the AGV, etcetera, etcetera. Therefore, it's one of the assets that creates stability in our P and L, etcetera, etcetera. And I don't think we should sell that asset today or in the next years to come. Your last question was about the results of our downstream operation. There are several reasons.
1, in several small reasons, all of them added makes a reason and make create a reason. Now one is the less utilization of our refining system because in the last quarter of 2010, Puerto Lano was shut down, was closed for 35 something like 1.5 months and Cartagena, too. The second one was that the last quarter of 2,009, we had the Brazilian refinery that was a 30% stake in RevPAR that was sold last quarter of 2010. The third reason was the trading income that we had during this quarter was not as good as the quarter before. But that just was because the deals didn't happen during this quarter, nothing against the business, nothing positive or negative.
We didn't saw we didn't see opportunities in trading during this quarter. The chemical business by then was good throughout the year, but the last quarter of 2010 was the worst year there because of the raw the NAFTA cost going up. Therefore, we had an average just to have an idea, an average margin per ton of EUR 150 throughout the year, but the last quarter of 2010 was €117 per ton. Therefore, even though through the whole year, we performed quite well and we breakeven, the last quarter of the year because of the increase in the cost of the raw material of the naphtha, we had a reduction in this trend. This year, 2011, we have gone back and we have a margin of more than EUR 200 per ton.
Therefore, it was a temporary situation, which is nothing critical. And lastly, which is my main concern today, is in LPG. You know that the Spanish authorities changed by the end of 2,009 the way to price LPG, the regulated LPG, based on a formula that in a growing market, in a growing raw materials market, kill the profits. And therefore, what we are now we are just having we have gone to the core, we have asked everybody to change the formula because in a continuous trend that we're moving up the price of oil and therefore the price of propane and butane, we will suffer in LPG. And that's not what we want.
It's a regulated business by law. We have to be regulated for being in the regulated business. And I think that sooner than later, we will have to see a change in the ruling, no? But this quarter, because of the increase in the price of the propane and butane, we have suffered. These are minor reasons that all of them added to make take can some this your conclusion.
Thank you so much. Just a very quick follow-up, if you don't mind. So what was the contribution of RevUp and the contribution of LPG to these results accumulated in
the Q4?
In the Q4, I think that RevFAP difference was €60,000,000 I think. But why don't you check with Mavi, if you don't mind, to make sure that the figure is right?
We have next question from Mary Lynch. Houtan, please go ahead with your question.
Good afternoon, everyone. Just a couple of quick questions, please. You've got another year of very heavy exploration coming through. And it looks like again you will be you will have 8 exploration stroke appraisal wells in Brazil with potential for further upside. Can you just give us some idea of if you continue to make some significant discoveries, whether you would look to further dilute the business or whether you are comfortable that should you find further accumulations, you will be covered on the CapEx side?
And then on the second question, it's really related to the sell down of YPF. You made a transaction with Eaton Park and Capital early in 2010 and the price there seemed to be significantly below the market price. Can you confirm whether how you're thinking about the next leg of the sell down? Are you going to be using the ADR price or whether you're going to be looking at again doing at a big discount? Thank you.
In exploration, I mean that our hope and I expect that we are going to have good results in exploration. Therefore, that means CapEx, as I fully agree with you. In the next coming 4 years, you have to think that at the downstream level, this year is the last year to place a significant piece of our CapEx. Once we finish Cartagena and Bilbao, the most we will start creating cash flow from these projects. And at the same time, we will not need placing money or placing CapEx in this business.
Therefore, we will focus our activity in investment in exploration and development and developing of the projects. To have an idea from now on to 2014, I think that our CapEx program in at the Afton outside Argentina will be between EUR 1,700,000,000 to EUR 2,000,000,000 per annum. With that, it's our cash flow, it's enough to finance that CapEx. Therefore, I don't think we need to dilute our positions unless we see that the results of this exploration will force us to invest again like Brazil too much money in one single place. Obviously, that could be the case, for instance, in Venezuela, where we have big, big successes with Perla, etcetera, etcetera.
But as of today, we see that we can manage that ourselves with our existing positions and financing debt organically. Therefore, we are not seeing dilution today. In the connection with YPF, now we are in the process of getting the authorization with F3 in order to go to start the selling. The price the market value of YPF in my opinion doesn't mean much, no? Because I think that there is very few there are very few shares in the market with not significant meaning.
My impression is that the value that we agree with Ituran capital was a very professional value, and the deal should be around that value. The next sales around or even higher than that value, but let's say around debt value. Okay. Thank you very much.
Thank you. We have next question from Todor Picryn and Holt with Anish Kapadia. Anish, please go ahead with your question.
Hi, good afternoon. I've got 3 questions, if I can. Firstly, just on your balance sheet, it looks quite comfortable at the moment. The question is what are you going to look to do with your cash that you generate over the next few years? Are you going to look to go back to a 10% per annum increase in the dividend?
Or are you going to look at acquisitions? Secondly, on the LNG side of the business, can you give some guidance in terms of your earnings for 2011? So it appears like you're buying gas from Peru at Henry Hub pricing. This is all uncontracted. So you've got the ability to sell this at spot gas prices, which are significantly higher.
Can you just give some idea of what that means for your earnings this year? And the final question, the capital structure of Repsol Brazil looks very inefficient given that you have the $7,000,000,000 of cash on the Repsol Brazil balance sheet, which correct me if I'm wrong, but I don't think you'll even be able to spend over the next 5 years. So just wondering what you're looking to do with that cash? Are you going to pay some of that out in dividends to improve the capital structure? Are you looking at acquisitions through Repsol Brazil?
[SPEAKER JOSE
MARIA ALVAREZ PALLETE:] Your first question and your last question, it's about the same. It's a consequence, one of the other. I mean, the dollar value chain today is very strong in terms of our financial position. But that's what we want to have with the volatility that we are seeing in front of us. I mean that you have to take into account that if you exclude Gasnab, our cash flow after taxes is around our cash flow is around $8,000,000,000 And if you have to pay and if you have a CapEx for the NOK 6,000,000,000 and we have to pay dividends and taxes, then we I would say, we organically today, we breakeven.
Therefore, keeping a sound financial position with this volatility that we see in front of us, I think that this is not a bad position. I mean that we can think in the future of result better being in this position, in this situation than if we had a different financial structure. Therefore, we do think that we can we will be able to pay higher dividends and increase the dividends at the level of the percentage that you have mentioned for the years to come. And we do not plan to have big acquisitions. Obviously, having said so, that doesn't mean that if we have if we see in front of us a good asset, not a good company, good asset that may create value to us, we will study.
But debt asset should be not a big one, should be something to be able for us to create value. And therefore, I'm considering, in case of this thing happening, yields of no more than $300,000,000 $400,000,000 just to keep our financial situation as it is today. Obviously, the Brazilian cash, I agree with you that in Brazil, it's not very efficient, but both partners will use that cash on a sixty-forty basis in order to maximize the value of that cash. Therefore, we are investing 60% of the $7,000,000,000 in Repsol and Sinopec is managing the 40% the remaining 40%. Every year, we will place in Brazil the money that Brazil will need.
And in LNG, I think that our best estimate today of the 2012 results should be sorry, LNG results sorry, 2011 results will be something around $225,000,000 to $275,000,000 of operating profit. Is that the case? Sorry, they correct me. Euros. It's 200 let's say, on average, EUR 250,000,000 of operating results coming from LNG.
This is nothing strange because Canaccord is working the whole year at a higher capacity than last year. Peru is working 100% through the whole year. One third of Peru is office free, twothree will go to Montanillo, but in 2012, not this year. Therefore, this year, we have 100% of the offtake free to maximize that value. Therefore, we see that these results are quite conservative and provide and we are just not maximizing the expectations of the possibilities that we had in front of us.
That's all right, Anish?
Can I just one clarification on that? So if current spot LNG prices stay where they are, what's the upside to that forecast?
What Henry had for us is not critical. I mean, we have a netback in case of Manzanillo in 2012. The formula give us, I don't remember exactly, dollars 0.60 of dollar after paying everything. Therefore, in month, the twothree of the production will go to Manzanillo. Obviously, the formula is linked to Henry Hub, but for us, it seems $0.60 per 1,000,000 BTU.
2011, we will not go to Henry Hub. Obviously, we go to Korea, we go to Spain, we go to Europe, we will go to the too long to the UK and to Argentina. Remember, in Argentina, they are paying not yet or have they are paying $9,000,000 $10 per million METU through the LNG floating terminals. Therefore, we try to move around the world and forget about Henry Hub. Henry Hub is a nightmare for us, and we don't like Henry Hub.
Okay. Thank you. You can answer.
Anish. We have the next question from Irene Himona from SocGen. Irene, good afternoon. Please go ahead with your question. Good afternoon.
I had three questions, please. So first, Libya, can you please clarify how much of the 3% to 4% targeted production growth rate in the Upstream is Libya? In other words, if we assume 0, what happens to that 3% to 4%? Secondly, in your 5 year plan to 2014, given your scenario on oil and gas prices, what dividend growth rate can we anticipate? Or what do you think you can afford?
Are we looking at double digit growth rates? And my third question concerns costs and YBF. You present on Slide 13, for example, the reduced decline rates of YBF output. But then equally, if I look at YBF upstream CapEx in 2010, it was up 57% year on year. With cost inflation in the country, have you got any particular initiatives to control costs, any particular targets?
And what happens to your spending as we progress through the next few years? Thank you.
[SPEAKER JOSE MARIA ALVAREZ PALLETE:] Yes. In connection with the growth of the 3% in the Upstream level, Libya is stable. It's not growing. I mean that in Libya, we produce per annum something like 14,700,000 barrels, and that remains flat. They are provided that Libya remains as it was 1 week ago.
Therefore, we are not seeing growth coming from Libya, although Libya accounts for something like 12% of the total production of our upstream division. That's Libya. In relation with the oil and gas prices and the volatility we see today and obviously, that impacting our P and L and therefore, having an impact in our dividend policy. Today, maybe it's the worst day in this year to answer this question, because from 8 o'clock in the morning to today, I don't know how many dollars per barrel we had, dollars 7 per barrel. And tomorrow, I don't know what's going to happen.
Let's say that this year, it's very important for us to be very prudent, very with a very strong discipline financially talking. With that in mind and with our sound financial position, maybe volatility may be there and will be there. No way, will be there, at least during the next coming weeks. But I am totally convinced that our P and L and our ability to pay dividends will be will allow us to increase those dividends at 2 digits. Obviously, 2 digits, maybe 10 or 99.
Let's assume 2 digits and let's stay at the lower side of this scenario. And in YPF, YPF in 2,009, we did a tremendous effort in YPF and expenses went down 10%, which is unbelievable for Argentina. In 2010, everything was out of control because of inflation, etcetera. And we had cost increases, for instance, in payroll year on year through the whole year, something like 20% or $21 terms. In other expenses, something like $15, etcetera.
2011, we see Argentina with the same tension, And we see that we are contemplating in pesos increases in payroll of around 20% from 20% to 25% and in other expenses, mainly lifting costs of around $15,000,000 to $17,000,000 Now $15,000,000 to $17,000,000 Therefore, payroll at the level of $20,000,000 to $25,000,000 in pesos, lifting costs, lifting expenses, production expenses at the level of 15% in dollars. Will we be able to do that? I'm not so sure because the pressure the tension there is high, it's very strong. But we will try to manage that. We are more efficient.
We are more closer to the businesses. We have people well to well, etcetera. And I think that our organization has improved a lot in order to guarantee that this thing may happen, but that's not going to be easy.
Thank you.
Okay. Thank you, Irene. We have the next question from Citi Group, Alastair Syme. Alastair, good afternoon.
Hey, good afternoon. Just a very quick question actually. On the €6,000,000,000 of CapEx this year, you kind of gave an indication of where E and P spending might be. Could you break down the rest of it by division would be helpful? And then I guess going forward, the implication is the CapEx stays fairly flat over the next 4 years.
Is that a fair assumption?
It's between EUR 6,000,000,000 and EUR 7,000,000,000 for the next 4 years. Today, for 2011, we have EUR 1,700,000,000 in downstream, mainly all of them placed well, not all of them, EUR 1,100,000,000 being placed in Cartagena and Bilbao. We have another 1.7 at the upstream level, developing CapEx and exploration. EUR 2,200,000,000 goes to Argentina, and maybe we could spend 1 minute on that. And the remaining, 2 headquarters, etcetera, etcetera, in total, EUR 6,000,000,000 dollars Obviously, if we add Gas Nat or staking Gas Nat is EUR 6.5 billion.
For the next years, I think that we will move between 6% and 7%, provided that the downstream CapEx will be significantly reduced to the levels of EUR 500,000,000 Therefore, we will free something like EUR 1,000,000,000 of downstream CapEx to finance upstream CapEx. In Argentina, you may be surprised with this level of CapEx. But Argentina is CapEx and reward. I mean that it's the payback of this CapEx, and we have proven that this year, 2010, is that it's investing in new drillings, enhancing oil recoveries, etcetera, the Titan shale gas, all the exploration, all the drilling activities that we have in Argentina will give an immediate rewards in terms of reduction in the declining ratios, increasing production, etcetera, etcetera. And then we see that we can manage day in a very short manner, I mean that day by day.
If we see that there is not enough reward, we stop investing. But we think that we have all the conditions there to make a lot of money, increasing the production of liquids, of oil, increasing the refining capacity in Argentina to produce more gasoline and exporting less because internally, we make more money than externally. And therefore, it's just a matter of investing where we see value added. And this is why we are putting to this emphasis in our CapEx program in Argentina. But again, this is not long term CapEx.
I mean that we manage that day by day, and we can stop investing the sooner we see a difficulty there.
Can I ask just as a supplementary on the Argentina issue? I mean, there's a lot of moving parts in terms of pricing and costs and CapEx. I think if I'm right, you had a net dividend of about €800,000,000 payable to Repsol this year. How big do you think that dividend could get over time?
The dividend in YPF, I think, the dividend from YPF or the dividend of Repsol?
The dividend of YPF paid to Repsol. In terms of cash terms, how much do you think YPF could contribute to you over time?
Our goal is that at least EUR 1,000,000,000 should be there. I mean that we have to our strategy, that YPF has a dividend policy that it's a very high payout. But for us, for Repsol, our priority is to have at least EUR 1,000,000,000 in total, gross, I mean, for the one 100% of the company being paid as dividend. YPF cash flow is something like $400,000,000,000 dollars 4 $100,000,000,000 excuse me, dollars $8,000,000,000 with a CapEx of 2.2 percent with taxes of something like $500,000,000 and then it's room to pay dividends at debt level. And at the same time, the financial structure of YPF that we want to have YPF as self financing.
I mean that they have to finance themselves is very low. I mean that therefore, they have plenty of room to increase their financing at the same time that they pay a good level of dividends. But 100% dividends, around $1,000,000,000 Thank you very much.
Okay. Thank you, Alastair. We have next question from James Hubbard, Morgan Stanley. James, please go ahead with your question.
Thanks. Just two questions, please. On the you mentioned in the slides 200 to 400 barrels a day coming from in oil coming from these tight reservoirs in the Neuquen Basin. I'm wondering what are your plans to I mean, I'm assuming that's inherently more attractive than the 4.5 Tcf of tight gas, just given that local oil prices are on a like for like basis so much higher. So what are your plans to appraise and develop these tight oil horizons?
It sounds like you've only done vertical well so far. So I assume you're going to try horizontal and I assume you're going to try to fracture it. So yes, what is the outlook there? What is your plan? And then the second question is, I think you mentioned about the SEC approval on the YPF planned YPF sale.
But I think you're also dealing with a case in Argentina where someone has raised an issue trying to block you from selling any YPF shares. Could you just update us on what that's all about and what's happening there and how and when it might be resolved?
Okay. The first question about the shale oil or shale gas comparing with Thai gas. In shale oil, we are planning now to drill something like 20 well, shale oil, 20 wells this year and the year to come, I mean, the 2011, 2012, in order to value to assess the whole area. And we see a tremendous potential, and the results are very good. Still now, we are just doing vertical drills, and we haven't started with horizontal drilling.
Therefore, we are very optimistic. And all the other measures, all the other companies are going there together with us. We see tremendous potential. But one thing about tight gas, tight gas by itself is not good because you cannot get a fair reward. But if you do a deal like our case through Petroleum Plus with Vale de Rio D'Oche, that's a good business.
I mean, because Vale is paying for the first $150,000,000 of investment, of CapEx. Then thanks to that and after that, investing half and half, paying $7 per barrel of 1,000,000 BTU and then going together, Vale keeping 50% of their production and thus selling to Vale at that price the remaining 50% production. Therefore, I'm not so sure this is not a good business take us, no? Although, obviously, we see more in a shorter in a closer manner, the shale oil production, no? Because we see the results, and they are very, very good as of today.
In connection with the SEC filing of the F3, we do think that in the next days, we will get everything in place to start the selling. Obviously, there is a situation in Argentina, which is, let's make, a quite unique situation, which is something that a plaintiff that was that we believe that is totally unfounded and is something that comes from 1990 at the time that YPF was privatized by the government of Argentina, nothing to do with Repsol, nothing to do with us. It also goes to 10% of the shares of debt YPS, 19.90, and it's nothing against Repsol. Unfortunately, things are not very clear in this case, and there is a judge in one place very strange called Belleville in Cordoba, which is not Buenos Aires that with no jurisdiction on this case. But the judge did that type of resolution, trying to force us not to sell the shares, not to use those shares.
We have already go against this sentence or this situation. And the judge that decided to close the shares resign. And now a new judge, and we hope that, that's going to be in Buenos Aires, will take that responsibility. And we are sure that it is too obvious that this is nothing to do with us, nothing to do with our shares. I'm sure there is a reason, but maybe a personal reason, not a professional reason, not a legal reason to do this type of resolution, to approve this type of resolution.
We will fight and we will battle, and we are totally convinced that by this month of March, the situation will be solved and because it's totally unfounded. I mean that it's totally stupid to say something clear.
Okay. Thank you very much.
Thank you, James. We have the next question from Lydia Rainfall from Barclays Capital. Lydia, please go ahead with your question.
Thanks and good afternoon. Three questions, hopefully very short, if I could. Firstly, just a clarification. Did you say going forward the CapEx would be $6,000,000,000 to $7,000,000,000 per year? And then just the other 2, I know Carioca seems to have slipped off the project list.
Is that just there wasn't room for it? Or is that now slightly later than 2015? And then just finally, on Gas Natural, understand you're going to take the dividend from Gas Natural as shares certainly for this year. Is the idea that you will keep those shares or will you look at selling those shares into the market?
The CapEx, you mentioned $6,000,000,000 to $7,000,000,000 It's €1,000,000,000
I got
you. And yes, that's the case on average for the next coming 4 years, which in total give us something like EUR 24,000,000,000, EUR 25,000,000,000. Your second point, you spoke very, very fast, and I was lost.
I'm sorry, just on Carioca, it seems to have fallen off the project list for 2015. I just didn't know whether there wasn't room for it or whether that has just been delayed slightly beyond that 2015 period from last year.
Yes. We are now talking with Petrobras and all the and BG. We do think that we will keep 2015 as the goal to start production. There is a debate there. I mean, that's always, but a positive debate.
And we think our position is trying to push to go faster and to reach the 12, 12, 2015 goal. And there may be others that may try to go to 2016. The results of Caryaoka Northeast are very satisfactory. Then we think that Caryaoka can be a candidate of production before then in many solar panels, so that we get Did you listen? Yes.
Thank you.
Okay. And in Gaznodoral, this the dividends that they are paying now, the complementary dividends, you have the option of cash or shares. But it's neutral for us. I mean that it may be both I think that we are going to but that's something that is not yet decided. We will go for shares in order not to be diluted, but it's irrelevant because it's €100,000,000 or something like that.
It's not more than €100,000,000 Therefore, it's nothing magic. I mean that it's keeping shares or keeping money or keeping or having kind, it's not relevant, in my opinion, at this point.
Perfect. Thank you very much.
Thank you, Olivia. We have last question from Jefferies, Daniel Ekstrom. Daniel, please go ahead with your question.
Thanks. A couple of questions, both on Argentina actually. Firstly, on the Petroleum Plus, which seems to have made a fairly material contribution to YPF's earnings this year. It looks that achieving the baseline of around 250,000 barrels a day of oil in 2011 could be difficult. Are you going to be able to renegotiate the baseline, I'd say, at a lower level?
And do we need to worry about the sustainability of that part of YPF profitability? And secondly, this is a difficult question I know, but we've got the Argentine elections coming up in October. And I'm just wondering what you guys are thinking about how this could impact the process of price liberalization in that country. If you could elaborate on your hopes and fears, I suppose. Thanks.
[SPEAKER JOSE MARIA ALVAREZ ALVAREZ:] Okay. In relation with Petroleum Plurals, which I agree with you, it has made a very good contribution to our P and L. We have different point of view. The strike that we suffer last quarter will damage us. No way, I mean, that to restart at the same level production is something that we are not so sure that's going to happen.
Therefore, I think that we have doubts personally have doubts that we will be able to get the Q1 Petroleum Plus subsidy. I'm sure that we are going to work to get the second, third and fourth quarter. 1st quarter will be difficult, and we'll do our best in order to get the 2nd quarter. But having said so, I mean, that even if we don't get petroleum plus this semester, the 1st semester, the P and L of Argentina looks very good, by the way, because price increases, etcetera, are huge. Obviously, Argentina is suffering elections in October, and all of us suffer elections.
But in Argentina, you have elections every year. And all the and every year, those elections become the most important elections for the country. It's the same in Spain or in the U. S, etcetera. But I don't think that the authorities today in Argentina are not aware of the need to clarify prices.
I don't think so. I mean that it could be the reality 3 or 4 years ago. But today, they know for sure that the best thing they can do to have a very good energy sector is to have prices at the level to make CapEx and investments to appear. And in my opinion, palm prices will increase. Gas prices will increase not at the level of the distribution at the retail level, but at the level of the power plants, industries, etcetera.
And that's life. I mean that it's nothing to do with prices. I mean that it's a country that is breakeven today that we have to import natural gas, we have to import products, we have to import crude. And therefore, playing with prices is not anymore the game. And the authorities are very serious today in my opinion.
And I have discussed a lot of time with them, they need to clarify the whole situation. And the reaction that I get from them is always a very severe reaction and a very positive reaction. It's just a matter of time.
Thanks, Antonio.
Okay. I think that we don't have more questions. So thank you very much to all of you for attending the conference call. And do not hesitate to contact us if you have further questions. Thank you.