Welcome to the Repsol fourth quarter 2019 and full year 2019 results conference call. I must advise you the conference is being recorded today. Today's call will be conducted by Josu Jon Imaz, CEO. A brief introduction will be given by Mr. Ramón Álvarez-Pedrosa, Head of Investor Relations. I would now like to hand the call over to Mr. Álvarez-Pedrosa.
Thank you, operator. Good morning. Welcome to Repsol fourth quarter and full year 2019 results conference call. Today's call will be hosted by Josu Jon Imaz, Chief Executive Officer, with other members of our executive team joining us here in Madrid. Before we start, I advise you to read our disclaimer. During this presentation, we may make forward-looking statements, which are identified by the use of words such as "will," "expect," and similar phrases. Please note that actual results may differ materially depending on a number of factors as indicated in the disclaimer. I will now hand the call over to Josu Jon.
Thank you, Ramón. Good afternoon, everyone. Thank you for joining us this conference call. Today I'd like to cover the following main topics. Firstly, a review of the key messages and main operational highlights of 2019. Secondly, a brief summary of the financial results. Finally, our expectation for 2020. At the end of the presentation, we'll be available to answer, of course, all your questions. Let me start by reviewing the key messages of 2019. Financially, we successfully navigated a challenging scenario of lower oil prices with gas and lower refining margins, delivering an 8% growth in operating cash flow and improving the remuneration to our shareholders. The EUR 5.8 billion of cash flow generated by our operations more than covered CapEx, interest costs, and shareholder remuneration, including buying back all the shares issued with the scrip option.
We've raised our dividend by 5%. We will reach EUR 1 per share this year, meeting the shareholders remuneration we committed to in the current strategic plan. Moreover, an additional 5% share capital reduction will be executed by the cancellation of own shares after receiving the approval of the next annual general meeting, expected to be held in May. Our share buyback program, related to the 5% share capital reduction, is expected to be launched in coming days, weeks, before the annual general meeting in any case. Strategically, we took a significant step in the fight against climate change, becoming the first oil and gas company to assume the ambitious target of achieving net zero CO2 emissions by 2050 with a clear path of intermediate decarbonization targets. This goal is aligned with the objectives of the Paris Agreement.
The ambition to reach carbon neutrality has an impact in the way that we look at our businesses now. Our activities and investment will have to meet new and more demanding criteria compatible with the transition into a less carbon-intensive world. In this context, we assume a new internal commodity price scenario consistent with the policies that target the decarbonization of the economy. In 2019, as you know, we have revised the evaluation hypothesis applied to our investment, incurring in a post-tax impairment charge of EUR 4.9 billion against our full-year results. This accounting adjustment has had no impact in cash generation or shareholder remuneration. The impairment has mostly affected the book value of our upstream assets, mainly the gas-producing assets in North America. Based on this new and more demanding scenario, a new strategic plan to 2025 will be released on May 5th.
Looking briefly now at the macro environment, Brent price was 10% lower year-on-year, with volatility coming from geopolitical tensions and concerns over the global economy. In the gas markets, there was a persistent weakness across most regions. Every hub was on average 16% lower year-on-year, with oversupply and record storage levels putting downward pressure on North American gas. Refining also endured a tougher environment despite some early evidence of the impact of IMO. The margin indicator was 20% lower than in 2018. We approach this challenging environment by focusing on what we can control, maintaining a tight capital discipline and increasing the contribution from efficiency and digital. Always with safe and reliable operations as our main priority. Let me elaborate now on the implication that the net zero emissions ambition has for us.
As you all know, sustainability is part of our strategy and is completely integrated in our DNA. Repsol, we were the first company in our industry to support the Kyoto Protocol and one of the first oil and gas companies to align with the climate goals of the Paris Agreement in an effort to limit the planet's temperature rise to well below two degrees Celsius. Sustainability is also embedded in the decision-making across all our businesses and, of course, has an impact on the remuneration of the CEO, the senior executives, managers, and the rest of employees. Moreover, there has been an increased demand from our stakeholders for a clear identification of the risk associated to climate change and its impact on the future demand of our products.
This fact, along with Repsol's commitment to the Paris goals, has made us review our assumptions on the prices of oil and gas to make them compatible with the current sustainable development scenario of the International Energy Agency. Yet, current demand scenarios indicate that by 2040, almost half of the global energy consumption will come from oil and gas. We have to balance in our mix the role that oil will play, for sure, in the future energy matrix and the role of natural gas as a transition fuel. To measure our progress towards decarbonization, we have developed a carbon intensity indicator in which we measure the CO2 emissions for each unit of energy we produce. We include here in this indicator the Scope 3 emissions from all the products obtained from our primary energy production.
We can improve the numerator, of course, reducing CO2, methane, and so on, but we also have the levers to impact the denominator. To walk the talk on our commitment towards a low emission future, we have set concrete and intermediate decarbonization targets. We are not talking only about 2050 and zero emissions, which is more important. From a 2016 baseline, we aim to reduce our carbon intensity indicator by 10% in 2025 and by 20% in 2030, figures that will be confirmed upon the release of our new strategic plan in May. We confirm our goal of a 40% reduction in 2040 and move to achieve net zero emissions in 2050. We are very clear about that. Today, it is possible to achieve at least 70% of this goal with the technology that can currently be foreseen.
A faster technology evolution and, as necessary, compensation of emissions with nature-based solutions or natural sinks should allow us to reach our net zero goal by 2050. In the upstream business, we will emphasize sustained cash generation and portfolio improvement, prioritizing value creation over production increase while maintaining the necessary strategic flexibility. Upstream will continue to be a sustainable cash contributor to the group that will finance growth into other areas. In the downstream, we need to ensure that our refining business remains in the first quartile of profitability, also as a lever to be leader in decarbonization. When we are talking about decarbonization, I want to underline that we are not only talking about renewable energy. Decarbonization is impacting in a positive way all the businesses of Repsol.
We have already committed in the refining to reduce the direct emissions in our refineries by an additional 25% in 2025 as compared with 2017. We will reinforce energy efficiency initiatives. We will double our production of biofuels coming from vegetable oils in 2030, of which half will come from waste transformation before 2025. We are exploring newer decarbonization pathways as different options of waste to gas and waste to fuels, and the integration of renewable energy into our refining operations, producing green hydrogen and using renewable power to fuel our industrial processes. We value chemicals as a low carbon use of oil. We focus on long life polymers, and we focus on circular initiatives with the aim to achieve a 20% recycled content in our polyolefins by 2030. We are exploring also waste plastic to fuel processes and using waste as a feedstock for chemicals.
On the retail side, we will continue to expand our offer of energy services to our clients. Repsol will continue developing a multi-energy strategy center around the customer, offering multiple solutions and differentiated services levered on digitalization. Our determination towards decarbonization is demonstrated by an increased low carbon power generation target that now stands at 7.5 gigawatts by 2025, an increase of three gigawatts from our previous objective that was announced one and a half year ago. Let me now go through the main operational highlights of last year. In the upstream, we prioritize cash generation over production growth. Efficiency and digitalization allow us to improve profitability, reducing our unit OpEx, and keeping our free cash flow breakeven after CapEx below EUR 50, ensuring that our development projects are resilient in a conservative price scenario. All that is critical in this volatile environment.
Full year production was in line with the previous year at an average of 709,000 barrels of oil equivalent per day. New barrels from short cycle projects and portfolio management were offset by lower volumes in Venezuela, Libya, and Trinidad and Tobago. Libya was negatively impacted by longer periods of force majeure. In 2020, production in El Sharara was shut down on January 19th, I think, and remains interrupted to this date. Marcellus contributed higher volumes from wells drilled mostly in the first half of the year. Due to the low gas price in North America and taking advantage of the flexibility provided by unconventionals, we adjusted the capital program for this asset. Currently, we don't have any drilling rig in the area. New projects brought on stream during the year included the startup of Angelin in Trinidad and Tobago and Buckskin in the Gulf of Mexico.
Portfolio management allows us to increase our exposure to countries where we have operating and financial synergies. This includes the acquisition of a stake in Yme in Norway and the purchase of Equinor stake in Eagle Ford in the U.S. Other portfolio actions were developed in the U.S. focused on balancing our positions in Alaska and the Gulf of Mexico. In Alaska, you know that we have reached an agreement with Oil Search to align our ownership interest in Pikka and in all the surrounding exploration blocks. In the Gulf of Mexico, we agreed with LLOG, the operator of Buckskin, to exchange working interest in Leon and Moccasin, providing an opportunity for a co-development of the area. In Indonesia, we were granted the extension of the PSC of Corridor by 20 years more, one of our core assets in terms of production and free cash flow.
The regionalization of our portfolio has continued in 2020 following the recent divestment of our position in Papua New Guinea. Moving now to the exploration activity. Our drilling program in 2019 delivered positive results. A total of 24 wells were completed, of which 16 were exploratory and eight were appraisals. Nine wells were declared positive, 10 were deemed unsuccessful, and five remain today under evaluation. The Kaliberau Dalam discovery in Indonesia was one of the top 10 global discoveries in 2019. The results in Alaska extended the Pikka discovery further south, and in the Gulf of Mexico, the operator of the Blacktip well reported a significant discovery. The Carapa well in Guyana was completed in the first quarter with negative results, and the appraisal of Sagitario in Brazil remains under evaluation today. Continuing now with the downstream.
The worse environment for refining and chemicals was partially offset by a solid performance in marketing and lubricants. The positive contribution from low carbon and outstanding results in trading and in Peru. Refining margins were negatively impacted by narrower crude differentials and weaker light product spreads. The average margin indicator was EUR 5, a decrease from EUR 6.70 a year ago. Actual CCS unit margin was on average EUR 1 over the indicator after reaching almost EUR 2 in the fourth quarter. We complete our preparations ahead of IMO according to plan and on budget. The accelerated turnaround schedule in our refineries have more than double turnaround days in 2019 than the average of the previous four years. The chemical business was negatively impacted by challenging international margins despite higher uptime in our crackers.
It's true, and I want to underline this fact, that in the first quarter, the operating result was negative, impacted by a two-month day or 58-day, better said, planned turnaround, a pluriannual turnaround in our main petrochemical site in Tarragona. In the marketing business, we continue maximizing the profitability of each of our service stations, thanks to our focus on the customer and the optimization of the non-oil segment. We are today, nowadays, using digital solution to boost interaction with our clients, and the wallet app for mobile payments has reached more than 1.4 million users at the end of the year. The expansion and internationalization of our operations continue in Mexico, where we have signed more than 340 service stations. In lubricants, we complete the acquisition of a 40% stake in United Oil, a platform to grow our business in Southeast Asia.
In low carbon, we made great progress in just one year, strengthening our portfolio on both sides of the business. In power generation, we are building a diversified low-emissions position in Iberia. Our current installed capacity approaches three gigawatts. Projects already approved or under construction will allow us to reach five gigawatts of capacity. On the retail side, by year-end, we reached more than 1 million clients, a 33% increase since acquiring the assets. We are expanding our business, thanks to the strength of the Repsol brand, our existing client base in Iberia, mainly Spain and Portugal, the capillarity of our marketing network, the successful use of digital channels to personalize our offer. At this point, let me review the progress in our path to increase cash generation.
Homogenized to the price deck of our 2018 strategic update, the six levers capture EUR 1.1 billion of incremental sustainable operating cash flow by the end of 2019. Upstream production contributed EUR 0.3 billion out of the EUR 0.4 billion targeted for 2020, coming from new barrels put on the stream since 2018 and portfolio rotation. Efficiency and digitalization programs in the upstream contributed EUR 0.5 billion, more than 80% of the objective in 2020. In downstream, the early effects of IMO didn't translate into higher margins. Let me remind you that our plan only factor the contribution of IMO since 2020. Profitability initiatives in the downstream related to efficiency on the digital side were halfway of the target for 2020, contributing EUR 0.1 billion. Downstream expansion and low carbon contributed EUR 0.1 billion out of the EUR 0.3 billion targeted for 2020.
Finally, the cost-cutting program in the corporation deliver over the EUR 0.1 billion of sustainable savings targets set for 2020. The total contribution of sustainable efficiencies and digital initiatives in the whole company to the operating cash flow of 2019 was EUR 750 million, with additional EUR 300 million of upstream CapEx savings that are not, of course, included in this figure. Turning now to the financial results. I've summarized the main figures for the fourth quarter and the full year. Adjusted net income was EUR 405 million in the fourth quarter and EUR 2 billion in the year. This was 36% and 13% lower, respectively, than in the same periods of 2018.
Full-year net income after inventory effect and special items was EUR 3.8 billion negative as a result of the EUR 4.9 billion impairment charge of, and the EUR 0.8 billion provision, in relation to our assets in the U.K. registered in the fourth quarter financials. Regarding the provision related to the assets in the U.K., as you may know, Addax and Sinopec initiated in 2015 an arbitration proceeding in connection with their purchase in 2012 of 49% of shares in Talisman Energy U.K. The claims are against Talisman Energy and Talisman Colombia. Therefore, they relate to events that don't involve any actions by Repsol.
The arbitral tribunal has recently issued a partial award on one aspect of the five matters to be determined in the liability phase. Although Repsol had considered the claims to be without merit, and still does, the tribunal has decided that Repsol affiliates are liable to Sinopec and Addax in respect of that aspect of the claim. Repsol expects to challenge this partial award before the courts of Singapore. While the amount of a possible compensation, if any, is not known with certainty, in an exercise of prudence, we have recognized a provision of EUR 0.8 billion for the entire litigation. Going on with the results. Upstream adjusted net income was EUR 186 million in the quarter, and EUR 1.1 billion in the year. These figures compare with EUR 310 million and EUR 1.3 billion, respectively, a year ago.
Downstream adjusted net income was EUR 369 million in the fourth quarter and EUR 1.5 billion in the full year. These results compare with EUR 485 million and EUR 1.6 billion, respectively, in the same periods of 2018. The adjusted net income in corporate and others was EUR 150 million negative in the quarter and 8% improvement over the same period in 2018. Full-year adjusted net income was EUR 464 million negative, a 17% improvement year-on-year. The group's EBITDA at CCS was EUR 7.2 billion in 2019, which compares with EUR 7.6 billion the previous year. Cash flow from operations amounted to EUR 5.8 billion, a EUR 0.4 billion improvement over 2018. Net debt stood at EUR 4.2 billion as of the end of December, a EUR 0.2 billion increase year-on-year, driven by a stock of 81 million treasury shares at the end of the year.
This treasury stock position can be used in our commitments of 2020 year, in which we are going to remove the dilution associated to the scrip, and once approved by the annual carry out the 5% capital reduction. For further detail on Repsol results, I encourage you to refer to the financial statement and accompanying documents that were released this morning. Let me now review our updated outlook and what we expect in 2020. 2019 was tough for the industry, this year looks increasingly challenging as well, driven by ongoing macro headwinds and volatility. In terms of guidance, we are assuming an average production of around 700,000, 710,000 barrels per day, subject to Libya, a $65 average Brent price, $2.8 of Henry Hub, and refining margin indicator of $7.30.
Based on these assumptions, we expect to generate around EUR 7.8 billion of EBITDA at CCS, EUR 6.7 billion of cash flow from operations, and a net debt reduction to EUR 3.5 billion excluding leases. We expect results to be back-end loaded into the second half of the year, driven by higher refining margins. A more adverse scenario of $60 Brent and $2.3 Henry Hub would impact the cash flow from operations and the net debt by around EUR 400 million. Total CapEx is budgeted at EUR 3.8 billion in 2020, of which EUR 1.8 billion in the upstream, EUR 1.9 billion in the downstream, and EUR 0.1 billion in the corporation. Around EUR 0.7 billion of the downstream investment corresponds to low carbon.
The production target for 2020 is aligned with current commodity price environment, especially in unconventionals, and the political context, specifically in Venezuela. The value over volume strategy will allow us to increase margins per barrel produced. The unit operating cash flow is expected to increase by 7% in 2020, and coupled with a lower CapEx, will increase by 50% the free cash flow per barrel produced. Free cash flow breakeven is expected to be, in the upstream business, below $45 per barrel. In refining, we expect a challenging first quarter, followed by a sharp margin recovery once the full impact of IMO kicks off in the second quarter. After a weak month of January, we have seen the margin indicator in February recovering above $6. Before moving on to the conclusions, let me elaborate on the outlook for IMO.
The new marine fuel specifications have already resulted in disruptive changes in the shipping, trading, and refining industries. We retain our view that the new regulation will have a positive impact for complex refining systems like ours. Last year, we already saw the collapse of the high sulfur fuel oil spreads as physical players started stocking up very low sulfur fuel oil. In recent months, we have seen the price of this product increase and even reach parity with gasoil. In our view, that our residual product is priced as high as medium distillates indicates there is not enough supply to cover demand. We expect that as stocks of very low sulfur fuel oil are depleted, marine gasoil will be needed to comply with the new specification, making refining margins to rise significantly in the second quarter.
In the meantime, we take advantage of market opportunities to maximize our premium to the refining margin indicator. Let me conclude, reaffirming 2019 as a significant event, transformational year for us. Despite a challenging environment, we were able to grow the cash flow generated by all four operations and increase the remuneration offer to our shareholders. Our alignment with the objectives of the Paris Agreement is a milestone in our commitment with the long-term sustainability of our company. As an industry, we need to provide clean and affordable energy to society.
At Repsol, we work to be leaders in this transition into a less carbon-intensive world. Achieving net zero emissions will have significant implication for our strategy. Oil and gas will be very relevant in the energy matrix for decades to come. There is a lot of value in our existing assets, provided that we manage our businesses with efficiency and CapEx discipline under more strict and stringent macro assumptions. At the same time, we progress with determination towards new low-carbon businesses and a client-centered multi-energy approach.
Let me highlight that as of today, we have received the recognition of the Climate Action 100+ initiative that includes more than 450 international investors managing over EUR 39 trillion, together with the Institutional Investors Group on Climate Change, with over 200 members, representing more than EUR 30 trillion for quote, "Repsol's commitment to align its activities and investments with the goals of the Paris Agreement." According to these investor initiatives, Repsol has set a higher benchmark for our industry by setting a path to firmly transition towards net zero emissions and interim decarbonization targets. 2020 will be the first year of our new strategic planning horizon. Despite a challenging macro environment, we are confident on delivering improved performance in our operations and improving shareholder remuneration.
The details of the new strategic plan to 2025 will be released on May 5th, but I can anticipate that we envision a company founded on three main business segments, with roughly an equal contribution mid- to long-term from upstream, downstream, and a customer-centric multi-energy business. We will aim for a stable dividend with room for additional share buybacks if we don't identify clear opportunities for growth. Upstream, we'll continue to prioritize value over production, relying on efficiency and portfolio management to generate sustainable cash and reduce the number of countries where we operate. Downstream, we'll continue to invest to increase efficiency and decarbonize operations and product footprint, a necessary condition to maintain in the long term our industrial assets in the first quartile of returns in Europe.
Looking at our decarbonization path, I see the 10% reduction of our carbon intensity indicator by 2025 as a challenging target, and we may need to accelerate projects to reach that goal. For refining, we have already in place a 25% CO2 emission reduction target. We have already reduced 23% the baseline we had in 2010 of CO2 emissions. We have already in place a 25 additional % CO2 emission reduction target, and the final investment decision for the HVO plant in Cartagena may be announced this year. In low carbon business, we expect to approve 400 MW-500 MW per year of additional renewable generation capacity. After proving ourselves in this new business, we will pursue internationalization opportunities, leveraging our position in Iberia.
Our next strategic plan will detail our guidelines for 2020 to 2025 to achieve all these ambitions. With that, I now hand the call back to Ramón, who will lead us through our question and answer session. Thank you.
Thank you very much, Josu Jon. In case you run into technical problems, please contact us through our email address, investor.relations@repsol.com, and we will contact you immediately to try to solve them. Before moving on to the Q&A session, I would like the operator to remind us of the process to ask a question. Please, operator, go ahead.
Thank you so much. Ladies and gentlemen, we will now begin the question and answer session. As a reminder, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. Please stand by while we compile the Q&A queue. This will only take few moments. If you wish to cancel your request, please press the hash key. Once again, please press star one if you wish to ask a question and the hash key to cancel your request.
Thank you, operator. Let me now move to the Q&A session. Our first question comes from Oswald Clint at Bernstein.
Ramón, thank you. Josu Jon, thank you. Two questions. Please, just on the refining margin, the EUR 7.3 a barrel, quite specific there on that number. You showed some data from another forecaster out through 2020. I just want to know, are those your forecasts for those particular products? Also maybe just talk around the other crack spreads that you're assuming for 2020 in terms of things like gasoline and also your kind of crude differentials. Really, the steps to get from EUR 5 last year per barrel up to EUR 7.3, please. Secondly, just in the upstream, I guess it's been three months or so since the Eagle Ford deal with Equinor. I just want to know any signs of the promised synergies coming through that kind of larger portfolio print there, and are any of those included in this year's EBITDA guidance as well? Thank you.
Thank you, Oswald. Going to the first, our refining margin figure was what I said for the whole year. In the first quarter, in our budget, what we have forecast is EUR 5.8 per barrel. Since January 1st till today, the margin index has been, in real terms, EUR 4.5. I have to say that we are also having a premium above the expectations we had due to the flexibility of our system that is mainly working when there is a disruption related to prices. We have, let me say, forecast in our budget. For instance, I'm going to put an example that is behind the EUR 2 per barrel premium in the fourth quarter. We have a heavy oil discount of EUR 13-EUR 14 per barrel, but we could take advantage of discounts of high sulfur fuel oil of EUR 28 or EUR 30 per barrel.
We changed the feedstock of our refineries, capturing higher premiums than expected. We see, and with the consensus of the analyst, we are seeing EUR 16-EUR 17 as an average for the whole year. For the gas oil, we are seeing for gasoline, EUR 6-EUR 7 per barrel as a spread for the average of the year. Taking Maya as a reference for heavy oil, we are forecasting a discount of EUR 11 per barrel as average for the whole year. Talking about high sulfur fuel, EUR 25 per barrel is our assumption for the whole year discount, of course, in terms of the fuel. Jet is aligned with diesel, EUR 16 per barrel. That is what is behind these, let's say, refining margins and spreads for the whole year. Going to the Eagle Ford.
Of course, in 2019, we acquired Eagle Ford in the second week of December. Nothing is included in 2019. Going to Eagle Ford, what we have in our hands now, and I want to underline this concept, is a turnaround plan to make the asset more efficient. In some way, what we did before this turnaround plans in Malaysia and U.K. and so on, we are translating this concept to a different asset because we are talking about unconventional, but we have had this experience in some other places, like in Canada, where even in these depressed gas prices in Canada, we are today free cash flow, free positive after CapEx, thanks to this effort of developing these efficiencies and turnaround plans. We are in the first completion we get, we are at around $1 million per well.
We are squeezing and reducing cost and this potential improvement, of course, is included in the EBITDAs we have for 2020. I prefer to deliver, let me say, after getting and finishing the plan that announcing improvements before seeing them in our P&L and in our cash. Oswald, that is going to be the main target we are going to have in Eagle Ford this year.
That's very clear. Thank you.
Thank you, Oswald. Next question comes from Biraj Borkhataria at RBC.
Hi, thanks for taking my questions. I have three, please. First one, just looking at the growth in expectations in cash flow is a little bit higher than the expected EBITDA increase. Could you just walk through some of the big moving parts there and was there anything relevant on cash tax or any items like that? Second question is on production. The 700,000 barrels a day is quite a bit lower than I think consensus expectations, especially if you consider the Eagle Ford addition. Could you just outline the assumptions within that 700 for Libya, and Venezuela in particular? Finally, within the guidance, what are your assumptions for chemicals? 2019 was quite tough, but what are you expecting for 2020, as well as the gas price assumption outside of the U.S.? Sorry, there's quite a few there.
Going to your first question, the cash flow for operations increase, was at 7%-8%. There are over the whole year, two non-normal, or non-recurrent effects. One of them is positive and the other one is negative. There is a negative impact, because the recovery of tax forecast for January 2019 was recovered in December 2018, EUR 300 million, roughly speaking. On the other side, you have the positive impact of the application of the IFRS 16 regulation that impact in a positive way EUR 300 million. Decoupling these effects, one of them negative and the other one positive, I think that the cash flow for operation improve in an 8.7%- 8.8% year-over-year in a fully comparable and recurring way.
There are, as you said, effects, but all of them are compensated. Going to Libya, or starting by Venezuela, I mean. Let me underline that, again, the main objective of Repsol in Venezuela is protect the position of our workers in the country and of course, guaranteeing the safety of our operation in the country. Our second priority is to maintain, not increasing the financial exposure to the country. You have seen that we have reduced to EUR 270 million, more or less, our total exposure to the country, coming from EUR 520 million at the end of 2018, including here equity, financial loans, and so on. In this sense, we have been able to reduce our exposure this year.
Of course, we are doing all that, adopting, where appropriate, the safeguards to ensure the fully compliance of the law and policies in force in the different countries in which we operate. We are, of course, continually monitoring potential changes and the effect of these potential changes in our activities. We are budgeting 50,000 barrels per day, including, roughly speaking, 20,000 barrels per day oil coming from Petroquiriquire, 30,000 barrels per day, roughly speaking, gas production in Cardón. Remember that we are, during this year, our target has been more or less neutral in free cash flow terms in the country, and that is going to be also our target for this year, 2020. In a country where, as I said, we have reduced in a dramatic way the financial exposure of the company.
Going to Libya, 35,000 barrels per day is what we have in our budget. Going to chemicals, let me first of all say that what we have in our budget, but I am going to put after that two additional comments, is EUR 2,020 million of EBIT. But we are going to have, first of all, an impact that is going to impact in January and some days of February. You know, because that was a tragedy in the Tarragona's site of a company, IQOXE, that had an accident January 14th. IQOXE is a stakeholder for Repsol, especially in polyols business, because it is a main supplier of ethylene oxide. As a raw material, we use to produce the majority of the polyols. We have reduced our production in Tarragona for some weeks due to this potential lack of supplying.
It's true that at the end of February, we are going to run plants at full capacity, thanks to the flexibility of our production program and because we have found new alternatives of supplying outside Spain from Europe. This doesn't mean that sales are going to recover 100% at the end of February, because we are going to have a gap with the production of recovery inventories and so on. On the other hand, I have also to talk about the coronavirus, what is happening with the potential China growth and the demand of petrochemical products in coming months. I can't give you more clarity about this potential effect. We will monitor this forecast of EUR 220 million of positive EBIT for 2020, depending mainly of all this last factor.
That is true that after December and January with very depressed petrochemical margins, we are seeing a clear recovery last days. What we have today in international margins terms is fully aligned with our budget. Theoretically, what we expect by the second half of the year could be even a bit improvement. I prefer to be prudent, taking into account the international circumstances on the potential demand of chemicals coming from the Chinese growth and coming from coronavirus.
That's very helpful. Just one quick follow-up. On the production, the 700,000 barrels a day guidance includes a fairly significant amount from Libya and Venezuela, not that far away from capacity. You're also adding the Eagle Ford volumes that you acquired. Could you just talk through the other side? What volumes did you have in 2019 that were the biggest declines into 2020 in the plan? Is it just U.S. gas?
Let me first of all, if you allow me, elaborate a bit about production. I have to insist over the last quarters that I'm going to put a lot of focus on value and cash and less focus on production. This week, I was analyzing what has happened with the production of the oil and gas sector in Europe. If you take all the IOCs of Europe, including Repsol, 15 years ago, we were producing together 14 million barrels per day. 15 years later, we are producing the same 14 million barrels per day. What is the difference? The capital employed that the whole sector has today is three times as average the capital employed we had 15 years ago. That is, of course, my strategy, and I'm saying that and underlining that and putting that on the table.
We are going to be more focused on cash, more focused on efficiency, more focused on margin per barrel than in production. A decrease of the production is mainly impacted by the decision we are taking, because now we are reducing in a dramatic way the capital allocation and the CapEx we are applying in North America, in Canada, in the Marcellus. I said before that today we are free cash flow positive in Canada at these prices because we have reduced in a dramatic way our capital program. We don't have any risk today in the Marcellus. Of course, all that has the consequences on production. On the other hand, has positive consequences in terms of free cash flow of the company that is going to be our main target. Cash, deal, and less target in production.
For instance, I'm trying to answer to your question. Canada has reduced its production in 11,000 barrels per day, mainly gas production in Canada due to this capital allocation program. In Colombia, the expiration of the Ecopetrol license has had as consequence a reduction of 10,000 barrels per day. You also know that we decided one year ago to divest our position in Algeria in TFT. We are going to see some impacts on that. Trinidad and Tobago is the main additional reduction, reducing 14,000 barrels per day of gas production in Trinidad. Venezuela is also, the production forecast is 5,000 barrels per day, mainly gas, due to lower demand coming from refineries and so on, that are clients of Cardón, that were shut down, reducing the expectations of demand for the year. Thank you.
Thanks a lot.
Thank you, Biraj. Next question comes from Pablo Cuadrado at Kepler Cheuvreux.
Yes, good afternoon, everyone. Just a few quick questions. The first one will be, well, we appreciate that you have provided a guidance for 2020 looking cash flow and EBITDA. I was wondering whether if you can also chat a little bit on the net profit side. Looking basically consensus, I think at the minute, you are having a net income estimate in the market for this year already of around EUR 2.6 billion, while you reported around EUR 2.1 billion last year. If you feel comfortable with that reference, or you think that probably consensus is too optimistic for this year? Second question would be on looking after the impairments, I was wondering whether you can help us to address which are the implications on the DD&A for this year.
I think at the end of last year, you have on a group level around EUR 3.5 billion of DD&A. I don't know if you can update us with the reference that you're expecting for this year after taking into account the impairment. Last question is on the renewable business, and probably this is a question more focused on the capital market there, I may confess, but while we have seen many peers and with this wave of renewable and low carbon development in the industry, probably focusing on building a portfolio of renewable assets clearly, but the approach generally speaking, the industry is to potentially deconsolidate the investment from the balance sheet point of view through asset disposals or farm downs of the assets.
While I think your strategy is totally the contrary. Have you considered to probably try to do that at some point, or you feel comfortable the way that you are behaving on this growth at the minute? Thank you.
Thank you, Pablo. Going to your first question, I'm sorry, I understand, of course, your question and your interest, we try not to announce any adjusted net income forecast for the year. We are comfortable giving these guidances of EBITDA and cash flow from operations because the adjusted net income is very dependent of one shot of taxes, from exchange rate, from scenarios and so on. We are more comfortable giving these guidances in terms of EBITDA and in terms of cash flow from operations. Going to the impairment and DD&A implication for the year. It's not material because it's at around EUR 60 million for the whole year. The difference between the impairment of the depreciation of the assets due to the impact of the impairment we announced in December, we have published this morning.
I think that your point about low carbon business, Pablo, is right and is very interesting. We are in the same row, and we are on track of doing in the future these kind of things. My only point is that you know that we are making progress in the projects we have under development now. You know that we have today two gigawatts on track in the pipeline at Valdesolar, Kappa and Sigma, more or less, roughly speaking, 600 megawatts of photovoltaic and Delta in Aragón and Pi in the Spanish region of Castilla y León, adding more or less 1.4, 1.3, 1.4 wind megawatts.
We are also working, of course, in the commercial side of this operation, what we want to put now our focus is in get returns from these projects, taking the whole risk of promotion, development, construction, operation, maintenance, and so on, fully de-risking the projects, and we are going to be there in coming months, fully focused on that. You are right.
We are also working for the future on the best financial structure that could allow us to boost, first of all, the return on equity, being clearly in the double-digit, because if we are able, after de-risking the project, after being operating and so on and maintaining the operation of the project to sell a 40%- 45% of a basket of projects to a fund, of course, that we are going to get another multiples, and we are going to get very clearly the double-digit return while maintaining the operation. This might include, of course, JVs, partnerships, YieldCos, and with this potential structure, as you said, we also could achieve the boost in the return on equity, but at the same time, we protect a bit more our balance sheet.
As you said, we are going to build a financial framework with partners in the future after de-risking, fully de-risking the projects with two targets. First, increasing the return of the project for Repsol, selling a part of the risked project with better multiples. Secondly, having a vehicle to deal with this business with a low cost of capital in a very efficient use of our balance sheet. We are going to be there, and all that is going to guarantee, first of all, as you said, a better protection for our balance sheet. Secondly, what is also important, a clear return in the double digits coming from these projects. Thank you, Pablo.
Thank you, Pablo. Next question comes from Alwyn Thomas at Exane BNP.
Hi, Josu Jon. Thanks for the update. Actually, to clear up something on the operating cash flow guidance. The guidance of EUR 6.7 billion for this year is on EUR 65. Should I be comparing that directly with what you set out in the 2017- 2020 target of EUR 6.5 billion by 2020 on EUR 50? Obviously, adjusting for price, it seems you're a little bit off. I just wondered if you could clarify where the gaps are, despite some underlying progress on efficiencies and things like that. The other thing I wanted to double check was whether you've made any assumptions for divestments within your guidance during the year, and maybe we can give an update on your plans for potential high-grading activities this year as well. Thank you.
Alwyn, going to your point, remember, you have in mind, I'm sure, this figure, taking into account your question. We have, under an assumption of $50 per barrel, EUR 4.6 billion of cash flow from operations in 2018, with a target of 6.5 improving in EUR 1.9 billion. Decoupling from any effect coming from the price of commodities. How do we compare this 6.7 with this 6.5? I'm going to try to be didactic. Sorry, because it's not very easy, not having the possibility to show the numbers to you. Theoretically, imagine that we are at $65 per barrel as an assumption this year. We have to add 0.9 additional billion euros coming from larger cash flows coming from the oil. The right figure in that case will be EUR 7.4 billion from our operations. We are going to be in 6.7. That means EUR 0.7 billion below this figure.
Where is the gap? 0.2 comes from the expansion and the low carbon. You know that we decided to go in the organic way. That means that this year, because all these renewable projects, they are going to be on track, the first Valdesolar and probably Delta in December, so we have not factored in any kind of cash flow coming from these projects. That means that we are going to have a gap of EUR 0.2 billion from this low carbon because we have spent, first of all, less CapEx than forecast, and secondly, we have prioritized return over, let me say, speed, in terms of going on in this business. Because we want to decarbonize the company. Let me underline again, the best decarbonization we could get is the decarbonization in a sustainable way.
That means sustainable of finance, sustainable of balance sheet, and increasing the cash flow from the operations of the company. The second effect, a gap of EUR 0.3 billion coming from the legacy production, mainly related to the gas price, because we have a gas price lower than what we have in our figures, mainly North America. Here, of course, we also have an effect coming from Venezuela. EUR 0.1 billion, more or less, coming from Venezuela. The last one, EUR 0.2 billion less comes mainly from refining and chemical margins that we are taking assumptions, more proven that we have by 2020 in our strategic plan, taking into account the current environment.
All in all, EUR 4.6 plus EUR 1.9, EUR 6.5 billion, we have to add EUR 0.9 coming from the oil price, EUR 7.4, less this gap of EUR 0.7. That is the EUR 6.7 we are giving in our assumptions for four years. All the levers of transforming the company, let me underline that, efficiency, digital, and so on, all them are included in our budget. Assumption from the investment in the guidance. We don't have any metric in terms of cash in coming from divestment in this budget. Divestments are going to happen. Remember that over the last year, we have divested in four countries in our E&P position, Papua New Guinea, Kurdistan, Romania, and Angola.
We are going to go on with this effort, and probably this year, we are going to go better to reduce or to divest our position in a minimum of two, three countries. That is our target. This year, we don't have any divestment coming from these processes, any cash-in. You could imagine that we are talking about countries with not a large production. I'm not going to deliver any name, of course. Because the process could last many months, we are not talking, let me say, any kind of production reduction for this year.
Again, I'm not going to doubt if I have to reduce our production target because we are increasing the cash-in, the value, and the margin per barrel for the company. We are going to prioritize, in absolute terms, in any business of this company, value and yield over, let me say, quantitative metrics of volume, production, and so on.
Okay. Thanks for that. If I could just follow up on that last point then. With regards to the solar market in Spain, obviously things are getting quite competitive with a number of your peers taking material steps to build capacity. Can I maybe ask you for your thoughts on the market, and whether this is going to put pressure on price?
Alwyn, seeing that our partners and competitors are entering the Spanish market, later, the position we have, that is underlining some way that we were in the right track. That is my first reflection. My second reflection is, we have additional capabilities in Spain because today still, the short positions we have in the market coming from our customers, retail and so on, are bigger than the long positions we have from the production side. That means that we are more protected than others to get margins, because we have in the Spanish market, the short position coming from the customer side that is growing. This year we have, as you said, in our objectives and so on, the target of growing in the number of clients we have in Spain. We have an integrated margin, let me use this expression, to improve all that.
We have in Spain a supply chain value, very efficient because the dimension we have in the country in terms of engineering and so on, that is going to allow us to capture that in a better position. I'm going to add more. We are being very prudent in terms of solar projects in Spain. If you take today our pipeline, we have 600 megawatts of solar projects in Spain. That is okay. Perhaps we could add some others in the future. I'm not going to say never. You have to take into account that only taking the Aguayo pumping dam, we have today 400 megawatts of pumping storage capacity, and we could have adding an installation to Aguayo with no change in the reservoirs, only adding more technical facility, even a potential one gigawatt in the future.
That means, and you could see that and you could check from December the 20th to the 24th, we have in Spain four days of fully depressed merchant price. The contribution margin of Repsol in the power system those days was even bigger than the average we had in the whole quarter. Why? Because we are taking advantage of the pumping and storage to pump the water up, when prices are fully depressed. On the opposite side, we could take advantage of the windfalls coming when at peak hours price is high. We have an integrated margin. We take into account, you are right about your comment about the pressure on price, but we are taking all that into account in our business. Thank you, Alwyn.
Thank you, Alwyn. Our next question comes from Matthew Lofting at J.P. Morgan.
Yeah. Thanks, gentlemen, for the presentation. Two quick questions, if I could. Firstly, Josu Jon, you talked through some of the moving parts and bridges in terms of cash flow earlier relative to the 2018 to 2020 plan. Could you also talk about the CapEx side of the equation in terms of how EUR 3.8 billion of organic spend for this year compares to what you expected a couple of years back when the plan was launched, it looks like it's lower. The extent to which the CapEx reduction has been leveraged primarily through lower activity in North America versus other moving parts. Secondly, if you could just clarify on the EUR 7.3 a barrel refining margin for 2020, whether that includes or excludes the premium that Repsol is likely to generate over the benchmark in a year where you have less maintenance. Thank you.
Thank you, Matt. First of all, what I have in mind is that we talk about EUR 15 billion for the whole period, including the money coming from the divestment of Gas Nat. What our best expectation and guidance today is that we are going to invest EUR 12 billion out of this 15 over the whole period, 2018, 2020. That means that we are going to be EUR 3 billion below. Why? A half comes from the E&P. What we said in the E&P is going to be reduced in EUR 1.5 billion. Let me say that again, we are not forcing our team to invest. We are forcing our team to get the best returns, and we are reducing our CapEx, capital programs in a dramatic way in unconventional in North America, mainly in Canada and in the Marcellus. Of course, we could always look for opportunities.
Even investing EUR 340 million in Eagle Ford, we have also reduced a bit the CapEx program because we are more focused now on having the efficiency improvement we are looking for. On top of that, we also have reduced a bit our commitment in the exploration business. We rely on the exploration business, we want to be very focused on the exploration business, very focused in areas where we are convinced that we could add value. Southeast Asia, Indonesia, and so on. Mexico, the Gulf of Mexico, Alaska, and the area of Guyana, Brazil and Bolivia. They are the main drivers of our exploration. I don't know, I forget another country because I don't have the list here in front of me. Be sure that if I miss something, Tomás is going to correct me in coming minutes.
In the downstream side, we are going to be EUR 1.5 billion-EUR 1.6 billion below. We are going to invest, in the forecast we have now, in the low carbon business, EUR 0.8 billion less than expected in our forecast. In the expansion of the downstream, that you know that included the retail, included the chemical business and so on. We are also to invest EUR 0.8 billion less than expected. That is today our best approach, EUR 3 billion below. Going to the refining margin. No, the premium is not included there. I think that what we have as premium budget for the whole year is $0.8 per barrel.
It seems to me that this quarter we are going to be clearly above this figure, but be sure that if we are in the EUR 7-EUR 8 per barrel of margin index, I think that the premium we have as a target is quite reasonable, not looking for higher targets.
Thank you.
Okay. Thank you.
Thank you, Matt. The next question comes from Irene Himona at Société Générale.
Thank you, Ramón. Good afternoon, Josu Jon. I had two questions, please. Firstly, thank you for providing a preliminary sense or guidance to 2025. You mentioned stable dividends to 2025. What should we be anticipating for production volumes out to 2025 to reflect your interim decarbonization targets? Secondly, I didn't catch it, maybe you mentioned it already. What was the contribution in 2019 of your low carbon business in terms of EBIT or EBITDA? Any guidance for 2020, please? Thank you.
Thank you, Irene. Let me say that I'm fully comfortable today with the dividend we have in Repsol. I'm fully comfortable about the future of the dividend of Repsol. We are going to present this 5% additional buyback to the annual general meeting of May. If you take the operation cash flow and you compare this operation cash flow with the dividend of the company, we are in the medium-low range of the European sector. That means that we have enough cash generation to guarantee and to cover the dividend commitments we have. On top of that, I'm going to be, of course, this year fully focused on the share buyback programs because you know that we are going to need more than 150 million shares in our hands.
At 10% of the total amount of shares Repsol had at the end of the year to redeem the commitments related to the 2020 buyback linked to the scrip. To the additional 5% we'll propose to the annual general meeting. As I said in my previous speech, our share buyback program related to the 5% share capital reduction is going to be formally launched in coming either days or weeks, in any case, before the annual general meeting, and with the limit, of course, not exceeding the 76 million shares and not exceeding the treasury stock limit of the 10%. I'm fully focused on these programs. I'm comfortable with the dividend we have. Of course, we are going to be comfortable, it seems to me, with the dividend in the future.
Irene, we have to take into account, first of all, that the cash in the upstream, because we have a more efficient production for the same number of barrels, is going to grow. Our upstream is getting a clear, free cash flow, free after CapEx. Due to the decarbonization, the downstream is going to improve the refining margins because we are going to work and invest hard, reducing the CO2 cost. We are going to add new margins coming from biofuels and so on. The low-carbon business, even with, today, a small investment less than EUR 1 billion over the last one and a half years, is already giving us an EBITDA of EUR 100 million with projects on track. That means that this business is going to be profitable, is going to give more cash to the company.
This year, in 2020, we are going to be there because as I said before, all the new projects on track are going to be producing at the end of the year, Valdesolar and the Delta II wind project. We have not factored in any kind of new EBITDA coming from this project. We are going to be at around this, roughly speaking, this figure of EUR 100 million of the EBITDA. That is mainly coming from the assets we bought and we acquired from Viesgo, that you know that we pay EUR 700 million. That means that we have having good returns in cash terms coming from the investment we are developing in the business. My point, we are comfortable in terms of production. Production is not going to be impacted in a negative way because the decarbonization.
Decarbonization, talking about the E&P means that we are going to be more focused on short cycle projects. We are going to be less focused on long-term projects. We are going to try to avoid stranded assets. Getting cash, being focused on cash, being focused on short-term returns with a flexible pipeline of projects in the E&P, I think that is the best way to prepare the company for the decarbonization target. We are going to have cash coming from the E&P, more cash coming from the downstream, and new businesses. For me, decarbonization is not, let me say, a threat for the company. It's an opportunity to enter new businesses, leveraging in the current position we have. I see, of course, the remuneration policy and so on of Repsol quite safe, and I'm comfortable in this scenario.
Thank you.
Thank you, Irene. Next question comes from Jon Rigby at UBS.
Thank you. Hi, Josu Jon. Can I ask about the upstream? Just that, you've talked about being more gassy. I think you just spoke about sort of shorter cycle, more modular, avoiding the risk of stranded costs, et cetera. You do have quite a lot of large oil opportunities in your portfolio. Alaska, Buckskin Gulf of Mexico, two Brazilian projects. Is it reasonable to expect that you make some selections, that there's some opportunity for some quite large disposals to come? The second question, can you just go back to just explain the logic of, as I understood it, when you sold the Naturgy stake, there was a set-aside that was going to see inorganic spend going into a combination of the renewables. I think you've touched on that, and also the downstream.
Is the fact that you haven't used all of that just a question of timing, or have you just revisited the thought process there about what you want balance sheet debt to look like and what you want to look in terms of assets around those two bits of business? Thanks.
Thank you, Jon. Strategically, gas is very important and is relevant for the future. I think that we have to combine the long term with the short term. If we take the Paris assumption and we take the 2040 energy mix scenario compatible with Paris, 48% of the energy mix is going to be oil and gas. Oil is going to be, still, in 20 years, an important part of the energy mix in the world, fully compatible with Paris. We have not getting rid of the oil. We are not divesting from the oil. We are not going to be out of the oil.
We are a multi-energy company, very proud of being involved in the oil, in the gas, entering new businesses, where we have, let me say, a hidden value of EUR 1 billion EBITDA coming from commercial and retail businesses that is fully hidden for the market. We are leveraging these commercial businesses to enter in new activities, being profitable in the low-carbon business. That is our picture, our framework about sustainability and reduction of emission. In the meantime, taking into account the current price scenario, we are going to be investing in the oil, always under this principle of short-term cycles, keeping going the flexibility, because we don't know exactly what is going to happen in the future. We could maintain this flexibility.
I don't discard even to increase a bit in coming one, two years, the production in terms of percentage in the ratio oil, gas, increasing the oil till the 37%, 38% or 40% of the production. Why not? We are increasing the oil part in the new projects like the Gulf of Mexico. You know that we have a partnership with LUKOIL. We are going to invest, and probably we could take the FID of this project at the end of this year, 2020, Leon and Buckskin. In Eagle Ford, we are increasing the oil part of the business because you know that we are mainly focusing on liquids there. Alaska is, as you said and you mentioned, Jon, a project that is there and is interesting for the company. Castilla in Colombia is oil. Campos 33 is a mix of oil and gas.
In Duvernay, we have mainly the focus, because you know that we are reducing the capital programs in Canada because the gas depressed prices. There is an area in Duvernay that is Ferrier East, that we are very focused in this area, and probably we could take, in coming months, FID to develop a project in this area. Oil is there, always under this principle of returns, short cycle, and trying to get, of course, better returns, maintaining the flexibility. Related to the disposals of Gas Nat. I think that is not a question, let me say, from my point of view, of timing. It is a question of returns.
It was very easy the day after, taking the money coming from Gas Nat and buying, let me say, three, four, five or six wind farms in operation in Spain, getting the same 6.5% or 7% of returns we got from Gas Nat, but that is not our target. Our target is to build real returns in the range of 9%, 9.5%, 10% project returns, taking the whole risk in organic terms of developing, operating, and maintaining these projects. Secondly, as I said before, looking for, after the risk in the project, for financial partners to be in the double digit. We are not in a hurry to invest. I prefer, clearly speaking, and I want to underline, Jon, this message.
I prefer to have in our pockets the money, to have the cash full, not investing if we are not sure that the returns could be there. Thank you, Jon.
Super. Thank you.
Thank you, Jon. Next question comes from Jason Kenney at Santander.
Thanks. Congratulations on the emissions commitment as well. Two guidance points, really. Firstly, on tax for 2020, if you could guide where that could average out over the year at your base assumptions. Secondly, on the corporate charge, if you could give us an indication of where you think the quarterly corporate charge could be. One point of clarification on a question from earlier about stable dividends to 2025. Does stable mean flat at EUR 1 per share? Does it mean potential for growth?
Thank you, Jason. First of all, going to your first question, that is tax for 2020. The assumption we have more or less is 25% for the downstream businesses as average, 50% for the E&P, and depending, of course, of always the mix of production countries and so on, but the range is going to be there, and the 40%, depending, of course, on commodity prices and so on, and how every business is going to impact on the operational income, 40% as average for the whole company. I'm going to answer to the second one in May, after presenting my strategic update. I'm going to repeat what I have said here a lot of times over the last quarters. First of all, we are comfortable with the current dividend, and that means that when we are comfortable, we are going to be there.
Secondly, I said before, what we said in July last year, having more cash, having in our hands because we don't find the projects to apply this cash or to allocate this cash in an efficient way, getting the returns we could expect. I'm not going to doubt to propose any kind of, or some kind of additional buybacks to our board. I'm going to do that in case of having additional cash flows or not having clear opportunities to invest with the returns we expect. My point is, dividend, comfortable with that, but any opportunity we could have in the future to add additional buybacks in case of not having clear and profitable investment opportunities, we are going to do that as an additional policy to remunerate our shareholders. Thank you, Jason.
Okay.
Thank you, Jason. Next question comes from Peter Low at Redburn.
Hi. Thanks for taking my questions. The first was just on IMO. What do you see as the primary reason why it hasn't come through in margins yet? Is it the use of VLSFO rather than MGO? If so, how long do you think that can persist for? I'd be particularly interested whether you had any visibility on VLSFO stock levels and how they're changing. The second was just a quick clarification on chemicals. I didn't quite catch what the expected contribution is from that business in 2020. Thanks.
It seems to me, because you know that it's not rocket science, but it's complex because it's easy to talk after seeing the effects. Today, I think that the consensus of analysts is that the very low sulfur fuel oil stockpile is behind what is happening. In the last quarter, a lot of storage of this low sulfur fuel oil was built, and now the consensus of the market is that this stockpile is being reduced. Today, the best approach we have is that the production worldwide of this very low sulfur fuel oil could have a capacity of 1.5, 1.6 million barrels per day. What the marine sector is going to need to fulfill the IMO could be at around 2.7, 2.8 million barrels per day.
After getting rid of this stockpile, it seems logical, but you know that sometimes logic is not behind commodity frameworks, that the world is going to need 1.3 or 1.5 million barrels per day to fulfill, of gas oil, I mean, to fulfill these needs. Probably March, April, this effect is going to affect or is going to impact in a positive way in the diesel margins and in the refining margins. I want also to mention some other effects that we are experiencing today in the diesel spread. One of them is the mild winter in Europe, that in some ways has reduced over this winter the demand of gas oil.
The second one is what is happening, as I said before, in Asia, where the negative impact on the Asian growth could have also an impact on that. Going to the chemical business, the EBIT projection we have for the year is EUR 220 million. The cash, but that was, as I said before, mention this effect of IQOXE, the Spanish company I mentioned before, that is one of the providers of Repsol, the suppliers, that this phenomenon could have an impact in January and February, but all that is going to be overcome at the end of this month. Thank you.
Thanks.
Thank you, Peter. Well, that was our last question. At this point, I'd like to bring our fourth quarter conference call to an end, but just reminding you that on the fifth of May, we will be holding our capital market day regarding the new strategic plan 2020, 2025, as well as the first quarter results for 2020. Thank you very much for your attendance.
That concludes the conference for today. Thank you for participating. You may all disconnect.