Hello, welcome to the Repsol fourth quarter and full year 2016 preliminary results conference call. Today's conference will be conducted by Mr. Josu Jon Imaz, CEO. A brief introduction will be given by Mr. Paul Ferneyhough, Head of Investor Relations. I'd now like to hand the call over to Mr. Ferneyhough. Sir, you may begin.
Thank you, operator. Good afternoon. This is Paul Ferneyhough, Head of Investor Relations at Repsol. On behalf of the company, I'd like to thank you for taking time to attend this conference call, setting out the company's fourth quarter and full year results for 2016. This conference call and associated webcast will be delivered by Josu Jon Imaz, Repsol's Chief Executive Officer, with 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, 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 conference call over to Mr. Josu Jon Imaz.
Thank you, Paul. Good morning, thank you to those online for attending this conference call on our fourth quarter and full year results for 2016. In today's call, I'd like to cover four principal topics. First, a summary of key events in 2016, along with a review of our progress towards our principal strategic objectives. Second, operation highlights and results from the quarter. Third, a high level of summary of financial results. Finally, an outlook for 2017. Let me first start with some comments on the key events from last year. 2016 was a year of delivery and transformation for Repsol. Despite lower average commodity prices compared to 2015 and high levels of volatility, we have demonstrated resilient earnings performance and dramatically improved cash flow generation.
The annual results were supported by our efficiency and synergy program, the strength of our integrated business model, and our continued focus on growing value in our asset base. Through 2016, we have continued to work on the transformation of Repsol under the guidelines of our strategic plan. The free cash flow from downstream, together with our flexible upstream portfolio, has allowed us to benefit from gradually improving commodity prices while protecting and strengthening the balance sheet through expenditure optimization, cost efficiency, and divestments. One year ago, I presented our commitments for the first year of our strategic plan. I will now summarize our progress towards these objectives, along with highlighting the key events underpinning our performance in the year. Starting with our efficiency and synergy program, we have accelerated the delivery of our self-help measures, achieving run-rate savings of more than EUR 1.6 billion in the year.
This figure is significantly above our initial EUR 1.1 billion target for 2016 and more than 75% of our target for 2018. The implementation of cost-saving initiatives accelerated across all parts of our business. The upstream division delivered an impact of more than EUR 800 million by the end of the year, contributing to a reduction in free cash flow breakeven, which for the upstream alone now stands at $61 per barrel. Synergy projects have delivered more than EUR 300 million in sustainable reductions in 2016. By year-end, 85% of the projects required to capture $400 million of synergies by 2020 have already been implemented. All in all, compared to our pro forma full year in 2015, we have reduced our total upstream operating expenditures by 20% in 2016 and by 24% on a per barrel basis. Turning now to CapEx discipline.
Total group investment was EUR 3.2 billion, an 18% reduction compared to our initial budget, and EUR 300 million below our third quarter guidance, mainly due to increased cost efficiencies across the whole company and reduced activity in the upstream. In exploration, a more focused drilling program together with a portfolio targeting lower risk contributed towards lower overall CapEx spend. The organic reserve replacement ratio in 2016 was 124%, reinforcing confidence in the long-term sustainability of our resource base. In the downstream division, we completed upgrades and restarted the low sulfur diesel unit at our La Pampilla refinery in Peru. Let me say that this investment not only allow us to meet tightening sulfur regulations, but it also delivers an increase in our utilization rate. The project is expected to deliver a return on capital of over 15% during its lifetime. Moving now to portfolio management.
By year-end, the announced proceeds and benefits generated by our divestment program amounted to EUR 5.1 billion. This compares to our original EUR 3.1 billion target by end 2017, and represents more than 80% of our EUR 6.2 billion target by 2020. In the fourth quarter, as you know, we announced the disposals of TSP in Trinidad and Tobago and Tangguh in Indonesia. Overall, during 2016, we achieved cash neutrality at $42 Brent, excluding divestments. This left the EUR 3.6 billion of cash received from divestments to directly reduce our net debt. Our focus on maximizing cash flows and strengthening our balance sheet resulted in a closing net debt figure of EUR 8.1 billion, as you can see in the figure, or 1.6 times our EBITDA. This reflects the organic cash generation from our business, maturing synergies and efficiencies, and of course, the success of our divestment program.
Now, for the main operational highlights for the quarter. Starting with the upstream division, fourth quarter production averaged 679,000 barrels of oil equivalent per day. A slight decrease year-on-year. Quarterly production was impacted by plant maintenance in several assets and the sale of Tangguh and TSP, partially offset by higher volumes in Brazil, thanks to the startup of Lapa and the ramp-up of Sapinhoa. Average production for the year was within our guidance range of 690,000 barrels of oil equivalent per day. Production in Libya, as you know, restarted on December 20th after more than two years of interruption. As of today, gross production in the El Sharara field has reached around 180,000 barrels of oil per day, which translates roughly to 20,000-21,000 barrels per day net share for Repsol. Turning now to exploration.
A total of four exploratory wells and one appraisal well were completed in the fourth quarter. Three exploratory wells and the appraisal well were deemed unsuccessful, and the remaining well is still under evaluation. In total, our exploration program for 2016 included the completion of 13 exploratory wells and six appraisals. By the end of the year, three wells were declared positive and five remain under evaluation. Looking now to the downstream division. In refining, the margin indicator averages EUR 7.20 per barrel in the quarter. Margins recover materially versus third quarter, mostly due to a strengthening of middle distillate spreads, together with a widening of the heavy crude differentials due to an active maintenance season in Latin and North America. Process crude oil volumes increased by 8% compared to the previous quarter, thanks to higher utilization in both distillation and conversion.
Actual CCS margin generated a premium to the indicator of around EUR 0.60 per barrel. Going to the figures for the full year, the refining margin indicator was in line with our long-term assumptions of EUR 6.30, with actual CCS margin averaging also EUR 0.60 over the margin. The chemicals business maintained its strong performance in the fourth quarter, thanks to steady volumes, good margins, helped by global demand growth and lower feedstock costs. Full year results from the commercial businesses improved compared to 2015, although the fourth quarter was impacted logically by seasonally lower sales in service stations, partially offset by higher volumes in LPG due to the winter season. Motor fuel demand, and that is an important point in Spain, continues its ongoing recovery with 3% estimated growth in 2016. We are also, of course, observing increased domestic competition together with a complex regulatory framework.
Let me say that we like competition. Moving on now to financial results. I will briefly summarize the principal outcomes from the quarter and the year. Fourth quarter 2016 CCS adjusted net income gross EUR 698 million, EUR 245 million higher than in the fourth quarter of 2015. Full year 2016 CCS adjusted net income gross EUR 1.9 billion, EUR 17 million higher compared with full year 2015 results. EBITDA CCS stood at EUR 5 billion for the year, in line with 2015. At the net income level, we closed 2016 with a positive result of EUR 1.7 billion, a EUR 3 billion increase compared to 2015, mostly due to impairments applied in that year. In the upstream, adjusted net income in the quarter was EUR 309 million, higher than the same period in 2015, at EUR 17 million.
Adjusted net income for the full year amounted to EUR 52 million, almost EUR 1 billion higher than in 2015. In the downstream division, CCS adjusted net income in the quarter was EUR 554 million. EUR 59 million higher than in the fourth quarter of 2015. Adjusted net income for the full year 2016 was EUR 1.9 billion, EUR 267 million lower than in 2015. For further detail, of course, on the company's quarterly and annual results, along with detailed variance analysis, I encourage you to refer to the financial statements and accompanying documents that were released today. Let me now go through the outlook for 2017 and the progress we expect towards our strategic objectives. Firstly, given the results achieved last year, we expect to continue to accelerate our efficiency and synergy program and bring forward our 2018 EUR 2.1 billion target to this year.
Most of this effort will come from the upstream, where the impact of OpEx and CapEx efficiencies is expected to reach around EUR 1.2 billion a year. Our upstream CapEx budget is EUR 2.7 billion. With downstream and corporate CapEx at similar levels as in 2016, this puts our total budgeted group CapEx at around EUR 3.6 billion for 2017. In terms of cost evolution, we are observing different trends depending on activity and region. We estimate, let me say that in 2017, Repsol has a relatively low exposure to rise in prices as the majority of our costs for this year are already contracted. Production volume is expected to be in the lower part of our long-term strategic range.
We will offset the impact of recent disposals with the upcoming startup of Montrose and Flyndre/Cawdor in the U.K. North Sea, a full year contribution for Lapa, and a conservative level of production from Libya. Despite the improvement in the security situation in Libya, we have been cautious around average production volumes for the year. On the development side, this year, we expect to receive local approval of Ca Rong Do Red Emperor in Vietnam sometime during the first semester. Later in the year, we expect to finalize the development plan for Acacias, the CPO-9 in Colombia. Recent commodity price trends have led us to revise our price forecast, with Brent now assumed to average $55 in 2017 in our budget. We expect our upstream business to be free cash flow positive at around $60, after CapEx, of course.
Moving to the downstream, we are forecasting a $6.40 average refining margin under our planned price assumptions. So far in 2017, the indicator has averaged well above $7 per barrel, and the average of February is for our system above $7.50 per barrel. Besides the major maintenance turnaround currently being finished in our Bilbao refinery, I think that today we are starting the ramp up of the coker in Bilbao, that it will be, I suppose, fully operative this weekend, fulfilling the five-year maintenance program. We are planning short stoppages in Puertollano in March and Cartagena during the second quarter as part of our multi-year plan maintenance schedule. In the case of Cartagena, we are talking about the hydrocracker. We are focused on improving our cost and energy efficiency, gaining flexibility in our product mix, and through our five interconnected refineries in Spain, optimizing product delivery.
In the chemicals business in 2016, we finished the installation of a new splitter in Tarragona that will allow us to process 35% LPG content in our crackers, delivering flexibility and resilience over a wider range of feedstock prices. Additionally, we are developing projects with two main goals in the chemicals business. First, targeting higher margin non-commodity products, and second, developing petrochemical products that fit within a low carbon future, such as CO2 polyols, CO2 as raw material substituting propylene oxide or biopolyolefins. Our chemical business is global in scope, and where we have generated competitive advantage, for example, in the Dynasol JV, we are competing with the top industry players. We are now bringing this global approach to our lubricant business, where we plan to double the size of the business in the next five years.
In the retail business, we are following a strategy that is core in Repsol, transforming while performing. This means while maintaining our current performance, we are also developing initiatives to respond to current and future challenges. With a strong focus on customers, we are adding services and products based on new consumer behaviors, for example, personalized offers or shared economy services. Additionally, we are addressing changing energy demands through the provision of charging points for electric cars and the supply of LPG or autogas. We have a strong retail network that is the starting point for the creation of further competitive advantages, such as partnering with Amazon to provide flexible delivery and collection points. This idea that we call transforming while performing, will allow us to create a retail business to supply energy products and related services, not only for 2017, but for the next decade and beyond.
In summary, in 2017, thanks to our top quartile refining business, together with the strong global demand for chemicals and the stability of our commercial businesses, we'll generate around EUR 2 billion of free cash flow in our downstream businesses and 55% of Repsol's EBITDA. For Repsol as a whole, I'd like to underline this fact, in terms of free cash flow breakeven, we are maintaining our strategic objective of being cash neutral at around $40 Brent, after paying our dividends, of course. In 2017, we will continue working towards that target. In conclusion, I want to reflect on what kind of company Repsol is today. We are a company where financial flexibility has become a reality and where we expect to achieve this year a net debt to EBITDA ratio around 1.1, committed to stabilizing our investment grade rating.
A company immersed in a process of performing while transforming, rethinking every process to be leaner, lowering our corporate costs, and streamlining our decision-making processes. A company that will organically break even approaching $40 per barrel after paying dividends and financial commitments. A company committed to the scenario defined under COP 21 in Paris, developing our own roadmap to be part of the solution on the way to the 2 degrees Celsius objective. A company fully focused on energy efficiency as the first driver to reduce emissions. Let me say that over the last 10 years, Repsol has already reduced by 4 million tons its annual CO2 emissions from our industrial activity, and we will decrease by a further 1 million tons by 2020 while improving our competitiveness.
Repsol is a company already prepared to contribute to a low emissions future with a significant presence in natural gas, representing 65% of our production today and 75% of our current reserves. We are a company also committed to the reduction of methane leakage, and we have the commitment promoted by the World Bank of having a zero routine flaring by 2030. A company with a portfolio of upstream assets that will allow us to consolidate our growth and maintain our reference production level of 700,000 barrels per day until 2020 from current reserves under development, while increasing value through higher margins per barrel.
A company that can sustain this production level to 2025 from contingent resources whose development projects will mature in 2018 and 2019, all while maintaining a 100% replacement ratio to 2020 and a long-term sustainable average reserve life of between eight to nine years, a bit higher in gas than in oil, giving us the flexibility to adapt to a wide variety of macroeconomic scenarios, improving margins and generating value in the company. Under current oil prices, we have a clear commitment to take investment decisions only where projects generate value above capital costs at a current price of $55 per barrel, even in any scenario of rising commodity prices. Therefore, giving us the necessary resilience to thrive in a time of energy transition and continued volatility.
We have a portfolio of downstream assets that sit at the top of the first quartile in terms of margin in Europe, delivering resilience and competitiveness across a wide variety of economic scenarios over the next two decades, and consistent with our support of the commitments made in Paris during COP 21. We have a set of commercial businesses focused on the customer and providing services allowing us to position our business for growth in new scenarios for mobility and energy. Repsol has a multi-energy approach with experience and knowledge that comes from our leading position in Iberia in the manufacture of biofuels, for instance, and more recently in the services of recharging electric vehicles, born out of our experiences providing energy through natural gas and LPG. As I look into the future, let me say, I see a sustainable Repsol with flexibility and choice.
This commitment and this capacity to be resilient and competitive in a changing energy landscape gives me confidence about the future. Let me conclude by saying that we set our strategy, and we have demonstrated our full commitment and ability to deliver the goals identified within it. This is the path we took in 2016. This will be the path we will continue in 2017. Delivering and performing, that is our clear and net roadmap. But at the same time, transforming the company to be prepared to take our part in future mobility and energy scenarios less intensive in carbon. I will now hand the call back to Paul Ferneyhough, who will take us through our Q&A session. Thank you.
Thank you, Josu Jon. In case any of you run into technical problems during the webcast or conference call, please address any problems to our email address at investor.relations@repsol.com and we will contact you immediately to try to solve it. I'll now ask the operator to just go over the process for putting questions to Josu Jon. Operator?
Thank you. If you would like to ask a question at this time, please press the star or the asterisks key, followed by the digit 1 on your telephone. Please ensure the mute function on your telephone is switched off to allow your signal to reach our equipment. If you find your question has already been answered, you may remove yourself from the queue by pressing star 2. Again, it is star 1 to ask a question. Again, it is star 1 to ask a question.
Thank you, operator. Let's now move to the Q&A. Our first question comes from Brendan Warn at BMO. Brendan, please go ahead.
Yeah. Thanks, gentlemen. It's Brendan Warn from Bank of Montreal. Just two questions, if I may. Just first question, I guess along the lines of capital allocation. I appreciate the update on your outlook for 2017 CapEx. Could you also just talk through your dividend and dividend policy going forward? Obviously following the cut, and you have one of the lowest cash dividend yields of your peer group, and just what you're going to be doing about the, obviously the dilutionary impacts from your script take up. I guess just secondly, if I could talk about financial flexibility, just what were your last sort of conversation with the rating agencies? Obviously, you've done a lot of good work with reducing your net debt EBITDA ratio. What sort of next steps can we see in terms of your investment rating?
Just my second question relates to your North American assets. If I can get an update on what your land rig positions are at the moment, and an asset you got as part of Talisman we haven't heard about recently, that's a bit of a sleeping beauty, is your Duvernay position. If you could just touch on what work have you been doing, even if it's just desktop work on the Duvernay, please.
Thank you, Brendan. First of all, going to your question about the CapEx allocation for 2017. Let me say that the total figure we are forecasting is EUR 3.6 billion. A relevant part, 75% of this figure is going to be allocated in the upstream business. The downstream is going to consume EUR 0.8 billion and EUR 100 million will be applied to the corporate side. Going to the dividend policy. Let me say the dividend will be proposed by the board of directors, so it's not my duty to approve the dividend. I'm quite comfortable with the same level we had in 2016. I think that it was a good compromise between the financial commitments and balance sheet of the company and the retribution to our shareholders. I'm comfortable with the same level of dividends and with the scrip mobility we had in 2016.
As I said before, it's the responsibility of the board to propose the dividend policy for 2017. Talking about the rating, the financial flexibility conversation with rating agencies and so on. Going and seeing the delivery of the company in 2016. Overperforming in almost every metric, what we said in the strategic plan about 2016, one year ago. Taking into account the tough objectives and targets we have for 2017. We take the metrics, we take the ratios, we are there. Of course, it's not up to me to define what is going to be the decision of the rating agencies. We expect to have the rating agencies acknowledgement of the delivery done along the year 2016, in line with our full commitment to maintain our rating within investment grade category.
Going to your last question about the North American assets. In North American assets this year, in 2017, we have a clear objective about Marcellus. Maximizing the cash flow generation in Marcellus. I want to remind you that Marcellus and our assets there are in the top quartile of the area. Marcellus is free cash flow positive after CapEx at a range of $2.5, $2.6 in Henry Hub terms. In the Greater Edson, where, as you perfectly know, the sound about gas prices is not exactly the same for the Canadian discounts and so on. We have a full objective of improving the situation we had in 2016, where we were free cash flow neutral, even taking into account the current prices and this discount.
We are going to try to optimize this cash position in the Greater Edson, taking into account that we are, in this area, one of the most performant operators in Canada. In the Eagle Ford and in Duvernay, the picture is different because there we are talking about growing assets. This year, in our agreement with Statoil, we are going to put a rig more in the Eagle Ford. We are going to develop the play with two rigs. Duvernay is going to be a part of the growth of Repsol in coming years, no doubt about that.
The work in 2017 is going to be focused on derisking the area, ensuring, of course, the land retention, and being prudent, trying to optimize our operation there to have the full conviction that we are going to be able to create value developing the area in coming years. Thank you, Brendan.
Okay. Thanks for the update.
Our next question comes from Flora Trindade at BPI. Flora, please go ahead.
Yes. Hello. Good morning. Thank you very much. The first question is regarding your retail division in downstream. You mentioned several activities and several initiatives you are taking there. I was just wondering if you would be open in the future to open up the shareholder structure or selling a minority stake. Would that be a possibility for you? The second question is on the production. It is more a clarification. You mentioned the 680 target. It does not include further divestments on top of the ones you made in 2016. Also, if you could give us what is the contribution from Libya. Finally, just a question on free cash flow. You give the detail for the downstream. Is it possible to give us an idea of what could be the free cash flow at the group level for 2017? Thank you.
Thank you, Flora. Going to your first question, the answer is going to be very net and clear. No. Our retailing business in Iberia is fully strategic for Repsol. Let me say, it's not only a way to maintain our current base of business and results, but it's also a potential growth platform for the future. Mainly acting on two bases. The first one, valuing the products and services we go to our large customers base. I'm talking about a multi-energy approach. As I said, of course, gasoline, diesel, as we are now entering in some other energies like LPG, natural gas, electric retailing services and so on. Also adding some other kind of services to this client base.
Secondly, it's also a quite strategic selling point for being involved in the future in some other kind of services, as we are now showing with the agreement we achieved with Amazon to use, in the framework of the business of Amazon, our retailing business as a collection point area. It's strategic. It's fully core. We have a full integration across the value chain in Iberia among our refining, retailing business, and our trading, we are going to maintain the full perimeter of our business. Secondly, going to Libya. Let me underline in some way my main messages about Libya. Thirdly, our current production, as I said in my speech, is at around 178,000, 180,000, I can't remember the exact figure, in barrels per day. That means 20,000, 21,000 barrels a day net to Repsol. We expect achieving our plateau at 340,000 barrels per day in 2018.
In the exploration side, we are working on the outstanding exploratory commitments in some areas in Libya. In our budget, as I also said in my speech, we have taken the decision of being very prudent, we are forecasting an impact in 2017 of only 12,000 or 13,000 barrels per day net to Repsol. A figure significantly lower than the current production we have today. We prefer to be cautious and prudent. Taking our budget basis, this figure of 12,000, 13,000 barrels per day could have an impact of EUR 200 million-EUR 210 million of EBIT in our accounting, and EUR 55 million-EUR 60 million of free cash flow after CapEx. Political situation in Libya, for that reason, we are prudent, remains unsolved, as you know.
The decision about the nation-building process that is supported by the international community and the United Nations Security Council belongs to Libyans, we hope they could take the decision focused on overcoming the current division and the split in the country. From the technical point of view, the good news is that after two years shut down, the pipeline valve at Zintan area was reopened without any problem, production resumed on December 20th. Since then, the fields are having a quite interesting ramping up in operational terms. Let me also stress the fact that, taking into account the quite complex political and social situation in the country, things on the ground are better than they were seven months ago. The presence of international terrorism along Libyan coast is more reduced now than it was one year ago, oil production is ramping up in the country.
This ramping up of oil production is generating the financial resources the country needs. That is positive in terms of the reconstruction of the country and for the nation-building process. We expect, of course, and take my disclaimer about the security situation of the country, that is not in our hands. We expect to reach a rate of 730,000 barrels per day by the end of this year and a 340,000 barrels per day plateau into 2018. Recovering these 40,000, 42,000 barrels per day of net position in Repsol. We prefer to be prudent and to be cautious and forecast only a production of 12,000 or 13,000 barrels per day this year. Sorry, I forget your third question about the free cash flow for the whole group of 2017.
Let me say that we expect to have a net debt, of course, in the current commodities environment and so on. That is not, of course, in our hand. My best guidance today for the net debt at the end of 2017 will be to have a net debt at around EUR 6.8 billion. I said before, this figure will fit to a net debt EBITDA ratio of 1.1.
Thank you.
Thanks a lot, Flora. Our next question comes from Hamish Clegg at Bank of America. Hamish, please go ahead.
Thanks very much, guys. Some great delivery we've seen. I had a few questions on CapEx, and your refining really. Just to start on CapEx. The longer-term strategic CapEx guidance you've given suggests kind of a slightly higher CapEx run rate than what we saw in 2016 and this year. Can you maybe elaborate if you expect CapEx to ramp up in the years beyond 2017? Or will we get an update on your four-year strategy later in the year that could change that number? With that, I just wondered if you could give us the % of exploration that might contribute to your CapEx, so to get a feel for how much money you're spending with the drill bit. The second sort of area for me is just in the refining side of the business.
Sounds like you're still very confident in the $6.4 per barrel guidance you've given. Could you tell us maybe if you have a target utilization that you're looking for in the refineries? It's been pretty high. You mentioned Cartagena having maintenance this year. It'd be useful just to get a number on that. Many thanks.
Thank you, Hamish Clegg. Related to the CapEx, in my guidance, in my speech, I talked at about EUR 3.6 billion of the whole CapEx of the company. I remember that they was talking about EUR 2.7 billion, EUR 2.8 billion for the upstream, EUR 0.7 billion for the downstream. That fits this figure with the CapEx of the downstream businesses over the last three, four years, EUR 100 million for the corporate side.
We are talking about a quite reasonable figure that is lower than the update of the strategic plan for 2017 I presented one year ago in this presentation, delivering the results of 2015. For 2018 to 2020, I only said that our first guidance today is maintaining the figures we deliver in the update of a strategic plan that we're at around EUR 4 billion per year. Of course, it's our first guidance, it's our best guidance now.
The figures we deliver in our strategic plan, and perhaps we could have a closer approach at the end of 2017. Talking about the % of exploration, the exploration business this year and exploration activity, is going to have a budget of EUR 660 million, and the guidance is at around $3.5 per barrel produced or $3 per barrel produced, approximately. Talking about the refining. The utilization rate for this year, the best guidance, because you know that we optimize the programming of the refineries every day and every hour, every day, depending on the margin we have for each one of our production units. Our first approach, taking into account the spreads we are forecasting that fits with this figure for the margin index of $6.40 per barrel. We have as guidance for 2017, is 86% of distillation utilization rate.
You know that our main target is always to optimize the conversion units that are the units that are really producing margin. For our conversion units, the forecast we have for the year is a utilization rate of 97%. Taking into account that we are now exiting from the maintenance stoppage in Bilbao, in Petronor, and in the second quarter, we are going to maintain the hydrocracker of Cartagena. On top of these main stoppages, we have two small, one of them in Puertollano, the other one in Coruña. The most significant are this maintenance planning we have in Cartagena in the second quarter, and that we are finishing now in Petronor. Taking into account, all in all, the conversion utilization rate for the year could be at around 97%. Thank you, Hamish.
That's fantastic. Thanks so much.
Thanks, Hamish. Our next question comes from Michele Della Vigna at Goldman Sachs. Michele, please go ahead.
Good afternoon. Thank you for taking my questions. Two, if I may. The first one is, almost two years on from the Talisman acquisition, I was wondering if you could tell us which assets have surprised you to the upside and where perhaps you've seen some disappointments. Secondly, you're clearly running on very conservative assumptions in terms of the macro environment. I was wondering if you had potentially more money to spend, where incrementally would you like to invest that in your business? Thank you.
Thank you, Michele. Talking about Talisman, let me say, first of all, that now we are one company. Talisman legacy and Repsol legacy are over. We are a single company. Let me say that the new company is stronger. It is stronger in strategic terms, first of all, because we have a more stabilized geopolitical risk. Having a significant part of our capital employed in countries like U.S., Canada, Norway, U.K., Indonesia, Malaysia, Vietnam, and so on. We are better managing of geopolitical risk now, first advantage. Second advantage, we are better prepared to the new energy transition scenario, because thanks to this acquisition, now we are producing, 65%-66% of our production is gas, and 75% of our reserves are gas. Thirdly, we are stronger in the upstream operational terms, because now we are operating or co-operating at 65% of our assets.
If you really want to manage in technical terms your assets, you want to enforce your efficiency programs and so on, you have to manage your own assets. We are stronger. Going to the assets. The best, the first in class, Marcellus. Marcellus is a very productive asset. Free cash flow positive in over the last one and a half year with this tough Henry Hub prices we have had in the past. Southeast Asia is a very interesting and growing position for Repsol for the future. This year, probably we'll take in the first half of the year, as I said, after having the permissions from the Vietnamese government, the FID in Ca Rong Do in the Red Emperor project in Vietnam. We are going to focus also as a relatively important part of our exploration effort in 2017, in this area.
Free cash flow positive, political stability interesting. Norway, good growing platform, plenty of room for tax optimization in the country. The U.K., that of course, perhaps let me say the worst part of the coin, two years ago. I'm happy seeing growth we are seeing in the U.K. In production terms, in 2016, we reversed the decline of the production, increasing the production in the area. If we go to the unitary cost, in the U.K., in 2014, the unitary cost we had in OpEx and lifting cost in our assets was $83 per barrel. This year, in 2016, the OpEx level has been $37 per barrel. It's a combination of OpEx reduction plus incorporating more barrels. The best approach we have for unitary cost for 2017 is at around $34 per barrel.
The picture is better than we expected, and it was in 2015 when we acquired the assets of Talisman. Let me say clearly speaking, because as I said, the worst part of the coin was the U.K., as you know, because I was very clear and transparent in the past talking about these assets. Saying that, I don't see now no regret asset coming from the former Talisman. Going to your second question, perhaps my answer is not the most charming. I'm going to be very clear. If I had more money to spend, my full target will be to fulfill and to deliver my budget for 2017. We are going to follow what we did in 2016. Delivery and delivery is our full commitment. We have to prepare the company to be leaner, to have less corporate cost.
I have read this morning, it's logical, your analysis, not yours, from the analyst community, saying that we are reducing the corporate cost and so on, and the financial cost, that is not perhaps an operational improvement. That is very important. We said after merging Repsol and Talisman Energy that our main target was to try to obtain synergies in the corporate level. In two years, we have reduced the corporate cost base of the new company in more than EUR 300 million per year. We have reduced our financial costs. All that is very important. We are revisiting every process we have. We are streamlining our decision-making processes. We are trying to do the same with less cost. We are trying to get rid of all corporate burden that is not adding value to the company. That is my full priority this year.
I'm not going to change all that, even having, let me say, an infinite amount of money in my hands. That is my roadmap. I'm going to follow this roadmap. My full target is to achieve this figure of 1.1 ratio, net debt EBITDA, at the end of the year. Be sure that perhaps in the next presentation, next year, we'll have the opportunity to talk perhaps about some other things or not. It depends on what is going to happen this year. My commitment to fulfill the roadmap we designed and we announced in our strategic plan is a full commitment, and we are going to deliver it. Thank you.
Thank you.
Thank you, Michele. Our next question comes from Rodolfo Ranouil at NatWest. Rodolfo, please go ahead.
Yes. Good afternoon. Thank you for taking my question. To your point on investment grade credit rating, you were talking previous results about potential hybrid issuance. Looking at where you are now and how fast you've delivered in the fourth quarter, particularly, I was wondering if you see all this as a possibility going forward. As in, are you still contemplating the issuance of such instruments or does that no longer seem necessary?
Thank you, Rodolfo. My first reflection at first glance, I think that this issuing of hybrid bonds, in the current situation, I think that is not going to be necessary for Repsol. Anyway, I'm going to do, as I said, all our best to maintain the financial balance sheet of the company. Perhaps today is not the most logical way because we don't have financial needs. I have Miguel here with me, and we have EUR 9.3 billion today, taking liquidity and credit lines we have in our hands. I think that we could cover our financial needs to 2020, 2021, Miguel? Yes, till 2021. We could cover 2.3 times our short-term financial commitments, including maturity of bonds and so on, with the liquidity we have now in our hands. Going to this kind of financial instruments is not the most logical thing.
I'm not going to discard never anything, but it's not our first priority today. Thank you, Rodolfo.
Thank you.
Thank you. Our next question comes from Biraj Borkhataria at Royal Bank of Canada. Biraj, please go ahead.
Hi. Thanks for taking my questions. I had a couple. The first one on Venezuela. It looks like there were some moving parts this quarter. Could you just update us on the current receivables balance there and your capital employed exposure to that country? My second question is just on the Red Emperor project, which is up for FID. Is there any way you can disclose the CapEx budget for that project or any other details? Thanks.
Thank you, Biraj. First of all, talking about Venezuela, that I suppose that is one of the complex issues I have to answer in this Q&A, it's logical, your concern and your questions. Venezuela is Probably no. In proven reserve terms is the country in the world with more oil reserves. I like to underline this fact. At the same time, Repsol has a solid position built in the country. We have a solid, a fluid relationship with PDVSA. Within the framework of difficulties that you perfectly know, we will continue to be involved in the country, trying to maintain and increase our operations in Venezuela. Let me say, we are going to do all that under the principle of financial prudence. Today, answering your question, we have a total financial exposure in the country of EUR 2.3 billion.
Taking into account equity and financing. This is a figure at around the 5% or less than the 5% of our capital employed. I believe that this is a reasonable risk for Repsol. Of course, we are trying to mitigate this risk. In addition on all that, this year, we are mitigating this risk in the two main assets we have in the country. The first one is Petroquimica, through the financial agreement we achieved in this quarter, in the last quarter of 2016. This agreement allow us to contribute to the growth of production, the operational improvement, a greater efficiency in cost, but under a framework of financial neutrality in the asset.
In addition to that, we have the deals in Cardon IV over the last months, where after the agreements, the cargos of condensate are contributing to pay the 50% of the bills in dollars. That percentage will increase progressively, because we have some other additional upsides that we are negotiating now with PDVSA. As I said before, we have built a quite a strong relationship with them. In addition to all that, the part in dollars in Cardon, the full part in bolivars that covers local cost has been paid. The situation is, of course, complex, but we are comfortable with this prudence framework, with this financial exposure, taking all the concepts in the country of $2.3 billion. Of course, we will continue to collaborate with PDVSA to solve the problems we may have along the way. Thank you, Biraj.
Sorry, I forgot your question about Red Emperor. Of course, we need the final permission of the Vietnamese government and so on, that we expect to have in this first half of the year. Repsol is the operator, is going to be the operator in this area. The Repsol stake in the project is 46%. Our main partners are PetroVietnam and Mubadala. The net CapEx for Repsol for coming three years, 2017, 2018, 2019, because probably we'll have the first oil in the last part of 2019, is $560 million net Repsol. The break even, every company is talking this kind of presentation about break evens. Sometimes we talk about break evens, break evens looking forward. Looking forward, the break even could be very low if we have a lot of CapEx invest before in an asset, in a play.
I think that we have to talk about full cycle break evens to be serious. Taking into account the full cycle break even in the case of Red Emperor in our figures, the break even is $33 per barrel. We have to take into account that this good and low break even also comes because a part of the production is a gassy production that has a fixed local price that allow us to have a lower break even for the whole project. Thank you, Biraj.
Thanks. That's really helpful. Just a quick follow-up on Venezuela. Of the $2.3 billion of the total financial exposure, what proportion is the accounts receivable?
In net terms, you have to take into account that we have always, as in every business, a mixture of bills that we have to receive and bills that we have to pay. If we take the net, take into account both concepts, the figure could be at around EUR 600 million, more or less, EUR 600 million, EUR 650 million. This figure is included in the EUR 2.3 billion I delivered before. This figure is a mixture of, let me say, commercial debt, financial debt, plus equity.
Great. Thank you very much.
Thank you, Biraj.
Thanks a lot, Biraj. Our next question comes from Thomas Adolff. Hi, Thomas Adolff. Thomas, please go ahead.
Hi. Good morning, everyone. Two questions from me. The first one on the free cash flow guidance that you provided for Repsol. Talking about substantial reduction again of net debt for 2017. Could you just let us know whether you are including any sort of remaining proceeds from divestments, and what would be your working capital assumption in terms of evolution versus 2016 in your free cash flow guidance for 2017? That will be my first question. My second question relates to Brazil. Okay? This year we will have a few potential deals in terms of the new bidding rounds. Part of the acreage that is going to be auctioned is next to your acreage. Is it something that you think that it will make sense to participate, or at the current stage you don't want to allocate any more capital to Brazil?
Thank you very much.
Thank you, Felipe. First one, in general terms, the divestment target as a policy fully focused on that we launched last year is over. Now we are in another page, another scenario. Saying that, we are going to be very active managing our portfolio. I said last year, and we deliver, we announced in our strategic plan that there is plenty of room to put more rational in our upstream portfolio. We have to take into account that we have doubled our production in the upstream over the last three years. It's not very usual to have companies doubling its production in this tough time. Now it's time to put more rational. We try to do that, of course, in 2016, the Gudrun Eagle Ford swap was an example of that. The Alaska operation was another example, what we did in the North Sea and in Norway also.
We are going to be more active. Trying to be neutral, in production terms, the main target is going to be put more rational, perhaps reduce a bit the scope of places where we are. Be more focused on our main type of place we define as objective in our strategic plan for the downstream. In operational terms, I'm talking about the unconventional, our onshore core regions, the shallow waters, and so on. Taking all the projections we have, and you have to understand that I can't deliver where we are thinking of the possibility to sell or to buy and so on. In this figure, to achieve this EUR 6.8 billion of net debt, I'm including a potential net divestment of EUR 600 million. The working capital variation that we forecast for the year could be EUR 300 million higher.
That is also included, of course, because we project, taking into account the price of commodities and so on, perhaps more financial needs to sustain the current inventories we have. EUR 6.8 billion is the debt net we have as guidance for the year, with EUR 600 million divestment and including, of course, an increase in working capital of EUR 300 million. Talking about Brazil. Sorry, the exploration round of Brazil. My approach for Brazil, we are comfortable there. We are comfortable with the current position we have in the country. This January, we are going to produce, I don't have here the figure, but I think that the figure is at around 48,000 barrels per day. We are going to increase a bit perhaps this year because I think that we only post 3,000 barrels per day from Lapa, that is in the ramp-up process now in January.
I think that this year we are going to be at around 50,000 barrels per day. You could check the figure, of course, with Paul and his team after the presentation. Of course, it's a free cash flow generator with Sapinhoa, with Lapa. At the same time, we have a fantastic growth opportunity in Brazil in coming years. Because I want to remind that the four main projects, after taking the FID of Red Emperor in the first part of this year. Over this year, we are going to work hard in preparing the development plans in four main areas for the company. What we call, let me joke, the ACDC project. I'm not talking about music, I'm talking about the growth of the upstream of Repsol.
A is Alaska, C is the CPO-9 in Colombia T is Duvernay, and the C is Sorry, CPO-9 is also Acacias. It's Acacias, and the C comes from Campos 33. Campos 33 is one of the main areas in contingent resources terms we have in Repsol now to grow. We have Sagitario also included as an opportunity for the future. We are looking at opportunities near the C-33, the Campos 33 block. We have enough exposure to Brazil. We are very comfortable with the current exposure, and we don't forecast to have additional growth in the country. Thank you, Felipe.
Thank you very much.
Thanks, Felipe. Our next question comes from Lydia Rainforth at Barclays. Lydia, please go ahead.
Good afternoon. A couple of questions, if I could. Coming back to the cost savings and the progress you've made there, bringing the target forward from 2018 to 2017, are you essentially doing everything that you want to do earlier or is this additional savings over and above what you would have planned at this point? And then secondly, if I can-
Excuse me, Lydia. Sorry, I had a little problem with the micro. Could you repeat your first question, please, Lydia? I'm so sorry.
No, not at all. It's probably my new phone. I just wanted to talk on the cost-saving side and bringing the target forward. Is this a case of you're doing more than you thought you would, or is it you're doing the same things just earlier? Just to get a sense of what we might be looking at further out. The second one was coming back to the refining business and looking at how you expect that premium margin that you've generated throughout 2016 to look into 2017. Final one, for me to help with my maths, if I could, on the EBITDA number and the implication from having net debt at EUR 6.6, EUR 6.8. Is that the EBITDA would be about EUR 6.2 billion for the year, roughly in the macro environment that you've outlined? Hopefully, that made-
Thank you, Lydia. Going to your first question, let me say that our main target is to anticipate the target we had for 2018 to 2017. Being tougher and increasing the operational efficiencies we launched in 2015 and 2016. The first target, of course, is make sustainable everything we achieve in 2016, and that is going to be my first concern and my first objective. We are putting is a mixture of new measures. Some of the measures were defined before. Some of them were launched in 2015, and they are going to have a ramp-up in 2017. A significant part is going to be also from the FTE reduction we experienced in 2016 that is going to be delivered in some way in 2017. The improvement in operational terms that we are launching in every asset we have, the reduction of logistic and commercial cost.
We are going to go on and to be tougher, as I said before. Analyzing every corporate function that we have and trying to have a more optimized and linear governance function in our corporation, and at the same time, in the part of the corporation that is providing services to the businesses, trying to have more competitive businesses. I want to say in some way that we are not involved in a tactic or a cost reduction program, but a way of thinking and acting for an entire organization that is Repsol. We are rethinking and revisiting our processes. We are trying in the upstream and in the downstream to standardize our operations. We are revisiting our engineering. We are resizing our corporate function, reshaping and optimizing our own reporting to be more efficient.
We are more focused on the value creation, and it requires a complete transformation of how a company conducts business. Let me say, Lydia, that we are starting now to deliver the results of this program. This program takes a long-term perspective, takes perseverance, and you could be sure, Lydia, that the fruits of these actions are going to appear in 2017, but are going to appear in an increasing way in 2018 and beyond. Going to the refining, we forecast to have. That is our budget, of course, and is our first approach and our best guidance. It could be at around $0.6 per barrel.
Let me say that you are going to see probably a higher figure than the $0.6 in the second half of the year, and perhaps a bit less in the first part of the year because the two main maintenance stoppages we have, they are going to be one of them. As I said, we are exiting now in Bilbao, and the second one in the second quarter in Cartagena. Probably, the average of the year is going to be at around $0.6 per barrel as a premium, but you are going to see perhaps a bit lower figure in the first half and a significantly higher figure in the second part of the year. The best guidance, of course, I have to say that I'm taking the approach that this $55 per barrel and so on is going to be there.
Taking into account this approach, Lydia, our guidance for the EBITDA at CCS for 2017 is EUR 6.2 billion, half is going to come from the E&P, EUR 3.1 billion. I expect that. A bit more, EUR 3.3 billion from the downstream businesses or 55% more or less, and the corporate, as is quite logical, is going to burn a part of this EBITDA, and this cost will be in EBITDA terms, EUR 0.2 billion. The whole figure, EUR 6.2 billion as you said. Thank you, Lydia.
That's hugely helpful. Thank you.
Thank you, Lydia. Feel free to call myself or the team if you need any more details around the numbers. Our next question comes from Irene Himona at Société Générale. Irene, please go ahead.
Thank you. Good afternoon. I had two questions, please. Firstly, you guided us today to sustainable production of 700,000 barrels a day out to 2025 from your contingent resources. You had said in the past that you have assets and resources that could potentially support 900,000 barrels a day of production at a higher price. At the current price, obviously it stays in the ground. I wonder if you can give us an idea, clarify perhaps what price you would need to dispose of the resource corresponding to that potential 200,000 barrels a day. Secondly, on Repsol Brazil. Again, you have said before that because it is deep offshore and it is not operated, it's actually a non-core asset. My question is there an active effort to market that asset given that there is quite a lot of interest in Brazil at the moment? Thank you.
Okay, Irene. Thank you. First of all, I like to clarify that this year, we have nine growing active projects, Carbonado, PM3, and we are going to invest 40% of the CapEx of the year in growing projects. Carbonado, PM3 in Malaysia, Kinabalu, Reggane, Monart, Lapa, Margarita 3, Block 57 with the Sagari project in Peru, plus a possible development in the Gulf of Mexico. All that is going to feed the growth of the production incoming, even in 2017, 2018, 2019, and we have the fourth growing projects, as I said, probably we'll have FID in 2018 or 2019. Our main focus is going to be not in increasing production. It's going to be in extract more value from the barrels we are going to produce.
If I have to punish production to obtain more margin, more cash, more EBITDA, and more result for the company, I'm going to prioritize this policy. We are not involved in a barrels growing strategy. I only said that taking into account this project we have now, I could, in some way, give you as a guidance that we are going to be above 700,000 barrels per day from now to 2025. Could we be above this figure? Of course. I'm not going to prioritize all that. We have a lot of option, in some way, to maintain this growing path. The first one, to slow down the pace of investment. I'm sure that accelerating the pace of investment, we could achieve perhaps 800,000 barrels per day in two, three years. We are not going to do that.
I'm going to tell you clearly, I am going to maintain the guidance of CapEx, so I'm going to be a bit more prudent. Perhaps the consequence is that we are not going to be in 900,000 barrels per day because I'm going to prioritize extracting value from our barrels. Of course, we could be more active in managing our portfolio. We could sell, in some cases, production in order to have perhaps less barrels, but with more margin. We are going to prioritize, Irene, the extracting the values from the barrels we are going to produce. Production, we are going to be above this figure, I said, that is not going to be our priority to grow above this figure. Thank you, Irene. Brazil, no active effort to market asset. Not at all. As I said before, we are comfortable in Brazil with our current position.
Thank you.
Thank you very much.
Thanks, Irene. Our next question comes from Giacomo Romeo at Macquarie. Giacomo, please go ahead.
Good afternoon. Thanks for taking my question. I think two left. One is on Libya. I was just wondering what are the key constraints that are preventing you from ramping up production to pre-war levels? If you can just give us some ideas of what is required in order to reach pre-war levels. Also, what sort of change in terms you're seeing or potentially discussing with the local and overseas governments. Second question is on your net debt EBITDA of 1.1 times guidance for 2017. Was just wondering, should you get to this level, do you think that it could sustain a higher level of cash payments to shareholders? Thank you.
Thank you, Giacomo. As I said before, I prefer to be prudent about Libya and the constraints today to have this ramp-up and to need some more time to achieve this figure. I said before, to be at 230,000 barrels per day in gross terms at the end of this year, is that some wells are a bit more far from the central area where we have our operation in Sharara and so on. We have some constraints to have this ramp-up, because security of the area for our people is going to be our first priority, of course. I prefer to be cautious and prudent because there are facts that are not in our hands. Even producing today, 20,000, 21,000 barrels per day, I'm more comfortable giving you a guidance of 12, 13 for the whole year.
Clearly speaking, there are facts that are not in my hands. I'm a bit more optimistic than I was some months ago because the security situation in the country is improving. I'm convinced, and I'm seeing that the revenues from the oil and so on are going to help in this reconstruction process. That is in some way, some kind of virtuous circle that is fit itself. I prefer to be prudent because it's not in my hands. Talking about your second question, I answered before, Giacomo. We are going to maintain the strip option in 2017, and that is going to be, of course, the position of our board, but I could anticipate that is my position, and I'm going to defend this position in my board. Thank you.
Thank you, Giacomo. Our next question comes from Jon Rigby at UBS. Jon, please go ahead.
Just a quick one, actually. I was a bit thrown by your reference to 1980s heavy metal. Can you just go back through your AC/DC reference again, just so I've got those? Can you confirm that is what you're referring to when you talked about the 2018-19 FIDs that will support your production at around 700 KBD, BOED out to 2025? I just noticed, actually, in the annual pieces that you put out today, you actually discussed Buckskin as a potential 2017 FID, I assume that's probably not correct. Is that right?
Thank you, Jon. The AC/DC, I had a mistake because You know that in Colombia, the project is either Acacias or CPO-9. The AC, I was confused before. I'm talking about Alaska, Campos 33, Duvernay, CPO-9. That is also the Acacias in Colombia. I'm not saying, I'm not confirming that we are going to take the FID in 2018-2019. I am saying that we are going to work in the directions of preparing the development programs in these areas to take potentially the FID in coming two years. Let me say, the full criteria to take these FIDs is going to be the net present value breakeven.
If we are able, at around $55 per barrel, to sustain that the profit of these projects is higher than the cost of capital in this area, we have positive NPV, we'll take these FIDs. Now we have to work hard this year and the months coming to prepare this development program. Thank you. Buckskin. We are working now in a potential project. I can confirm that LLOG has been named operator of the Buckskin unit, and that Repsol currently owns 22.5%, I think, of the leases. We are working in this potentiality. As I said before, the NPV is going to be always the criteria before approving the FID. Thank you, Jon.
Right. Can I just ask a quick follow-up on the question before?
Yes, of course.
I take your point that you don't want to preempt or discuss what the board might decide, from your allocation of capital point of view, the implications are on your cash cycle that you start going quite low in terms of net debt by the time we exit 2017 and 2018. What would you see as a priority in terms of allocation of capital there in terms of, let's say, returns to shareholders, additional CapEx, or continuing to reduce the net debt on the balance sheet? Is that a way of looking at it?
Thank you, Jon. Your duty is to ask me this question, and I have to say that I'm not going to be very charming about all that, and I'm going to be very tough. Now my concern is to deliver what I said was our commitment for 2017. In the same way that last year, my main objective and target was delivery, what we announced for 2016. I'm fully focused on that. Let me say, after having the debt net to EBITDA ratio at around or below one. After extracting all the value from our efficiencies and so on. After having a very stable financial balance sheet. We'll talk about that in 2018, in the next full year presentation. Now I'm only focused on what I said, and we are working to prepare the company to have this debt net ratio at the end of the year.
Thank you, Jon.
Okay, thanks.
Thank you, Jon. Our next question comes from Christyan Malek at JP Morgan. Christyan, please go ahead.
Hi. Thanks, Paul. Thanks for taking my questions. Just two questions. Just to follow on from Jon's question. First on your capital expenditure projection over the medium term. I'm just trying to be clear. I get what your fiscal mandate is, and it's very clear, but trying to understand in the context of what you're trying to achieve industrially through managing your CapEx against long-term production growth. What would you argue is the right steady state or sustained CapEx number mid to longer term, that should help underpin production growth of, let's say, 1%-2% beyond 2020? I'm just trying to understand what that number is, particularly against the fiscal framework that you set out. The second question is around your threshold returns to approve FIDs going forward. What do you mean by generating value at $55 a barrel?
Can you give us some numbers around the return threshold that you're thinking about to help move FIDs forward?
Thank you, Christyan. My best guidance, of course, we have to decide the CapEx allocation every year. My best guidance today, with the facts I have in my hands, to say that we could sustain our production above 700,000 per barrels from now on to 2025 and beyond. That we could have as an average of the period of strategic plan to 2020, and 100,000 reserves replacement ratio and so on. Is at around EUR 4 billion for the whole company from 2018 on. When I say generating value of $55 per barrel, I'm saying at exact terms that if we take a $55 barrel price flat and discounted at WACC of the country, taking into account the risk and so on, every cash flow in net present value, we are creating value for the company.
That is the criteria that we are taking when I said that we have to take an FID, if we could show internally that we are able to create value for the company at $55 per barrel. Thank you.
Just to follow up. Is it fair in saying that you're assuming EUR 55? Is that your starting point mid to longer term as well in your price assumption?
No, Christyan. That means that we are going to be very prudent, and we want to maintain the flexibility of the company. I don't know what is going to happen in the world in 20 years, in 15 or in 10 years. My duty is not to have a crystal ball to see what is going to happen in 10 or 15 years from now on. My duty is to have the flexibility to adapt the company, to adapt Repsol to whatever scenario we could have in the future. The main plan we have in our strategic plan was to create value and at the same time, to be resilient. We are showing that we are able to create value, and at the same time, we are showing that we could be resilient at the lower part of the cycle.
We have to be prepared for that, and I prefer to be prudent and to have the flexibility to take the decision we have to take in the future. Let me say, Christyan, we have doubled the production in the E&P over the last three years. We can't forget this fact. We don't need now in the short and mid-term to grow in barrels. We have to grow in value. We have to reduce our break-even, and we have to grow in EBITDA and in EBIT. That is the commitment I have. Thank you.
That's very clear. Thank you very much.
Thank you, Christyan. Our next question comes from Fernando Lafuente at Alantra. Fernando, please go ahead.
Hello. Good morning. Just a very quick one on production again, and sorry if you're on. I'm looking to the target in 2017. My impression, considering that in Libya you're being conservative, is that probably the target Basically, considering what you said, could be very conservative. My question would be, first, to your assumptions to 2025, what is the declining rate that you are assuming, annual declining rate? Secondly, what explains this potential reduction in 2017 versus what was the production in the Q4 and the exit production you expect for the end of the year? Thank you so much.
Thank you, Fernando. I couldn't agree more with your point. Perhaps it's a very conservative assumption in production terms. I prefer to be conservative giving you this guidance, Fernando, because I like to deliver everything I commit. I prefer to be conservative because I know that there are facts that are not in our hands, and Libya is my main concern. I prefer to be very clear. It is a conservative assumption, but it's the best assumption I could announce today. Talking about what we are missing in 2016, let me remind that we divest in Tangguh, we divest in TSP, and combining both, perhaps we are talking about 13,000 barrels per day, something like that. You know that we own an asset in Norway that is performing better than expected at this Gudrun that we said from the very beginning that is a declining asset.
We could have an average, you asked me about the decline rate, that it could be at around 3%-4%, the average declining rate. I want to remind you that the production is in line with the fourth quarter of 2016, where we have produced 679,000 barrels per day. We are announcing 680,000 barrels per day for 2017. At the same time, as I said, we have nine growth projects that are now in the pipe, and we are going to see the first oil on the first gas either this year or in 2018 or 2019. Thank you, Fernando.
Great. Thank you so much.
Thank you, Fernando. Our next question comes from Anish Kapadia at TPH. Anish, please go ahead.
Thank you. Question on the downstream, first of all. Wanted to get an idea of the impact that you see potentially coming from the OPEC cuts and higher crude prices. In terms of what percentage of medium heavy crude do you use and kind of impacts from OPEC cutting back on those. Then also in terms of higher oil prices, I'm guessing you got some benefit over the last couple of years at lower oil prices, reducing your energy costs in the refining and chemicals part of the businesses. What's the kind of sensitivity of higher oil prices for your refining, but I suppose also your pet chems where you'll be competing with other companies that have gas as feedstock? Second question on the upstream. With around two-thirds of your production gas versus oil, I'm just wondering if strategically you're looking at trying to get more oily.
When I look at the pre-FID projects, they tend to be a bit more oily. Just wondering if you can give, in particular, a bit more detail on your Alaska project. You've got a 1.4 billion-barrel discovery. I think you're exploring for another 1 billion barrels with the current well this year. Just wondering where that fits within your plans. Then just one quick final one. What's your expectation in terms of the cash tax you're going to pay this year? Thank you.
Great. Thank you, Anish. The idea of the impact from OPEC cuts in the heavy and medium crude oil, I think that is not going to be material in terms of changing. I think that the most important fact, in my opinion, from the spread among the Brent and heavy oils is mainly the Atlantic basin market. I don't see a tight market for this kind of crudes in the Atlantic in the short midterm. I have to stress the fact that Venezuela, Colombia, the oil coming from Canada, the heavy oil that is going to be accelerated, thanks to the decision of promoting the extra Keystone Pipeline and so on, is going to put more offer of heavy oil in the Atlantic basin.
That is very interesting to maintain and to increase the competitive side of our refining system that, as you know depends 35%-40% in its basket from this kind of crude oils. The sensitivity for higher oil prices in refining. Perhaps I'm going to say something that is heterodox. There is not a direct influence of oil price on the refining margin. There is an indirect influence, of course, but the refining margin is defined by two main factors. The first one is demand. Of course, oil prices influence the demand. Let me say, the demand is growing in our main market, that is Spain and Iberia. From the offer side, thanks to the low oil prices period, some companies, mainly national oil companies and so on, are defer or delay investment projects for new refineries.
That means that I'm quite comfortable about the evolution of refining margins in the short and in the midterm. I think that our assumption of EUR 640 per barrel in our strategic plan, with the facts we are seeing today, it could be quite realistic, or better said, taking Fernando's expression, conservative. Going to your second question about the upstream, strategically trying to get more oil. When you are exploring, sometimes you don't know what is there. You know that there are hydrocarbons, but you don't have the full picture. In strategic terms, we are comfortable having or being a gassier company than an oiler one. In Alaska, I suppose that we are talking about oil there. These days we are evaluating the Horseshoe exploratory well, a well that we drilled 20 miles in the south part of the discovery we have in our hands.
We think that we are in the same Nanushuk formation, in the same Nanushuk play we drilled before. We are going to have more news about this drilling perhaps in coming days or in coming weeks after finishing the drilling process. Going to the tax cash. The tax cash figure in 2017 was EUR 700 billion. Sorry, this year, 2017, the first guidance we have for the year in cash terms. Thank you, Anish.
Thank you.
Yes, of course. Sorry.
We have one further question from Marc Kofler at Jefferies. Marc, please go ahead.
Hi there. Thanks for taking my question, everyone. I'm very conscious of the call duration, so I'll keep it brief. I just wanted to come back to the upstream and the volumes that you were producing on the gas side from Trinidad in 2016. It looks like it was down reasonably sharply on 2015, which I presume was maintenance. Is it fair to expect those volumes to recover in 2017?
More or less, Marc, we could be at a similar production. That is our first guidance for Trinidad, perhaps 10,000 barrels per day more than in 2016. Not now, not in the first part of the year. You know that one of the reasons for this maintenance and work covers and so on is that we are, better said, BP as operator and we as partner, we are investing in the Juniper project that is going to be a project that is going to allow us to maintain the former production we had before in Trinidad. Taking into account the entering of the Juniper project over the year, in average, my best approach now could be that we could produce 10,000 barrels per day more as average over the whole year. Thank you, Marc.
Thank you.
Thank you, everybody, and have a nice day.
That will conclude today's call. Thank you for participation. Ladies and gentlemen, you may now disconnect.