Hello, welcome to Repsol's first quarter 2026 results conference call. Today's conference will be conducted by Mr. Josu Jon Imaz, CEO, and a brief introduction will be given by Mr. Pablo Bannatyne, Head of Investor Relations. I would now like to hand the call over to Mr. Bannatyne. Sir, you may begin.
Thank you, operator. Good morning to everyone joining us today. Welcome to Repsol's first quarter 2026 results presentation. Today's conference call will be hosted by Josu Jon Imaz, our Chief Executive Officer, with other members of the executive team joining us as well. At the end of the presentation, we will be available for a Q&A session. Before we begin, let me remind you that 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 on our disclaimer. With that, I will hand the conference call over to Josu Jon.
Thank you, Pablo. Good morning and welcome to everyone. Last quarter marked a solid start to the first year of our update 2026/2028 strategic roadmap that we present six weeks ago in March here in Madrid, and most of you were present here. This strategic roadmap is built on three clear pillars: increased cash flow generation, higher shareholder returns, and disciplined capital allocation, always preserving the strength of our balance sheet. Since then, since our capital markets day, the escalation of the conflict in the Middle East has had global implications for our industry, increasing volatility across commodities and reinforcing uncertainty around the near-term economic outlook. Our market environment has since become more complex, shifting from concerns about oversupply risk to a very different context of actual physical disruptions.
The closure of key energy routes has led to a significant tightening of oil, gas, and product markets, increasing price fluctuations and reshaping global trade flows. In this situation, Repsol has remained focused on the safe and efficient operation of its assets, ensuring continuity of energy supply while taking timely and disciplined actions to help mitigate the impact of fuel price volatility to our customers. As of today, across our assets, remain stable and reliable. All the operations, I mean. With no material exposure to the Middle East, we are well-positioned to navigate the current environment and benefit from commodity market dynamics. All that support by a diversified and resilient portfolio.
Looking at the main developments of the first quarter, in the upstream, we complete the agreement to incorporate TotalEnergies to our U.K. JV, creating the largest independent oil and gas producer on the U.K. continental shelf. In addition, we continue moving forward with our project pipeline, starting production at Lapa Southwest and reaching the latest stages of development in Pikka, in Alaska. In Venezuela, the recent updates in the country could provide a material upside within the portfolio. In the industrial side, the performance benefit from the strong refining environment in March and increased contribution from trading businesses. Results were partially held back by non-transacted results and time lag effects on products pricing, which are expected to flow through the P&L in coming months, in the next quarter. In customer, activity remained resilient, supported by higher mobility sales and the continued growth of our customer base.
In terms of results, first quarter adjusted net income reached EUR 873 million, a 57% increase over the same period in 2025, mostly due to a stronger contribution from industrial. Cash flow from operations stood at EUR 1 billion, 2% higher than in the first quarter last year. Cash generation was impacted by a EUR 1.4 billion working capital build-up, mainly related to inventories linked to higher prices and volumes as we ensure full security of supply to our refining system in this complex and volatile environment. Excluding working capital movements, operating cash flow generation amounted to EUR 2.4 billion, more than covering investments, interest, and shareholder remuneration in the quarter. Net debt closed at EUR 4.8 billion, a EUR 0.3 billion increase over December.
Giving rate here stood at 14.3%, and 6.5% if we exclude leases. Shareholder remuneration was aligned with our distribution objectives. The first cash dividend of 2026 was paid in January, amounting to EUR 0.5 per share. The second dividend will be paid in July to reach a total dividend of EUR 1.051 per share in the full year. This figure is, roughly speaking, an 8% increase compared to 2025. Dividends will be complemented with share buybacks to reach our committed 30%-40% cash flow from operations distribution objective. Aligned with this, the first buyback program of 2026 was launched in March for up to EUR 350 million. With additional buybacks to be implemented in the second half of the year.
Looking briefly at the evolution of the main macroeconomic indicators in the period. Brent oil averaged $81 per barrel, 7% higher year-on-year, moving within a range between $61 and $127 through the quarter, so a strong volatility in the period. The Henry Hub averaged 5.1 dollar per million BTU, 13% higher than in the same period in 2025, driven by severe weather at the beginning of the year and the ongoing ramp-up of new LNG export facilities in the U.S. Repsol's refinery margin indicator was 106% higher compared to the same period in 2025, mostly driven by higher middle distillate spreads since March, particularly diesel and jet fuel.
At the exchange rate, the dollar averaged 1.17 in the quarter and 11% depreciation compared to the first quarter last year in 2025. Turning now to upstream performance. Adjusted net income was EUR 302 million, 5% lower year-over-year, driven by a weaker dollar, as I mentioned before, and the divestments executed in 2025. This was partially compensated by higher gas realization prices and a stronger contribution from equity affiliates. Production averaged 539,000 bpd , in line with the first quarter in 2025.
The higher contribution in the U.K., the Gulf of America, and Trinidad and Tobago was partially offset by disposals, a force majeure situation in Peru, and the lower unconventional production due to the extreme, sorry, weather conditions we had in the U.S., mainly in January and February. Excluding this, disposals I mentioned before, production was 4% higher year-over-year. In the U.K., on the 13th of March, we complete the agreement to incorporate TotalEnergies assets into our North Sea JV. The resulting entity, that is named NEO NEXT+, is projected to produce around 250,000 bpd in 2026, of which around 60,000 bpd are net to Repsol.
In Libya, first quarter production reached 42,000 bpd , 11% above the same period in 2025, demonstrating the resilience of our operations despite a localized disruption in March. Furthermore, we strengthen our position after being awarded with two new exploration blocks in the first licensing round held in the country in nearly two decades. In our development pipeline, the volume growth forecast to 2028 will be supported by the risked projects that are already producing or close to first oils. In Brazil, in the Santos Basin, the development of Lapa Southwest reached first oil in March. The project features three wells tied back to existing FPSO, contributing to increase the total production in the Lapa field to 60,000 bpd , where Repsol holds a 15% interest.
Furthermore, the development of Raia, remember that is the former Campos 33 in the Campos Basin, enter its sixth well drilling phase, representing an important milestone towards the planned startup in 2028. In Alaska, the first phase of Pikka is mechanically complete and undergoing final commissioning. First oil is expected in, I mean, in an immediate period, coming days, coming weeks. Key facilities are being integrated with the objective of reaching a plateau production capacity of 80,000 bpd by the end of July, early third quarter. In the Quokka unit that is located in the Nanushuk area, to the east of Pikka, the successful completion of the first appraisal well earlier this month in April, has further delineated the potential of all this Nanushuk reservoir.
An additional commitment to Alaska was reinforced after securing 42 new exploration licenses in the latest federal round, supporting future developments plans in the area. Finally, in Venezuela last quarter, we reached a strategic agreement to ensure the continuity of natural gas production in Cardón IV. Moreover, after quarter end, we signed an agreement to resume operational control of the Petroquiriquire oil asset. This includes plans to increase gross crude oil production in the country by 50% within 12 months, and to triple it over the next three years, all under a disciplined free cash flow positive framework for capital allocation. Our priorities in the country are clear: monetizing current production and increasing our volumes.
Within this framework, next week, our Cartagena Refinery will receive the first oil cargo linked or associated to the gas production of Cardón since the issuance of the new U.S. export licenses that remember We were allowed to with these licenses at the end of February. Additional cargos are expected going forward. Continuing with industrial, first quarter adjusted net income was EUR 440 million, 233% higher than in the same period a year ago. The improvement was driven by higher contributions in refining, Peru, and the trading businesses, partially offset by weaker chemicals and non-transacted sales. In refining, the better results due to higher refining margins were partially offset by non-transacted sales adjustments, as I mentioned before, and a negative price lag effect, mainly in kerosene sales.
I mean, these adjustments are expected to be fully reverted in coming quarter. The refining margin indicator average $10.9 per barrel, roughly in line with the fourth quarter of 2025, and $5.6 higher than the first quarter last year. The indicator average $6 per barrel through January and February, rising in March to an average of $20, driven by stronger middle distillates as a result of the conflict in Iran. Since the closure of the Strait of Hormuz, diesel and jet fuel spreads have suffered extreme volatility resulting from the interruption of products flows and tight global inventories.
HVO and SAF margins have also experienced a material increase due to the escalation of the mineral alternatives, and also because the increase of the regulatory demand of this kind of products. The premium generated over the indicator averaged $5.7 per barrel in the quarter, mainly due to a better crude and products balance optimization on the contribution of buyers. Let me say that in this disrupted and complex situation, I mean, the margin indicator, in some way, is losing the capacity to define what is happening in margin terms in a refining system.
We are going to see this kind of, let me say, exceptional premiums, because with the high flexibility of the assets, we have, all that is, enabling us to efficiently adapt the crude diet and our products yield to this kind of exceptional situations and disruptions that are happening in the market. That is the explanation, let me say, for this exceptional situation. Utilization of distillation capacity reached 79% in the quarter, while conversion units operated at 86%. Crude throughputs were negatively impacted by the reduced availability of the topping unit in Cartagena.
Remember the fire we had in January, together with crude supply constraints in January and February due to the severe weather and the storms that were preventing vessels from docking at some of our refineries, mainly Tarragona, Petronor, and Coruña. The trading businesses delivered a very strong performance in the first quarter. The operating income was EUR 343 million higher year-over-year, reflecting a solid contribution from both crude and gas trading activities. In chemicals, Repsol's margin indicator averaged EUR 174 per ton in the first quarter, negatively impacted by the sharp increase of raw material costs in March, which was not yet reflected in selling prices.
The situation in the Middle East has tightened the global petrochemical market due to supply constraints and the consequent reduction of production in Asia and Europe. Margins are going through a period of exceptional volatility, especially affecting naphtha-dependent producers with limited feedstock flexibility. Regarding the transformation projects within our industrial portfolio, the new HVO unit in Puertollano is this week starting the production, becoming our second facility in Spain for the production of 100% renewable fuels. In renewable hydrogen, we approved the construction of our second large-scale electrolyzer to be built in Bilbao at our Petronor refinery, and is expected to start up in 2029. Remember that the project has received EUR 160 million in funding from the European Union. Going on now with customer division.
First quarter adjusted net income was EUR 160 million, a 3% increase over the same period in 2025, and this result was mostly driven by a higher contribution from mobility. Cash flow from operations amounted to EUR 429 million in the quarter. Sales of road transportation fuels in Spain were 11% higher compared to the same period last year. Non-oil contribution margin in our service stations was 11% higher year-over-year. Non-oil is increasing, step by step, its contribution margin to our service station business. In a complex environment of higher fuel prices and significant daily volatility, Repsol strengthened its customer value proposition by doubling discounts that are applied through the Waylet app, as well as increasing discounts to professionals and self-employed workers.
These initiatives had a direct and positive effect on Waylet registrations and fuel sales. In power and gas retail, we are the 129,000 customers in the first three months of 2026, reaching 3.2 million clients. That is equivalent to a 20% increase year-over-year. As a result of the larger customer base, the power commercialized by Repsol was 26% higher compared to the first quarter in 2025. The number of digital clients reached 11.2 million at the end of the quarter, a 17% increase over the same period of 2025, with Waylet as the main contributor. Finally, around 1,600 service stations offer 100% renewable fuels as of the end of March, with 62% of our Spanish network already providing multi-energy solutions.
Turning now to low carbon generation, the adjusted net income was EUR -4 million , a EUR 6 million decrease compared to the first quarter in 2025. Results were negatively impacted by lower electricity prices in Spain that more than compensated the higher power production. The average pool price in Spain was EUR 43 per megawatt hour, roughly 50% below the same period last year due to an exceptionally rainy quarter. The power generated by Repsol increased by 57% year-over-year due to a higher contribution from combined cycles and renewables. Wind and solar production reached 2.3 GWh , 80% higher comparing with compared to 2025.
Renewable generation capacity under operation reached 6 GW by the end of the quarter, thanks to the startup of new capacity in Spain and the addition of the last part, 133 MW of Pinnington Solar Farm in the U.S. that is now reaching its maximum capacity of 825 MW. Finally, we continue to execute our asset rotation strategy. In the U.S., the divestment of our stake in Outpost agreed in December was cashed in in the first quarter, and the rotation of Pinnington is expected to be launched over the course of 2026. In Spain, we are progressing with the second phase of the rotation that was launched in 2025. Moving now briefly to a summary of the financial results.
In this slide, you may find an overview of the figures that we covered today. For further details, I encourage you to refer to the complete set of documents released this morning. Regarding the outlook for the rest of the year, let me say that it is the most complex part of my speech because, first, I mean what is known, April production has been impacted by the plant turnaround of Peru LNG liquefaction plant, and now almost complete, which is factored in our budget. Full year production guidance remains in the range between 560,000 bpd and 570,000 bpd , that is driven by the increased production in conventional, that is already happening, and the startup of Alaska.
In refining, diesel and jet prices are expected to remain strong in the second and third quarters, even in the case of the reopening of the strait tomorrow. Moreover, the drawdown of strategic reserves implies that inventories will need to be refilled, boosting European diesel demand into the second half of the year. The refining margin indicator has averaged $11 in April, and the current scenario refinery maintenance plan for 2026 has been adjusted to prioritize production and feedstock flexibility. The premium over the indicator has averaged above $10 this month, underpinned by the higher share of middle distillates in our mix and increased sales to our domestic market in Iberia.
Strong disruptions in the spreads and discounts of our crude slate and products are allowing optimization of our planning and programming, increasing our refining premium to high figures. With respect to the cash flow from operations outlook, and I was referring to this outlook when I said that this is the most complex part of my speech. I mean, in light of the extreme level of uncertainty and volatility, we are not providing a revised guidance at this point. I mean, let me remind you that based on the updated sensitivities under the new reporting model, every $10 increase in the Brent price would translate into roughly EUR 250 million of incremental annual operating cash flow on average for, I mean, on average for the period of 2026, 2028.
Roughly speaking, it's a bit higher, EUR 285 million, but I mean, this year, because the gas component in the production is a bit higher, let me approach saying that could be, roughly speaking, EUR 250 million. Similarly, for every $1 per barrel increase in the refining margin indicator, the cash flow from operations will increase by around EUR 200 million. You may apply those sensitivities to estimate the expected cash flow from operations under the commodity scenario you deem appropriate. I mean, I don't have the crystal ball that is needed to give you a guidance about the evolution of the commodities over this year in this disrupted scenario.
That being said, we can confirm that between 30% to 40% of the additional cash generated will be allocated to shareholder remuneration in any case, as I said in the speech of the Capital Markets Day last month, in line with our capital allocation policy. To conclude, this first quarter marks a solid start to the first year of our updated strategic roadmap. Our recent Capital Markets Day established a robust framework to deliver cash flow growth with great visibility, increase shareholder remuneration, and maintain a rigorous capital discipline. Even though the current market environment is clearly more uncertain than what we had at the beginning of the year, as the closure of the Strait of Hormuz has altered international trade flows.
The economic impact of the conflict, sorry, will depend on its duration, the damage to energy infrastructure, that we don't know in the, in the whole dimension, and indirect effects through industrial value chains and financial conditions. In this scenario, Repsol benefits by a limited exposure to the Middle East, and our Tier 1 refining system in Europe, heavily weighted towards middle distillates outputs and production, with flexibility to adapt our crude oil diet. In addition, our advantage location in the Iberian Peninsula provides access to feedstocks and markets in the Atlantic Basin. The startup of Pikka will provide near-term growth to our upstream volumes while adding a world-class asset to our portfolio with a long-term production plateau. The improved situation in Venezuela, not factored in our projections, is another material upside to our strategic plan.
At this moment, we are prudent in our financial outlook, as I mentioned before, subject to the evolution of the macroeconomic scenario in coming months, always maintaining our commitment to distribute 30% to 40% of the cash from operations to our shareholders. With this, I will turn it over to Pablo as we move on the Q&A, and thank you very much for your attention.
Thank you very much, Josu Jon. Before opening the Q&A, I would kindly ask participants to limit yourselves to a maximum of two questions. If time permits, we will try to cover more in a second round. To begin, I would like the operator to remind us of the process to ask a question. Please, operator, will you go ahead.
Thank you. To ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again.
Thank you, operator. Let's get started. Our first question comes from Biraj Borkhataria at RBC. Please, Biraj, go ahead with your question.
Hi. Thanks for taking my question, and thanks for the presentation. Just the first one on refining. There's obviously a lot of volatility in that, and you're very well set up to benefit. Could you just unpack, you know, the premium as you see it? Can you talk about the biofuels contribution in the quarter and anything else to note? Just on the maintenance point you made, should we assume that refining is running at full capacity through 2Q and 3Q through the summer? Second question is just on the Pikka ramp-up, which you mentioned. I've noticed that those barrels, the North Slope barrels in particular bid and trade at very strong premiums relative to other benchmarks. Could you just highlight when you expect to get that project to plateau? Thank you.
Thank you, Biraj. First, our refining system is running at full capacity. The distillation percentage average in April is 85%, 86%. That is the average of last years. You know that we try to refine or to distillate, better said, the last barrel, giving us a positive margin, looking for the full coverage of the conversion. We move as far as we could the turnaround, the maintenance period. For instance, we had a turnaround period in May in Cartagena to change the catalyst of the hydrocracker, and we moved this maintenance to October, November. That's that was done.
On top of that, we also had in Tarragona, a turnaround that was replaced also to first quarter of 2027. We are going to operate because now it's not only a financial approach. I think that now we have the responsibility as a responsible operator to guarantee that we could provide the products that our hinterland and our customers, they need. You know that, for instance, kerosene production is very important for the Spanish economy because mainly in summer it's very dependent on the aviation and the tourism season. We have been able, over the last weeks, over the last two months, to invest and to change logistics in our refineries to increase our historical kerosene production.
We have increased not 25%, I mean, May, better said, we are going to be prepared to increase in a 25% of level, the level of kerosene we had three months ago in February. We are going to be able to produce 95,000 bpd of kerosene in our refining system from May on. That means that we are going to not only to be able to provide our customers, but even more, we are going to be able to offer an additional production to any problem or disruption that could come in the Spanish market from some other operators. I mean, we are going to be able to provide a 25%, roughly speaking, of the demand we had last year from our kerosene customers.
I'm not saying that the game is over because, I mean, we could have tensions in the market, we could have tensions because, first, keep the countries sending tourists to Spain, they could have problems to fuel their planes in their countries, in their countries of origin. Perhaps some of our competitors, I mean, I don't know the situation, I can't speak, of course, on behalf of them. Saying that we are developing all the effort to, let me say, squeeze the production capacity we have in this second quarter with our refining system. You could assume that, Biraj, that the refining system is going to work at this full, not only capacity, I mean, adapting the products to the main needs in the market.
I mean, again, as I said before, now the margin is not exactly the best indicator or the best KPI to follow what is happening. I mean, even if tomorrow, and that would be great to see that, the Strait of Hormuz is getting fully operational, I mean, I think that this year as average, we are going to see even in a full normalization of the situation in a good way, a refining indicator that is going to be probably above $9 a barrel for the whole year for.
A premium that seeing the figures that we are experiencing now and even seeing a normalization in two months, probably the premium is going to be above $5 for the whole year. We are, of course, prepared to take and to capture these margins. I mean, going to Pikka, I rely on the operator, Santos. I can't add more to the information that was provided last week by Santos. We fully agree with because, I mean, our technical people is engaged in the technical team of the operations. I mean, all the mechanical part of Alaska mechanical is fully completed. Commissioning activities are almost finished. They are progressing well.
A first, sales revenues are expected, roughly speaking, in two months. The plateau capacity of 80,000 bpd gross, of course, is expected in July. That is, roughly speaking, the approach I could give you about Pikka, and let me say that the first oil is imminent. Thank you, Biraj.
Thank you very much.
Thank you very much, Biraj. Our next question comes from Sasikanth Chilukuru at Jefferies. Please, Sasi, go ahead with your question.
Hi. I'm afraid I also had a question on the $10 premium to the indicator refining margin. I specifically wanted to check on one key factor that you had highlighted. You talked about spreads on the discount and discounts to the crude slate. It seems a little different from what we are hearing from your peers. I just wanted to understand what your crude slate was, how this, you're getting these discounts, I suppose. Also if the Venezuelan barrels and the cargoes are going to make any material impact or they're already factored in this. Yeah, thanks.
Thank you, Sasi. I mean, I know that it's perhaps, I'm sorry because, I mean, the complexity of what I'm going to explain, and that is my problem, it's not yours, is not easy at all. Again, I mean, when we take the refining margin indicator, what we are taking is the structure of a slate and the structure of yield of products and the conditions we have and we see in the market, and we budget that for the whole year. What is happening now, for instance? I mean, you know that our exposure to Middle East is tiny, but we have a 6% of our Basra oil that.
I mean, when you introduce in our refining margin, the Basra, I mean, because it's very complex crude oil to be bought today in the market. I mean, the premium over this crude oil is extremely high. We are not, of course, using Basra in our system. We substitute the Basra by heavy oils with strong discounts coming from Latin America. All that is improving in a dramatic way. I mean, we are taking in a very volatile situation. We have extreme opportunities to optimize the refining margin indicator that are not there every day. Because you have, let me say, very heavy oil, you have residues. Because the Brent price is very high, you have heavy oils that are competing probably with fuels and some other products that today could be, in relative terms, extremely cheap.
Because the high conversion capacity we have in our refining system, we are taking advantage of this crude oil. We are, let me say, beating in a clear way the refining margin indicator. Going to the yield of products. I mean, remember, we were producing, roughly speaking, I mean, don't take the exact figures, but we could be producing 350,000 cu m, 360,000 cu m of kerosene per month at the beginning of this year. That was budgeted in our refining margin indicator. What is happening now? Thanks to the investment we developed over the last two months, either operational, either logistics in some of our refineries. In May, June, from May on, we are going to be able to produce 560,000 cu m of jet per month.
What is happening with these figures? That because the spread of the jet is significantly higher than the spread of the alternative products we were producing in our refining margin indicator, we are going to improve in a dramatic way the refining margin indicator through the premium. I mean, you are seeing this premium. I mean, $1 per barrel of this premium is coming from this change or this increase in the jet production. You could say, "Okay, please change the margin indicator because all that is going to be more simple." That could be an option, but I'm even discussing with my own team because we don't know in this volatile situation what will happen in May or in June. Perhaps we have to change twice the refining margin indicator over the quarter.
At the moment, please, what is real is that the refining margin indicator plus the premium is reflecting the real margin we are capturing. The refining margin indicator is, let me say, the theoretical construction that works in a normal situation, in a normal way, and the premium is what we are capturing above this, let me say, refining margin indicator. I know that is complex, but again, I don't have another way to explain that. Saying that, when I said before to Biraj that even in the case of opening tomorrow, Hormuz, we are seeing a minimum of 9 + 5. That means that we are seeing a total refining margin over the year, even if situation is normalized tomorrow, probably above $14 a barrel for the average of the whole year. Thank you, Sasi. I'm going to Venezuela.
I mean, again, the Venezuela cargoes structurally, they don't improve the refining margin. If I have to assume that we are buying the Venezuela cargoes at the same, let me say, fair discount, fair value that the Colombian Castilla, sorry, or the Mexican Maya or the Canadian heavy oil. That is theoretical, of course. If there is more heavy oil in the Atlantic Basin, I mean from Venezuela, from Canada, from Colombia, from Brazil, from Mexico, and so on, the equation supply-demand of heavy oil is not so tight, so the discounts are higher.
Let me say that not because one or two cargoes are coming to our refining system, but because there are more heavy oils, thanks to the Venezuela recovery, and I think that is important to see that Venezuela in social, in economic, in production terms, is starting to recover about after January, where a new opportunity for Venezuela started. I have to assume that in some way, having a good access to heavy oils is good for our refining system. Thank you, Sasi.
Thank you very much, Sasi. Our next question comes from Alastair Syme at Citi. Alastair, please go ahead with your question.
Thanks, Pablo. Josu Jon, I wanted to ask about biofuels. I think from memory, your biofuels investments are based on a 15% hurdle rate and a EUR 275 ton of HVO versus feedstock. I just really wanted to confirm those assumptions and ask, you know, with current margins, I guess around five times that level, if that's having any impact or discussion in Spain about how RED III gets implemented. Thank you.
Thank you, Alastair. First, I didn't say before, in this premium, a part of this premium is also coming from the bio component that nowadays you know that is included in this premium. As I mentioned before, is significant. I mean, when we prepare the budget of the year, we assume, roughly speaking, for this year that the HVO minus UCO margin could be at around $850 per ton, $875 per ton. At those figure, roughly speaking, the margin for this year, I mean, we have to take into account that Puertollano is starting the production this week. I mean, we missed from January to April the Puertollano's production.
The EBITDA for this biofuel industrial business could be at around EUR 90 million. We have to add another EUR 25 million from the trading area and EUR 25 million from the client renewable fuel EBITDA. Roughly speaking, we had budgeted EUR 140 million for the bio business as a whole. I mean, taking, let me say, the comprehensive view of the business for this year. We have to take into account that today we could have EUR 570 million, roughly speaking, of capital employed in this business. That is important. You know that when we talk about EUR 570 million , we are taking the C-43, I mean, Cartagena, Puertollano, plus what is now in the investment pipeline in the Ecoplanta.
That is, of course, it's just not still producing. If we take the average as of today, so it could be $ 1,450 per ton of HVO minus UCO. At those prices, roughly speaking, the industrial EBITDA, I mean, if we maintain this average over the whole year, could be at around EUR 220 million, roughly speaking. If we include the trading, plus the commercial side, we will be talking about EUR 270 million of EBITDA. That is, roughly speaking, almost close to a half of the capital employed in this business. That is the best picture I could provide you today, Alastair. Thank you.
I mean, obviously the return on investment that's.
Of course.
That's the return on investment of that's huge. You know, does that provoke any discussion in Spain about RED III?
Discussion about what? RED III. Yeah.
Well, just implementing, you know what I mean.
I mean, yeah. First, Alastair, you are right. I mean, let me say that there is a roadmap to increase this demand that is mainly linked to mandates in the framework of the RED III. I mean, if we take, I don't have all the figures in mind, Alastair, but Alastair, sorry. If we take the potential demand in Europe this year could be a 30%-35% higher than the demand we had last year due to the application of the European directive. On top of that, we could expect some additional impacts coming from the change of the concept of the double counting in Germany, that they are also to increase the real demand and so on.
On the other hand, you are going to have also, I mean, new capacity entering in the system that in some way is going to balance all that. We have to take into consideration, Alastair, that the price of the HVO is in some way depending on two factors. The first, we can't forget that the HVO is also competing with the mineral diesel. There is a component coming from the mineral diesel that is also, in some way, contributing to forming the price of the HVO. You have a premium delta that comes from this, let me say, from the nature of the bio market.
In this sense, about RED III, I think that increasing the mandates of RED III could in some way increase this delta. From the Repsol point of view, let me remind you that with the new plant of Puertollano, we are only providing a 70% of our own sales with our customers of biofuel. We could have even, in a prudent way, some kind of room to increase a bit our production taking, let me say, a limited risk. Thank you, Alastair.
Thank you.
Thank you very much, Alastair. Our next question comes from Michele Della Vigna at Goldman Sachs. Please, Michele, go ahead with your question.
Thank you, congratulations on the strong results in such a volatile environment. I wanted to ask two questions, Josu Jon. First of all, I was wondering if the current better macro environment makes a potential liquidity event over your E&P business more or less likely. On one side, you will probably get a better valuation. On the other one, the company is able to generate a higher free cash flow in the near term. I was just wondering how you're thinking about that. Second, perhaps a bit of a difficult and unfair question, but I was wondering, do you have in mind a number of months, where if the strait remains closed, you would end up finding it difficult to have enough feedstock to feed into your refiners?
Clearly, this is not just about your refiners, it's more about the global balances. Do you have in mind a kind of duration that would really start to put the feedstock to the refining system at risk of shortages? Thank you, Josu Jon.
[Non-English content] , Michele. Going to your first question, I mean, I'm going to be crystal clear about that. Now, I'm not in a hurry to jump into a liquidity event in this context. We have, and let me say that, the two partners of the business, Repsol and EIG, we are fully aligned on this perception. In technical terms, we are fully prepared. All the, I mean, reporting, adaptation to stocks, I mean, all this, let me say, this burden we have to work in to prepare the company, to be prepared to go to the American market. All that was done. Going to the fundamentals, I mean, I think that we are very comfortable in this 2026 year not jumping into this liquidity event. I tried to elaborate.
We are convinced that the upstream, the quality of the upstream we have, and not because the commodity prices and so on is better than what we had three months ago, six months ago. I mean with Venezuela, the risk it with any significant increase showing to the market that we are increasing the production, oil production in Venezuela, with all the support of Venezuelan government and all the support also of the American authorities. With seeing that the payments of the gas we produce in Venezuela to help to stabilize the country, they are going in a regular and good way. With Alaska producing in a good way.
With Quokka, the results we have seen in the wells in Quokka, in Alaska, giving us new expectations about Alaska. Preparing the FID of Pikka 2 for the beginning of 2027. I mean, when we take all that, the perception we have is that, I mean, decoupling the commodity scenario, we are going to have a better up-upstream in three months, in six months, and probably in one year on from now. If we take this analysis, I am not saying that that is right. I am saying that is our analysis and is our expectation. We are comfortable in the current situation. Let me say that we are not going or to jump to a liquidity event in the short term, Michele.
Going, I mean, the better valuation, you know, the M&A world probably, as far as I know, or better, probably. You know that, I mean, these temporary circumstances are not changing in a dramatic way the valuation of our business, because an investor is seeing the long-term view of the business. We are improving the fundamentals. I think that this view is in our, in our mind, more important than taking, let me say, the opportunistic advantage of seeing the oil price high to jump into the market. That's our view. Going to your second question.
I mean, probably, and, I have had the opportunity to talk to most of you in, most of you, I say, the analysts you are today following this conference, in a personal way over the last eight weeks, even when we were, most of you were here in Madrid and we were having a coffee after the capital market day and so on. You know that my view has been, let me say I have had from the very beginning, a concern about what is happening in the market related to the situation in the Middle East.
I mean, I'm going to say that quote of, "Never say never." I think that what we have seen in the market is so disruptive, I mean, is unprecedented, that we could see, let me say, disruptions that probably we haven't experienced in any time in our lives. Saying that, we are more protected. I mean, I'm not going to say never, we are more protected than others, Michele. The reason is, first, because, I mean, in logistic terms, we are fully dependent on the Atlantic Basin. North America, Latin America, West Africa, and a bit of Northern Africa, Algeria and Libya, and a bit of North Sea. We are, let me say, in the more robust and safest part of the supply chain.
I could imagine a war without crude oil disruption, yes, because, I mean, we are missing, probably today 11 MMbpd . I mean, following your, your company own estimations, 1 1 MMbpd- 11.5 MMbpd of the crude oil plus products. I mean, we can't sustain the world this situation. If this situation goes on, the only solution is the destruction of demand. Probably, we are going to see, in this case you are analyzing, I mean, the Hormuz that could remain closed for a more time, probably the demand is going to show some kind of elasticity to price.
In that case, perhaps countries or areas, and I'm thinking mainly in Asian countries, they could have more difficulties to get the supply, not only because the logistic, also because the price. I mean, today we are seeing countries like Pakistan, Bangladesh, Philippines, and some others, that they have real difficulties to provide or to have the oil. I think that we are not going to suffer this oil restriction, and because we have an strong refining system. I'm not only talking about, of course, Repsol, but in Spain, I have to, I only have a positive words to my competitors like Moeve, BP, and the other companies with assets in Spain, or Galp in Portugal.
I think that in the Iberian Peninsula, we have a real privileged situation to resist the situation of guaranteeing the supply in a better way than some others countries in Europe. Saying that, I mean, I can't say never because it's going to depend on the evolution of the situation.
Thank you, Josu Jon.
Thank you. [Non-English content] . [Non-English content], Michele.
Thank you, very much, Michele. Our next question comes from Alejandro Vigil at Santander. Please, Alejandro, go ahead with your question.
Yes, hello, good morning. Thank you for taking my questions. The first question is in continuation with these comments about this second energy crisis in five years. In the previous one, there were several European countries taking a interventionist view, market intervention, price caps. If you are seeing a similar potential risk of market intervention in this context. That would be the first one. The second one is about the blackout in Spain last year. How is the situation in terms of potential compensation or which is the amount you are claiming insurance? What can you tell us about that? Thank you.
[Non-English content], Alejandro. Thank you so much. I mean, you mentioned the previous crisis of 2022. First, I mean, let me say that the nature of both crises is fully different, mainly for our market, for Repsol. In the Ukrainian crisis, or Ukrainian invasion crisis, better said, we didn't lack in Europe a single drop of oil products over this crisis. All the Russian products were diverted towards China, Asia, India, I mean, some other geographies. Now what we have is a real problem of supply, a product restriction. Remember that at that time, you probably know because you are a Spaniard, in November 2024, there were proposals at the Spanish Congress to reintroduce similar mechanisms for the energy sector from 2025 onwards.
These proposals, they didn't succeed because they lacked the parliamentary support in Spain. In the European level, remember at that time there was some kind of approval of some kind of windfall tax that was called contribution, and we have not seen at the moment a real aim to approve such a measure in European level. Let me elaborate perhaps a bit more. We are now in Spain, as I said to Michele some minutes ago, with a reinforced supply system thanks to companies like Repsol, Moeve, BP, Galp, that Galp in Portugal, that invested hard in the refining system. In the case of Repsol, we have invested EUR 15 billion in our industrial business in Spain since the financial crisis of 2008.
On top of that, I have to mention that we have invested more than EUR 1.4 billion in the last weeks to guarantee the supply of kerosene, to guarantee the Spanish tourism season. I mean, if you suffer the losses from time to time. Every time you have profits, you suffer from cost confiscation. I mean, you are not going to invest anymore, of course. You are not going to invest in working capital to guarantee the supply if you don't have the incentive of profits, the legitimate incentive of making money. It seems to me that introducing an extraordinary levy on the energy sector will be not only unjustified and counterproductive, I think that it will undermine the security of supply and erode the competitiveness of European industry at this critical moment.
I mean, if we take also into account that, over the last 15 years, 20% of European refining capacity has been shut down or idle. I mean, a new levy will accelerate this trend, increasing the dependence on imports and in some way also reducing the security of supply. From my point of view, this kind of debates, they create regulatory uncertainty. They divert resources away from investment. Also, they put at risk the projects we need to decarbonize our industry and our economy. Of course, the risk is worsening the risk of security of supply in coming months in Europe. I tend to think, Alejandro, that this kind of confiscatory levies are not going to appear this time, neither in Europe nor in Spain.
Going to your, to your second question about the blackout that you know, that is a trending topic in the Spanish media these days. I mean, we know exactly, I mean, what the consequences of the blackout were for Repsol. Remember that we talk about different incidents, a first blackout impacting in Cartagena, another disruption, nothing to do with that, in Puertollano related to a distributor. I mean, if we go to the major blackout on April 28th, one year ago, which shut down our operation for days at five refineries and three petrochemical sites. Remember that I explained before that we experienced a similar event in 2016 in Bilbao, in the PetroRefinery. In 2022, the Spanish Supreme Court issued a decision confirming full compensation for Repsol's affiliate, Petronor.
That was EUR 18 million for the 12-minute blackout we suffered at that time. That stopped our operations in the refinery for days, we were fully compensated. I mean, broadly speaking, this EUR 18 million is close to the impact of on each of our refineries from the blackout we suffered in April. We estimate a recoverable amount of EUR 105 million in the legal claim we are entering in. We are fully committed, Alejandro, to seeking legal accountability from those responsible for these events. We initiated this legal process last week. I mean, before entering in any lawsuit, the law requires the opposite party to be invited to seek a settlement.
In this sense, last week, Repsol already was complying with this legal requirement, and we sent formal notices, what is called a burofaxes, to Red Eléctrica and to the distributors with which our industrial centers, they have contracts. If this prior attempt, dispute resolution is not satisfactory, Repsol will formally file the corresponding lawsuits to all these companies. Let me tell you, I rely on the Spanish justice system. I believe we have a solid and reliable judiciary. In the end, we will be compensated, as we were in the Petronor case. Let me say, I finish, Alejandro, that probably the court task may be somewhat more complex this time because the regulator, the CNMC, didn't fulfill, from my point of view, its duties in an efficient way.
Because I have the impression that the regulator, the CNMC, has applied what is called in Spanish, the [Non-English content]. We could say or describe that in English as a scattergun approach. It has mixed very serious issues that affected the supply, allegedly caused by the system operator with dozens of alleged deficiencies over a two-year period. All that is creating confusion. Perhaps that is what the regulator intended. I mean, to give the impression that it's distributing blame. I mean, however, a technical reading makes the responsibilities much clearer. Again, we have a solid judiciary. Spain is a democratic and solid state where the rule of law works, and I'm convinced that the truth will prevail and Repsol will be, at the end of the road, fully compensated. [Non-English content], Alejandro.
[Non-English content], Josu.
Thank you very much, Alejandro. Our next question comes from Guilherme Levy at Morgan Stanley. Guilherme, please go ahead with your question.
Hi. Hello. Thank you for taking my questions. Maybe, showing the refining crude procurement debate, could you perhaps, even if just qualitatively, share with us, how much of your crude supplies currently come from purely spot transactions versus how much they are coming from perhaps the benefits of your long-term relationships with different players in LatAm. Because I wonder if that's also playing a role here in your ability to source crude maybe better than peers. Secondly, thinking a bit more about upstream, perhaps pick your brain about short cycle investment opportunities that you could now pull the trigger on in light of the higher oil and gas price environment. Thank you.
Going to refining, roughly speaking, 80% of our supply comes from long-term contracts, and 20% is spot. I mean, saying that, we don't see, I mean, that is not our main, mainstream case. We don't see any kind of concern to supply our refineries. I answered before, I think that it was to Michele. I mean, we could see disruptions. I'm not going to say never because things could be worse. I mean, the current situation, I think that price is going to be the concern, price is going to be a problem, but we are going to be able to supply our refineries, I mean, in our central case, in a normal way.
Going to the upstream only, I mean, you mentioned that if we have short cycle opportunities to invest due to these prices. I mean, you have three ways, let me say, to increase your production in a structural way. First, M&A, today is not the best moment to buy. Secondly, exploration. Exploration, the results are going to come, and we continue exploring as we demonstrate with the Alaska bid, where we were granted with 43 new leases, new licenses. The third one is the unconventional. Of course, in the unconventional, we are taking flexibility to improve our position.
If we take the figures for the first quarter, and we compare with what we have over the whole year, we are going to increase in 22,000 bpd our unconventional production. You have to take into account that there are two effects here. First, because the cold weather, probably we were producing 10,000 bpd less in the first quarter because the cold we had in Marcellus and Eagle Ford, and the increase of new pads that we are going to take advantage of them to increase our production over the year. All in all, 22,000 bpd of increase over the whole year in the unconventional if we compare with the first quarter.
If we take that, we take the Peru incident, we take the ramp up of Leon-Castile, plus Alaska that is going to come, plus Lapa Southwest. For that reason, we are quite comfortable with the guidance of 560,000 bpd, 570,000 bpd for the whole year. Thank you, Guilherme. Today, I mean, this morning, that is not, I'm not going to extrapolate today's production to the whole year, but this morning we are producing 570,000 bpd in our system. [Non-English content].
Perfect. [Non-English content].
Thank you very much, Guilherme. Our next question comes from Fergus Neve at Rothschild & Redburn. Please, Fergus, go ahead with your question.
Yeah. Hi there. Thank you very much for taking my question. Two from me, if I might, please. Just first on chemicals, you talked to a tighter petrochemical market in your slides. Could you just give us any color on how the chemicals business has been performing this month and whether it's been able to kind of start capturing those margins, please? Secondly, can I just ask what you're seeing in Iberia in terms of fuel demand at your retail sites, given the current price environment? Do you expect to start seeing demand destruction if prices remain at current levels, or do you think they need to move higher before you would see any meaningful destruction start coming through? Thanks.
Thank you, Fergus. Going to your question, first, in the short term, the chemical business is performing in a bad way. I try to elaborate, and that is behind also. You could see the impairment we have introduced in a problem way in our P&L this quarter. I mean, the huge increase of raw materials, naphtha, LPG, energy, natural gas, plus, I mean, we are not able to translate these prices to our customers. I mean, the plastic producers from the, I don't know, the automotive sector, the food sector, and so on.
What we are seeing in the short term is a worsening of these margins because this short-term situation, that has, in some way, pushed us to be prudent in terms of the book value of the chemical business in our company. Saying that, we are fully focused on putting in operation the new projects that are going to give us additional margin, the ultrahigh molecular weight polyethylene plant in Puertollano, the derivative chemical business in Sines, plus the electrification of the crackers, as I mentioned before, plus the splitter of propylene in Petronor that is starting this second quarter its operation. With all the cost measures, improving the logistic and so on, we are enforcing.
I mean, yesterday we have a the board meeting, and I maintained my commitment to the board yesterday that in 2026, we aim to have a zero EBITDA, a neutrality of EBITDA in our business in our chemical business. We aim to be positive in our operational result in the EBIT in 2027. We are fully focused on that. When we go to the Iberia fuel demand, what we have seen the first quarter and in March and in April is an increase of a figure that is close to at 10%. 10% in the first quarter and 3%, 4% in April, roughly speaking. That is curious, Fergus, because it's counterintuitive.
Remember, I don't know what is going to happen, so I don't want to. I don't have a crystal ball. I only introduce a variable in the debate. Spain receive 100 million visitors a year. We are, after France, the second country receiving visitors in the world, and in revenues, the second one behind the U.S. I think that we are going to see a twin phenomenon this summer in Spain, and I don't know what is going to prevail. I think that the global tourism probably is going to suffer because, I mean, aviation prices, the lack of security in the world and so on. On the other hand, Spain is a tourism destination more secure, safer than some others.
It seems to me that many Northern European citizen, they are going to take the decision, instead of going I don't know where, and you could imagine places, and I don't know, I'm not going to mention any country, to come to Spain. We could have a positive effect on the Spanish tourism. I don't know what is going to prevail, but taking into account this reflection, we don't see today a reduction of volumes in our Iberian business. What I'm saying for Spain, I mean, is also applicable for Portugal. That is, I mean, as attractive as Spain in, in, in tourism terms. Thank you.
Brilliant. Thank you very much.
Thank you very much, Fergus. Our next question comes from Henri Patricot at UBS. Henri, please go ahead with your question.
Thank you, Pablo. Hello, everyone. Yeah, two questions, please. The first one I wanted to ask on Venezuela. Good to see the progress with the payments for Cardón IV . I was wondering if you have had any more discussions regarding the payments for the past production and over the past year in particular. Secondly, coming back to a question around kind of short cycle, potential upside due to production, I wanted to check on Libya. What's your latest outlook on the production potential coming near and medium term? Thank you.
[Non-English content], Henri. I mean, Venezuela, I'm going to be crystal clear about that. Step by step. Now, we are fully committed to collaborate, to contribute to the recovery of Venezuela. Our main contribution to recover Venezuela, taking advantage the opportunity we have in our hands, is first to stabilize the gas production. We are going to increase in at 10% in coming months, thanks to the bottlenecking process, the gas production in Cardón. Of course, all that under the agreement we achieved three weeks ago, about the sustainability of this production. That means that this year, we have a clear commitment from PDVSA to receive the cargoes that are going to pay the full gas we are producing in Venezuela.
In Petroquiriquire last week, we signed an agreement where as paying agents, Repsol, we could be able to manage the oil production, of course, paying the royalties, paying taxes, paying the OpEx and CapEx Petroquiriquire needs to increase the production and having a percentage, a fair percentage for the service that the operators, the shareholders, PDVSA and Repsol will provide to the Petroquiriquire assets. That means more cargoes to be paid, an increase in production, more taxes and royalties for the country, a contribution to the recovery of Venezuela and the social and economic recovery of Venezuela, the political stabilization in a win-win strategy. From my point of view now, and of course, we know what is the debt we have with PDVSA knows that.
I think that a time for that will be open in the future, no doubt about that. Now, from our point of view, it's time to do what I mentioned before. If Venezuela recover from the current situation, if there is, I mean, higher production, more revenues, I'm sure that we are going to find windows of opportunity to talk and to try to redress this question. Going to Libya, I mean, Libya, remember that this quarter we have been producing 42,000 bpd . Even taking that into account that we have an event of two, three days, an operational event in a pipe, that is the.
I mean, transporting the crude oil from El Sharara to Asabiya and the refinery in the Libyan coast. I mean 42,000 bpd could fit, roughly speaking, and I could, I mean, perhaps, make a mistake with the figure, but 320,000 bpd- 325,000 bpd, 327,000 bpd . The best expectation I have today, gross, I mean, the figure I mentioned now is gross, that we could finish 2026 with 350,000 bpd . That means an 8%, roughly speaking, of the current production increase. That means that we could be producing something net Repsol 45,000 bpd-46,000 bpd in Libya. An important improvement comparing with the 32,000 bpd-34,000 bpd we produced two years ago.
On top of that, connecting wells of course is the magic for getting these figures. We are exploring, we are now engaging in an appraisal in a drilling well in Libya. On top of that, you know that this quarter we were awarded with two new exploration opportunities. One of them onshore in the Sirte Basin, and the second one offshore in front of Benghazi in the east part of Libya. Again, we rely on Libya. Stability is there.
I think that the job that, I mean, General Haftar and the Libyan army is developing, I mean, to stabilize the country, to, I mean, to reduce over the last year the impact of any security disruption in the country, including terrorism and so on, is very important, not only for Libya, not only for the stability of the country, but also for the stability of Europe and the Mediterranean Basin. We rely on Libya, and I think that we are going to have in the country, I mean, good news step by step in terms of political and social stabilization. [Non-English content], Henri.
Thank you very much, Henri. Our next question comes from James Carmichael at Berenberg. Please, James, go ahead with your question.
Hi, guys. Thanks for taking my questions. Just wanted to come back on Alaska for a second. I'm just wondering, obviously Pikka looks to be going well. Just wondering if you can provide a bit more detail on that, the Quokka appraisal. The operators' commentary seemed to indicate some positive results there. Obviously you flagged winning sort of just over 40 exploration licenses. How important, I guess, do you think Alaska could be to growth going forwards? Then just coming back on refining. Not to sort of underestimate the achievement, but in terms of that 25% increase in kerosene production you flagged February to May.
I mean, is that as far as you can push it, or is there potentially sort of more upside if you see that, as the right way to go, further in the year? Thanks.
Thank you, James. I mean, Quokka, the test of the well was really very, very positive. I think that the production was at around 2,800 bpd. That's for a test is an impressive figure. It's perhaps too early to comment that, but our perception today is that in gross production, Quokka is a new Pikka 1. What we have in our hands in Quokka is something equivalent to a Pikka 1. If we take into account, of course, we have to drill new wells to maintain the plateau in Pikka 1 in coming years and so on, but we take that. We take what we are seeing in the prospect of Pikka 2.
Pikka 2, we are working, in fact, in the feed, the preparation, the engineering preparation of the FID. Of course, our approach, fully shared with Santos, is that, I mean, it's important to analyze, to see the behavior of the production of the wells of Pikka 1. I mean, to incorporate, to use all this information to improve the engineering of Pikka 2. When we take Pikka 1, Pikka 2, where we take FID next year, plus Quokka, and we put and project this development, I mean, we are seeing in 2032, 2033 a gross production of, at around 150,000 bpd-160,000 bpd in Alaska. Where we retain a 49%.
In some way, Alaska is for Repsol could be, let me use the term I know that perhaps could be a bit, I mean, big words, but a bit a company maker for Repsol. What we are growing, the way we are growing, we are going to grow in Alaska is going to add a lot of value to our company. I mean, I prefer not to say and not to answer to your question in front of my refining team, because when I ask to them, four weeks ago, they developed a huge effort to increase in a 15% the production in A Coruña and Petronor.
When I asked to them about going on with this effort, they answered, "Josu Jon, that is impossible." I mean, we are achieving the limit. Three, four days ago, this extraordinary team came to me saying, "We have been able, and we are going to be able in May to increase in an additional 10% this production." That means that all in all, we are going to increase in at 20%-25% the previous production we have. Now my answer is no, we got the limit. Because I mean, in technical terms, it's not easy. Let me say that we increase the logistics. We, in operational terms, we change things and so on.
I mean, 95,000 bpd of kerosene, it means that it's a figure close to a 12%, 13% of our total production. It's a very high figure. My answer would be we can't do more, but again, we are going to do our best to increase this figure, James. Thank you.
Thank you.
Thank you very much, James. Our next question comes from Nash Cui at Barclays. Nash, please go ahead with your question.
Hey, good afternoon, everyone. Thanks for taking my questions. Two, please. The first one, you delivered very strong trading results in Q1. I wonder if you could provide some color on the trading performance in April and perhaps some of your expectation for Q2, please. My second question is, Josu Jon, how great we are in a very volatile environment. Could you just update us on Repsol's current oil and gas hedging positions and how the current volatile environment could lead you to change your hedging strategy? Thank you.
Thank you, Nash. I mean, as far as I know, April, I don't, of course, talk about the whole second quarter. April is going to be close to March in terms of solid results in trading. The second quarter, probably because, it's going to be probably even better than the first one. I'm talking about the trading of liquids, because if we go to gas, you know that the gas trading business of Repsol is fully impacted by the American winter. You know that January, February, depending on weather, we captured a lot of positive margins because we are able to replace the gas from Canaport towards the New England area, capturing the high margins in the area.
As always, gas is going to be lower in second, third quarter, and fourth quarter is going to depend on the December weather. Liquids, probably second quarter are going to be even better than the first one. Hedging, we don't use to hedge the oil. The only exception we have the debt of a very in $ 2 per million BTUs, roughly speaking, and $5.2 per million BTUs or something similar, as a call. We have a similar caller, covering at 20% of the 2027 production with no cost, but only related to every half production. Thank you, Nash.
Very helpful. Thanks, Josu Jon.
Thank you, Nash. Our next question comes from Matt Lofting at JP Morgan. Please, Matt, go ahead with your question.
Hi, thanks for taking the questions and doing the presentation. Can I just ask, I mean, obviously the refining environment's exceptionally volatile. When you look at April, perhaps as an example, could you share a sense of the range in the realized margin that you've seen around the sort of the average that you've mentioned earlier, if the sort of the daily range is too volatile and too wide, perhaps, for example, as a five-day moving average or whatever you think is most appropriate. Then second, I just wanted to ask you on cash flows, generation in operating cash flow in the first quarter is very, very strong.
I just wondered if you could share the extent to which there's positive timing effects in there, perhaps linked to inventory gains that we should be aware of as we think about the cash flow trajectory for the rest of the year. Thank you.
Matt, I mean, I agree with your point about volatility, mainly if you analyze the margin indicator, day after day, when we see the whole picture of the margin, I mean, the indicator plus the premium is not so volatile. I'm going to give you the real figures. April, we have an indicator of $ 12 a barrel and a premium that is going to be at around $ 15 a barrel. That means that we could have $25 a barrel-$ 27 a barrel for the whole system. Some days we have seen. I mean, probably I have to dive, sorry, a bit more on that.
Some days because the decoupling between the physical Brent and the financial one, we saw strong decreases of this refining margin indicator. Those days, in real terms, the premium we were capturing was significantly higher. All in all, I mean, there is some volatility as always, but we have seen as quite constant margin in April, that all in all, as I mentioned before, could be at around $12 a barrel indicator and $15 the premium. We are entering in May, tomorrow, I mean, under this scenario. I don't know what could happen. It would be great, I mean, to see some kind of, because as I mentioned before, we could have concerns about the supply and so on worldwide, the situation today is there. Cash flow.
You are right, the cash flow generation in first quarter was high. You know, and we were very transparent about that we took advantage to increase our working capital, first in a physical terms. Let me say that we have fulfilled all the capacity we have to restore crude oil products in our refining system. I mean, we even contracting new capacity and so on. That means that it's not going to be easy for us to increase the physical exposure over the year. I mean, the working capital is going, of course, to evolve depending the evolution of the price, and that is not in our hands.
If we, I mean, decouple this effect, that is of course important to guarantee the supply of our customers in this complex and volatile time, we could think that the inventory effect is not going to have any negative influence over the year in terms of tons, of volume. I mean, we are not going to see changes. The changes could be only positive, that means, or neutral. I mean, maintaining the current storage or reducing the level of physical storage depending of the evolution of events. If we talk about prices, Matt, I mean, I can't give you a clue because that is going to depend on the evolution of crude oil price and products price. That is not in our hands.
I could imagine that the cash flow from operation is going to be pretty good over the year. As I mentioned before, I am not going to give you a guidance because I am not able to do that. Remember, we had something between $ 5.5-$ 6 in an environment where we were talking about $7.5 a barrel of refining margin and $1.5 of premium for the whole year, and $65 a barrel for the Brent for the whole year.
If you take the sensitivities that you perfectly know, or of course, Pablo and the team will be ready to work this figure with you, and you take the consideration I developed in this conference, probably you are going to have some kind of a real clue about the cash flows from operations for the year. That again, is not going to have any negative effect in terms of inventory coming from the volume side. If we talk about prices again, I could give you additional clues. Thank you, Matt.
Thank you.
Thank you very much, Matt. Our next question comes from Paul Redman at BNP Paribas Exane. Go ahead with your question, Paul. Thank you.
Hi, guys. Thank you very much for your time. Yeah, two questions. First one's on CapEx. You've guided to EUR 2.7 billion for the year on a net CapEx basis. I just wanted to ask how much divestment or acquisition you're including in that number. Secondly, AccelerateEU has come out. I wanted to see whether you're getting any or having any conversations with governments about, sounds like you're running as hard as you can around jet fuel, but whether there's any more pressure on Repsol from governments to see if you can go further.
Thank you, Paul. I mean, the exact figure I give in the capital market day, you are right, it was EUR 2.7 billion. I mean, I'm working under the range EUR 2.5 billion-EUR 3 billion. I mean, that's in the middle. I think that EUR 2.5 billion-EUR 2.7 billion, as you mentioned, could be today our best approach to the net CapEx of the year. There is no any disposal or acquisition included in that figure. That means that the only, let me say, inorganic thing in this figure is the recurrent rotation of the assets of low carbon. Let me say that it's working in the right way.
If you analyze the cash figure we released this morning with the papers of the results and so on. You could see that even the renewable business, the low carbon business, has a positive free cash flow this quarter because this model of cash flow from operations plus investment, we are growing this business of course, minus the in this case, the cash incoming from the Outpost rotation. Now we are engaged in the final part of another rotation of 700 MW of assets in Spain, and we expect to have a positive result of this process. Things are going to work in the right direction, and we are comfortable with the EUR 2.7 billion for the year net CapEx you mentioned before.
We have a very transparent, direct, and positive dialogue with the Spanish government. Of course, the Spanish government knows that, I mean, in any European country, jet is important. I mentioned before, if you analyze the percentage of the gross domestic product that tourism represents in Spain, and if we go to areas like Balearic Islands or Canary Islands that are fully dependent on aviation, I mean, that is, let me say, in national terms, it's fully strategic for Spain, the jet production. We have a very positive dialogue with the, in this case, with the Environment Transition Ministry and with the Vice President that is leading this ministry. We are informing them of all this evolution.
The effort we are developing, the robustness of the refining system in Spain. In this sense, again, as I mentioned before, I can't say that the game is over because it's not depending only on Repsol, but Repsol today is ready and could say that we are going to provide all the jet that we provide to our customers last year over the whole summer, and we have an excess of a 30% of this figure that we are ready to work in terms of trying to solve another problems that could appear. When I say another problems, I'm talking of, for instance, I mean some other operators, that they could have a gap between production and demand, or what could happen, as I imagine a flight, Birmingham-Málaga, transporting British tourists to Málaga.
That is quite normal in summer. Nice city, Málaga. I mean, if we have the product in Málaga to provide the fuel or the refueling this company needs to go to Birmingham, it's okay. Perhaps this company could have in Birmingham a problem to be refueled. When I say that I don't know if this 25%, 30% of excess capacity is enough, I'm talking about that. It's true that now there are some kind of restriction in regulation in European level that every airport has to refuel a minimum of a 90% of the fuel this plane needs for this flight.
It seems to me that, and we are talking with administration about that in European level, probably they have to change this rule, because otherwise we could have problems in some European countries not able to fulfill or to enforce this rule. Again, Repsol is going to do its best to contribute to the Spanish society in terms of guaranteeing the maximum security of supply, not only with our customers, but also thanks to the efforts we develop to provide additional needs. Is that going to be enough? I don't have a full answer, but we are going to do our best in this direction. Thank you.
Thank you, Josu Jon. I'll book my Málaga flight.
I mean, I'm from San Sebastian, from the other side of the peninsula. Again, Málaga is a fantastic destination. Thank you, Matt.
Thank you very much, Paul. Our next question comes from Christopher Kuplent at Bank of America Merrill Lynch. Please, Christopher, please go ahead with your question.
Thank you, Pablo. Just two more questions, please, and maybe a view as well. Josu Jon, you were mentioning potentially having to change definitions of indicators versus premium. I hope you don't. As long as you give us the transparency that you're giving us on both, I'm very happy with sticking to the existing definition. To that point, if I could ask one more question on your March data. You told us about the indicator being as high as $20 then. Do you have the data for how high the premium was in March that you were able to extract? That's question number one.
Question number two, sorry, a tiny detail, but just wanted to see whether you could give us some insight into the extra central costs that you have recorded in industrial EBITDA in Q1. That sounds like a one-off in your spreadsheet at EUR 250 million. If not now, we can revisit after the call as well. Thank you.
Thank you, Chris. First, you are right. Again, I have to excuse myself because, I mean, the indicator is working in a normal situation, but what we are seeing is fully disruptive and is not working. We, of course, we are fully transparent, Chris, and you have, on top of the indication on the figures I could provide you here, you have the team of Pablo Bannatyne ready to work with you in terms of providing all the figures you need to follow what is happening. In March, roughly speaking, the indicator was at around $20 a barrel, and the premium was at around $10 a barrel. In the case of April, as I said before, we could be talking about $12 and $15, roughly speaking.
The total figure is similar in both months. Behind this $ 10 of indicator of premiums over in March is the 5.7 average I mentioned before. This extra negative central cost that we reflect in industrial, I'm going to try to elaborate. I mean, this is happening every quarter. What is happening now, again, that because the price differences are so high, the impact in the P&L is significantly material this time. For that reason, we have to explain that. I mean, imagine that our refining is selling in March 30 the product to our service station network or to our trading business. The refining business is, of course, taking the price of this product according the market is refining that day.
Because in March 31st, the last day of the quarter, the product is still in a company, included in Repsol Group, I mean, we can't, in the consolidated figures of the company, we can't take this market price. We have to discount or to reduce the real price in the market till we are able to sell this product in the market. That probably is going to happen in the service station case in April 1 or 2, and in the trading, perhaps 10 or 15 days later. That is happening. I mean, it's a rule that is working every quarter. This quarter, because the high increase of prices, the effect of this, let me say, extra negative cost is included as a non-transacted operation that is included in the central cost of the industrial area.
Be sure that these EUR 250 million in March are EUR 250 million we take not only Spain, but also Peru, they are going to appear in the second quarter. If they don't appear in the second quarter, it's because at the end of June, we are still seeing, let me say, a higher increase of prices. Probably, that is not going to happen. The central scenario is that these EUR 250 million of negative central cost, plus an additional EUR 200 million that they come from the lag in the pricing for the aviation sector, that you know that this industry is working with the prices of the month before, are also going to appear in the result of April.
That is perhaps behind the comments that in a right way, some of you did this morning saying that probably the industrial area result, the adjusted net income was slightly below the expectation. If you add these EUR 400 million, EUR 450 million that are going to appear in the second quarter, perhaps you have an answer to your reasonable doubt. Thank you, Chris.
That's great. Very helpful. Thank you.
Thank you, Chris. That was our last question today. With this, we will be bringing our first quarter conference call to an end. Thank you very much for your attendance.