Hello, and welcome to the Repsol second quarter 2022 results conference call. Today's conference will be conducted by Mr. Josu Jon Imaz, CEO, and a brief introduction will be given by Mr. Ramon Alvarez-Pedrosa, Head of Investor Relations. I would now like to hand the call over to Mr. Alvarez-Pedrosa. Sir, you may begin.
Thank you, operator. Good afternoon, and welcome to Repsol Second Quarter Results Conference Call. Today's call will be hosted by Josu Jon Imaz, our Chief Executive Officer, with other members of the executive team joining us as well. Before we start, I advise you to read our disclaimer. During this presentation, we may make forward-looking statements based on estimates. Actual results may differ materially depending on a number of factors, as indicated in the disclaimer. I will now hand the call over to Josu Jon.
Thank you, Ramon, and thanks to everyone online for joining us today. I hope that all of you are well. I mean, today's call, I like to cover the following main topics. First, the key messages. Secondly, the performance of our businesses. Third, a summary of the financial results. Finally, our updated outlook for this year, for 2022. At the end of the presentation, of course, as usual, we'll be available to answer your questions. To begin with, let me take you through the key messages. During the second quarter, our industry faced a complex scenario that was triggered by the changes in the geopolitical context, raising energy prices and growing concerns on security of supply. As a result, we experienced a volatile combination of higher oil and gas prices, a stronger U.S.
dollar, and wider product spreads in refining. The adjusted net income reached EUR 2.1 billion for a total of EUR 3.2 billion result in the first half of the year. The upstream and industrial divisions contribute with around EUR 1 billion each to the group's result in the quarter. On the negative side, the commercial business was penalized by the discounts applied by Repsol in an effort to mitigate the impact of higher gasoline and diesel prices to our clients in Spain. Cash flow from operations stood at EUR 1.8 billion for an accumulated figure of EUR 2.9 billion in the first six months.
Cash generation was held back by a significant investment in Working Capital, mostly related to higher inventories as we increased the storage of raw materials and products in contribution to the supply security of the country in a complex moment for the whole European continent. Excluding Working Capital movements, the Cash Flow from Operations amounted to EUR 3.8 billion in the whole quarter, and EUR 6.9 billion accumulated to June. Net debt closed at EUR 5 billion, a EUR 0.9 billion reduction compared to March. The Gearing Ratio stood at 17% as of June, down from 20% in March, and below our long-term strategic target of 25%.
Overall, in a year in which we have recovered pre-pandemic levels of investment, this scenario has allowed us to move faster towards our long-term targets, align with the capital allocation priorities defined in our strategy, and we are also accelerating our transformation into low carbon. We are improving the remuneration to our shareholders, and we continue to reinforce our financial position. In June, we reached an agreement to dispose of 25% of our renewable businesses, valuing the entire business at EUR 4.4 billion, including debt and minority interests. This transaction validates our growth strategy in renewables and crystallizes value in a complex environment. Not less important, we incorporate two experienced partners that will support our ambitions, our growth, to become active player in the energy transition.
Regarding shareholder remuneration after our AGM held in May, we canceled the 75 million shares previously committed, around 5% of our share capital. Today, we are increasing the number of additional shares to be canceled in coming months from 50 to 75 million shares, aligned with our shareholder remuneration commitment. In refining, the structural changes derive from the current situation have moved us to register EUR 1 billion pre-tax impairment of refining assets in Spain against second quarter results. The accelerated pace of the decarbonization and the measures that intend to reduce Europe's reliance on fossil fuels has made us rebase our future demand assumptions. On the other hand, the expected lower availability of heavy crudes and higher prices will have a long-term negative impact in the optimization of our refining system.
Let me now briefly review the main macroeconomic indicators of the quarter. Brent crude averaged $114, a $12 increase quarter-on-quarter, and $45 above the same period a year ago. The Henry Hub averaged $7.2 per million BTU, 44% above first quarter, and 157% higher than a year ago. Repsol refining margin indicator increased due to higher product spreads, mainly diesel and gasoline, and wider heavy-to-light crude discounts. Lastly, the US dollar continued its escalation, averaging $1.06 per euro in the quarter, approaching parity in July. Moving on now to the performance of our businesses, starting with the upstream.
Second quarter adjusted net income was EUR 0.9 billion, a EUR 216 million increase over the first quarter, and EUR 596 million higher than in the same period of 2021. Year-over-year, results were mainly driven by higher realization prices, partially offset by a lower production due to our value over volume strategy and the portfolio actions taken last year. Net production averaged 540,000 barrels of oil equivalent per day, 3% lower than the previous quarter and 4% below the same period last year. Compared to the first quarter of the year, production was negatively impacted by Libya, maintenance in Norway, and some PSC effects due to prices.
In the year-over-year comparison, the higher activity in conventionals, lower maintenance, and higher contribution from Peru couldn't offset the impact of disposals, the outages in Libya, and natural decline. Libya was affected by a force majeure situation in the El Sharara field. Production averaged 21,000 barrels net to Repsol, around 7,000 barrels below first quarter, and 14,000 barrels lower than a year ago. The force majeure has been lifted in July, and we are producing around 30,000 net barrels as of today. Development activity remained strategically focused on capital efficiency and cash generation. In conventionals, higher activity in Eagle Ford and the Marcellus increased production by 14,000 barrels equivalent compared to the same period of 2021 for a combined production of 114,000 barrels of oil equivalent.
We currently have two rigs running in Marcellus and three in Eagle Ford after bringing the third rig earlier than planned. In the Gulf of Mexico, our first well was drilled in Paxtin that will start producing in the second half of the year. As discussed in our previous call three months ago, we took the FID for the joint development of Leon-Castile, with first oil expected in 2025. In Alaska, the final investment decision for the development of Pikka is expected to be taken this quarter, with first oil forecast in the first half of 2026. In Venezuela, we continue to monitor the situation after the oil for debt compensation scheme of previous years has been resumed.
A cargo with Venezuela crude oil already arrived some days ago to our refining system, and a second one is expected to unload this week. Moving now to the Industrial and Circular Economy division. The adjusted net income was EUR 1.2 billion, which compares to a result of EUR 236 million in the first quarter and EUR 166 million a year ago. Year-over-year, second quarter results benefit from the contribution of refining and trading, partially offset by lower results in the chemicals and wholesale and gas trading businesses. In refining, the margin indicator averaged $23.3 per barrel, which compares to $6.8 per barrel in the previous quarter, and $1.5 per barrel in the same period a year ago.
The average premium in our unit CCS margin was $0 over the indicator. The market was highly volatile during the period due to the turmoil created by the war and the sanctions to Russia. Margins were mostly driven by product spreads due to the recovery of demand, the partial loss of Russian exports, and the low levels of stocks. The utilization of our distillation capacity stood at 91%. The utilization of the conversion units reached 97%. Once Bilbao completed its plant turnaround early in April, run rates benefited from the absence of any other major maintenance activity in the quarter. Production was rebalanced to maximize the output of middle distillates, logically, taking into account the cracks scenario.
We are incorporating new crude varieties to replace Russian crudes in our diet. The return of cargoes from Venezuela is good news for our refining, as the quality of those crudes matches perfectly with the high complexity of our system. In this high gas price scenario, we are also managing our assets with the aim of reducing its consumption using naphtha in the hydrogen units or LPG to replace natural gas. In July, a combination of lower demand and worse European economic outlook has brought margins down from the levels achieved in the second quarter. The utilization of the distillation and conversion capacities is growing. In July, it has averaged 95% and 105% respectively.
Going on now with the chemicals business, international margins improved over the previous quarter as selling prices reflected the increase in raw materials and energy costs. Year-over-year, margins were below second quarter of 2021, in which the chemical business delivered a historical performance. Petrochemical margins have come down in July. We see the market, let me say, already showing signs of a weakening demand worldwide, together with uncertainties on gas availability and a potential economic downturn. Let me now update you briefly on the projects that are helping us to transform our industrial sites. In Bilbao, construction work will start soon in the new decarbonization hub, composing our first stage by a synthetic fuels plant and our renewable hydrogen electrolyzer, involving an investment of EUR 103 million.
In Puertollano, we will invest EUR 105 million in a new plant to manufacture ultra-high molecular weight polyethylene, which will be the most differentiated polyolefin in our portfolio. The plant will be operational in 2024, and it will have an annual capacity of 15,000 tons. In sustainable aviation fuels, Iberia, the company, I mean, in collaboration with Repsol, operated its first long-haul flights with biofuel produced from waste in Spain, in our refineries. This initiative is another step in the collaboration agreement signed last year between the two companies, Iberia and Repsol. This was an important agreement, among others we signed on this type of advanced fuels. Finally, some days ago, we have signed a collaboration agreement with Navantia to jointly explore business opportunities in renewable hydrogen production in Spain.
The agreement includes the startup of an electrolyzer production line in Ferrol, in Galicia, in the northwest part of Spain. Turning now to the commercial and renewable segment. The adjusted net income was EUR 98 million, EUR 19 million lower than the previous quarter, and EUR 29 million below the same period a year ago. Year-over-year, the performance of low-carbon generation and lubricants couldn't compensate it for the lower results in mobility. Retail prices in Spain reached new records driven by the sharp increase of international commodity prices and lower product availability in Europe, mainly diesel. The earnings of the mobility business were dragged by the result in our service stations in Spain, which was reduced to basically zero, the result, due to the discounts voluntarily applied by Repsol to its clients.
These discounts that will extend throughout the summer represented more than EUR 140 million during the second quarter. Sales in service stations were 14% higher than in the second quarter of last year, although still 3% below pre-pandemic levels, so that means the second quarter of 2019. Our Waylet app has reached 4.5 million registered users in July, more than halfway to our strategic target to 2025. Considering all commercial businesses, we have achieved the figure of 5 million digital customers. In Portugal, this month, we have entered the retail electricity and gas market, aligned with our ambition to become the leading multi-energy provider in the Iberian Peninsula.
In Spain, we have partnered with Telefónica, you know, our leading company in the teleco sector, to launch Solar360, a new joint venture that will be our platform to develop solar self-consumption business already in operation. In low carbon generation, the average pool price in Spain was EUR 183 per megawatt hour, 20% lower than the first quarter. The power generated by Repsol reached 2.3 terawatt-hours, 19% higher than in the previous quarter. In June, we reached an important milestone in the delivery of our strategy with the agreement to divest a 25% minority stake of our renewable business for EUR 905 million. The evaluation achieved in the transaction multiplies by 3 the capital employed by Repsol.
The incorporation of the new partners not only validates our business model, but also includes an investment commitment that reinforces our growth strategy towards the objective of having 6 gigawatts of installed capacity in 2025, including the entry in new markets and technologies. The development of our project pipeline continued. In the U.S., the recently approved 600 megawatt Frye Solar project is expected to start construction this quarter. Lastly, yesterday, we have completed our third asset level rotation by incorporating Pontegadea as a partner in the Kappa photovoltaic project in Spain. Kappa is in the south part of the Spanish High Plains in the south of Madrid, and it has an installed capacity of 127 megawatts. The total asset valuation has been EUR 109 million, and both companies are already partners in the Delta wind farm.
In this slide, you may find a summary of the financial results of the second quarter that we have discussed before when reviewing the performance of all our businesses. For further detail, I encourage you to refer to the complete documents that were released this morning. Let me now review or update outlook to the end of the year. We expect full year production to average 570,000 barrels per day, around 15,000 barrels below previous guidance, mostly due to the interruptions in Libya and a longer than expected ramp-up process in Norway.
Production is expected to average 590,000 barrels per day in the second half of the year due to the contribution that is already material of new wells in Marcellus and Eagle Ford, production stability in IMI, and the higher volumes in the Gulf of Mexico. CapEx remains at around EUR 3.8 billion-EUR 3.9 billion, EUR 1 billion higher than in 2021. With regard to remuneration, we maintain our guidance to allocate between 25%-30% of our organic cash flow from operations to shareholder remuneration. Earlier in the year, we increased the 2022 dividend by 5% to EUR 0.63 per share, and we executed in May a 5% capital reduction through the redemption of 75 million shares.
Additionally, we announced the intention to cancel another 50 million shares subject to the confirmation of the macro assumptions for our annual budget. At this point, we are increasing this target from 50 to 75 million shares, and for this purpose, today, we are launching a 50 million share buyback program. Once the program is finished, in coming months, we will execute the 75 million shares capital reduction. All in all, as of the end of 2022, we expect to have canceled a minimum of 150 million shares, representing 10% of our share capital and 75% of the total share repurchases expected in our strategic plan until 2025. Total shareholder remuneration in 2022 will comfortably surpass the EUR 1 per share guidance originally expected by 2025.
In our third quarter conference call, we will provide an update for our next remuneration plans, including the cash dividend to be paid next year or any additional measure depending on the evolution of the cash flow over this next quarter. Let me say that we have enough time to talk about that in the call of the first quarter of the year. To conclude, the recent changes in the geopolitical context have reshaped the energy paradigm. The pace of decarbonization is a must, but security of supply now joins energy transition as the most critical priorities for governments and companies alike. In this context, we are moving faster in most of our strategic guidelines, accelerating portfolio transformation, improving shareholder remuneration, and reinforcing our financial position.
Moreover, the transaction in renewables completes a process that has generated great interest among investors. The multiples achieved demonstrate how Repsol can generate value in this environment after building a new, solid, and profitable business in record time. Looking forward, we still see a very complex and volatile scenario ahead that will test the new energy paradigm this winter. With that in mind, we will remain committed to a disciplined capital approach and our value over volume strategy as those factors that are the only ones that are fully under our control. During the second quarter, most indicators were supporting, but we can't forget that we are in a cyclical business. Our industry operates at risk, under great regulatory scrutiny, but with no regulated tariff ensuring profitability. Risk management is probably one of the core competencies of any successful oil and gas company.
Just three years ago, Brent plummeted to $30, and our refining margin was negative. We have to deploy ambitious resilience measures to navigate a real and pretty challenging scenario of prices and demand without any external support. Honestly, I think we did a remarkable job protecting our financials and maintaining the continuity of our operations through the worst of the pandemic. Having said that, we approach confidently the second part of our strategic plan from 2023 to 2025 with a very strong financial position. We are reducing our gearing, building headroom to face uncertainty in any macro scenario, and being ready to take advantage of potential opportunities we could find in the way.
We will keep running our business in the most efficient, reliable, and safe way as possible, and it is our duty to be at the forefront to guarantee the delivery of energy products and services that are essential to industries for our society and people's daily lives. With that, I'll now hand the call back to Ramon, and I expect to see you in person in our upcoming ESG day to be held in London on the fourth of October. Thank you, Ramon.
Thank you very much, Josu Jon Imaz. In case you run into technical problems, please contact us through our email address, investor.relations@repsol.com, and we will contact you immediately to try to solve it. Before moving on to the Q&A section, I'd like the operator to remind us of the process to ask a question. Please go ahead.
Thank you. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced.
Thank you, operator. Let me now move to the Q&A session. Our first question comes from Biraj Borkhataria at RBC.
Questions. The first ones are, I gather the Spanish government's due to formally propose windfall taxes in the next couple of hours. Do you have a view on what you expect the impact to be on Repsol in 2023? The second question is obviously there's an energy crisis in Europe, particularly on the gas front. We look at the latest data for Spain, refining is one of the industries where gas demand has actually reduced very significantly year-on-year, but your utilization remains high. Can you talk about you know what you're doing to lower gas demand and what the implications are for sort of run rates or conversion rates or anything else?
One final add-on will be post the impairments on the refining business, could you just highlight what the remaining book value is on your refining assets and what your long-term margin assumptions are now? Thank you.
Biraj, thank you. I appreciate your question that are pointing perhaps the hottest issues today. I mean, first, I'd like to point out that Repsol doesn't have windfall profits. I mean, in the oil and gas sector, margins are cyclical. Margins are by definition volatile, and we must not forget the EUR 1 billion losses we recorded in previous years. I think that there is in the media arena a confusion among regulated and non-regulated activities. When an activity is regulated, for instance, an utility, the regulator tries to accommodate the interest of the producer with the interest of consumers.
I mean, if there is a disruption, we are seeing and experiencing today that is impacting on the interest of one of the parts, it makes sense to see some intervention from the regulator. It makes sense in a regulated business. Frankly speaking, it doesn't make sense in a free, open, and non-regulated market. As I said before in my speech, oil and gas activity is an activity at risk. There is no regulated tariff that ensures its profitability. I mean, long-term investment decisions are made based on our assumptions and however, are subject to enormous volatility and risks. Going to the taxes issue, I mean, first of all, let me start saying that taxes in our E&P activity are paid in countries where we are producers, in most cases at high rates, and are generally not subject to tax in any other jurisdiction.
It will be even legal in many cases. Going to industrial activities or refining business during the past years, Repsol kept investing to reinforce our industrial facilities, even though refining margins were low and other companies were closing capacity due to these low margins. We have invested a lot of billion EUR in our refining system over the last 15 years, and thanks to this investment, we enjoy a high security of supply in a very, let me define, complicated business for other European countries. Last year, we experienced the lowest refining margins recorded in decades. I mean, comparing our margins and results this year with last year's results is not accurate. Let me say more, it's a nonsense, and it will be an attack to industrial activity and the industrial jobs in Spain doing that.
I mean, when prices fall, revenues fall, and companies are not compensated in a free market. I mean, our refining business lost hundreds of millions EUR in 2020 and 2021, and I didn't see any government talking about supporting these extraordinary losses. I believe and I firmly think we live in a safe jurisdiction. Let me say that I have no doubt that our constitutional framework, the Spanish legal system, and our internal European legal system are going to protect us from any potential arbitrary initiative. Against arbitrary measures, rule of law and legal security are a must, fortunately, in the European Union. Let me say Biraj, I'm comfortable.
We know that we have a solid constitutional and legal framework, both Spanish and European, that are protecting markets, that are protecting entrepreneurial activity from any arbitrary initiative, and we'll do our best to avoid any kind of impact of any arbitrary measure on our company. Going to your second question, the gas demand reduction in Europe. Your question makes sense, Biraj, because we are close to, I mean, the risk of a disruption in European gas system. It's also true that, I mean, security of supply is more protected in Spain and in the Iberian Peninsula, because we are not dependent at all from Russian gas. We are decoupled from the continent, from the worst, and in this case also from the best. We have a spare capacity to import gas to Spanish terminals.
I mean, going to Repsol. In Repsol, we are long position in gas. I mean, what we have in the Gulf of Mexico overcomes the needs of gas we have in Spain. If I take the figures of this year, I mean, we could have contracts that are covering 120% more or less of our industrial needs, and 104% if we take into account our retail gas business. If we go to coming two years, in 2024, these figures are even more evident. I think that we achieve a long position of 140% more or less of the needs we have in our industrial activity.
Saying that, I mean, we are working hard to focus on security of supply, and for that reason, we have started to reduce in a dramatic way the gas consumption in our refineries, in our industries. Over this year, we have reduced in 1 BCM the gas consumption in our industrial sites, mainly substituting our hydrogen plants gas by naphtha, LPG, and some other kind of fuels. I mean, 1 BCM is a huge figure. It's at 3% of the total Spanish consumption. If we take or we decouple the part of Combined Cycles, I mean power production and so on, I mean, our reduction accounts for a 5% of the total Spanish consumption. Our production is not at all at risk. We have enough gas.
Saying that, we have a full solidarity with the needs of the European society has at this crucial moment. For that reason, in Repsol, we have taken strong measures to reduce the gas consumption and the gas needs we have today and we are going to have in coming months. Because from my point of view, Europe needs this effort. My third question, Biraj, or you better said your third question, I mean, goes to the refining. I mean, first of all, let me say that, I mean, my duty is to be prudent.
It's true that now, I mean, we could say that in the short term, the war and all these sanctions and so on are disrupting the supply chain, are making raw materials more expensive, are reducing the supply of products, and because of this situation, we are seeing a strengthening of industrial margins. All that is true. However, it's also part of my duty to try to forecast the long-term projections. It's true that what is happening it could accelerate the energy transition in Europe, and there are public policies that some of them has been stated, has been approved this half that are impacting. For instance, I'm talking about the REPowerEU roadmap that are accelerating this decarbonization.
We have seen measures like the decision coming from the European Commission to ban the combustion engine cars by 2035. We have to prepare our balance sheets and our accounts for that scenario. I mean, I'm saying that our refining is going to be competitive, not at all, because I mean, I want to split in a clear way. We have in our industrial business, new businesses, new activities, biofuels, advanced biofuels, e-fuels, hydrogen, that are growing and are going to give new cash flows to this company in coming years. All that is going to be very positive. All this part of the coin is going to benefit from this kind of decarbonization measures that authorities are taking in Europe.
I mean, I can't hide that all that is going to have an impact in the accounting of the old assets, of some plants, of the, let me say, the oldest part of the refineries. We have, of course, foreseen, sorry, what is the impact in cash flows in these assets. I mean, for that reason, we have impaired them to be prudent because I think that is part of our duty. Let me say, Vera, that, remember what we did in 2019, in December, adapting the company E&P and the commodity price to the most adverse scenario in energy transition terms. What we are doing now is exactly the same, but applied to our industrial assets.
We are taking the worst-case scenario for coming years in terms of energy transition in Europe, and we are adapting our balance sheet to this reality. I think that is part of the prudence that a manager fully committed, as we are, and as I personally am, in terms of decarbonizing the company and boosting in favor of the energy transition has to do. I mean, trying to solve your question, I think that, if we take all the stocks, inventories and so on, our industrial business, crude accounts, the refining business, better said, at around EUR 7 billion. I mean, here, all the working capital, inventories and so on are included. Thank you, Biraj Borkhataria.
Thank you, Biraj Borkhataria. Next question comes from Irene Himona at Société Générale.
Thank you. Good morning. Two questions, please. Firstly, is there any comment you can make regarding the approach you have had or the offer to sell a quarter of your upstream business? Secondly, on investor distributions, in the first half, I think the cash cost of your dividend and the buyback was around 30% of your CFFO. In this very strong macro environment, do you expect to go on distributing at the top end of that range? Or is it possible you might move to above that 30%? Thank you.
Thank you, Irene. I mean, as you know, E&P is one of our company's core businesses. It's going to go on being one of the core businesses of Repsol in any place. In any case, sorry, I think that this business, as we mentioned when we presented the strategy, is playing a key role, in creating and generating the cash the company needs to support the financing our energy transition ambition. I mean, saying that, in the context of a dynamic portfolio management we always apply, the company always analyze all the opportunities and proposals related to any business of the company.
Of course, we are doing the same, analyzing any opportunity and proposal coming from the market related to this business. I mean, let me say that any decision being made or has been made has not been made in this regard. Going to your question about shareholders distribution. I mean, you know that I always try to be very transparent, again, in terms of giving guidances and so on. In such a volatile environment, I mean, I'm not comfortable giving you, I mean, guidances where the price of oil, the price of gas, and so on, or the economic environment in terms of growth or decrease of this growth, either in Europe or worldwide, could be decisive in coming months to give you a guidance.
I mean, I'm going to give you the guidances that are in our hands. Going to our operational guidances, I mean, 590,000 barrels per day of production in the second half, as I said. Going to our refining business, I mean, in July, we are already with a distillation level of 95% and a conversion rate or a conversion utilization of 106% in the whole system. That could be, let me say, the picture over the half year, excluding probably 40 days in October and the first half of November, when we are going to shut down Tarragona, a refinery.
On top of that, my perception today and seeing the improvement we have developed in terms of optimizing our refining business, I think that we are not going to have any difficulty to get a clear premium over the refining margin in coming months. I mean until now, I'm talking about facts. I'm going perhaps to be in contradiction or to with my first statement, Irene. I mean, seeing what is happening in the refining business, perhaps I could give you some clue. In July, the refining margin index in Repsol till today has been at $12.8, almost $13 per barrel in July. My perception is that in this second half, I mean, the figure is going to be close to $10 per barrel for this half.
Of course, again, it's going to depend on the evolution of the demand. I'm seeing very solid demand in service stations in Spain this July. You know that in the aviation sector, the demand is growing in a dramatic way. Tourism is going to have a very positive impact in our main markets this quarter because, I mean, summer, Spain is plenty of visitors and tourists. Saying that, I mean, I could have or I prefer to be more prudent related to the second or last quarter of the year. So that's my perception. And again, Irene, we are going to honor this commitment of the 25-30% of the operating cash flow devoted to the distribution to our shareholders.
That means that in the third quarter conference, I mean, in the current situation, we will present for sure an increase probably of the dividend in cash for next year, 2023. Of course, that would be my proposal to the board. The board is the organization that has to approve it. Probably to fulfill this gap between what is going to be our distribution proposal and the commitment in terms of distributing the operating cash flow in this range. I mean, I don't discard, depending of course on the economic mood at the end of the year, that we could perhaps add some additional buyback program before the end of the year.
That is going to depend on the evolution of the economy. Today, Irene, I prefer to be prudent in terms of guidances and commitments. Thank you.
Thank you.
Thank you, Irene. Next question comes from Sasikanth Chilukuru at Morgan Stanley.
Hi, thanks for taking the questions. I had a related question regarding the picking order of the uses of operating cash flow generated. Excluding working capital movements, Repsol generated material cash flow from operations in the first half this year. We've already seen net debt and gearing levels decrease as well. In the second half, you're talking about production expected to be materially higher compared to the first half. Refining, you're talking about generating refining premium, and you'll also receive the proceeds of sales of the stake in the renewables business. In this context, again, what should we expect again in the near term from the cash flow generated? Would we likely see more further drawdown of the net debt?
Would we see the proceeds of the cash flow being invested in low carbon businesses, potentially higher CapEx? Or the likelihoods for higher dividends and buybacks, is that much more higher? If you could please the probability or some kind of level of importance on these three buckets, that would be quite useful. Also slightly related to this, if you could explain how you arrived at the figure of 50 million shares expected to be repurchased from the market. Just wondering, the free cash flow generation has potential for higher repurchases of shares from the market. I was just wondering why the redemption of 75 million shares be entirely supported from the repurchase of shares from the market. Why use treasury shares in this?
Oh, thank you, Sasi. I mean, first of all, I mean, what should we expect, of course, is going to depend on the environment that is volatile, as I said. It's quite reasonable to think, as you mentioned, that in the second half, perhaps the cash flow from operations due to the probable lack of effect of working capital could be even higher than in the first half of the year.
It's true, I mentioned before, that now we have increased our inventories in EUR 1 billion, EUR 1.1 billion, more or less, a bit more, EUR 1.2 billion, because we want to be an actor guaranteeing the security of supply of fuels in coming months in Spain and in the southwestern part of Europe. You know that we are also exporting some diesel to France. France is experiencing a quite complex potential shortage of diesel. France is importing a huge amount of this middle distillates. Repsol wants to be part of the solution of the problems we are going to have in Europe, or we could have in Europe in coming months.
For that reason, we took the decision that perhaps, I mean, in terms of financial, in terms of markets, perhaps it's not the best one, but I think that companies, we have to be responsible, taking into account what we are seeing and the environment we have around us. We took the decision of increasing our inventories in EUR 1.2 billion to be prepared for next fall and next winter. Probably the cash flow from operations could be, in some way, equivalent or higher. Your point is, I mean, it makes sense. We are going to apply this cash first, as we are doing, trying to accelerate our transformational process, I mean, investing in low carbon businesses and technologies.
Of course, always putting return as a first condition to invest in these businesses. I mean, you know that we approved an increase of this CapEx of EUR 1 billion in the Low Carbon Day in October. We have also the opportunity to talk perhaps deeper about that in October in London in our Sustainability Day. We are going to complement this acceleration with the improvement of shareholder remuneration. For us, it's a priority. I mean, today I have the full conviction, and these results underline this point, that we have a very cheap stock price.
Taking into account the cash generation we have, I mean, reducing capital number of shares of the company is going to be our priority in terms of increasing the shareholder distribution in coming months. I mean, going to the technicality of how to redeem these 75 million shares we have currently, and you could see probably in our financial statements, we have already 25 million shares in our balance sheet. I mean, in our current treasury shares position. From now on, we are going to start buying in the framework of a share buyback program that is going to be launched today. The additional buyback of 50 million shares.
All in all, taking the 25 we have in our balance sheet plus 50, we are going to buy from today on, in coming months, we are going to get 75 million shares in our balance sheet that, as soon as possible, we are going to amortize, we are going to redeem them. In any case, before year end, all that is going to totalize a minimum, and I explain the term minimum in some seconds, a minimum of 150 million that will be canceled in 2022. That is more or less a 10% of capital, and it's a 75% of the strategic plan commitment. As I said before, I mean, in case of...
I prefer to be prudent today because in case of seeing all that in the third quarter, perhaps we could have room to something additional. All that is going to depend on the evolution of economic growth in the world in coming months. Taking into account the current environment, let me say that I prefer to be very prudent. Thank you.
Thank you, Sasi. Next question comes from Matt Lofting at JPMorgan.
Please, Josu Jon, first coming back to the comments that you made at the beginning of Q&A on the topic of windfall taxes and fully acknowledging the sort of points that you made in particular, sort of the frame around regulated versus non-regulated businesses. Can you nonetheless just share some data points with us and remind us from the perspective of sort of revenue and PBT, the absolute and sort of relative share of profitability and revenues that Repsol derives in Spain, please, perhaps what it was in 2021 and where you see it the first half of this year.
Secondly, coming back to restructuring and the renewable transaction that the company successfully delivered in June, could you talk a bit more about the capital allocation and cost of capital optimization opportunities that come with that transaction and on the former, then how the proceeds would be deployed, the extent to which they will be ring-fenced within the renewables business in order to support cost of capital efficiency? Thank you.
Thank you, Matt. I mean, I think that you have in the financial statements a figure that is related to our revenues in Spain, but I mean, that is not the real figure because these revenues are including a part of taxes and so on. The figure is lower. But again, I'm quite comfortable related to this news because I'm convinced that we have a legal framework, and we have a rule of law that protects market entrepreneurial activity and protects Repsol from any arbitrary initiative. Believe me, Matt, we'll do our best to avoid any impact of any arbitrary measure on our company. Saying that, Matt, you talk about the renewable transaction about the cost. Could you repeat your second question please, Matt?
Yes, certainly, Josu Jon Imaz. Can you talk a bit more about the capital allocation and cost of capital benefits that go with the renewables minority transaction that the company delivered in June, please? In particular, within the capital allocation side, how the extent to which the proceeds, the EUR 900 million will be ring-fenced within the renewables business to support cost of capital efficiency?
Sorry. Excuse me, Matt. Thank you for repeating the question. I mean, first of all, let me say that this partner is mainly going to support our growth plan in this business. We are going to go on together, fully committed in this growth to get 6 gigawatts in operation by 2025 and 2030. Saying that, what we are going to do with these proceeds is to finance and to grow in the low carbon platforms. That is going to be, I mean, all these proceeds are going to be used in this growth, either in this business or in some other growth platforms, but mainly in this renewable business.
In terms of profitability, efficiency and so on, I mean, what we are fully engaged in is this process of increasing the return on equity in this business through the portfolio rotation we are enforcing. This morning, we released, and I think I mentioned some minutes ago also in my speech, the last one we did in Kappa, in the south part of the Spanish plateau with Pontegadea. I mean, they acquire 49%. Thanks to this rotation of a partner that is acquiring a non-operated part and stake of the business, probably with a cost of capital lower than the cost of capital that Repsol could have, we are increasing the return on equity of this asset.
I mean, that is behind this strategy of making more efficient the use of capital in this business by Repsol. Thank you, Matt.
Thank you, Matt.
Thank you.
Next question comes from Joshua Stone at Barclays.
Yeah. Thanks, Ramon, and good afternoon. Two questions, please. Firstly, just coming back to shareholder returns. I mean, I know you want to wait till 3Q, but just on this principle of returning 25%-30% of cash flow to shareholders, does that apply in principle for 2023 as well? And then secondly, on the fuel subsidies you're giving in Spain, and the larger discounts to digital customers, can you just talk about what's the take-up been on that and how successful has that program been, and how sticky are those customers? Thank you.
Thank you, Joshua. I mean, let me say that the floor is going to be our commitment in the strategic plan and the ceiling is going to be this 25%, 30% of the operating cash flow applied for our shareholders. I mean, in case of seeing and having this environment in business terms, in our business and in your company, I mean, we will apply the same strategy of maintaining our shareholders distribution next year in 2023. That could range something in between the 25% and the 30% of the cash flow from operations. Definitely, yes.
Discounting service stations impact, I mentioned before, I think that if we take what is happening in P&L terms in our Spanish service stations, April, May, and June, the results, the P&L has been zero month after month. That is our strategy. It's a strategy based first of all in a commitment. I mean, we want to be close to our customers that are experiencing a complex situation in price terms. Secondly, it's a strategy also in commercial terms because we are increasing sales. We have increased by 16% in this quarter our sales in our service stations.
On top of that, we are building the digital strategy of this business, increasing in a dramatic way, either the number of people using Waylet or app, to get the relationship with Repsol and the number of operations developed with Waylet. That is part of our strategy, and it's an investment, an investment in our customers, in their needs, and an investment in the future of this business. Saying that, in the operational result, impacted by this discount has been EUR 142 million, more or less, this quarter. I have to say that, this impact has been positive, positively impacted by an additional 42 million euros positive because the margin is coming from the increase of volumes.
All in all, we have in our operational results in some way impacted negatively by this discount in service stations over the quarter has been EUR 100 million. That it seems to me that after taxes could be seventy-five million euros after taxes. I mean, if you take our account in one year ago, more or less, we were earning an average of 23-25 million euros per month after taxes in this Spanish mobility business. That is the part we are reducing our P&L, but in the framework of the strategy I mentioned. Until when?
I mean, we are going to maintain this policy over the summer, and we are going to adapt, of course, this policy to the evolution of prices and the evolution of the economic environment in our society, in our country. As always, remember, I mean, we anticipate any government in terms of supporting Spanish customers. Before any kind of initiative coming from the Spanish government, we were the first mover that reduced our prices, that increased discount, trying to be close to them. We are going to be there. Thank you.
Thank you, Joshua. Next question comes from Giacomo Romeo at Jefferies.
Thank you. Two questions. First one is a clarification on what you just said, just to join on the retail discount and in the context of the potential for a windfall tax in Spain. Are these two in any way related? As in, would you reduce or remove the discount should the windfall tax be introduced, or is the discount at the pump unrelated to whatever action the Spanish government decides to take? The second question I have is goes back to the potential for a divestment of a minority stake in the E&P business.
I know obviously I understand that, you look at a variety of, you're looking at proposal, nothing is, no decision has been made. Just wanted to check if should you divest any part of your businesses, would any of these proceeds be considered to be returned to shareholders, or would they be invested in further your energy transition? How do you see the potential use of proceeds from divestment in other businesses?
Thank you, Giacomo. I mean, going to your first question, I mean, our clear priority is going to be being close to our clients, being close to their needs, that is the Repsol strategy. We are doing that when we are developing our multi-energy strategy to offer all kind of products. Where we want to be digital is to offer in a better and more accurate way the service our clients needs. When we are reducing our prices because we are increasing discounts, that is because we want to be close to our clients. Our priority has to be being close to our clients. It seems to me that governments have to decide what they prefer, to collect taxes, to get money, or to be close to the customers, to be close to the Spanish society.
It's a decision that governments they have to take. Going to your second question, I mean, that is not any decision related to that. Sorry, Giacomo, but that is not on the table. I mean, we are, of course, analyzing any opportunity, any asset, any business is always analyzed in terms of portfolio management or portfolio rotation and so on. I mean, be sure that the priority capital allocation terms for any single penny or cent entering in Repsol is going to be, first of all, accelerating the energy transition of the company always. That is going to be the first priority.
In case of not having enough profitable projects, the distribution to our shareholders, and of course, always trying to sustain a sound and a strong financial balance sheet in the company. Mainly when we are entering in a volatile time where financial strength is an important asset to weather or to steer the vehicle in such a tough times. Thank you, Giacomo.
Thank you.
Thank you, Giacomo. Next question comes from Fernando Abril-Martorell at Alantra.
Buenos días, just a couple of questions please. First is with regards to refining margin premium. I don't know how this evolved during the first part of the year and what do you expect, 'cause you just mentioned just recently that the second half could come better than the first one. And also, linked to this, what could be, I don't know if you can quantify a bit the potential impact from the better situation with regards to Venezuela right now into your refining margins. Second question is just a kind of clarification. I don't know how do you calculate shareholder remuneration for this year.
I mean, is this the dividend paid in 2022 plus the investments made in buybacks and this is not including the ones that will be canceled because you had on your balance sheet prior to the, you know, prior to the investment?
Buenos días, Fernando, y gracias. Going to the refining margin premium. I mean, let me say that, I mean, of course, I don't know the exact figure before performing and operating the assets. My rationale is that the premium is going to be significantly higher in the second half than in the first part of the year. What is the rationale for that? First, now, if you analyze the conversion utilization rate we have in February, March, April, May, with the difficulty of adapting the slate of crude oils to the lack of Russian oil because the decision we took and all that, all in all, the utilization rate was low.
I mean, that was impacting a very negative way in the capacity we have to get and to obtain this premium. Now operating at 105-106% as we are this conversion rate. It seems to me that that is going to stay perhaps except in the period of October because Tarragona's shut down. Remember that we also had a full shutdown in Bilbao's refinery in March and April. We also have a unit in Cartagena. I remember, I think that it was the hydrocracker in March. All in all, it's going to be significantly higher, the premium. On top of that, the contribution of Venezuela, I mean, what is Venezuela doing?
This oil is mainly help us, that is going to be, I think, that more evident in coming weeks. We are going to fulfill in a better way the cokers, because you know that the yield in the vacuum unit of crude oil depends a lot of the API of this crude oil. If you are using in our system more heavy oils, straight, I mean, the impact is going to be that we are going to have a higher capacity to fulfill our cokers, and due to this impact, we are probably optimize in a better way the conversion units we have.
I mean, allow me, and let me, Fernando, not giving you because I have this figure of course before operating the units, giving you a figure. I think that is going to be significantly better in this second half. Going to your second question, you are fully right. What we are doing is exactly accounting for or taking the shares we are acquiring over the whole year, this year, 2022. We are not taking into account what we had in our balance sheet in December 2021. Exactly what we have bought or acquired over this year, plus the dividend in cash.
I mean, I don't have here the exact figures in my mind, but the cash could be at around EUR 900 million this year. We could have EUR 250 million that was used to acquire a part of the shares of the program before. I mean, more or less 20 million shares that we acquired over the first part of 2022 to redeem the 75 million shares in May after the AGM, plus the EUR 1 billion we are going to use either because we are taking into account the 25 million that we have acquired over the last months, and they are in our balance sheet, plus this 50 we are going to acquire in the buyback program. I mean, all in all, EUR 1 billion.
EUR 1 billion + EUR 0.9 billion + EUR 0.2 billion, EUR 0.3 billion. I mean, we are talking more or less about EUR 2.1 billion-EUR 2.2 billion applied this year in this remuneration policy of our shareholders. That, if you divide all that among the, or by the number of shares, I mean, that is a figure that could be close to EUR 1.4, EUR 1.5 per share. Gracias, Fernando.
Thank you.
Thank you, Fernando. Next question comes from Ignacio Domenech at JB Capital Markets.
My questions. My first question is on Canaport, on Saint John LNG in Canada. I would like to know your view on the possibility of reconverting Canaport into a liquefaction facility, and if this is something that could go ahead given the current environment. My second question is back on working capital. I'm not sure if I understood correctly, but on the higher working capital build, if you expect to revert this during the second half of the year. Thank you.
Gracias, Ignacio. I mean, going to your first question, I mean, it's true because we have listened, we have met authorities and there is a, I mean, an interest about Canaport in some European countries, Germany, even Canada as a potential provider of gas towards Europe in the context of the war we are suffering. I think that this Canaport plant was part of the bilateral talks that in the framework of the NATO summit was held here in Spain in the end of June. I mean, saying that, first of all, let me introduce a new word. I mean, we are not talking about converting, but adding a new facility. I mean, having the dual regasification plus liquefaction unit.
Secondly, I mean, probably makes sense from a geopolitical point of view, taking into account the situation in Europe. But what is, I mean, crucial and important is first of all to have clearly an offtaker that is going to commit to buy this gas in coming 15-20 years that is needed to, I mean, to go ahead in such a project. Secondly, to guarantee, and that is not easy. I mean, it could be done, but that is not easy to guarantee that the gas from Alberta is going to arrive to Atlantic Coast. I mean, some additional. I mean, it's not a large infrastructure because main part of it is there, but perhaps some kind of infrastructure is going to be needed.
Some tolling framework is going to be needed to have a competitive gas in the Atlantic Coast and so on. I'm talking about things that all are not in our hands, but it could be possible in the framework of the energy crisis we are seeing. I mean, saying that if you have an offtaker committing for coming years, and we have the access to gas, and we have our main part, or an important part, better said, of the facility that is already built, I mean that could be a very interesting project for anybody and of course for Repsol. Again, I mean, I want to put on the table that it's not an easy game, that there are a lot of difficulties to arrive to this scenario I was describing. Working capital.
I mean, I don't know enough here because, now first of all, I said in the second quarter, I always try to be, I mean, with the best information I have in that moment, fully transparent in my Q&As. I said in the first quarter conference, that an equivalent price, we will have a constant working capital this quarter. First of all, it's true that prices has been higher in the second quarter than the first one, but the effect of these prices could be at around EUR 600 million-EUR 700 million more. That is a part of what has happened this quarter. On top of that, we have EUR 100 million from Venezuela.
This figure is going to be probably lower in coming months because, I mean, we are starting. If we take the 3 million barrels of oil that are arriving this July to our system, and we take the 50% in the JV that is the stake of Repsol. I mean, taking into account that we have a start in this business in May 17th, we are recovering almost 75% of the bills of the whole first half of the year. It seems to me that we are entering in a new dynamic related to Venezuela, and this impact is going to be also positive in coming months.
Again, we took a decision that is not forecast three months ago, but taking into account the strong concern we have in Europe related to the security of supply and the risk of seeing European countries with a diesel shortage in coming months, we took the decision of increasing our inventories in EUR 1.1 billion-1.2 billion in volume terms. It's going to depend on prices, Ignacio. I think that there is no room for increasing probably in volume terms because we are using the maximum the capacity we have, and depending on the price, the working capital is going to increase or is going to decrease in coming months. Thank you. Gracias, Ignacio.
Thank you, Ignacio. Next question comes from Kim Fustier at HSBC.
First one is, I wondered if you could comment on the degree to which Repsol is benefiting from high wholesale power prices in Spain in your generation business, or is your pricing exposure mostly from PPAs? And also on your ability to pass on higher wholesale gas prices to your industrial and retail customers. That's the first question. The second question is coming back to refining margins and the premium you're expecting in the second half. You've got a very complex refining fleet, and I'm wondering whether the very weak fuel oil margins we're seeing are a net benefit to you as you're able to use cheap fuel oil as a feedstock, or are they weighing negatively on margins? Thank you.
Thank you, Kim. I mean, more or less, in Spain, what we have in our P50. Because you know that it depends on the hours of wind, depending on the season and so on. All in all, I mean, we could have in Spain, in our power business, 40%, 35% more or less of PPAs with third parties. We could have 30%-35% of PPAs with our own power retail business, and we could have a 30% of market open position.
Gas prices, you know that I expressed in the last conference call my opinion, as I mentioned today, that in a regulated market, it makes sense that our government or our regulator could intervene trying to accommodate the interest of the producer and the customer. In terms of gas prices, I mean, you know that we have a framework that is discounting a part of this price in the market, the full price. Saying that, I think that is no material this impact on Repsol.
What is happening in gas terms, and that is not related to profits. It is related to the operation that due to the lack of wind and hydro in Spain this quarter, our CCGTs they have operated at higher rates. Again, I mean, we have to buy the gas to operate the CCGT and the impact on profits is not material at all. I mean, going to the refining margin. First of all, in our refining margin, we have. I mean, fortunately, we are in some way reducing the impact, the negative impact we had to use heavy oils.
First of all, because we have maintained a significant amount of heavy oil as a feedstock over the last months. I mean, from Mexico, from Colombia, from Canada, and so on. On top of that, we are also using Venezuela's crude oil since July, so that is going to improve in some way the access we have to heavy oils. On top of that, I mean, fuel oil has always been an alternative in our system. It's always there. It's an option of programming.
I mean, if we see that the fuel oil or the alternatives to this kind of heavy products are there, and the optimization of our programming of our refinery is saying that makes sense, it's saying that it makes sense to take this fuel as feedstock, I mean, we do it. If the advantage of using either a heavy oil or a lighter oil is better, I mean, that depend on the optimization of the programming. That depends on prices, depends on the yields of every crude oil and of this fuel, and of course depends also on the relative discount of this fuel oil.
The alternative is always there, and it seems to me that perhaps we could have better conditions in the second half of the year, to optimize the feedstock that we have had over the first half of the year. Thank you, Kim.
Thank you, Kim. Next question comes from Irene Himona at Societe Generale.
It appears that Spain has just announced their measures. It appears that they're seeking a 1.2% tax on domestic energy sales. You don't report by country, but functionally, I wonder if you could give us a sense of Spain's weight in your revenues or EBITDA. Thank you.
Again, Irene, I mean, first of all, one hour ago, the leakage was in one direction. Now, some minutes later, they are talking about 1.2%, and probably tomorrow we are talking about a different kind of tax. We don't have any clue, and we don't have any clear clue about that now. Saying that, I'm comfortable. I mean, first of all, we have to know what is real in the draft of the bill. Secondly, remember that this draft has to be analyzed, discussed, and so on in a parliamentary process of probably weeks or months.
Saying that, we are quite comfortable because, I mean, it doesn't make sense, the application of the concept that is behind this kind of measures of the windfall profits to a company not regulated, a business that is cyclical. Let me say that I believe in the solid constitutional and legal framework we have, either in Spain and in Europe, and we do our best to avoid any kind of impact of this kind of measures on our company. Thank you, Irene.
Thank you, Irene. Next question comes from Alessandro Pozzi of Mediobanca.
First of all, I was intrigued by your comment about the resilient demand in Spain. The reason is that we're seeing demand destruction in the U.S., in particular for gasoline. Probably there, the percentage change in the price of gasoline was probably higher than in Europe. I was wondering whether that too could have a spillover effect in Europe as well at some point, maybe after the summer. The second question is on the impairment in refining. I always thought Repsol had one of the best refining set up in Europe. I was wondering if you can give us maybe a bit more color on those impairments and why now?
Also, maybe an update on Sakakemang. There are reports that maybe a well test has not really performed within expectations. I was wondering whether you can give us an update on that project as well. Thank you.
First of all, Alessandro, I mean, it makes sense what you are saying about the demand destruction in the US and so on. Perhaps all that could happen, I mean, in Europe, because, I mean, it makes sense that there is a potential elasticity in this market. That is, I mean, is logical, but what we are seeing now in the market is not that. What we are seeing in the market is still a strong increase regarding the figures we had in 2021. As I said before, we are even close to 3% below the pre-pandemic figures in what we are seeing in the market.
In some other businesses, kind of fuels like aviation and so on, I mean, the increase is dramatic. Perhaps, I mean, the demand is probably almost flat in Spain now, but because we are increasing our market share, we are increasing our sales in a dramatic way. I mean, we have increase in 16% our sales, so what we are seeing is just the opposite. Again, Alessandro, what I'm saying for today, perhaps in three, four months could be different depending on the economic evolution in Europe because it makes sense that, I mean, there is an elasticity also in this market. I mean, going with the refining business, first of all, let me say that almost all European companies impair their refining assets over last years.
I mean, saying more, a lot of European companies shut down their refineries over the last years. Remember that in France, a half of the refineries were shut down over the last 14 years. In Italy, almost a half of the refineries were shut down over the last 14 years, since 2008. In Spain, I mean, not only Repsol, I mean also our competitors, our other competitors, BP, they also, as Repsol, they invested in their refineries in Spain in the midst of the crisis. For that reason, we have a great refining system in Spain. Saying that, I mean, if we have, and I'm going to try to explain that because it could be, let me say, a bit surprising for some people.
I mean, if you are experiencing a good quarter, why are you developing this impairment for your assets? I think, remember the exercise we did, 3 years, two and a half years ago, in terms of adapting our E&P and our commodity prices to the energy transition. What we are seeing today in Europe, due to the regulation and the REPowerEU program, is that there is a clear aim, a clear political ambition in Europe of accelerating the energy transition. I mean, it makes sense. It makes sense in terms of decarbonizing the world, and it makes sense in terms of preparing Europe to be more self-sufficient in geopolitical terms, taking into account the energy sector.
I mean, I have to to read the signals coming from regulators, and I have to try to imagine that this acceleration that could come and that is going to be evident from the milestone of 2035, where the combustion engine, new car sales are going to be banned. All that is going to impact, not now, not next year, not probably in two, three years, but it's going to impact in the future volumes and margins of our, let me use the term, our former legacy units of the refining business. Of course, we are building at the same time over the last years, new units. We are building new plants.
We are building new factories within our industrial sites that are linked to new activities, are linked to biofuels, are linked to advanced biofuels, are linked to hydrogen, and all that is going to grow. These cash flows are going to grow. That is a new business. I mean, we have to take into account what is happening in our balance sheet with our oil units that has been impaired. I mean, that is the rationale behind its prudence. It's not only prudence in financial terms, it's also the full commitment of this company, of Repsol, of being a positive actor in the adaptation that the European Union has to be in terms of energy transition. We need to be agents of this decarbonization, and what we are doing today is adapting the balance sheet of our refining business to this new reality.
Going to Sakakemang, what we are doing now, I mean, is an appraisal activity, because, I mean, we want to evaluate in an accurate way what is the dimension of the asset of the play, the gas we have discovered.
We are in the appraisal process of the business, and we are also working analyzing the development project, taking into account not only the part of the production of the gas, but also the part of the carbon capture and storage we have to build in this infrastructure to be able to, I mean, to have, let me say, a production that is going to be, I mean, in the international best standards in terms of CO2 emission. We are discussing these activities with the regulator, with SKK in Indonesia, and preparing what could be the future development of this project. Thank you very much, Alessandro.
Thank you.
Thank you, Alessandro. That was our last question. At this point, I'll bring our second quarter conference call to an end. Looking forward to see you in London on the fourth of October at our ESG day. Thank you very much.