Hello, and welcome to the Repsol Third 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, and good morning to everyone joining us today. Welcome to Repsol's Third 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 in our disclaimer. With that, I will hand the conference call over to Josu Jon.
Thank you, Pablo. Good morning and welcome to everyone. Let me say that before we begin, I would like to extend our deepest condolences on behalf of everyone at Repsol to the families and loved ones of those who lost their lives in yesterday's tragic train accident in Spain. Our thoughts are today also with those who were injured and with everyone affected by this tragedy during this very difficult time. It's not the best day to enter in this kind of messages, but it's also our duty to go into the key messages impacting in the third quarter of Repsol.
Going back to what is the end of today's speech, let me say that Repsol delivered a very strong set of results and cash flow generation in the third quarter of 2026, underpinned by higher refining margins, a robust contribution from trading, and disciplined execution across all business divisions. Market conditions were, again, extremely volatile over the quarter, reflecting ongoing geopolitical tensions and elevated levels of uncertainty.
Operations at our industrial assets remain stable, allowing us to ensure continuity of supply to our customers in an exceptionally tight middle distillate market. The complexity of the current scenario continues to underscore the critical role of energy security and a diversified energy mix for our economies. The commodity environment remained highly supportive, driven by stronger refining margins and oil prices averaging close to $100 per barrel.
In addition, volatility generated significant opportunities for trading, while resilient demand in Spain continued to support the performance of our commercial businesses, built on our leading multi-energy proposal. In this context, Repsol continues to deliver on its strategic commitments while capturing favorable market conditions supported by disciplined capital allocation, reliable operations, and the successful delivery of growth projects.
Looking ahead, the refining outlook remains positive, even assuming a normalization of the situation in our most driven by the necessity to replenish inventories, restore disrupted refining capacity, and complete deferred maintenance. Turning to the results, third quarter adjusted net income was EUR 2.7 billion, roughly a EUR 2 billion increase over the same period in 2025, with the industrial division as the main contributor. Cash flow from operations amounted to EUR 3.5 billion in the quarter, a EUR 2.3 billion increase year-on-year.
Cumulative operating cash flow to September stood at EUR 6.5 billion, already exceeding our initial estimate for the full year. Working capital was mostly driven by higher inventory levels in refining and trading, reflecting higher prices and a strong focus on security of supply to ensure the availability of diesel and jet fuel across Spain and what could be defined in some way as our natural hinterland. Net debt stood at EUR 2 billion at the end of the quarter, a EUR 1.6 billion reduction compared to June, driven by a strong cash flow generation.
The gearing ratio stood at 6.2% as of the end of September. Shareholder remuneration delivered in the quarter remained aligned with what is our distribution framework. The second dividend of the year was paid in July, bringing the total dividend in 2026 to EUR 1.051 per share, approximately an 8% increase compared to 2025.
Regarding share buybacks, the capital reduction associated with the second EUR 500 million program was executed this week on Monday, bringing total year-to-date buybacks to EUR 850 million through the redemption of 33.1 million shares. Furthermore, to deliver on our strategic cash flow from operation distribution commitment, this morning, we announced a third EUR 950 million share buyback program to be executed by year-end.
As a result, total buybacks executed in 2026 will reach EUR 1.8 billion, bringing total shareholder remuneration to EUR 3 billion, which will place distributions at the lower end of the committed range. Regarding the evolution of the main macro indicators in the quarter, starting with oil, Brent crude averaged $97 per barrel, 7% below the previous quarter, but 40% above the same period in 2025. In gas, every hub averaged $3 per million BTU, 3% higher quarter-on-quarter, and 3% below the same quarter a year ago.
In Europe, main price references continued to strengthen, reflecting a tight gas inventory situation on the continent. The refining margin indicator averaged $36 per barrel, a $22 increase over the second quarter, and $27 higher than in the third quarter of 2025. Finally, at the exchange rate, the US dollar remained stable against the euro, at an average of 1.15. Continuing with upstream performance, our focus remained on the successful execution of our development pipeline, maximizing value in Venezuela, and further optimizing the portfolio.
Third quarter adjusted net income was EUR 415 million, a 93% increase year-on-year, supported by stronger oil and gas price realizations, higher volumes, and a greater contribution from equity affiliates. Production average 574,000 barrels equivalent per day, a solid 4% increase year-on-year, driven by the ramp-up of Pikka, the contribution of Leon-Castile, and higher volumes in unconventionals and in Libya.
Excluding inorganic transactions, production increased 5% year-on-year. The average production in the first nine months of 2026 was 557,000 barrels per day. Production has averaged 590,000 barrels per day in October, with daily volumes exceeding 600,000 barrels a day on multiple occasions quarter to date. In Alaska, the Pikka project contributed an average of around 10,000 net barrels per day to third quarter volumes.
Phase one continuous production operations commenced in June, reaching 69,000 gross barrels per day at the end of September, nearing its plateau of 80,000 gross barrels per day. We continue working in increasing production through debottlenecking and preparing the phase two FID. The second phase is expected to add a further 40,000 gross barrels per day of production by 2030. In the Horseshoe unit, we plan to appraise the Stirrup discovery during the upcoming winter exploration campaign.
Going on with Libya, third quarter production averaged 45,000 net barrels of oil per day, a 12% increase year-on-year, driven by better field performance and positive contractual effects. In Brazil, the development of Raia is progressing well, with two of the six development wells already complete with significant time and cost savings, increasing our confidence in delivering first oil on schedule and within budget.
In Venezuela, production averaged 72,000 barrels per day in the third quarter, and our priorities remain firmly centered on monetizing current production and increasing volumes invested in that country. In Block four, we aim to increase production from the current 580 million gross cubic feet per day to 645 in the first quarter of 2028. Of the five cargos to be received by Repsol in 2026 as payment for gas production, three have been monetized and the remaining two are already committed.
At the JV Petroquiriquire, we have made solid progress since assuming operatorship in April, including the award of a significant proportion of the contracts required to increase light crude oil production. Lastly, at Petrozamora, we are also making progress towards having a productive participation contract in place by year end, in line with the agreement reached with the country's Minister of Hydrocarbons.
This heavy crude oil asset offers the greatest upside potential because it's a greenfield nature, and subject to the appropriate conditions being in place, could make, from my point of view, a substantial contribution to the country's production growth. Continuing now with the industrial division, adjusted net income was EUR 2 billion, EUR 1.7 billion higher than in the same quarter a year ago. Results benefit from stronger contributions in refining, liquids, and gas trading, and from the operations we have in Peru.
Compared to the previous quarter, the refining business benefited from a better margin environment, driven by higher middle distillate and gasoline spreads, wider heavy-to-light crude differentials, and higher utilizations. These improvements were partially offset by a negative price lag effect. You perfectly know because I explained that last quarter, the jet effect on jet prices is rising.
The premium generated over the indicator was $10 per barrel, in line with the previous quarter, bringing the current realized CCS margin to around $46. Utilization of distillation capacity was 81%, while conversion units, that is our main driver, operated at 98%. Crude processing continued to be negatively impacted by the reduced availability of the Cartagena topping 3 unit. That is expected to restart the normal operations in the fourth quarter.
Our remaining refinery maintenance schedule for 2026 doesn't include major turnarounds in our facilities, and that is going to allow us to run at full conversion capacity until year-end. At the beginning of October, the refining margin indicator was pressed by a sharp increase in freight rates, higher oil prices, and potential emergency stock releases. Since then, the indicator has recovered to around $44 to $45 per barrel, bringing month-to-date average to around $18 to $19 per barrel.
Turning to the trading businesses, the solid third quarter results reflected our ability to capture the optionality embedded in such a high volatile market. Excluding the working capital build, crude and gas trading activities generated EUR 1.1 billion of cash flow from operations in the first nine months of 2026, a 153% increase over 2025. The spike of freight costs creates a material opportunity for trading through fleet management.
Lastly, in chemicals, performance was negatively impacted by lower prices, sales, and utilizations reflecting a weaker market. The petrochemical margin indicator averaged EUR 387 per ton, 32% below the second quarter. The Sines expansion project is expected to commence operations in November, improving the earnings contribution of the chemical business with a strong focus on differentiation and specialties.
Continuing now with customer, adjusted net income was EUR 244 million, a 4% increase over the same quarter in 2025. Performance was driven by a higher contribution from lubricants, as far as aviation and the specialties business. Cash flow from operations remained strong at EUR 511 million in the quarter, representing a 32% increase compared to the same quarter last year.
Demand in Spain has proven resilient through the current price environment, supported by the mitigation measures adopted by the Spanish government, the record tourism activity this quarter, population growth, and higher sales across our hinterland. The aviation segment continued to benefit from solid demand, with the Spanish market growing by 4% year-on-year. In mobility, sales of transport fuels at our service stations were broadly in line with the same period last year.
Including wholesale, volumes were 8% above the third quarter of 2025, and the non-oil contribution margin grew by 6% year-on-year. The business continued to reflect the customer support initiatives introduced by Repsol on the 21st of March. These measures deliver approximately EUR 30 million in discounts to professional and retail customers in the quarter for an accumulated EUR 80 million to September since their implementation.
Reinforcing our customer value proposition, high price environment as we are. In power and gas retail, customer activity and commercial performance remained solid. Our customer base reached 3.4 million as of the end of the quarter. This figure represents a 60% growth year-on-year. Finally, our digital client base, through our Waylet app, reached 12 million at the end of September. This figure is a 15% increase over the third quarter in 2025, and that is supported by this ambitious multi-energy offering built, as I mentioned before, around the Waylet application.
Turning to the low carbon generation, adjusted net income was EUR 37 million, a 48% increase year-on-year, thanks to higher contribution from renewable generation and also the contribution of combined cycles. The average pool price in Spain was EUR 122 per megawatt hour, 84% higher year-on-year. Persistent intra-day volatility drove record margins in pump storage hydro generations or Aguayo, which stood at 82% higher compared to the third quarter in 2025. Repsol's total power generation reached 3.9 terawatt hour, an 18% increase compared to the third quarter of last year, 2025.
Wind and solar production amounted to 2.5 terawatt hour, 31% higher year-on-year. At the same time, the company continues to lay the foundations for future growth in Spain, the U.S., and Italy. In the U.S., we recently took the final investment decision on the Ritter Station solar project that is located in the state of Ohio, which will add 269 megawatts to our portfolio. We currently have close to 1.4 gigawatts of wind plus solar capacity under construction, all with FID taken in this country, distributed in four different projects. Looking ahead, the business continues focus on consolidating its self-funding position.
You could see that in the figures of this quarter or previous quarter. For full year 2026, we anticipate a positive free cash flow supported by active portfolio management. Moving now briefly to a summary of the financial results. In this slide, you may find an overview of all the figures I mentioned and all the figures covered today. For further details, of course, I encourage you to refer to the complete set of documents that were released this morning.
At this point, let me review our outlook to the end of the year. During 2026, we have continued to deliver on our strategic priorities based on a competitive shareholder remuneration, a solid financial position, and capital discipline. For the full year, upstream production is expected to average between 560,000 to 570,000 barrels per day, in line with our initial guidance.
Net CapEx is expected to remain at between EUR 2.5 billion and EUR 3 billion by year-end. The company is actively managing cost pressures to preserve the value and returns of its investments. Under the current commodity price context and a fourth quarter refining margin indicator of around $22-$23, plus a figure that will be close to $8 per barrel as a premium, we expect to generate between EUR 9 billion to EUR 9.5 billion of cash flow from operations in full year 2026.
With EUR 3 billion of shareholder remuneration through dividends and buybacks, we expect to be at the lower end of our cash flow distribution range. Let me underline that this reflects a prudent approach given the uncertainty of the current environment, while still, I think that we are delivering attractive shareholder returns that are supported by strong cash generation.
To conclude, eight months into the execution of our strategic update, we presented, remember, the Capital Market Day in March. We continue to deliver against our key priorities, supporting, better said, our key priorities. All that is based and supported by a strong business momentum, a solid operational performance across all divisions of the company. The strength and resiliency of our industrial model, built on flexible Tier 1 refining assets, advantage positioning, and diversified sourcing capabilities, has allowed us to ensure continuity of supply.
That is important for the Spanish economy, and we are fully focused on ensuring the security of supply in our natural hinterland, while capturing value across the portfolio. Moreover, we are on track to deliver on our targeted profitable production growth based on new projects coming on stream, and with the U.S. as one of the main contributors.
And a better-than-expected macro scenario, combined with this solid operational performance, has allowed us to increase our cash flow from operation expectation for 2026 by around 60%. In line with our capital allocation framework, we are deploying this additional cash to support higher shareholder distributions and reinforce our financial position while delivering on our investment plan.
Our stronger balance sheet enhances our resiliency against fluctuations in the current scenario, while preserving flexibility to capture potential attractive growth opportunities. With this, I will turn it over to Pablo as we move on to the Q&A. Thank you very much.
Thank you, Josu Jon. Before opening the Q&A, I would kindly ask participants to limit yourself 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 go ahead.
Thank you. To ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again.
Thank you, operator. Let's get started. Our first question comes from Alastair Syme at Citi. Please, Alastair, go ahead with your question.
Yeah. Thanks, Pablo. Hi, Josu Jon. I really just had one question, and it was to try and get an update on how you're thinking about the upstream capital exercise. Obviously, the agreement you have with the private equity shareholder, I think, took us to earlier this year, and I'm just interested in your thoughts about how you think the market is positioned for that transaction currently. Thank you.
Thank you, Alastair. I think that we have a full alignment, Repsol and our partner of EIG, our shareholder of the E&P vehicle, about what to do now. I'm not the right person to talk on behalf of EIG, but we have a very close contact, a very close collaboration, and I could say that first, we are fully aligned. We are comfortable with the vehicle.
We are convinced that this vehicle is improving its performance on the portfolio day after day, and we are now fully focused on extracting value from Alaska, where in coming days, the first days of November, as the operator, Santos, expressed, we are going to achieve in a stable way the 80,000 barrels a day gross production.
You know that we also have in Alaska, we are taking all this information from the new wells and so on, and the production to feed the engineering of the FEED process that is going to allow us over the year 2027 to have a full preparation for the next second phase, the FID of the second phase of Pikka. On top, we have the results with performance from Quokka, the Stirrup, a price I mentioned before in the Horseshoe earlier.
We are creating value in Alaska. We have the opportunity of Venezuela, where we are doing, fully supported by the Venezuelan government and fully supported by the American administration, we are doing pretty well in terms of preparing the increase of our gas production, growing and having all the work over we have to do to grow in the light oil production in Petroquiriquire.
Giving all the steps to prepare all the contracts on the full project in the Petrocarabobo area. So we are convinced that we are creating value. We are growing. I think that today our partner, our equity partner, EIG and Repsol, we are fully comfortable with the vehicle and fully focused on improving the quality of this vehicle. So, none of both, we are in a hurry to do different things now. Thank you.
Thank you very much.
Thank you, Alastair Syme. Our next question comes from Biraj Borkhataria at RBC. Please, Biraj, go ahead with your question.
Hi, thanks for taking my question. Just have one on refining and one on distributions. On refining, it is obviously an exceptional environment, and there is a growing disconnect between the indicator and the realized margin. Can we just talk about one aspect in particular there, and that is the spot freight. Can you talk about your actual exposure to that within the refining segment? Just one clarification on refining.
In your initial remarks, I think you said $44 to $45 indicator. I was not sure if you meant $24 to $25, or there was some misstep there. Just some clarification on that. On the distribution front, ex leases, you are now in a net cash position, and obviously that will improve further into year-end. How should we think about where you want to be on the payout ratio for 2027? Should we expect you to be at the higher end because you are sitting on excess cash, or do you expect to keep building on that cash on the balance sheet? Thank you.
First of all, Biraj, and all the people listening in the conference, sorry, because now I am checking that I had a mistake when I was relating the third quarter performance. The real figures in October about the refining margin are $18, $19 per barrel as average in October and $24, $25 today. So, and growing. Sorry, because it seems to me that your $44, $45 perhaps was my mistake trying to express $24, $25. First, sorry, in order to clarify.
Again, the expectation we have for the whole fourth quarter, including refining margin plus premium, is at around $30 a barrel, 30. Again, sorry for this mistake in such a sensitive figure. Going to your question about what is happening with the spot freights.
It is true that the crude freight cost in average over the last months, years, has been at around $1, $1.5, $2 a barrel. What we are experiencing in this October is completely exceptional. The freight rates rose sharply in October, reaching about $30 a barrel, cost at the beginning of October, comparing with this $2 a barrel I mentioned for the whole year 2025, for instance.
These rates are expected to decline, from the second half of October, and we estimate an average monthly increase for October of about $10 a barrel. The figures are there. What is the impact of these spot freights and these freight costs on our margins? There is an impact on both, IMR, the refining margin, and the CCS margin, including the premiums. The key difference is timing. The refining margin, the IMR, is reflecting current market conditions.
For that reason, in the first half of October, the refining margin goes lower than in September. For that reason, I said that the average for the whole month could be at around $18, $19 a barrel, and is now growing, being $24 a barrel, roughly speaking, today. The effect, because the CCS production margin reflects the freight cost for the crude that was bought 1 or 1.5 months before being processed, there is a positive effect on the premium.
Probably for the whole October, the positive effect on the premium coming from this freight rates cost could be at around $7, $8 a barrel. Again, probably in 3, 4 weeks, this effect is going to disappear, both eliminating this lag effect, both figures are going to go on, in previous terms, with these differences of $6, $7, $8, $9 a barrel.
What we are going to see in October is a lower refining margin. The figure I mentioned before is reflecting this effect, and a higher premium coming from this lagging effect related to freight costs. Going to distribution, the 2026 distribution is totally fine, Biraj. EUR 3 billion, that is, roughly speaking, at 10% of the market cap of the company. We think that is very attractive, is within the 30%, 40% of cash flow from operation, is a figure, EUR 950 million. It is a significant figure that we can execute without any problem from now on, before the end of the year.
All in all, taking into account the execution capacity we have, taking into account the volume of figures, taking into account also reinforcing the balance sheet of the company and so on, we took the decision of being in the lower part of the range, 30% to 40% redefine in our capital markets day. On top of that, we are increasing the dividend cash we are going to pay in January. What is the rationale of that? Again, for me, it's written on a stone what we define the capital markets day.
If we take the figures of the capital markets day and we take the forecast of the total redemption of shares over this year, I have to approximate this figure, of course, that is not a commitment, because that is going to depend on the price in coming three months and the capacity we are going to have to repurchase this buyback at market prices.
But, if we take, for instance, EUR 29 per share, stock price as a reference, and we execute at these prices the EUR 950 million in coming two months, all in all, taking into account that the total dividend, cash, the total amount is going to be increasing at 3% plus the redemption of shares over the year, we could estimate, again, it's an estimation, a dividend, cash dividend in 2027 of EUR 1.15, roughly speaking, of euros per share.
If we take this figure as an approximation, we are comfortable paying EUR 0.56 of euro in January and EUR 0.59 in July. So for that reason, we are increasing in 3 cents this estimation for the cash dividend for the year. Again, we are fully committed, Biraj, with this 30% to 40% of distribution for our shareholders, taking into account the cash flow of operation. Let me say that a stronger cash generation doesn't automatically justify a higher payout ratio.
We have to take into account some other considerations, like the capacity of executing this figure and so on. But we could see in a lower cash flow from operation year remuneration, that could still fall towards the upper end of the range of the distribution. But that is, these EUR 3 billion, Biraj, is going to be the full distribution for this year. Thank you.
Thank you.
Thank you very much, Biraj. Our next question comes from Nash Cui at Barclays. Please, Nash, go ahead with your question.
Hi, good morning, everyone. Thanks for taking my questions. I have two, please. The first one is, I understand that you have pushed back some of the refinery maintenance. I wonder if you could update us on the latest plant maintenance schedule, please, probably from Q4 into Q2 next year. Also, I know some of your peers have moved very quickly into Venezuela. I wonder if you could give us an update about your future plan there, and also any update on the recoverability of your receivables position. Thank you.
Thank you, Nash. First, I want to express in a clear way. We are going to fulfill the full program we had in our budget for the maintenance of our refineries in 2026. We are not delaying or passing any turnaround activity to 2027. That is important. If we go to the fourth quarter, I have to say that we had the catalyst reposition or change in Cartagena's hydrocracker that was forecast in April/May, and we decided to delay to September, the end of September.
It was a turnaround period to change the catalyst that was executed in 18 days, 19 days, roughly speaking. That was over some days ago. It is the only thing impacting in Cartagena this quarter. What also we have at the end of this year, this quarter, is a program maintenance for Puertollano that is going to impact in a part of the conversion. I mean, it is the vacuum, the mile and the FCC. It is not impacting the coker.
That is everything we have for this quarter. Going to 2027, I am talking about refining because, the chemical side, we have the cracker of Tarragona and so on, but that is chemical business, nothing to do with refining and refining margins. What we have for next year, the most important turnaround maintenance activity in 2027 is going to be the conversion of Cartagena in the last quarter of the year, the fourth quarter of 2027. In the midst, we do not have any significant maintenance activity.
Of course, there are always, I don't know, the desulfurization unit, a visbreaker, things like that that are not impacting neither in the conversion activity nor in the premium we are capturing. Thank you. Going to Venezuela. Nash, first, the situation in Venezuela has improved, clearly compared with seven months ago. The priority now, of course, for Repsol is to contribute to consolidate this progress and strengthening the social stability of the country and supporting the economic development.
Increasing production is going to be important. Increasing production means increasing tax collection and improving the quality and the life in the country. We are fully committed on that as a responsible operator. Today, our full focus is first to be paid, and I have to say that PDVSA is respecting in a full way this approach.
Every cubic feet of gas we produce is paid through the cargoes program we have had over the year, including an additional cargo to finance the investment in Cardón IV to increase from 580 cubic feet per day to 645. That is going to be in operation by the first quarter of 2028. All that has been delivered by PDVSA. When we go to Petroquiriquire, I have to say that PDVSA is also fully delivering the commitments they have.
That means that you know that we have an agreement, after paying the royalties of the production, we have 50% is devoted to taxes, 30% CapEx, OpEx. There is another part to pay the service and the operation of the activity and so on. All that has to be paid through a program using heavy oil cargoes. They are delivering about this commitment, and we are using these proceeds, this cash in, to invest and to increase the production in Petroquiriquire.
We are in a win-win strategy, growing, using the cash coming from Venezuela to invest in the country, to improve the situation in the country, and to increase the production. On top of that, we are in the last steps of the negotiation of the contract, where we are going to have a relevant role in Petrocarabobo, in the Orinoco Faja, in the Orinoco area, where that is a greenfield project we are going to grow in a significant way. Before the end of the year, we are going to have relevant news about this commitment and this activity of Repsol.
Let me say that thanks to this production, Petrocarabobo, we are talking about a plateau at the end of the road that could be at around 210,000 barrels a day gross production, where Repsol is going to have a stake at around one third of the total stake of Petrocarabobo.
That is material. Let me say that I comfortable with the commitment I took as CEO of Repsol at the beginning of this new positive journey for Venezuela when I said that in one year, we were going to be able to increase in a 50% the oil production in Venezuela, multiplying by three this figure in three years. We are fully focused on that and fully prepared to deliver the commitment I took in January in the White House. Thank you.
Thank you, Josu. Very helpful.
Thank you very much, Nash. Our next question comes from Michele Della Vigna at Goldman Sachs. Please, Michele, go ahead with your question.
Thank you, and congratulations on an exceptional quarter. Two questions, if I may. The first one, I wanted to come back briefly to freight rates, and I was wondering if you could help us understand for all of your crude tanker needs, how much of that is effectively guaranteed under long-term rates versus spot?
If you have long-term rates, whether the benefit of that would be reflected in your refining margins or should be considered instead as trading profits on top. Secondly, it is probably not too material, but I just was wondering, relating back to the Cartagena fire that you suffered earlier on, whether you expect insurance payments from there and how material those could be. Thank you.
Thank you, Michele. Grazie mille. First, going to the freight rates, let me first elaborate that if we take the two faces of the coin, heavy products, including oil and light products, diesel, kerosene, and so on. For Repsol, because we are selling the high main part of our production in the Spanish market, we do not need any kind of freight, or we do not have freight costs associated to our product.
There are some tiny amounts, I do not know, diesel from going from Cartagena to Lavéra in Marseille and things like that. But we are selling by pipe in our own country. So we have to look at one part of the coin, that is the supply of crude oil. If we go to the fleet needs, roughly speaking, one-third of the needs of the crude oil and the products we are moving is supported by our own fleet through long-term contracts and so on.
Two-thirds could be related to the spot. In some way, these long-term positions we have, including also our trading, are supporting an additional income in our trading activity, where we are managing from our trading business, the fleet of Repsol. As of today, if we take the whole cash flow from operation of trading over these nine months, EUR 150 million, roughly speaking, are linked to this freight activity. So a positive impact on trading.
If we take, and that is not cash-in, it is not reflected in the cash flow from operation, if we take the whole nine months in mark-to-market position, we could have a potential benefit of EUR 400 million in trading that only a 40% of this figure has been materialized or cash-in as of today. I think that roughly speaking, your first question was answered, Michele.
Going to the Cartagena fire. Till the end of the road, not delivering and expressing all the figures, but I could say that most of the cost, and when I say cost, in the broadest meaning of the cost or lack of opportunity, is going to be covered by the insurance contracts and policies we have in place. So most of them, they are going to be fully covered, Michele. Grazie.
Thank you.
Thank you very much, Michele. Our next question comes from Sasikanth Chilukuru at Jefferies. Please, Sasi, go ahead with your question.
Hi. Thanks for taking my questions. I had two, please. The first was on capital allocation. The balance sheet gearing is decreasing materially now at 6%, and going towards potentially a net cash. I was just wondering in this scenario, how the priorities of capital allocation were changing versus our CapEx,
M&A, distributional upgrades, or perhaps letting the balance sheet even go down further in that context. I just wanted to hear views on that. The second one was on working capital. How should we think about working capital going forward? How much of the EUR 2.4 billion outflow so far this year, how much of that was related to price, and how much of that now was related to perhaps additional stocks for the security of supply?
Thank you, Sasi. Going to your first question, we are going to follow the roadmap and the journey that was defined the capital markets day. It's true, you are right, we have a small gearing rate that is even smaller if we eliminate the impact of leases. In that case, we have a negative debt, so a positive net cash position. We are not going to change this priority. We are going to be fully focused on delivering on our commitments with our shareholders.
The dividend, cash dividend growth, plus the share buyback for next year. Reinforcing the balance sheet means that we don't want to be pro-cyclical. It's not now the best time to invest in assets that are at the top of the cycle. I want to be crystal clear about that. Our organization, and I know that that could be strange, but it's now fully focused in containing cost inefficiencies, trying to reduce our management processes, reducing the cost of the company, because I think that having low breakevens in every business is the best way to be competitive.
Sometimes you have to take advantage of this period to reduce your breakevens and to be prepared for some other parts of the cycle. So we are entering in a complex environment, macro environment, scenario. I don't know what is going to happen because, of course, I don't have a crystal ball, but let me say that when we see high inflations in our economy, tightening monetary policies from central banks, high interest rates, and so on, that is a concern for the growth of our society.
I think that in this period, reinforcing your balance sheet, being prepared for future opportunities that could appear, but being very cautious about not being pro-cyclical, I think that is important. On top of that, we are trying to improve even more this financial flexibility. You know that we repurchased EUR 250 million of the hybrid that is going to be mature in 2028. We also have a senior bond, EUR 500 million, that is going to expire this quarter.
We are not going to refinance this bond. We are optimizing the financial structure for the company. We are improving our balance sheet. We are reducing our costs. Saying that, of course, in this capital allocation policy, we have to move the tune in some things. For instance, going to the divestments, the EUR 950 million that were announced in our capital markets day today, I don't have any incentive, any necessity to push in this direction.
Of course, we could consider transactions if they are creating value, but that is not now a concern for me. Of course, being very focused on guaranteeing the returns of the project, we could accelerate some projects in our portfolio, some pipeline we could have. For instance, I'm thinking about our activity in Yme in Norway, where we could accelerate an additional infill well. We are accelerating our activity in the Gulf of America, in the Sapinhoá.
We are also accelerating our well there. Alaska, I mentioned before. In the industrial side, we are analyzing the potential acceleration of our second A Coruña retrofit with 1.2, roughly speaking, million tons a year of capacity. A half will be SAF and a half will be HVO. That is going to help us to cover the market positions we have to cover the European mandates in terms of renewable fuels and so on.
In the customer side, we go on, as you could say, growing in the power and gas retail activity in the Iberian Peninsula. We are targeting mobility expansion in our own hinterland. We have a lot of opportunities in our portfolio. In the low-carbon generation , we are trying to finish the process before the decision investment we could take in the storage capacity in the Iberian Peninsula to take opportunity of these low prices we are seeing in the renewable energy over the central hours of the day.
For instance, here we have in mind the pump storage expansion of Aguayo, with 1 gigawatt of capacity, hybridization of projects in the renewable side, and so on. But let me say, we are going to be very selective in the organic. We are not going to enter in millions of euros. We are going to be selective, anti-cyclical, and trying to maximize return. I prefer, in this balance, to be unbalanced towards protecting the balance sheet of the company than entering in a dynamic of acquisitions because we have cash in our hands and with the risk of being pro-cyclical in the worst moment. Thank you.
Thank you very much, Sasi. Our next question comes from James Carmichael at Berenberg. Please, James, go ahead with your question.
Hi. Morning, guys. Thanks for taking my questions. Just a couple. Just thinking about product markets generally. I think if we go back to Q2, you mentioned that diesel jet and gasoline supply could become a real issue for Europe in the coming months. Just wondering how you view that now heading into winter, and if there is any particular areas of tightness that you see.
Then just on the chemicals business, it has had one decent quarter in Q2, but otherwise does not really seem to be improving materially. Maybe some obvious reasons for that, but just interested in your view on the chemist business and the outlook there. Thanks.
Sorry, before. Thank you, James. Before going to your question, Sasi, sorry, you asked me about the working capital. We do not have, let me say, any physical capacity to increase our storage in these circumstances. So, at the same price level, you could expect the same working capital at the end of the year. This EUR 3.7 billion of increase over the year, EUR 2.4 billion could be related, roughly speaking, to prices.
So, in case of seeing in coming one, two years, prices go down, of course, that is going to be cash in. And EUR 1.3 billion, EUR 1.4 billion, EUR 1.5 billion could be related to storage, so inventories and activity. That is, roughly speaking, the 3.7% of increase we have had over the year. Sorry, 1.2 price. Sorry, my mistake. 1.2 price and 2.4 was inventories and activity.
That is actually explaining the working capital and what will happen with the working capital. Again, two-thirds is inventories and activity, and one-third is price. James, going to your questions. What we have seen, diesel has been a real issue in Europe this summer. I am not going to describe some European countries, but I have seen, driving across Europe this summer, some difficulties in some service stations in some European countries. So that is a real concern.
Market, the tightness of the market, it seems to me that is also to be related to some other factors. First, the temperature in winter in Europe, a colder winter means, first, more gas oil to heat, probably a higher price for LNG, more shifting from LNG to diesel to power in some countries. So, that is going to depend on some factors.
But I have some concern related to the tightness of diesel in Europe in coming months. We have to take into account that many countries, OECD countries, they are releasing strategic reserves of diesel and all that is helping to overcome the current situation.
Saying that, going to the Spanish economy, because the refining capacity we have, and because we do not have any problem to get the supply to feed our refineries with oil, we are fully comfortable with the capacity we have to provide all the diesel and the kerosene that the Spanish economy needs and is going to need in coming months. But let me say, this concern about Europe is not only mine. Yesterday, I think that there was very interesting statement coming from European Commissioner, Jørgensen, that I fully support, and Repsol was present in that meeting.
Saying that crises are also opportunities, we have to look at the future of the refining sector in Europe. Jørgensen said that refining is strategic, and diesel and jet fuel are essential for mobility and for the broader economy. They said more, because the Defense Commissioner joined that statement. That is also very important for defense.
We have to create an environment that support this fuel production in Europe. I think that refining is crucial for that, because the concern is there and the tightness is there. The European Commission is taking positive measures, from my point of view, to build a better European refining business for the whole continent. That is reflecting that the problem is there.
Let me only add that in Spain, we are more comfortable because we invest some years ago in a strong refining business, and that is going to guarantee not only what the Spanish economy needs, but also what the Spanish tourism sector, you know, that accounts for 12% to 13% of the total Spanish GDP needs in terms of jet for aviation and so on.
Going to the chemical business. First, the quarter. The quarter is impacted after a positive second quarter, as you mentioned, James, by two effects. First, growing costs, I mean, naphtha and natural gas to feed the crackers, and the difficulty to translate these prices in international markets to our customers. So, a lowering of margins.
Second effect, we have an additional EUR 20 million cost this quarter because we were in all the preparation phase of the cracker of Sines to start the new derivative activity from November on. You know that after these ups and downs over years, putting an operation and commissioning a cracker is not an easy task.
So EUR 20 million OPEX more this quarter because this activity. I have my full commitment about what I said, even in this acid international margins scenario. To put the chemical business of the company this year with a positive EBITDA. The EBITDA as of today is EUR 58 million. It seems to me we could expect something close to EUR 70 million-EUR 80 million positive for the whole year. Having a positive result, a positive EBIT in 2027.
All that is not only efficiencies, it's the expansion of Sines that is going to add even this depressed scenario, EUR 80 million-EUR 90 million of new EBITDA in 2027, is the new reactor of OPCM in Tarragona, that is also adding and contributing with EUR 10 million the EBITDA in 2027. Is the plant of ultra-high molecular weight polyethylene that this October is going to enter in operation, that is going to contribute with five new million euros of EBITDA.
Next year is the electrification of cracker of Sines that we are changing these weeks, and the cracker of Tarragona with the turnaround process I mentioned before, in 2027, that is going to electrify the cracker. All in all, even in these depressed prices, the chemical business of Repsol, and that is, of course, the commitment I have with my board, is to be positive in results in 2027. Thank you. All that, of course, not taking into account a potential recovery of the business that we have not seen today in Europe.
Thank you. Cheers.
Thank you very much, James. Our next question comes from Alejandro Vigil at Santander. Please, Alejandro, go ahead with your question.
Yes. Thank you, Josu Jon, and Pablo, for taking my questions. Just coming back to a previous question about the Repsol Upstream potential market listing, which is your preference considering the strong balance sheet of the company, between having the company listed in the market or just recovering the full control of the vehicle? Thank you.
First, gracias, Alejandro. Again, we are fully comfortable, fully aligned in the strategy of the E&P business with our partner of EIG. We are now fully aligned with them and fully committed together to improve the quality of our business and growing, taking the opportunities we have in our portfolio. That is my full priority, increasing the activity and the production in Alaska, Venezuela, Trinidad and Tobago, Gulf of
America, the unconventional in the U.S., Libya, the U.K., because when I say that we have to be anti-cyclical, it's not evident today to grow in the U.K., but you know that we are doing pretty well in this country. That is my full priority. We are comfortable with our partner, and we are working together to improve the quality of our E&P business and to grow the production with better barrels. Gracias, Alejandro.
Thank you. Gracias.
Thank you, Alejandro. Our next question comes from Fergus Neve at Rothschild & Co Redburn. Please, Fergus, go ahead with your question.
Brilliant. Thank you very much for taking my question. Just the one, if I may, please. You commented that October production has been around 590,000 barrels of oil equivalent a day. I was just wondering whether that is a sustainable starting point for the rest of 4Q, and potentially into 2027, or whether there are any more temporary factors that we should be considering when we look forward over the next 12 to 18 months. Thanks.
Michele. Yes, the figure is what you mentioned, 590,000 barrels a day, the average of October. Today, we are producing 600,000 barrels a day. Probably the figure in coming 2 months is going to be closer to 600,000 barrels a day than to 590,000. That is maths. You have the inertia of 10 months. As of today, taking the whole year, because I check this figure every morning, today, we are at 560,000 barrels a day of average over the last 10 months.
Improving and growing the average after 10 months, that is maths. The inertia is very high. I am comfortable. We are going to be in the 560,000, 570,000 barrels a day. It could be great, and we are going to do our best to be in the higher range of this figure. Again, we are competing with the maths of the previous 10 months.
I am comfortable saying that that is going to be the average of the year, from 560,000 to 570,000 a day, and we are going to be in these figures, significantly higher in coming two months. Thank you. For the next year, temporary factors to be considered. For next year, what we are going to see are positive factors, because the positive factors, that is not time to give you a guidance, but next year, we are going to be in a range, the whole year, probably from 580,000 to 600,000 barrels a day.
That is going to be, and we are working in the budget on this basis. The growth is going to come mainly from the ramp-up of Alaska that is going to be consolidated, of course, next year. Leon-Castile, that as of today, probably here, and I have the numbers I have in my mind, it could be at 12,000, 13,000 barrels of production. Next year, probably it is going to be close to 17,000, 18,000 barrels a day. The growth in Venezuela that I mentioned before.
We have something coming from the unconventionals. These high prices means that, for instance, the PSCs and so on, they have a negative impact, Bolivia and some others. All in all, next year, we could give you a better guidance in February, but we are preparing the budget under the assumption of 580,000 to 600,000 barrels a day for the whole year. Thank you, Fergus.
Thank you very much. Cheers.
Thank you, Fergus. Our next question comes from Ahmed Ben Salem at ODDO BHF. Please, Ahmed, go ahead with your question.
Yeah. Hi. Thank you for taking my question. I have two, if I may. The first is on refining. With margins currently at $25 per barrel, what would you consider sustainable level for next year, 2027? On distribution, you are targeting around 30% payout this year despite the very strong cash generation. What would need to happen for you to move closer to the upper end of your target of 30% to 40% range? Thank you.
Thank you, Ahmed. First, the refining margin, yes, I have a positive view also for next year. Of course, I do not have a crystal ball. Let me say that it is very hard to anticipate a potential refining margin for the whole year 2027. But taking into account, even in the case of a full geopolitical recovery of the current situation, building again all the infrastructures, building the refineries, all that is going to need probably a time close to one year to be complete.
On top of that, we have to take into account that after the release of reserves, countries, they have to recover the reserves level in coming one, two years. On top of that, I mention also that some companies, because they reported that, they are delaying the turnaround activities in the refinery.
All in all, not having a crystal ball, but today, I think that the refining environment remains fully favorable for the whole 2027 year. If I have to give you a figure, and please take this figure very cautiously because, again, it is very difficult to anticipate that, but we are working under the basis of the analysis of a refining margin for Repsol of $19 a barrel for next year, 2027, and probably the premium is going to remain above $4 a barrel.
Of course, we will continue to monitor market developments closely, and we will update to you our refining margin estimations accordingly. Because, again, I do not have a crystal ball. What would need to happen to move up to the range towards 40%? Again, we have to see first a clarification of the macro scenario.
As I said before, not always the 40% is going to appear, when the cash flow from operations is very high. Put you in my shoes now. The figure we are launching in the buyback program from now on to the end of the year could be executed. It's not an easy game, but I could say that if we are taking this commitment, it's because we have time, and we could execute respecting the governance and the market rules, and the compliance in an open way.
But increasing significantly this figure today could be even a problem in terms of execution. We have to balance many things, Ahmed. Perhaps you could see a higher range in the future, probably with a lower cash flow from operations. So these figures are not necessarily related. We are comfortable now because we are fulfilling the capital markets day.
The cash flow from operations generation is pretty good, believe me. We are seeing day after day in the company a very positive cash flow generation. We don't have this concern. It's true that our balance sheet is strong, but let me say that is a minor problem. I could live with a strong balance sheet, mainly when we could see a potential different macro scenario.
I think that to jump into acquisition and so on is not a good business, excepting fully anti-cyclical investment that in our business, that today is not very evident. But of course, we are analyzing small opportunities, and I think that it's important to put the focus, even in these circumstances, in reducing cost, being efficient, and improving the break evens of every business of the company. Because that is what is going to do Repsol stronger in coming months, years, able, with a strong balance sheet, to take the opportunities that be sure that are going to appear in the market. Thank you.
Thank you.
Thank you, Ahmed. Our next question comes from Matt Lofting at JP Morgan. Please, Matt, go ahead with your question.
Thanks for taking the question. Congratulations on the strength of the results. Just one follow-up question, really. Josu Jon, you talked about capital allocation earlier. It strikes me increasingly that the cash generation in 2026 and the strength and balance sheet position creates, you could say maybe a once in a cycle opportunity for companies in this sector to accelerate the delivery of strategic plans and strengthen, as you mentioned earlier, break evens and financial positions for the midterm.
If you take the opportunities that you mentioned earlier, how are you thinking about that at the moment? How much scope do you see in aggregate to put forward additional investments to accelerate the plan? How do you see the merits of that factoring, perhaps, inflationary challenges and anything else that may sit with that against it? Thank you.
Thank you, Matt. First, we have a lot of opportunities, but I think that it's important to analyze very cautiously the expected returns of this opportunity. We are going to be very tough about hurdle rates, about the returns we are going to ask to any investment in the company. Of course, depending on the cost of capital of every business of the company, that could be different. But I think that we have to be present. There is room, of course, to increase. I mentioned before, I'm not going to repeat all the projects we have in mind and so on. But, we have also some execution capabilities, and we have to measure that.
We have a good engineer in the company, but we have to be able to manage that in a proper way so that we have a bottleneck, let me say, in terms of execution of investment. We are going to be proud from this point of view. We are going to accelerate some things, but we are not going to enter in a, let me say, a dynamic of investing everywhere, doing everything.
That is crystal clear. The inflationary challenge, we are following that in a very close way because as you mentioned, that is going to be part of the landscape in coming months. That is appearing everywhere. We are following, in any investment decision, we are going to take into account what is happening in these markets. Things, for instance, are better in some places than in some others.
Today, we could see in the U.S., service companies and so on, inflation is starting to spike and to grow. We are going to consider in any investment analysis this situation, what is happening, and that is going to be part of our investment decision process. You could expect some acceleration of some projects probably next year, but always under the general principles in financial terms we defined in the capital markets day eight, nine months ago. Thank you, Matt.
Thank you, Matt. Our next question comes from Henri Patricot at UBS. Please, Henri, go ahead with your question.
Yes. Thank you, Pablo, Luis, Ramon. Two questions from me. The first one, just to come back to the outlook for production. On Libya, you mentioned that production has increased to 45,000 barrels per day. Do you see any more upside in the near term in that country? Secondly, a quite remarkable resilience in fuel demand. What are you seeing in the year, in the fourth quarter? Is demand continuing to hold up very well given the high prices in your own network and more broadly across Spain? What are you seeing? Thank you.
Going to your question about Libya, I have to mention that we had the peak of production, in many years in August, 34,000, 35,000 barrels a day gross, roughly speaking. These 45,000 barrels a day net, they are fitting with a figure of 315,000 barrels a day gross. They were not impacting directly to our assets, but there was a pipeline problem for some days in Libya and so on that reduced, in some way, our production capacity.
We are consistently producing at these high figures. We are working different directions, of course. We have spudded a lot of wells in the area. Six new wells were connected during this quarter in El Sharara in the production, adding some additional production. Now our focus is mainly focused on the exploration side.
That is going to be probably the way to improve and to increase our future production in Libya, because we remain very confident in Libya, as I have expressed in previous call. The country is becoming more stable. The security conditions are improving in a dramatic and significant way. I have underlined a lot of times the important contribution of General Haftar and the Libyan army in this positive evolution of the country.
That is not only important for Libya, that is also important for Europe in a time where controlling and combating terrorism, stability of the Mediterranean and so on is very important. This contribution from the Libyan army is not only important for Libya, it is important for the whole Mediterranean basin, and it is very important for Europe.
I think that Europe has to recognize this effort that the Libyan army and General Haftar are doing in that country. Because we believe in Libya, we are also betting in favor of exploration. You know that we are going to, this November, the Waha appraisal well is going to be spudded in November in one of the blocks in El Sharara.
That is a way to go on growing in the future in our production. Last year, in another well, the P3, it was spudded, and we encounter and discover a good oil column. All that remains under evaluation, but that could be another way to grow. Kobra was, some months ago, also in the area, declared successful. We have another spudded well, Ural, that was apparently positive and is now under evaluation.
We are working with the Ministry in extensions for these two blocks with some exploration commitments and so on, that they are very positive. Let me say that some months ago, we were also awarded with two new exploration blocks with further growth potential. One of them is onshore in the Sirt Basin. Here we are the operators with a 60% with the Turkish TPAO company as a partner.
Another one with the same partner plus more, the Hungarian guys. We are also operators there, in this case, in the offshore in the northwest of Benghazi. Again, a stable country. We believe in Libya. We have a very good position in the country. We rely on the future of a stable Libya, and we are growing and investing in the exploration to grow these figures in the future. Thank you, Henri. Merci bien. Sorry.
The second question I forgot. I was excited. Speaking about Libya, it is a country and an operation I love so much. What we are seeing, going to the fuel demand, is that even in this consideration of higher prices, demand remain resilient. Road transportation fuels are broadly in line with last year. I think that reflecting the resilient mobility demand. Aviation demand remains strong, probably supported by all the travel activity, the increase of tourists in Spain, that is also impacting in a positive way.
I have to say that the measures that government took in terms of reducing taxes for customers, they have been also very positive in terms of helping consumers, Spanish consumers, in these difficult times, and maintaining volumes.
We are also contributing, as I mentioned before, with our own strong and important discount campaigns, where we have already invested a figure close to EUR 80 billion in the last five, six months in discounts. We have growing discounts for everybody going to our service stations, only the requirement of using the Waylet app. Of course, we are increasing these discounts for people that have a multi-energy approach to Repsol. All in all, we are seeing a good resilience of fuel demand. I don't know what is going to happen here, but at the moment, the situation is like I described. Merci bien, Henri.
Thank you.
Thank you very much, Henri. Our next question comes from Sadnan Ali at HSBC. Please, Sadnan, go ahead with your question.
Hi there. Thanks for taking my questions. Two, please. The first one, just going back to refining. Are you able to give us the IMR and premium achieved on a monthly basis over the quarter, and any commentary you have on those as well, please? How much have you been proactively adjusting your slate for certain products in the past few months?
Secondly, on production, I just want to clarify, if I heard correctly, I think you guided an early range for 2027 production of 580,000-600,000 KBD, obviously with an October average of 590,000 and today at 600,000. Directly speaking, that's suggesting a flat or decline in production on average next year. Just want to reconfirm that that's the right direction we're heading in. Thank you.
Thank you, Sadnan. What I have in mind is that this $10 a barrel of premium over the quarter is quite a good balance over the two, three months, in July, August, and September. Probably, it seems to me that it was slightly higher in September, probably closer to. Sorry, slightly higher, I meant in July, close to $11, $12 a barrel in the average in August, and something in between 8.5, 9, is the figure I have in mind in September.
You could check that with Pablo Bannatyne and his team. What you are going to see, I do not know the whole figure in October because you know that the final adjustment of the premium has to be done with the real accounting of the month. My perception is that it is going to be higher in October because this freight rate cost I mentioned before.
Thank you, Sadnan Ali. I am going to your question. Flat or decline production for next year. No. You have some kind of natural decline, of course, in some assets. What I am considering that oil price is going to be high in the coming months, higher than the first part of 2026. So in countries where we have the PSC contracts, you are going to have for the same, let me say, payment, less barrels that are going to be accounted.
This figure is going also to be there. So what we are seeing is a quite stable production comparing with this quarter, with fourth quarter, that I mentioned that we were at around 590,000, 590,000, 600,000. Let me be a bit prudent about the guidance for 2027.
For that reason, I mentioned from 580,000 to 600,000 barrels a day, that we are seeing an instability between projects growing and the negative effect of some natural decline in some places like Brazil and some others, and also the PSC effect I mentioned before. Thank you, Sadnan.
Thank you, Sadnan. Our next question comes from Ignacio Doménech at JB Capital. Ignacio, please go ahead with your question.
Hi. Thank you, Josu Jon, and the team for taking my questions. I have two. The first one is a follow-up on the Cartagena refinery, particularly on the fire at the distillation unit, because you mentioned that the insurance policy covers the cost, which, if I am not mistaken, that was probably on the tens of millions. I was wondering if it covers also the unrealized profits as well, because this would be a materially higher amount, maybe roughly closer to EUR 500 million.
So if you could clarify that, please. My second question is related with the downstream, Iberia, earlier this week, we learned that some of your peers put to an end consolidation plans in Iberia. I was wondering, what is your view on consolidation in the sector, if you are comfortable with your already leading opposition in Iberia, and if in the coming years, we could see no further consolidation and just get your view there, which is always very interesting. Thank you.
Gracias, Ignacio. Going to your first question, you are right. The insurance policy covers the cost and also the lost profits in the period, in a crystal clear way. For that reason, I cannot give you the final figure of this insurance recovery because it is going to depend on margins and so on in the coming weeks. The figure is going to be significant and high, and allow me, Ignacio, not having the need of, or the capacity of giving you an exact figure, but it is going to be a significant figure.
Let me say that you have a good approach for this kind of businesses. I am not going to say more. I was talking about the figure, Ignacio. Going to the downstream in Iberia, first, Moeve and Galp, they are very good companies, solid companies. What I have to express is my whole respect, for they were engaged in a consolidation process. They decided a different thing at the end of the road, and my whole respect to the decision they took some days ago.
In our case, respecting, of course, the strategy of every competitor, in this case, as I mentioned before, good competitors, our view is different. We are the leader in the market. That is good. But at the same time, we have more limits in terms of competition rules and so on to grow in an inorganic way in our market. We try to improve our competitive position day after day. Again, my whole respect to what we saw these days, and we are not fully comfortable, let me say, with the position in Iberia, because we always want to improve this position.
We try to increase our multi-energy approach. We are growing in the retail power sector. We are increasing our multi-energy approach. We are trying to have, always when we have, let me say, competition, we know for that, better service stations, even small M&A transactions to improve in an opportunistic way this position. We are growing in and all. Always trying to improve the position, but with the position of the leader that at the same time have some competition rules that are not allowing us to grow in a significant way. Thank you. Gracias, Ignacio.
Muchas gracias.
Thank you, Ignacio. Our next question comes from Álvaro Bernal at Alantra. Please, Álvaro, go ahead with your question.
Hi. Thank you for taking my question. I have just one. It is regarding if you can give us an update on any potential windfall energy tax discussions that are ongoing with the government, if there is an update there. That would be all. Thank you.
Gracias, Álvaro. Thank you. I think that now, and everywhere, it's time for guarantee the security of supply. Today, the concern and the debate around the refining business is about security of supply and the effort that the sector has to develop, has to do to guarantee that. When I was talking about that three months ago, some people could think that I was talking in a different reality because I was talking about investing in working capital, investing in guaranteeing the security of supply, transforming refineries, and so on.
But when I read what I said before, what the European Commission and Commissioner Jørgensen said yesterday, the mind of Commissioner Jørgensen yesterday was fully focused and fully aligned with what I was expressing now. Priority now is security of supply, is in a period where, and also the commissioner expressed that yesterday, we have lost almost a 23% of the European refining capacity over last years. More than 30 refineries were shut down because they were not profitable.
The debate, the political priority, and I believe that in the mind of our leaders is that, is to guarantee the industrial activity and the security of supply. I fully underline the words that yesterday Commissioner Jørgensen expressed, and we are going to do our best in this dialogue he has opened with the refining sector to support this investment effort in Spain, made in Spain, because it's our main focus of business to improve this security of supply.
We are going to deploy this effort and convince that we have also the right to win in entrepreneurial terms in this Spanish and Portuguese hinterland to do that. Álvaro, I think that that is the debate, and it's going to be the debate in coming weeks. Thank you.
Gracias.
Thank you, Álvaro. Our next question comes from Guilherme Levy at Morgan Stanley. Please, Gui, go ahead with your question.
Hi. Hello, thank you for taking my question. Many have already been asked, but I have just a last one, a follow-up on the debate on shareholder remuneration. If you think about the total cash dividends that you pay, the commitment continues to be of 3% per year. However, that was also set in a very different market. I do not think that anybody is discussing $6 to $7 per barrel refining margin next year and over the coming years anymore. Could we think of that commitment as being somewhat stale at the moment? Do you think you could do more than that given the sustainability of current refining margins? Thank you.
Guilherme. First, our commitment is going to grow in coming years, and the shareholder remuneration is going to grow in coming years. It is going to grow because the cash flow from operation of Repsol is going to grow in coming years. That is structural. That is not because the commodity prices are now high or refining margin could be higher or lower. Our perception, as I mentioned before, is that it is going to be pretty good in 2027.
Remember, when we present the capital markets day, our message was, "This company is going to improve the cash flow from operations at 25% to 30% in coming three, four years, at the same oil, gas prices, at the same refining margin," because that is going to be the contribution of the new projects that are entering on track.
On top of that, we have a customer-centric business that is growing and is growing a significant way in cash generation. That is going to increase the cash flow for our shareholders in coming years. We have new projects. This year, for instance, we are not talking today, because we cannot talk about everything every day, but about biofuels.
This year, the biofuels business is going to have, all in all, including the customer side and including the trading side, a new cash flow from operations of EUR 450 million in 2026, with a capital employed that today could be at around EUR 600 million-EUR 700 million for the whole company. The E&P, Alaska, Venezuela, Libya, the unconventional, they are adding, and Gulf of America, new cash flow. So in structural terms, we are going to improve the cash flow from operations of the company.
In structural terms, eliminating and balancing these ups and downs coming from commodity prices, the 30% or 40% in 2029 or 2030 is going to be higher than the 30% or the 40% in 2025, 2026. So we are improving in this. If we have, of course, higher cash flow from operation, maintaining the framework that we committed in the capital markets day, we are going to have a higher figure for dividends that is going to grow at 3% year after year, and we are going to have more money for buybacks and for our total shareholder distribution.
So, I am fully comfortable, Guilherme, including, of course, for 2027, I have a clear view, a view, better said, about refining margins. I do not have a big, of course, 2028, 2029. But independently of commodity prices, of refining margins, this company is improving day after day in structural terms. You are seeing this improvement in many businesses that are fully hidden in the company.
When we presented the capital markets day, I remember that almost 40% of the total cash flow from operations of the company was related to businesses that were not, let me say, directly related to commodities. It was the customer side plus liquid tradings, plus gas tradings and so on, commercial businesses. So all that is going to improve the cash flow of the company and as a consequence, the shareholder remuneration in coming years. Thank you. Grazie. Obrigado.
Thank you so much.
Thank you, Gui. Our next question comes from Paul Redman at BNP Paribas. Please, Paul, go ahead with your question.
Hi. Yes, two quick questions, hopefully. You mentioned recovery of insurance for the Cartagena fire. I wanted to ask whether that is a cash-in event or is there another way we should be accounting for it? Secondly, you released a press release this morning about 11.5 billion EUR on Spanish projects. I just wanted to ask whether all of that capital is baked into your current CMD guidance for capital over the next few years. Thank you.
Thank you, Paul. First, yes, it is going to be a cash-in event. It is going to be cash flow from operations. It is going to be accounted as cash flow from operations, and probably is going to enter in the first quarter of 2027. That is our central scenario today. Going to EUR 11 billion of CapEx in Spain, yes, it is included. It is the Capital Market Day, 2026, 2027, 2028. Similar figures for 2029 and 2030.
Remember that in our Capital Market Day, year after year, we are investing at around EUR 1.2 billion, EUR 1.3 billion in the industrial business as average every year. On top of that means in 5 years will be EUR 6.5 billion, the figures of our Capital Market Day.
On top of that, we have an investment that was also in the Capital Market Day under this assumption of self-finance, low Cardón generation business, where we could have at around EUR 400 million or EUR 500 million of investment per year in Spain. All in all, you have EUR 2.5 billion more. We are in a figure that could be close to EUR 9 billion, EUR 9.5 billion.
The only addition, what is only new in that goes not reflected, because the effect in 2027, 2028 is going to be very low, is the Aguayo project that we are considering as a high likelihood possibilities of taking in coming weeks the final investment decision about this fantastic battery of 1 gigawatt that could, in some way, help not only to capture low or cheap energy produced with solar in Spain over the whole day and selling this energy at the high prices time and when we are depending on gas, but it is also be important to help the stabilization of the Spanish grid.
After the blackout we suffer one and a half year ago in Spain, I think that that is also relevant for the system and we are seeing an appetite of investors and so on, and to finance this project. We are closing all the financial aspects of this project, and I hope that we will be able to take a decision about that.
But the only, let me say, new, that is not in the Capital Market, there is, remember, an important effort to invest in Spain because we believe in Spain and we believe in the Spanish economy to invest in this country. We see that we have the right to win to develop our activities here in Spain and Portugal, is the Aguayo project. Thank you, Paul.
Thank you, Paul. Our next question comes from Biraj Borkhataria at RBC. Please, Biraj, go ahead with your question.
Hi. Thanks for taking my follow-up. I just want to go back to the refining and 2027. Obviously, spot cracks have been really strong, but forward curves moved quite a bit higher and has been more resilient in recent weeks. So just wondering if you are considering hedging any of your 2027 refining output and, practically how much could you do?
Because typically you put forward a quite conservative indicator guidance and run the business on a conservative basis. But obviously if you were to hedge some, you could underpin a margin that's well above mid-cycle levels at this point. So just getting your thoughts on that and whether that's an option. Thank you.
Hi, Biraj. That is a continuous debate and a continuous work in our company following the future market to potentially hedge. Let me say that, we have to see very extraordinary things to take hedges in our refining business. That could happen. But, first we have a positive view about this business. Remember that one year ago, we were seeing a future market of $10, $11, $12 a barrel for our refining margin that was significantly higher than our own budget.
We analyzed that and we decided not to do. I think that was the right decision. Of course, what is behind is, as an analyst or an investor could expect from Repsol, is to be exposed in some way to the refining margin. If you put, with my whole respect to all business of the company, an element that is different for Repsol is a high exposure to the refining margin. So, saying that, may we take some opportunistic hedges from time to time in a part of this exposure, I don't know, cracks for diesel, cracks for jets, and so on.
Yes, that could happen. But in general terms, my general trend is to be as open as we could be to the refining margin, because that could be for you as an investor. It would be hard to explain that, seeing refining margins of $36, $40 a barrel a year, we are not capturing that because we have a fantastic hedge at $10, $12 that we took in December.
We could do these kind of things in, I do not know, the gas for the unconventional in North America or crude oil in the U.K. and so on. But in general terms, we analyze every opportunity. I am not saying no 100%, because clear opportunities could appear, but our general focus is to be open to the risk of, and opportunities of course, of the refining margin. Thank you, Biraj.
That was our last question today. With this, we will bring our third quarter conference call to an end. Thank you very much for your attendance.