Ladies and gentlemen, thank you for standing by and welcome to the Repsol fourth quarter and full year 2018 preliminary results conference call. Today's conference will be conducted by Mr. Josu Jon Imaz, CEO. However, a brief introduction will be given by Mr. Ramón Álvarez-Pedrosa, Head of Investor Relations. We now hand the call over to Mr. Álvarez-Pedrosa. Please go ahead, sir.
Thank you very much, operator. Good afternoon. This is Ramón Álvarez-Pedrosa, Head of Investor Relations. Welcome to Repsol fourth quarter and full year 2018 results conference call. As already mentioned, today's call will be hosted by Josu Jon Imaz, our Chief Executive Officer, with other members of the 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, or 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 over the conference call to Josu Jon.
Thank you, Ramón, and thank you to everyone online for attending this conference call. Today I'd like to cover the following main topics. First, I'll start by reviewing Repsol's strategic progress in 2018. Next, I'll go through the financial results and main operational highlights. Finally, an update on the outlook for our objectives through 2020. Let me begin by reviewing the progress towards our strategic objectives and the key messages of our 2018 results. Last June, we presented an updated strategy for the period 2018 to 2020, focused on delivering value growth in any oil price scenario, mainly founded on a strong company position with solid financials and a sound operating performance. 2018 was a strong year of strategic delivery for Repsol. We met all the key commitments laid out for the first year of our roadmap, putting us firmly on track to deliver on our objectives through 2020.
Our distinctive value proposition leverages financial flexibility and the strength of Repsol's integrated model to provide value in a volatile environment. Our results in 2018 validate our conviction to continue managing the company regardless of the oil price scenario, delivering on our short-term targets while working on our long-term opportunities. The first pillar of our strategy is to increase the returns to our shareholders. In 2018, we have increased the dividend pay by 14.7%, and we have implemented a successful buyback program to compensate any dilution associated with the scrip option. The second pillar is to continue growing our portfolio in a profitable way, delivering higher volumes and better operational performance in upstream, while activating downstream as an asset-light growth engine. In 2018, upstream volumes increased by 3% to 715,000 barrels of oil equivalent per day. Our record production level since 2011, despite ongoing uncertainties in Libya and Venezuela.
This is aligned with our objective to grow production to 750,000 barrels per day in 2020 or 2.6% growth per annum. Moreover, tight capital discipline and stronger contribution from efficiency measures allow us to achieve an upstream cash breakeven below $50 per barrel. Compared to 2017, upstream division generated around EUR 1.1 billion of additional operating cash flow from higher realization prices, higher production, and from efficiency and digitalization that were in line with the plan, partially offset by higher working capital. In downstream, we continue building on our strengths. The company worked to optimize its refining operations ahead of the new IMO regulation to maximize the value to be captured from 2020 on. We also made important progress in the international expansion of our marketing in Mexico and Peru and in our advanced mobility solutions in Spain.
The third pillar of our strategy is to become a player in the energy transition, developing and operating a profitable low-carbon business with full synergies with our portfolio. In 2018, we took a significant step in this direction with the acquisition of the low-emissions assets and retail business of Viesgo, becoming Spain's fifth-largest gas and power player with 2.9 gigawatts of low-carbon generation capacity. Finally, consistent with our commitment to maintaining a sound financial position, we achieved a net debt reduction of 45% and an improved credit outlook as recognized by the rating agencies. Moody's upgraded Repsol's long-term rating by one notch, and Standard & Poor's and Fitch improved their credit outlook. To summarize, we face 2019 confident in delivering on our objectives to 2020 and with a clear path to grow our cash flow generation in an increasingly complex and volatile energy sector.
Let me underline, the energy sector is always complex and volatile. Before going into the financial results, let me take you briefly through the macroeconomic environment in 2018. Starting with oil prices. We saw significant volatility throughout the year. A steady recovery took Brent to almost $85 per barrel in October, but geopolitical uncertainties and concerns on the global economic outlook resulted in the oil price closing 2018 at around $50 below its price at the beginning of the year. In the gas market, Henry Hub finished roughly flat compared to 2017, despite fluctuation linked to weather conditions and inventories. Repsol's gas realization price increased 17% year-on-year, averaging around $0.30 above Henry Hub in 2018. And I think that this figure shows our limited exposure to North American gas prices, reflecting that most of our production is linked to Brent and other liquids and gas references.
Let us move now to the financial and operational results that underline the strong strategic delivery achieved in 2018. We met, as you could see in the figure, all the key commitments set out for the first year of our plan. Adjusted net income stood at EUR 2.4 billion, 10% higher year-on-year. EBITDA CCS was EUR 7.6 billion, a 16% increase compared with 2017. EUR 4.8 billion were generated in the upstream, and EUR 2.9 billion in the downstream, while the corporation contributed with EUR 0.1 billion negative. Capital expenditure amounted to EUR 3.9 billion, with EUR 2 billion invested in the upstream, EUR 1.8 billion in the downstream, and EUR 0.1 billion in the corporate center. Inorganic CapEx amounted to EUR 0.9 billion, which EUR 0.8 billion corresponded to the new low-carbon business. Net debt stood at EUR 3.4 billion by the end of the year, a EUR 2.8 billion reduction compared with 2017.
In 2018, the cash flow generated by our operations more than covered organic CapEx, dividend payments, share buybacks, and financing costs. At the operating level, we achieved our 715,000 barrels per day production target for the year, around 21,000 barrels higher than 2017. Full-year production was positively impacted by new projects coming on the stream, the ramp-up of projects started in 2017, the acquisition of Visund in Norway, higher volumes in Marcellus, and a higher production in Libya. This was partially offset by asset disposals and the lower sales in Venezuela. Bunga Pakma in Malaysia reached first gas in April with an expected plateau of 160 million gross standard cubic feet of gas per day. This project will enable the PM3 asset to meet its gas delivery commitments for the coming years. In North America, Marcellus contributed with higher volumes following the connection of new wells in 2018.
Fourth quarter production averaged 722,000 barrels of oil equivalent per day, a 4.5% increase from the third quarter. Daily production in Libya averaged 31,000 barrels in the fourth quarter and 36,000 barrels for the full year 2018. As you know, production has been interrupted since December 9 following the shutdown of El Sharara field due to a deterioration of the security situation over the last weeks. In Venezuela, production averaged 53,000 barrels per day in the fourth quarter and 62,000 barrels per day in full year 2018. The lower output compared to 2017 was mainly due to lower gas sales in the domestic market. Our exposure to Venezuela stood at EUR 456 million as of the end of 2018, representing less than 1.5% of our capital employed.
This accounts for a EUR 1 billion reduction from our exposure at the end of 2017. During the year, we were able to partially recover the outstanding receivables, helping us achieve our cash neutrality target in the country. Moving to the development activity in our projects in 2018. In the Gulf of Mexico, progress continuing Buckskin towards achieving first oil in the second half of 2019. The two wells of the first stage were successfully drilled. The subsea installation campaign is on track. In Norway, the redevelopment of Yme received the approval from local authorities. Today, first oil remains planned for the first half of 2020. In Colombia, the development of the first phase of Acacias in CPO-9 block was approved in January of 2018 with the objective of doubling production in 2019.
In Trinidad and Tobago, the ramp-up of Juniper progressed as planned. The development of Angelin continued towards its first gas that has been achieved this week. Moreover, during the last quarter of 2018, two additional projects in Trinidad and Tobago were approved, Cassia and Matapal, aimed at developing the gas reserves in the Savannah discovery. Exploration activity included the completion of 21 exploratory and one appraisal well in 2018. Five wells were declared positive. One remains under evaluation. The rest were deemed negative. An additional four wells remain ongoing as of the end of December. Of these, last week, we received, let me say, great news from the Repsol-operated Kali Berau Dalam well in the Sakakemang Block in Indonesia. Our preliminary estimation is of at least two TCFs, so two trillion cubic feet of recoverable resources, the largest discovery in Indonesia in 18 years.
The consumption will continue exploratory work, of course, with an additional appraisal well planned in the coming months in 2019, probably. Indonesia is the focus of Repsol's exploration investments in Southeast Asia. In addition, the acquisition in 2018 of new acreage in Mexico, Brazil, and Alaska reinforces our strategy of building a strong exploratory portfolio to 2020 and beyond, centered around our core strengths. Our portfolio management has been active and also included the sale of our stake in Midcontinent and the exit of our exploration positions in Angola, Romania, and Gabon. Moreover, the acquisition of Visund in Norway has been followed by the purchase in 2019 of a stake in the Mikkel field, also in the same country, in Norway. The reserve replacement ratio in 2018 was 94%. Three-year average reserve replacement ratio stood at 96%. That is 101% in organic terms.
Turning now to the operational highlights of the downstream business. Beginning with refining. The margin indicator averaged USD 6.70 in 2018, roughly in line with 2017. The strength of middle distillate spreads accentuated since September, and the widening of heavy to light crude differentials were offset by higher energy costs and weaker gasoline prices. During the fourth quarter, the margin indicator decreased by USD 0.50 compared to the third quarter of the year, averaging USD 6.20. This decrease is explained by the weakening of gasolines and the narrowing of the medium crude crack spreads. This effect was partially offset by stronger middle distillates and the drop in the crude oil price. Let me highlight or underline that despite the worse environment, our unit CCS margin generated a USD 1.20 premium to the indicator in this quarter. In chemicals, we met our latest EBIT guidance for 2018.
Full-year results were negatively impacted by worse international margins, the higher price of naphtha, and lower utilization due to unexpected capacity disruption in Tarragona and Sines, mainly the second and third quarter, already fully solved during the year. In the commercial businesses, the operating results were in line year-on-year, mainly due to a higher contribution from the regulated part of LPG, offset by the building up of our position in Mexico. Our internationalization strategy in Mexico included progress in our service station network and the agreement achieved this year to manufacture and market lubricants through Bardahl. In new mobility trends, significant progress was made with the launch of Waylet and WiBLE services in Spain. In low carbon businesses, we completed the acquisition of the unregulated low emission electricity generation assets of Viesgo, as well as its gas and electricity retail business for EUR 732 million.
Furthermore, in 2018, we acquired the greenfield Valdesolar project, which permits to develop a 264-megawatt solar project in Spain. We started developing Europe's largest floating wind park in Portugal. Focusing now on the financial results, I summarize the main figures for the fourth quarter and full year of 2018 and how they compare with the same periods of 2017. Fourth quarter 2018 CCS adjusted net income was EUR 632 million, a 7% increase from the fourth quarter of 2017. Full year 2018 CCS adjusted net income was EUR 2.4 billion, a 10% year-on-year increase. Going to the upstream. Upstream adjusted net income in the fourth quarter was EUR 310 million, EUR 165 million higher than in the same period of 2017. Full-year adjusted net income amounted to EUR 1.3 billion, a 100% increase compared to 2017.
Mostly due to higher realization prices, higher volumes, and lower technical amortization, partially offset by the depreciation of the dollar against the euro and higher taxes. Downstream adjusted net income in the fourth quarter was EUR 485 million, EUR 39 million higher than in the same period of 2017. Full year adjusted net income amounted to EUR 1.6 billion, 16% below the previous year. Mainly due to the results in chemicals and the lower contribution from the refining businesses in Spain and Peru. These effects were partially offset by better results in the commercial businesses and a strong contribution from the trading and gas businesses. In corporate and others, the adjusted net income of the fourth quarter was EUR 163 million negative, a EUR 160 million decrease quarter-on-quarter, due to the higher impact from exchange rate positions in the same period of 2017.
Full-year adjusted net income accounted for a net expense of EUR 566 million, compared to EUR 378 million in 2017. For further detail on Repsol's results, I encourage you to refer to the financial statements and accompanying documents that were released today, this morning. At this point, I like to review or reaffirm outlook through 2020. Our strategic update defines a clear path to grow our cash generation based on six levers. Under a flat $50 per barrel scenario, we will increase the cash flow from our operations by more than 40% from EUR 4.6 billion in 2017 to EUR 6.5 billion in 2020. This accounts for a 12% cumulative annual growth rate. In 2018, upstream new production contributed with EUR 0.2 billion, homogenized to the price deck of our strategic planning assumptions.
This is roughly halfway to the EUR 0.4 billion we expect to obtain from production growth and portfolio management by 2020. Upstream efficiency and digital measures deliver around EUR 0.25 billion of sustainable operating cash flow. Our ambition is to generate EUR 0.6 billion in sustainable savings through efficiencies and digital initiatives by 2020. In the downstream unit, international margins didn't have any effect in 2018. The EUR 0.3 billion of incremental cash flow in this lever correspond entirely to the impact of IMO expected from 2020 onward in our projections. Profitability improvement measures in the downstream businesses, basically linked to efficiency and digital initiatives, contributed EUR 0.1 billion of additional operating cash flow in 2018, roughly 50% of our objective through 2020. The recently launched downstream expansion plans and low-carbon business will impact the 2019 and 2020 results.
Finally, corporate made good progress towards its target, reducing its cost perimeter by 6% in 2018. In total, progress in 2018 was EUR 0.6 billion of the EUR 1.9 billion objective to 2020. The company has a well-defined CapEx plan to allocate EUR 4 billion to expand the downstream business and build a new low-carbon position. The EUR 11 billion to be invested in our core upstream and downstream portfolios will be funded by the cash flow generated from our operations. The remaining EUR 4 billion will be fully funded by the proceeds obtained from the sale of Gas Natural. Our organic CapEx budget for 2019 is EUR 3.8 billion. The total CapEx invested in our core portfolio in 2018 and 2019 will amount to EUR 6.8 billion out of the EUR 11 billion to be invested through 2020. Let me now go briefly through our roadmap to increase shareholder remuneration to EUR 1 per share in 2020.
Last year, our board of directors approved a dividend increase to EUR 0.90. I proposed to the board an increase to EUR 0.95 in 2019, in line with our plan. The acceptance of the scrip option remained high in 2018, with more than 75% of our shareholders opting to receive the dividend in shares. Aligned with our commitment to avoid any dilution over the whole 2018 to 2020 period, we implemented a buyback program to repurchase and amortize the 68.8 million shares issued with the scrip, with a cash impact of EUR 1.1 billion in 2018. Our CapEx, dividends, and buybacks will be fully financed at $50 per barrel to 2020. The overall group's free cash flow breakeven, excluding inorganic CapEx and divestments, was $54 in 2018, in line with our strategic objective.
Ongoing efficiencies and digitalization initiatives, new production, and additional portfolio management actions will contribute with further saving towards our objective of being cash neutral at $50 on average in 2018 to 2020. At this point, I want to review the outlook of our businesses to 2020 and beyond. In Upstream, we are building a differentiated position that combines the strength of a nimble operator with a significant scale. The free cash flow breakeven in 2018 stood below our reaffirmed long-term target of reaching cash neutrality at $50 in this business unit. We maintain our objective to reach a production level of 750,000 barrels of oil equivalent per day in 2020, based on the contribution from newer barrels coming from short-cycle projects and portfolio management actions, in which we will trade volume for value. Short-cycle projects contributed 28,000 barrels per day in 2018.
Compared to 2017, our pipeline of short-cycle projects has the potential to deliver 95,000 barrels per day of incremental production to 2020. Oil bias new volumes will combine with incremental low-cost production coming from scale gas projects. Around 37,000 of new barrels coming on stream between 2019 and 2020 will come from North America. 21,000 from Europe and Africa, and 9,000 from Latin America and Asia. Looking at our value growth beyond 2020, our core AC/DC projects continue progressing according to plan. In Alaska, a two-well appraisal campaign started on December 31st, and is currently underway with encouraging early results. First oil is expected from 2023 to 2024, more or less. In the CPO-9 block in Colombia, the FID for the full development of Acacias is currently expected for the second half of 2019, with potential start of production between 2021 and 2022.
In Duvernay in Canada, a total of 10 wells were drilled in 2018. The current activity focuses on the risk in the Ferrier East area, with a potential final investment decision within the next 12 months. Campos 33 in Brazil is already fully appraised. The conceptualization of the project continues towards potential initial production between 2024 and 2026. Finally, also in Brazil, the appraisal campaign of Sagitario will start shortly with a well planned to start during the second quarter of 2019. The modular AC/DC, so Alaska Campos 33, Duvernay, and CPO-9 plus Sagitario projects give us long-term flexibility around CapEx levels and production volumes. This is all in line with maintaining low overall breakevens and growing margins per barrel. Moving now into the Downstream unit. Our view on the impact of the new IMO regulation entering into force on January 1st of 2020 remains broadly unchanged.
Our strategic plan projections continue factoring a $1.4 increase in our refining margin indicator no earlier than 2020 due to IMO. In our view, this continues to be a prudent approach considering the current forward curve. Our refining scheme is fully invested for IMO with no additional integration or investment required. Repsol is very well prepared to capture a higher margin and in a position of competitive advantage compared with other European refiners. Our main goal now in this period is maximizing conversion availability through, among others, minimizing the turnaround impact since 2020, mainly in 2020, 2021, and 2022. The turnaround days in our refineries in 2019 will be more than double the average of the last four years, with no major expected impact in our distillation and conversion capacity utilization compared to 2018.
We will invest EUR 1.5 billion to 2020 to expand our downstream businesses. We have made good progress in 2018, the last weeks of 2018 mainly, to activate this division as an asset-light growth engine. Progress included new international growth opportunities, leveraging our competitive advantage. In marketing, Repsol has more than 180 service stations operating in Mexico out of the 240 contracts already signed. Our objective is reaching an 8%-10% market share in five years. In Peru, we added Puma Energy service stations to our network, increasing the sales volumes in that country by 10%. In lubricants, Repsol teamed up with Bardahl to produce and distribute lubricants in Mexico, bolstering our internationalization strategy in this business. We are already producing lubes under the Repsol brand there. The identification of new growth levers included progress in our advanced mobility initiatives. First, Waylet.
Waylet is our free mobile payment app and was launched in 2017, reached one million users in 2018, and processed around seven million registered payments in our service stations. Agreements have been signed with 2,400 stores and 3,300 service stations. WiBLE, the new car-sharing service that Repsol and Kia launched in Madrid, ended 2018 with more than 500 hybrid cars active. Looking forward, growing our chemicals business will be a focus of our expansion to 2020. Our performance in 2018, as you know, was affected by operational issues. The overall outlook in the business continues to be promising. Our growth in chemicals will be focused on being a high-performance integrated and regional leader, and on building a key position in high-value products like rubbers, EVA polymers, and the propylene oxide and polyols.
Finally, in low carbon business, we are quickly delivering on our growth targets to advance in the energy transition. Our ambition is to be relevant players in the future, fostering sustainability and energy efficiency. The recently acquired assets are the platform on which we are building our new position in this business. Let me say that we are, in some ways, swapping our former exposure to a medium carbon business through Gas Natural Fenosa, into an operated business with synergies with the rest of our portfolio. Our plan expects to invest EUR 2.5 billion from 2018 to 2020. We have set our long-term goals to be achieved by 2025. The three main areas in which we want to operate are, first, low carbon generation, where we will leverage our current capabilities to manage large-scale projects.
Secondly, retail, gas and power, where we have a competitive advantage of a strong brand and a 10 million client base. Finally, wholesale gas, leveraging our industrial self-consumption as the largest gas consumer in Spain. Our objective is to achieve 4.5 GW of unregulated low-carbon generation by 2025, of which more than 70% has already been achieved with the Viesgo and Valdesolar transactions. In retail, our ambition is to have a 5% market share or 2.5 million clients of the Spanish market by 2025. As of today, we have added 60,000 new users to the client portfolio, I mean, over the last 12 weeks since the acquisition of the asset of Viesgo, to reach a total of 810,000 clients. This represents an 8% increase, as I underlined, in 12 weeks.
Let me now briefly elaborate on our digitalization and efficiency programs that are already showing as the important levers for cash flow growth that we envision in our strategic update. In 2018, both programs deliver combined EUR 350 million of incremental sustainable cash flow from operations that will contribute to the fulfillment of our commitments to 2020. Upstream business accounted for EUR 250 million of incremental sustainable cash flow from operations, thanks to the improvement in its maintenance logistic and the commissioning cost, together with initiatives in gas commercialization. Moreover, there were additional upstream CapEx savings of around EUR 200 million-EUR 250 million compared to our budget for 2018. In the downstream business, the digitalization of several processes, as well as initiatives aimed to improve the integrated margin, resulted in EUR 100 million of sustainable operating cash flow generation.
At the corporate level, we are working in more efficient ways that are enabling us to do more with less. That is the target. In 2018, we achieved a 6% reduction of our corporate costs. Along the economic impact, digitalization has a key role in the cultural transformation of the company. Today, that is, let me underline, one of the main targets for coming years. Today, 130 initiatives framing our digitalization program are ongoing across the company, involving every area, every business, and every corporate function of the company. Among others, digitalization is enabling new business models, operational excellence, and robot process automation that will translate in EUR 0.3 billion of free cash flow generation pre-tax in 2020. Looking ahead, we are confident we will meet our ambitious target of EUR 0.9 billion of operating cash flow coming from these programs by 2022.
Let me underline that we are on track of achieve this figure. Moving on to what we expect in 2019. As discussed before, the organic CapEx budget for the year is EUR 3.8 billion. Around EUR 2.4 billion corresponds to the downstream division-- Sorry, the upstream division. Downstream is expected to invest EUR 1.3 billion, the remaining EUR 0.1 billion will be invested in the corporation. Upstream production is budgeted to reach 720,000 barrels per day, subject to fluctuations in volumes from Libya and Venezuela. Main drivers will be the increase of development activity in the Marcellus, and projects coming on the stream during the year, such as in Trinidad and Tobago, Bakken, and Acacias. In downstream, we are budgeting for a refining margin indicator of $7.60 per barrel.
As commented before, we are not anticipating a decrease in our refinery utilization despite the maintenance work brought forward from 2020. Remember that over the last two years, we have coped with the maintenance of Three of the four cokers of the company. That is the reason behind that. We are not going to decrease the utilization of our refineries, despite the maintenance work we are going to develop this year. Planned maintenance of the FCC unit in our Bilbao refinery started in January and is expected to end in coming days in March. The crude unit in Bilbao will stop by mid-June to complete all the major maintenance expected in this refinery in 2019. A turnaround work in the coker, is the only coker that is going to be maintained this year.
The coker of La Coruña will start in April, the work on the hydrocracker and hydroskimming units of Cartagena will start in September. The planned maintenance schedule will finish with work in Puertollano, starting at the beginning of November. On the chemicals business, there is planned maintenance in Tarragona during the fourth quarter. Under these assumptions, we expect to deliver around EUR 8 billion of EBITDA at CCS for the group, of which around EUR 3.4 billion, of course, will come from the downstream division and EUR 4.7 billion from the upstream. Finally, as a part of our commitment to reduce 3% our carbon intensity, meaning that is the CO2 emission level per every energy unit in euros we produce, allow me to say that we are budgeting a 2.25% reduction by 2019.
We are on track of being a more sustainable company in the future, aligning ourselves with the Paris Agreement. Finally, I want to conclude reaffirming our path to meet our targets to 2020. With regards to improving the remuneration to our shareholders, in 2019, we will increase our dividend to EUR 0.95 per share, we will implement a buyback program to purchase and redeem the shares issued with the scrip. Subject, of course, that will be my proposal, all that will be subject to the authorization from our annual shareholders meeting. We will continue growing the profitability of our businesses, improving the operational performance of our upstream assets, putting on stream our pipeline of growth projects, managing our portfolio to meet our production targets to 2020.
Ahead of the implementation of the IMO in January 2020, we will accelerate the planned maintenance in our refineries to ensure we maximize the value capture from the new regulation. We will take new steps into the internationalization and growth of the rest of our downstream businesses, in which chemicals, be sure, will play an important part. We will continue transforming our company, as I said before, preparing for the energy transition towards a less carbon-intensive world. We will work on our path to reduce our total carbon emissions and the CO2 intensity of the energy we produce and transform. The position we are building in low carbon is our opportunity to thrive in this transition. Sustainability is in the DNA of Repsol, as is recognized by investors, with roughly 30% of our institutional shareholder base managed under SRI or ESG criteria.
We will continue progressing in our digital and efficiency ambitions with a clear commitment to deliver on our path for cash flow growth through 2020. Thank you.
Thank you very much, Josu Jon. In case you run into technical problems during the webcast or conference call, please address any problems to our email address, investorrelations@repsol.com, we will contact you immediately to try to solve it. Before moving on to the Q&A session, I will ask the operator to remind us of the process to ask a question. Please, operator, go ahead.
Thank you very much. As a reminder to ask a question over the phone today, please press star then one on your telephone keypad and wait for your name to be announced. You can cancel the request by pressing the hash key. Once again, star then one to ask a question over the phone.
Thank you very much, operator. Let's move on to the Q&A session. Our first question comes from Flora Trindade at CaixaBank.
Yes. Hello, good morning. Thank you very much for taking my questions. I will start with some details on 2018 numbers. I think you had mentioned before that during 2018, you could advance taxes related with the sale of the stake in Aposci that would then be recovered in 2020. Can you just explain, this was not the case effectively. Can you explain us whether this has changed? Also detail on the consolidation of Viesgo. In the P&L, there was no contribution from Viesgo in 2018. Secondly, on the guidance for 2019, can you just give us an idea of what is behind the 720,000 barrels per day of production for Libya and for Venezuela? Finally, there was some press news around the potential interest of Repsol in a renewable energy company that could mean around EUR 1 billion of the five-year investment.
I think you had mentioned before that following Viesgo, you would be focused on acquisitions of smaller size. Can you just confirm if this is still the case? Thank you.
Thank you, Flora. Going to the first question, we anticipated the prepayment, better said, because the acquisition in tax terms of the disposal of Gas Natural Fenosa. We prepared EUR 0.5 billion roughly over this year, in this quarter. This figure in our information is under the paragraph or the line of divestment. It's a reduction of the divestment figure. This figure of exactly, I think that is EUR 463 million, is going to be repaid to Repsol the first quarter, more or less, January of 2020. We are anticipating a tax payment because the disposal and the capital gain coming from Gas Natural. We are going to recover this figure, this amount of money, the first month of 2020.
Going to your question about the P&L of the assets, there's no material and there is not any clue about that because we integrated in November these assets. We have in 2019 the clues and, of course, P&L and so on, of these new businesses. We integrated these assets 12 weeks ago, and there is nothing material in 2018 about that. Going to the production, roughly, Venezuela, we are taking into account 50,000 barrels per day, oil and all, combining the gas and the oil production. It's a lower figure that we had in 2018. It could be 25,000 or 26,000 barrels per day, a lower figure that we had two years ago in Venezuela. In Libya, we are taking 35,000 barrels per day.
I know that today is a quite challenging figure because you know that we haven't been able to produce since the shutdown of the field the 9th of December due to the blockage of El Sharara field. Last Monday, we had good news coming from there. The NOC and the Tripoli government leader, Al-Sarraj, they achieved an agreement to lift the force majeure current situation in El Sharara. We expect to have some news probably in coming days from the NOC about the potential reopening of the production in the field. Today, in our current guidance, this figure about Libya is still there. Going to the investment in low-carbon businesses and so on. I like to underline again that the main growth and the growth in this business is going to be mainly organic. We are not going to buy assets in operation.
We could, as we did, or we have analyzed in the past to buy, let me say, developer teams. We could buy pipeline. We could buy capabilities. We are not going to overpay buying companies with assets in operation. Our financial approach to this business is going to be fully prevalent. We are an industrial company. We want to build this business fully based in organic capabilities, including or cross-pollinating in some way, new capabilities coming from developers and so on. The industrial capabilities and the constructions of skills is going to be the key driver for Repsol to build this new business. Returns is going to be a must. We are not going to invest, and we are not going to grow without the returns that we could expect from a company like Repsol. Always above the capital cost of Repsol.
I'm going to be very clear about that. That is our target, that is our aim, and we are going to look for these objectives. If we are not able to achieve these targets, we are not going to invest, destroying value for our shareholders. Thank you, Flora.
Thank you, Flora. Our next question comes from Thomas Adolff at Credit Suisse.
Good afternoon. Two questions from me. Firstly, also on the low-carbon business. You've mentioned in the release, also in the presentations, that the acquisition basically means you've already reached more than 70% of the generation capacity targeted by 2025. You also talked about making good progress on adding new customers since you bought Viesgo. Considering you've only spent EUR 900 million or so out of the two and a half billion budget, what does that mean for the budget as a whole? Surely you'll find it hard to spend EUR 1.6 billion organically in 2019 and 2020. Secondly, on the production guidance in 2020 of 750,000 barrels per day, I wondered what you also assumed for Venezuela and Libya, whether it's the same as in 2019. Presumably, versus the initial guidance, Venezuela has been lowered. I wondered which areas have been revised upwards. Thank you.
Thank you, Thomas. You are right. As you said, we have the 70% of installed capacity recommitted by 2022. We are on track. You also said that it's not going to be easy to invest the rest of the money in this kind of project. Let me say, I agree with your point. It's not going to be an easy task. We are going to do, first, organically. Secondly, as I said, we could inorganically acquire small developers to acquire the capabilities to push in favor of this kind of project. Of course, we could buy pipeline in an early stage of development to develop our own projects as we did in the case of Valdesolar.
Taking into account all that, taking into account that we also have the development of Valdesolar on track, where you know that we are going to invest at around EUR 200 million. We could, in some way, repeat this kind of operation of acquiring pipeline, investing for ourselves, and so on. Your point is right, Thomas. It's going to be a tough and difficult task. Let me underline again that I'm going to prioritize return over growth. Expending CapEx in this company is not a target. It is a guideline. The most important thing is the internal returns of this project. If we are able to evolve our capital cost, of course, and creating value for our shareholders, and with projects that compete with some others of the company, we will go on. Otherwise, I'm not going to invest in this kind of projects.
Be sure about that. Expending capital is not a target for Repsol. Venezuela and Libya, production lowered during the year. Yes, mainly Venezuela. Libya, as I said, today, we could reduce in 3,000, 4,000 barrels per day, the average expected for the year. We think that we will be on track. Venezuela is reducing the production, as you said. We are increasing, first of all, with projects that started in 2018 over the year, and now they are entering in the full year. I am thinking, for instance, about the Reggane, I'm thinking about Kinabalu, the increase that we experienced in 2018 in the Marcellus. This year, in 2019, on top of that, we are going to see the first oil of the Buckskin. As I mentioned before, this week, we are starting with the first gas in Angelin in Trinidad and Tobago.
That is going to increase also the production in Trinidad and Tobago. We have the start of the Southern Compression project in Corridor in Indonesia in the second quarter, I think. I remember the date of the second quarter of this year. On top of that, this year, we expect to have a higher production in Peru because in 2018, we had a lot of problems with the TGP pipeline and so on, and that is over. Today, we are going to increase with, I can't remember the figure, 14 or 15 new wells. The production in the CPO-9 in Acacias in Colombia. On top of that, in 2020, we are going to have the effect of the second rig of Marcellus. We are going to have the full effect of the Buckskin that is going to start with the first oil the second half of this year.
That means that in 2020, you are going to see the full effect. In the first half of 2020, we are going to see also the effect of the first oil of Yme. On top of that, this year, we are also starting with Mikkel in Norway that was acquired some weeks ago. On top of that, we have to take into account slightly in 2019 and mainly in 2020, the growth of Duvernay. Be sure that I'm forgetting some projects because that was the projects I had in mind, Thomas. This new project and this additional production is going to offset and to increase the production of Repsol, giving us today some comfortability about the target of 750,000 barrels per day in 2020. Thank you.
Thank you.
Thank you, Thomas. Our next question comes from Joshua Stone at Barclays.
Hi, good afternoon. I was hoping to focus on refining margins. It looks like you achieved a very good level of additional refining margin in the fourth quarter. I was hoping you could talk about that and also how refining margins have trended for Repsol in the first quarter and what you're thinking about additional refining margin over that period. Then related to that, you have the guidance of $7.4. I presume that includes some IMO upside. If maybe you could try and disaggregate first-half versus second-half refining margins within that number. Thank you.
Thank you, Joshua Stone. You know that I'm always happy talking about the refining business because my past. I know that for some of you, this morning was quite amazing and surprising, seeing that the spread of the gain evolved, the IMC margin was so high this quarter, $1.2 per barrel. Taking into account that the third quarter of this year, the third quarter of 2018, was also a good month with not too much turnarounds and so on, because all that was concentrated in the first half of the year. And there, I remember that we obtained a gain of $0.4. What is the difference? What is behind this $0.4 in the third quarter and $1.2 per barrel in the fourth quarter? First of all, in operational terms, it was a great quarter.
That is the first reason, but this could explain in some way, let me say, $0.2 per barrel more than the $0.4 figure we had in the third quarter. What is behind this $0.6? If you analyze the fourth quarter, we see that after the month of September, we experienced a huge drop in the gasoline spreads. What did we do after this drop? React. React how? First of all, trying to adapt the basket of crude supply of our units, being, let me say, more efficient, adding a feedstock with a lower yield in gasoline. In operational terms, minimizing the gasolines and maximizing to the limit we could, in operational terms, the middle distillate production of our refineries, because over this quarter, the middle distillate spread was quite positive.
All in all, this additional flexibility, because you have to understand that the IMC, the index of the margin, is calculated for the whole year with a fixed yield, with a fixed supply, with some kind, let me say, of fixed parameters or factors. But operation is very flexible. When we are saying that we are optimizing programming, that we have entering a new project like Cyclos and so on, that we are, thanks to the digital, having a more flexible programming and planning in Repsol, that we are reacting day after day, that we are forgetting the old times where we programmed for the whole month, that we are fully flexible and so on, we are talking about that.
Thanks to this flexibility, thanks to having the reaction capacity to change the feedstock, thanks to the capacity to change day after day in a flexible way the operation of our refineries, we have increase in 0.6 the additional of the refining. For this year, our guidance for the whole year is 7.6. What is behind this refining margin? First of all, let me say that January and February, historically, they are bad months in margin terms. Even today, we are above 6.5 of IMC in our refining system. Let me say that this $1 per barrel of spread, I have checked this morning the development and the performance of our refining business in February, and we are gaining over the whole month $1 per barrel to the figure of the IMC. We expect, I said 7.6, sorry, 7.4, the guidance.
Here we are including, of course, to the current situation, first of all, the start of the maintenance in refineries. That means that there is room to have better spreads. Secondly, driving season. I'm not saying that gasolines are going to have good or spectacular margins over the whole year. Be sure that what we are experiencing today is not going to be probably the scenario in coming months for gasolines. On top of that, people is going to start in the second half of the year to adapt to the new reality of the IMO. That means that we have a room for an improvement of margins in the second half of the year.
All in all, today, our best guidance, and I correct again the figure, I'm going to the first figure I said in my speech, is $7.6 per barrel of refining index margin for the whole year. Thank you, Joshua.
Thank you. Thank you very much.
Thank you, Joshua. Next question comes from Alessandro Pozzi at Mediobanca.
Thank you for taking my two questions. The first one is on CapEx. I believe you're spending EUR 1.3 in the downstream. I was wondering if you can give us maybe a bit of a breakdown between maintenance and growth opportunity CapEx within that number. Going back to the crack spreads, IMO, can you tell us when you're planning to have that fuel oil fully compliant? I think it's going to be at some point, maybe Q3 or Q4 later on this year. Final question on the working capital. I believe you have a working capital release in Q4. Just wondering how should we think about working capital as we go into 2019? Thank you.
Thank you, Alessandro. Our CapEx guidance for the year, as I said, is EUR 3.8 billion in organic terms, EUR 1.34 the downstream. Roughly speaking, I could say that EUR 400 million of this CapEx will be for growth. When I'm talking about growth, I'm talking about Mexico, I'm talking about the Mexico service station, I mean. I'm talking about some CapEx for low carbon. I'm talking about some CapEx for lubricants expansion, and so on. EUR 800 million-EUR 900 million, more or less this year, will be running business. Running business means what we need for running the chemical service station and refining business, plus the additional maintenance program we have in the turnaround of our refineries this year. Not only refineries, also the Tarragona cracker, the last quarter of the year.
Finally, also here we have included a panoply, a lot of small investments that we apply in our refining and chemical business to improve efficiencies, digital and so on. That will be more or less the best opening or summarize of our CapEx for our downstream for this year. Related to IMO, it seems to me that when you are talking about the full compliance fuel oil this year, you are talking about our own system as Repsol. Let me say that we don't need any additional investment today to fulfill in our European refining system, the IMO regulation. Because A Coruña is fully prepared, and the turnaround we are going to have in Coruña's coker this year is also to have the refinery prepared to transport the bottom of the barrel from Tarragona to Coruña, to reduce to zero, if we like, the fuel oil production there.
In Petronor in Bilbao, the coker of Bilbao is also prepared to take as feedstock the bottom of the barrel there. We are not going to have a high sulfur fuel oil at the end of this year. We are prepared to have this year, and we are, in some way, we have a prudent guidance about the effect of the IMO in our system of $1.5 per barrel. If you take today's future markets and you apply to the yields of our refining system, the 55% of middle distillates, the 45%-50% of heavy oil as feedstock. If you take the yield of gasolines and so on, you could see that today, the future markets is anticipating a higher figure that we are taking as guidance at around $2.5 per barrel.
Going to the working capital release, taking the case of seeing the oil price flat for the rest of the year, under this assumption, today my best approach will be to see an increase of EUR 200 billion of working capital over the whole year, mainly driven by Venezuela. That will be my best guidance for the working capital evolution over the whole year. Thank you, Alessandro.
Perhaps. Thank you.
Thank you, Alessandro. Our next question comes from Alastair Syme at Citigroup.
Hi. I'm still a little bit confused in the whole discussion about the CapEx guidance. There does seem to be sort of building up this large, is it a residual for acquisition spend? I know you've talked a bit about the low carbon, can you maybe sort of update us on what you're thinking around chemicals acquisitions? You did allude to it on sort of where you're at and where you think timing might be. I wonder if just also with that, if I could get you to break out what you think the chemicals EBITDA might be in 2019. Thank you.
Alastair, perhaps I'm the root of the reason of your confusion, because perhaps my explanation was not so clear. When I'm talking about the CapEx for 2019, I'm talking exclusively of organic CapEx. Any additional inorganic potential acquisition and so on. Disclaimer, as I said before, we are going to be fully prudent about the inorganic acquisitions. We are not talking about large acquisition. We are only to buy in case of being needed, the capabilities, and so on. In case of having something inorganic, it will be additional to this figure I said before. In the chemical case, we analyze, of course, every time the market, we analyze potential growth in our businesses, and so on. Today we don't have any relevant inorganic acquisition in the chemical business on track. That could be different in some months, but today we don't have.
Unfortunately, I say, because in case of having, let me say, a great opportunity to create value for our shareholders, will be great. Always in the niches we define before and in case of having good opportunities, otherwise we are going to go on in the organic way. As a guidance of our chemical business for this year, my best approach is at around EUR 370 million of EBIT this year. We think that international margins are going to be slightly, but I underline, slightly lower than last year in 2018, because new capacity is coming on stream this year in the world, and perhaps this capacity is going to be a bit larger than the growth that is happening, of course, of demand growth in the world, but it's going to be a bit larger.
From the performance point of view, last year, as you know, we had a penalty unexpected in mainly in the Sines cracker, Alastair, we have an expectation of having a good performance in our plants this year. You know that when you are operating industrial plants, it's hard to say that, I don't see any special concern today. Thank you, Alastair.
Thank you.
Thank you, Alastair. Our next question comes from Christopher Kuplent from Bank of America.
Yeah. Thank you very much for taking my questions. I hope you can hear me okay. Again, you've mentioned some of these subjects before. Two questions, please. Firstly, can you remind us the underlying refining margin indicator in your 2020 guidance? To me, it looks like your 2019 $7.6 per barrel indication is already incredibly close. I wonder whether you feel tempted, at some stage to increase your guidance for 2020 as we get quite close to that timeframe. The second question is, again, on CapEx. You've highlighted CapEx efficiencies you've already achieved during 2018, yet the overall envelope has stayed the same. As a number of other questions have already highlighted, you've left yourself quite a bit of room in your CapEx envelope.
Again, just wanting to put you under a little bit of pressure and ask at what stage are you going to tighten your guidance, both upside in terms of refining margins regarding IMO and, second, CapEx guidance, considering the efficiencies you've already achieved. Thank you.
Thank you, Chris. When I said before that we forecast a premium of EUR 1.5 per barrel coming from the IMO, I have to underline that we are taking as basis the 2017 refining margin because that was the base before presenting our strategic update. At that time in 2017, EUR 6.8 per barrel was the refining, the IMC, the refining margin of Repsol, the index, and we are forecasting $8.3 per barrel in 2020. The premium is there, and when we say that this year we are expecting $ 7.6, is because we have seen, let me say, a small part or a light part of this premium coming in the last months of the year. Related to the refining margin, and of course, if you like, Chris, we could elaborate a bit more on that, but that will be the answer to your first question.
When we are talking about the efficiencies in the CapEx. The CapEx guidance for 2019, the best guidance is EUR 3.8, as I said before. You are right in some point because when we see the investment figure of 2018, mainly the downstream, because the downstream you know that is affected by the acquisition of Viesgo, the assets of Viesgo, you could see that the investment was EUR 500 million, more or less below our guidance at the beginning of the year. EUR 250 million comes from additional efficiencies we got maintaining the perimeter and the execution of the CapEx project we have in the E&P. A part comes from Sorry, EUR 350 million. I mistook. EUR 300 million comes from this efficiency. The rest is because the deferral of projects or apart coming from the project Carbon Blue, that you know, that is on hold.
You are right, because if you take the organic figures in 2018 and 2019, and you add these two figures, you could see that we are talking about EUR 6.8 out of EUR 11 billion. Perhaps, today, it's hard to give you a guidance for the whole period of the 2018, 2020. The guidance was at EUR 11 billion for the whole organic investment of the downstream and upstream businesses by 2020. Taking into account these gains and efficiencies and so on, perhaps today, I will be being perhaps too early to say that more comfortable with a figure at around EUR 10.5 billion or something like that. That would be my best guidance for this year and for 2020. I think that I'm not forgetting anything from Chris?
No.
No.
That's good. Thank you very much.
Thank you, Chris.
Thank you, Chris. Next question comes from Jason Kenny at Santander.
Good morning. Thanks. When do you think that your annual return on capital employed will hit double digit? Have we got to wait for the expansion CapEx to finish, so we're looking at 2021, or on your base $50 a barrel assumption, do you think you can get there within the 2020 timeframe? On the associates number, please, in the fourth quarter, just looking at the impact of the downstream, I'm wondering if you could maybe explain some of the main reasons for the difference in the loss there. Finally, just on tax, is there a common pattern of higher tax generally in the fourth quarter every year? Why would that be? Is this something I'm just reading too much into? Thanks.
Sorry, Jason, we didn't capture your second question. Can you repeat that again, please?
Yeah. Looking at the associates loss, it looks like that downstream was the main reason. I'm trying to dig in to find out what was in the associates number, please.
Going to the return on average capital employed. The target we have for the whole company, it was committed and expressed in the strategic update, is a 9%, evolved the capital cost of the company at $50 per barrel. That is the return for the whole company, and we maintain our target and our guidance for the return on average capital employed for 2020. Seeing the expansion of the downstream and low carbon business, we don't have to wait. We are on track, after the acquisition of Viesgo assets, we expect to have higher returns that the cost of capital Repsol in the assets we acquired from Viesgo. We are on track of having ready to build the Valdesolar project at the end of this year.
In Valdesolar, we expect to have returns above the cost of capital of the company, and in equity terms, they are going to be double-digit returns. We are today analyzing projects pipeline and so on. I think that we could have, and we could get these returns, always based on organic growth and having the whole value chain of this project. You know that in this low carbon generation businesses, if you are the operator, you have the maintenance, you are the developer, and you are selling the power, taking the merchant risk, you could have two, three points higher, a larger return that acquiring or buying assets in operation. For that reason, our growth is going to be mainly organic, and we expect to be able to fulfill our plan. As I said before, I'm going to prioritize return over the speed of growth.
We have projects on track to do that, Jason. Associates in downstream business in the fourth quarter 2018. It seems to me that that is linked to the good results in La Pampilla in Peru, the good profit in refining and mainly Petronor, and you know that we have a minority associates in both projects, Kutxabank in Petronor and also minority shareholders in La Pampilla. It seems to me that this figure is related to this associated in these businesses. Be sure that is going to be in line what we could expect. Tax, let me say that the effective tax rate in the fourth quarter. It's hard to say that something is normal or average, but I think that this 41% is the normal or the average of the current basket of mix of downstream and upstream businesses.
You could see that in our downstream business, the average is always around the 25%, and in the upstream business, of course, depends on the countries and the productions of the countries where we are producing at every time, but could be at around 46, 47, 48. This 40, 41 of average could be normal. It's true that if you compare with the figure in the first quarter of 2017, there was an extraordinary tax benefit there that give us a very low tax rate this quarter. I don't have now the figure in mind, but of course, we could check it, Jason. Thank you.
Thanks.
Thank you, Jason. Our next question comes from Biraj Borkhataria at RBC.
Hi, thanks for taking my questions. I had a few. Firstly, could you just clarify what the volume contribution you expect from Buckskin over the next couple of years once it's online? Secondly, and linked to the upstream, I think in the past you've talked about wanting to clean up the upstream portfolio. Can you give us a bit of insight on where in the upstream you would like more exposure than you currently have? Finally, just a clarification because I think I missed your comments, but what is the chemicals EBIT guidance for 2019? Thanks.
Biraj, I have in mind the figure, but I'm checking the figure now because I have something like 7,000 barrels per day in mind. Checking the figure is exactly 7,100 barrels per day in the Buckskin. Taking into account that the production is going to start in the second half of the year, I'm not sure about that, but around October, something like that. You have to take this year a quarter of this figure, but you could take the whole figure for the year 2020. In the upstream business, we will be comfortable having more exposure perhaps. We are happy being in the areas where we are, clearly speaking. Secondly, North America, mainly United States, will be okay because we have tax shields and tax credits in the area that could, in some way, give us more profitability to the growth of our production.
In Southeast Asia, we are really comfortable and let me say happy seeing the expectation we could have, not only in Malaysia, also in Vietnam, where we are seeing a country and a government very committed with the rule of law and fulfilling their commitments, but also in Indonesia. Indonesia, of course, the last discovery of Sakakemang, is giving us a growth opportunity in the area. On top of that, the North Sea is okay. We are performing in a spectacular way, either in the U.K. and in Norway. In the U.K., we have reduced from $114, $116 per barrel the OPEX cost in 2014 to a figure close to $30, $32 per barrel now. We have plenty of room to go on increasing the efficiency in the U.K., and perhaps having additional production, bolt-on projects, and so on, could be always an option.
Same thing in Norway, where we are happy seeing the next potential production coming from the Yme. Talking about the EBIT of the chemical business, the EBIT grows EUR 350 and the EBITDA, I'm not sure if you were asking me. I'm going to give you both guidances. The EBIT will be at around EUR 350-EUR 370 million this year. The EBITDA, you could take into account a depreciation of €100-€120 million for the chemical business. The figure of the EBITDA will be at around €480 million more or less this year. Thank you, Biraj. I think that I'm not
Yeah. Thank you very much, Biraj.
Thank you.
Our next question comes from Matthew Lofting at J.P. Morgan.
Thanks for taking the questions. I had two, please. Firstly, just overviewing the strategic objectives to 2020, you've been clear that aggregate delivery is on track. If you sort of characterize execution to date, are there any standout areas that have meaningfully out or underperformed initial expectations? And within that, how much of the EUR 300 million 2020 cash flow increment from low carbon can be delivered from the platform Repsol already has in place, inclusive of Viesgo, and what additional key steps are required or should we look to over the next 12 months? Secondly, if I could just come back to refining margins and your outlook for
To clarify what you talked about previously, do either of the current $6.5 a barrel margin you're seeing or the $7.6 for the full year include or exclude Repsol's usual premium over the benchmark? I wasn't fully clear from your early comments. Thank you.
Thank you, Matt. I'm not going to say that I don't have any concern, I don't have any focus, and so on, because when you have tough commitments on the table, you have to be always focused on pushing in favor of achieving these targets. I think that we are showing a good track record of delivering what we committed in the past. Looking at the future, you are right about the expansion on the low-carbon businesses, let me remind that these EUR 300 million of cash flow from operations were, let me say, at the end of the period. They were forecast for 2020 because we have to build the business between 2018, 2019, these cash flows from operations are going to come. Today, I have the guidance, I maintain the guidance of these EUR 300 million of cash flow from operations in 2020.
As I said before, that is not going to be a must if we don't see clear returns in every investment we push forward or we develop. Today, I think that we are going to get it. Talking the IMO is not, as you know, in our hands from the point of view of environment. We have the system fully prepared to take the tailwinds for our refining business. Seeing how the future market and the spreads are for 2020, I think that the EUR 300 million of additional cash flows coming from the IMO is a quite realistic and prudent approach, and I'm comfortable with this guidance. Trying to be short in my last answer to you, Matt. When I said 7.6, I'm excluding any kind of premium. Premium, because the operation of Repsol.
We are talking about the IMC, $7.6 per barrel as a guidance for this year. Let me also underline that the guidance of the premium for the whole year is not $1 per barrel. It's at around $0.4, $0.5 per barrel, $0.5, $0.6 per barrel, more or less. Today, we are overcoming this figure, but the best guidance we are taking for the whole year is below this premium I said before. Thank you, Matt.
Clear. Thank you.
Thank you, Matt. Our next question comes from Yuri Koktanick at Deutsche Bank.
Yes. Thank you. Two questions from me, please. Could you please discuss your plans around the new exploration blocks that you acquired in the fourth quarter in Alaska, and whether you have any commitments on these blocks for this year or 2020? The second question is about Peruvian refinery. In fourth quarter 2018, there were new gasoline production units initiated there. If you could just tell us what it means for utilization and contribution from that refinery going forward. Thank you.
Thank you, Yuri. In Alaska, let me say that the idea, today we are following the Pikka B and Pikka C wells. From the Pikka B, we have good expectation. We have to see the evolution of Pikka C. After having the results of these two wells, we will have, it seems to me, the information we need to prepare the future investment project for Alaska. The idea we have for the future and the commitment with the new blocks you said before, today our commitment is, for this year, a 3D seismic that we are going to develop in 2019, 2020. That is the only commitment we have related to these new blocks in Alaska. All in all, I think that as a general framework of idea, we are going to drill in coming years, two wells per year, more or less, in Alaska. Related to Pampilla.
Pampilla is the Lima refinery of Repsol. The guidance, as you said, because the investment we developed over the last 3 years in the desulfurization plants for middle distillates and gasolines, we have improved the margins of our refinery. It's a smaller refinery than the system we have in Spain. The distillation capacity is at around 100,000-110,000 barrels per day. The IMC for this year, the guidance for 2019, is $6.10 per barrel. Let me underline that what is important in Peruvian refineries is that the utilization rates are now higher than they were in the past. Why? Because in the past, till 2018, 2017, 2018, we had some restrictions to supply the internal market with the required sulfur content specification. Now, because the new units we have, we don't have these restrictions.
We are reducing the import of products to supply our wholesale and our retail market in Peru, we are increasing the distillation capacity to a guideline more or less of a 90%. That is going to depend, of course, on the margin day after day. A 90% of utilization rate this year in La Pampilla, with a guidance of $6.10 margin in dollars per barrel as IMC. Thank you very much, Yuri.
That's great. Thank you.
Thank you very much, Yuri. Well, that was our last question. At this point, I would like to bring our fourth quarter conference call to a close. Thank you very much, everybody, for your attendance.
Thank you very much. That does conclude the conference for today. Thank you for participating. You may all disconnect.