Good morning, ladies and gentlemen, and welcome to MOL's Q1 2022 results conference call. My name is Zsolt Pethő, the head of Investor Relations, and we have a strong line-up of management to discuss the recent developments. Dr. György Bacsa, Executive Vice President for Group Strategy Operations and Corporate Development, Mr. József Simola, Group Chief Financial Officer, Dr. Balázs Garsó, Executive Vice President of Upstream, Mr. Gabriel Szabó, Executive Vice President of Downstream, and Mr. Péter Ratatics, Executive Vice President of Consumer Services. We continue to use Microsoft Teams as a platform to hold our conference call. The presentation can be downloaded from our website at molgroup.info, and we'll be sharing the slides in Teams too. After the presentation, we'll move to a Q&A session, where you will have the chance to ask questions by using the Raise Hand function of Teams.
Please keep yourself muted throughout the call, except when asking a question. Before we start, I would like to draw your attention to the cautionary statement on slide number 2. Now, let me hand over to György Bacsa, who will take us through the highlights of the Q1 2022 period.
Thank you, Zsolt. You can see the highlights on page number 5, which, again, the usual format in respect that you can see the Q1 results comparing to last year Q1 results. On the right column, you can see the 2022 guidance that we are issuing after the Q1 result. It's also usual, not only in respect of format, but also in content, since we are showing against some financial performance for the Q1 . I think that I would just looking back for the start of this year. After the COVID disappeared somewhat in Europe as well as in Central and Eastern Europe, we thought that we are over, we navigated through the troubled waters, and we will not face substantial challenges again.
However, late February emerging crisis in Ukraine practically changed the oil and gas industry landscape completely. This is now the greatest challenge in for us and it's faced for the upcoming period as well. This is now really affecting the energy supply security. We are making significant efforts to adapt to the new environment, to diversify, to make fit our portfolio, to secure energy supplies to the region. Amongst the rapidly changing external conditions, MOL Group still proves to have the ability to react swiftly. The $833 million Q1 clean EBITDA generation proves that we are on the right track. As one of the key events in our operation, that in the Q1 of 2022, we decided to divest our UK portfolio. The headline numbers that you can see now equals only the continuing operation.
In essence, we excluded the financial impact of the UK portfolio. Accordingly, if you see the 2022 guidances, we updated the production guidance because of that, and in the upstream section, we will talk about it. The other parts of the guidance we didn't change, and we keep the original guidance for 2022. As far as the main financial and operational KPIs are concerned, Q1 didn't bring major surprises, so we've had a strong start of the year. The more than $800 million clean CCS EBITDA delivery and the corresponding $510 million simplified free cash flow is a promising sign that we can deliver in line with annual guidance. At this point, however, financial forecasting is increasingly difficult.
In 2022, we may very well see a high oil and gas price environment with extended volatility, especially in case the war continues. Moving to the macro side. On the macro side, you can see that, downstream margins reached all-time highs during March. Here I have to mention that, the regulatory regimes, which included, fuel price capping in many countries or full price regulation formulas, are out of the scope of the refinery margin calculation. Those regulations obviously impacted our results otherwise in a negative way. The oil price continued to rise and averaged above $100 per barrel. We haven't seen so high oil prices since 2014. The crack margin normalized further. Now let's move further on. Let's move to the sustainability section.
In relation to MOL Group sustainability development, I would like to mention two main topics. One is that the first EU Taxonomy report, which was part of our integrated report, and we published first time. The second, the total recordable injury rate for Q1 , which was one of our key ESG indicator. This is the first time when, according to the EU Taxonomy regulation, we issued a report which included three KPIs, CapEx, OpEx, and turnover. In case of MOL Group, climate adaptation can be primarily relevant and mostly reflected in the CapEx KPI.
As a result of the transformation strategy that we started already in 2021, we are able to report that 15.5% in our CapEx, 5% in our OpEx, and 14.5% in our revenue can be qualified as taxonomy eligible. This is absolutely in line with all our peers and absolutely are among the best in oil and gas companies. As a benchmark or as a long-term target, I would like to remind you that we set the target of reaching 50% of taxonomy aligned activities in CapEx by 2030. Definitely, we are just at the beginning of this road, of this transformation, but we are not, how to say, starting with a very low figure.
The other one is that the TRIR, which I think is very relevant because we went back to normal operation post-COVID, and we still keep the rate below the thresholds that we set as a tolerable one. One of the key indicator, there is no on-staff fatality of the group. I think the ESG performance of the company was strong in the Q1. On the taxonomy alignment and on the transformation strategy, we are proceeding according to our schedule. Now I would like to hand over to Mr. Simola.
Thank you, Mr. Bacsa, and let's start the financials on page 10. I mean, as usual, you will hear in-depth review for the three major divisions from the divisional heads. Couple of smaller comments. In the bubbles below in the charts, you see the impact of the UK operation. So the numbers are an apples-to-apples comparison, as Mr. Bacsa mentioned. The natural gas, as a smaller division, Gas Midstream, the 48 million is essentially the same numbers on year-on-year. In terms of expectations for the year, I mean, two major impacts, high gas prices, and higher operating costs expected to remain. But it's very hard to forecast volume and how storages will be filled up or utilized.
No really kind of reasonable forecast for the year. Fortunately, unfortunately, given the other uncertainties and volatility in the larger division, that's not going to impact the overall EBITDA and visibility. Finally, probably a smaller than usual loss on the C&O line. The reason is that this quarter, the intersegment number was a very small negative number. That's a mix of the high price environment and actually decreasing gas inventories and increasing crude inventories. Now going to the next page 11, CapEx spending. I think a very usual kind of seasonally low number in the Q1 . Small inorganic spending. Organic part is around 15% higher than last year.
I would say still, very much in line with the expectations, and those will be the yearly guidance. In terms of the yearly guidance, clearly uncertainties for the remaining part of the year increased. At this point of time, we see no actual reason to change this number. Page 12, simplified free cash flow. Very strong number. It's actually in Q1, we delivered more than half of our yearly guidance. As it was mentioned, please don't forget the kind of uncertainties on the EBITDA side. Also, of course, we have the CapEx seasonality. The very low, seasonally low, CapEx spending in the Q1 increased the Q1 simplified free cash flow.
Next page thirteen, below EBITDA items, the closing Brent went from 80 to 102, so the change to positive CCS modification. The CCS EBITDA is higher than the clean CCS EBITDA. No special items in the quarter. In the DD&A, a smaller than usual number essentially coming from two sources. One is an impairment reversal in E&P due to the higher oil price environment. Also, U.K. is not included anymore. Just for comparison, the Q1 2022 U.K. number in terms of depreciation would have been $151.5 million. Last year full year U.K. $105 million. Now in terms of the going rate ahead, it's clear that will be without the U.K.
Because of changes in kind of crude prices for the assumptions and also reserves. The going rate, the quarterly going rate is expected to be around $300 million for the next quarter, of course, without any special items. Total finance gain actually is the number is a small gain, as FX was pretty much flat in the quarter and we have a small interest expense. You could have expected a small negative number here. The small positive number is due to one-off items in the quarter. Income from associated +3, as indicated at the Q4 number. That time the relatively higher number was essentially because of year-end closing and adjustment items.
We should expect kind of a relatively low number in the coming quarters. Then the year-end, of course, depending again on crude prices and other items. Income tax expense $188 million. In terms of the background or the details, I would like to point out two items. One is that on the industry tax line, it's +$28 million. You may have gotten used to it from time to time, seeing a negative number there. Essentially, the tax agreements from the Norwegian operations as we discontinued the operations in Norway, the expectation for this line is actually constantly a positive number. The other kind of larger change, $111 million on the CIT line, is much higher than Q4 or Q1.
Essentially two reasons for this. I mean, clearly the overall strong profitability of the segment was one driver. Also the other thing that in INA with the end of last year, we actually utilized all the tax losses carry forward. So that's hence the higher positive contribution on this line from INA. The non-controlling interest, as usual, represents the positive contribution of INA and the share of the INA shareholders of the profit. Now let's go on page 14, operating cash flow, working capital. Two items. The other is essentially a commodity derivative fair value change in the last quarter. The really big item is the change in working capital of $1.2 billion.
What I like to point out that a vast majority, so 80%-90% of this is actually price impact coming from the high crude price environment and actually the high product margin environment. There is also some inventory buildup included. But going forward for the next quarter, the expectation is a slight decrease or neutral coming essentially in the next months. The expected volume changes, where we expect actually a decrease in the inventories in Q2. And of course, if there would be a decrease in the price environment, that would be visible also as a negative change in the working capital. Let's go to page 15, which is just a financial page.
I mean, overall message is clearly, I mean, a very, very strong balance sheet and financial position. A couple of technical comments on net debt to EBITDA before the U.K. restatement, and because the U.K. is not counted as part of the EBITDA for 2021. The net debt to EBITDA was 0.6 in the Q4 number. For end of the year it's 0.65. So that's the U.K. impact. The 0.04 percentage point change in Q1, that's actually a slight increase in the net debt. What you see below in the chart is essentially the reason for this, the major reason for this is the change in the working capital. As I mentioned, we don't expect further increase.
EBITDA ceteris paribus, we expect a decrease in the net debt for the Q1 . With just a recent event that I'd like to mention it briefly, that most of you probably have seen that the board of directors made a decision about the dividend payment date, which is the twenty-eighth of July. It's expected to happen in the similar way as in the previous year. For more details, please consult the announcement or contact IR. With this, I'd like to hand over Gabriel to cover the downstream results.
Thank you very much, József. Good morning, ladies and gentlemen. As Mr. Bacsa and Mr. Simola mentioned, the downstream business environment, and within it, mainly the refining sector, was not really a standard one in the Q1 of 2022. What we are reporting is the high crack spreads combined with high Brent-Urals spread in March. On the other side, we also see high energy prices throughout the whole reported period. From March on, also a strong expectation from the external stakeholders to keep the fuel price increase limited. Even what we see in some countries, a price cap was applied. Speaking about the numbers. Downstream reported a clean CCS EBITDA in the amount of $254 million in Q1 2022, what is representing a very similar contribution as last year.
However, if we take a closer look to the composition of Q1 CCS EBITDA, it is very much different compared to base. While R&M contribution increased, we see the petrochemical contribution dropped compared to the base period. I assume there is a lot of interest around the refining and marketing performance, but let's have a few words, a short explanation about the petrochemical first. We see a drop in contribution from $170 million in Q1 2021 to $110 million, and this is a reflection of margin normalization and increased energy prices. As for the volumetric performance of the reported period, total sales grew very significantly by 11% year-on-year. There are two main drivers there. In a lot of CEE countries, the base was still quite COVID heavy, hence the strong rebound.
While in Hungary, we have seen the signs of rapid demand increase towards fuels produced by MOL. As the wholesale fuel price got squeezed, the market participants and also what we are reporting, and I believe Peter will speak more about it, what we see also a heavy traffic tourism and international transportation increase. In terms of the strategic projects, despite of the difficulties of the material supply chain and tight construction market, both of our projects, Polyol and DC, are progressing. Now, let's get to page number 18, please. Slide number 18. Thank you very much. A few words about the macro developments that rightfully received plenty of attention over the last couple of weeks.
The average petrochemical margin was just below EUR 500 per ton in Q1, but what we see it's rather high volatility within the quarter as the result of the oil price fluctuation and which of course impacted the naphtha prices. On the refining margin side, the story of Q1 is very different. I mean, very different for January, February period, and then for March. The early weeks of 2022 were characterized by a fairly high energy price environment, which was coupled with seasonally low demand, resulting in a depressed margin. As for March, we see extraordinary changes, mostly through skyrocketing Brent-Urals spread I mentioned before and also a significant rise in middle distillate crack spreads. Let me note that our ability to capture the skyrocketing spreads was limited.
Besides the factors I mentioned at the very beginning, we had approximately 20% of non-Russian crude processing in March, and also in Rijeka, the refinery there was going through start-up towards late March. Now, let's go to the slide number 19. Thank you very much. So, discussing the actual CCS EBITDA in downstream, what we see, it's a flat performance year-on-year. There is an interesting development as far as the internal composition is concerned. The petchem, I believe I mentioned it, and we do not need much more explanation to what I said before. In terms of the R&M segment, the price and margin impact probably needs to be explored further. I believe that it also explained most of the difference compared to your expectation.
On the one hand, we have experienced a rapid uplift of the refining margin in early March, as I presented to you earlier. On the other, we had two main drivers working against us in the quarter. One of them are the sales margins, where a continuous, repeatedly increasing price environment triggered a compression of our actual realized margins. It's also worth to mention that the oil price significantly increased from below $80 per barrel in early January to about $120 by mid-March. Obviously, we consider this oil price move rather exceptional, so I expect that also the sales margins would reverse. Of course, it's really difficult to predict also in taking into account the sixth potential package of embargo.
In addition, we have a wholesale fuel price cap in place in Hungary with strong profitability implication. The total impact of this price cap is roughly $65 million in March. This is the period when the wholesale fuel price cap was in place in Hungary. We have also prepared additional slide about our sustainability projects which we launched recently. There is the ReMat acquisition. ReMat is a recycling company, is a leading plastic recycler in Hungary. The total annual processing capacity is 25 kt. With that the total group recycling capacity grew to 40,000 tons. In terms of the hydrogen, we also did a major step in this area as well.
In the green hydrogen route, we are going to utilize the 10-megawatt electrolysis facility, and with it, we will produce approximately 1.6 kt of green hydrogen annually, which will remove 25,000 tons of CO2 by displacing the currently used natural gas-based production process of steam reforming. This process represents roughly one-fifth of the carbon dioxide emissions of MOL Group. I believe that this investment supports most carbon neutrality goals and will contribute to energy independence for the region, which is a heavily discussed topic nowadays. Once operational in 2023, MOL will use the green hydrogen, mainly in our Danube Refinery during fuel production, and it will be incorporated to our molecules of MOL fuels, lowering the carbon outputs from the production technology and final products.
The plant is going to be delivered all the technology by a U.S.-based power company. There is the metathesis plant, or we call it also propylene plant, with the aim to produce roughly 100 kt of propylene. The feed to this OCT unit, so the olefin conversion technology unit, is going to be the cracker feed, the feed coming from the steam crackers, mainly ethylene and the refinery feedstocks. The approximate CapEx needed for this project is $200 million. With it, I would pass the word to Peter, who will share with you the performance of consumer services. I also believe he will also share the impact of the regulation on his segment as well. Thank you. Péter ?
Yes. Thank you, Gabriel, and good morning to everyone. Well, obviously in the Q1 , we faced with a very, very challenging external environment. Actually that put us back to the level where we were in 2017 as far as the EBITDA generation capability concern. That roughly represent 40% decrease compared to the last year Q1 performance in local currencies. Still I think the positive side of this that we are still generating positive free cash flow and we are focusing very much on it to continue the generation of the positive free cash flow throughout the entire year in every quarter. In this quarter, the external environment gives us two very, very challenging aspects.
The first one is the regulation, the fuel price regulation. In several countries, we got a price formulation or even a cap on the price what we can put on the totem, while on the other hand, the other kind of challenge for us is the significantly increasing operational expenditure in the retail operation. Let's start with the fuel volume and the margin analysis. As you can see, $35 million was the negative effect on the margin side this quarter. If I have to divide it into three pieces then, the fuel price caps or the limitation by the regulation by the governments, mainly in Hungary, Croatia, but also in Serbia, Slovenia and Bosnia and Herzegovina. Half of the operation, we got serious limitation.
All in all, that resulted in a $53 million negative impact compared to last year. The other group or the other kind of bucket is also negative because the unprecedentedly high total price environment, the fuel price environment in other countries as well, where we haven't got any price cap or regulation. That also negatively contributed to the margin generation because we got serious pressure to limit our unit margins because of the high environment and also the migration from the premium to the main grade was significant. That roughly represent, by the way, a $15 million negative margin. The third category, which is the positive category, is the additional volumes what we gained.
The market itself was very strong from a consumption point of view, but also we were capable to gain additional market shares, mainly from the white pumpers. That represents roughly 20-25 million dollar additional margin. All in all, as a combination of these three effect, we got $35 million negative margin compared to the previous period. As far as the OpEx concern, as the other kind of negative development or negative contributor, you know, out of these 20-21 million dollar, what you can see on the slide, I have practically four major contributor to this.
$6 million, roughly the effect of the extended opening hours and the more resources what we needed in order to manage the higher transaction and higher consumption, but also the wage pressure was significant. As a combination of these human resource-related OpEx increase, that's roughly $6 million. Another $5.5 million, roughly, came from the increasing energy prices around the operation of the service stations. $3.5 million, roughly the additional Hungarian special retail tax effect due to the higher fuel volume fuel revenues due to the volume and the higher prices. Another, the last kind of large bucket is the bank charges, by the way, alongside of the very high transaction numbers.
An additional $2.3 million, the total effect of the higher transaction-driven bank charges cost. Those are the challenges what we have to face with. The positive side is the non-fuel one what I will explain a bit later. If you turn the slide to the next one, then the fuel sales volumes, well, that's rocketed all-time high Q1. We have never experienced that large consumption in the Q1 of the year. That's practically 20% higher than last year, but 13% higher than we have ever accounted in the Q1 .
Here, the biggest aim and the biggest attention for us, the focus was on the market share gain, that in this very weird operational environment, probably the best what we can do is to gain additional customers and try to make them loyal to us for the later when the environment will stabilize again, and we will be capable to generate higher unit margin on the transactions. But also, the higher transaction because of the fuel gives us an opportunity to convert it to the non-fuel operation. That's what I can show you on the next slide. That's probably the silver lining effect of the current Q1 environment.
We were capable to increase the sales and also the margin on the non-fuel side in the Q1 8% higher than it was in the Q1 last year. The contributor is practically the grocery, but also the gastro. Even within the gastro, I have now two very good performer next to the coffee, the hot dogs and also the sandwiches started to grow up. Actually, the hot dog sales performance was 70% higher than in the last year. Actually, even in the Q1 , we reached 5 million pieces hot dog sales in our network. I think those are a good kind of factors and good products and also good performing operation what we can rely on.
The non-fuel margin now represents 36.7% of the total margin. I think in absolute and also in relative terms the non-fuel performance looks very great. The previous investments now have its payback and also our philosophy is now not to hold back the horses on the non-fuel side, but put an extra intention and an extra resources efforts to differentiate ourselves from the white pumpers and from the other branded international network operators in this region. I mentioned that in this period we have to focus on the loyalization.
How can we make the customers more loyal to us and even to have a glue, have a relation with them, what we can rely on in the later period as well. We just launched, sorry, here in Hungary, the MOL Move, which is a new reward-based loyalty platform. In the first three months, actually, more than 400,000 registration and application download happened. I think that's a very good channel for us to communicate directly with the customers and to offer them personalized offers and more tailor-made targeted marketing materials and also offers. The conversion rate seems to be very high.
I think this will give us high hopes and high beliefs that later can generate also additional margin and free cash to the group. I'm really sorry that this time I was not able to report record-breaking positive performance from the consumer side. Yeah, the external environment is very challenging. However, we believe that we can also win and we can also have a good momentum to gain additional customers in this very turbulent world. We can stabilize further the future growth of the consumer services. With that, I hand over to the much better performing part of the MOL Group. This is upstream with Balázs. Thank you.
Thank you. Thank you, Péter. Good morning. Good morning from the upstream division as well. I'd like to start basically with saying that, as József already mentioned, following the UK portfolio divestment, UK numbers are now presented as discontinued operations. I'm not going to go into the details of that, but you can see both figures clearly shown here and restated also for earlier periods. First comment that I would like to make is on the macro in Q1. We have an average Brent price of $101.4 per barrel and a gas price of EUR 100.2 per megawatt-hour, or roughly $192 per barrel if you calculate the barrel of oil equivalent, basically.
Now, that elevated EBITDA in the Q1 to a very high number, which is $504 million. That's 104% year-on-year, and an 11% improvement quarter-on-quarter. Similarly, free cash flow in the Q1 stands at $420 million, which is 163% more compared to the same period a year ago and 20% compared to the earlier quarter. Now, before I move on, I'd like to comment a little bit on realized gas prices and the delta you see between 192 and 92.3 in terms of realized gas price. CEE volumes are roughly 80% of our entire gas production, and that amounts to roughly 40,000 barrels per day.
In Hungary, we speak about 18,000 barrels per day production, out of which 65% is spot-driven and 35% is roughly regulated. For Croatia, we have 10,000 barrels per day, out of which roughly half is spot-driven. Half of that volume that we produce in Croatia is spot-driven, while half of it runs on fixed term contracts. Now, that mixture that I just explained to you explains to you the difference between spot gas prices and then ultimately the average realized gas price for the Q1 . Now, with that explanation, I'd like to move on to the next page, which is page 27. This is the usual unit free cash flow slide that we show. In the Q1 , in a $101 Brent price environment, extremely strong cash generation.
We stood at $52 unit free cash flow per each barrel that we have lifted. Next page. Now, this is the usual quarterly and yearly EBITDA bridges that we show to you. This time a bit more complicated than earlier because you can also see the UK adjustment and the usual ACG adjustment. Now, I'm not gonna comment on either of those. If you have any questions to that, feel free to reach out to IR. Let me just start by explaining first the upper part of that bridge, which is the quarter-over-quarter comparison, and it shows how we increased from $447 million EBITDA to $500 million.
I mean, clearly a strong price effect, +$75 million, fully in line with basically also the Brent price movement that you have seen on a quarter-over-quarter basis. No surprise here. The volume, the -28%... The -28 million, I'd like to make clear kind of comment that half of that is driven by one-offs. I mean, we had a Sangachal trip on ACG. We had a bunch of other one-off items. This is not something that you will see coming in that magnitude also in the quarters ahead of us. On the other three buckets, basically no major comments on my side or no surprise.
In terms of year-over-year, similar movement from 232, we went up to $500 million. Very strong, of course, price effect, pretty clear. Then on the volumes, I'd argue that one-third of that is roughly Pakistan and CEE. The other two-thirds are ACG. There's also, of course, entitlement adjustments and other things that you need to factor in. Now, next page 29, production. Production remained around 94,000 barrels per day in the Q1 . That's up roughly 600 barrels per day on a quarter-by-quarter basis. That was partly driven by production coming from equity consolidated interests. There was an increase driven by Pearl, high seasonal gas demand.
We had ACG, an increase driven by a technical quarterly settlement that took place now in the Q1 . CEE was moderately down on natural decline. I think in terms of 2022 production guidance, given that on the last call, we issued a guidance of 105,000 barrel per day. Now, without the UK in the portfolio, the new guidance will be 90,000 barrel per day, and that has two effects. The first effect is that we're adjusting for the UK barrels, of course, but in this very strong and persistently high oil price environment, we also factor in lower entitlement coming from the production sharing agreement on ACG.
That will probably push down somewhat our production, but provide us, of course, more valuable entitlement barrels as we move forward in the year. Last page, unit OpEx and CapEx. I would say basically no surprise, business as usual. A very strong unit direct production cost. I mean, ex UK, roughly at $5.1 per barrel. And then CapEx stood at $84 million. That had two components, largely driven basically by ACG, which was $38 million. And the other bulk of that spending happened in CEE, the $32 million. And these two elements explain basically 80% of the capital expenditures. Now with this, I'd like to thank you all, and I'm handing back to Zsolt now to start the Q&A.
Thank you indeed, Balázs. This completes, I believe, our presentation. I believe we have a question from Piotr Dzieciolowski. Piotr, please unmute yourself and allow the question.
Yeah. Hi. Good morning, everybody, and thank you for the presentation. I have a couple of questions. The first one, I'd like to understand two things about the downstream. When are we going to see a little bit more clarity on the price cap regulation in Hungary, which is the most severe one? How do you think about the sustainability of this measure? Is this going to disappear? That's the first one. The second question I wanted to ask you, to what extent are you benefiting from this $50 margins that you could see in April? Are you fully benefiting, and we should think about it as a, you know, a downstream huge result from the Q2 ? That's a second question.
The first question I want to ask on the upstream, you know, you just made a disposal, and then your production is in the visible downtrend, and you generate big, big cash flow there. Is there any assets you're looking at to buy, or were you going to keep monetizing the assets for the time being and just generating cash flow? Shall we prepare for M&A there? Thank you.
Yes. Thank you very much. Yes, Piotr, thank you very much for the question. I believe both of them are very closely connected. First part of your question was around the price cap and the impact. I mentioned earlier that the monthly negative impact of the price cap is roughly $65 million. As we will see that the macro environment stays the very same, I believe that we can assume that this will be the impact to the future till the price cap is applied in the form as it is today. In terms of the positive environment.
Yes, you are very right that there is the positive impact, significant positive impact of the Brent-Ural, and also what we see, the crack spreads in diesel were in the historically highest level of $400. gasoline is really very high. definitely what I foresee that will have a positive impact to our performance. On the other side, there are also the other products where the spreads are rather having a negative impact, mainly for the products from the bottom of the barrel. probably you are aware of the discussions around the natural gas embargo, which can have a very negative. still has a very negative impact to our performance, eating up the part of the benefits I mentioned earlier.
Once there will be any limitation of supply to the European region, I assume there will. The natural gas price will increase further, which will further then depreciate the positive impact. Thank you.
Piotr, morning. On the upstream question
I think our approach remained unchanged. I mean, as you know, we don't have volumetric and reserve replacement targets. We don't chase those metrics. Equally, we've always said that our approach on the upstream side will remain opportunistic. When we see a good opportunity to sell, we might divest, but we might equally acquire something interesting that might come our way. None of that, though, would be the size of ACG or similar that you have seen two years ago. Okay?
Yes. Thank you very much. That's quite helpful. Thank you.
Thank you. I believe the next question comes from Alexander Burganski. Alex, please unmute yourself and go ahead.
Yes, good morning, thank you very much for this presentation. I actually have a few questions. First of all, on the regulatory impact, I mean, the figures that were given, $65 million per month in the downstream, does that include the retail segment as well, or the consumer services segment? And, you know, Peter mentioned a $53 million effect in the consumer services in the Q1 , but most of that probably came in the month of March, or maybe I'm mistaken. If you can just clarify the total impact of regulation for the downstream and consumer services business, that will be great. That's the first question.
The second question is on the EBITDA guidance and related to the refining margin publication. I noticed, maybe I missed something, but the April number has not been published for the model refining margin. At the same time, it appears that it should have been very strong and one would expect a stronger guidance on EBITDA as a result of this and even despite the effects of the regulation. Can you maybe clarify why you have not published the refining margin for April and why you have not increased the EBITDA guidance? My last question is on the potential embargo on Russian crude.
I understand that the European Commission is now considering the bans on acquisitions of the Russian oil and the Hungarian leadership said that, you know, they need some, maybe five years also to replace Russian oil because it would be necessary investments that need to be made in infrastructure, logistics, et cetera. Can you please walk us through the potential impact of this switch? What will happen to your EBITDA and maybe CapEx forecasts if we find out tomorrow or next week that this ban was introduced and it will be imposed more or less immediately? What could be the effects on MOL in such a scenario? Thank you very much.
Alex, this is Zsolt. On the first question, clarification is basically that I think the impacts that have been presented in Downstream and Consumer Services are to be combined, i.e., $65 million refers to the impact purely and entirely in Downstream. The $53 million refers to Consumer Services. If you're trying to calculate the total group number, the two should be added together.
That's per month, the HUF 53 million in consumer services, that's a month?
Basically, the Hungarian fuel price cap had an impact in March, essentially that's.
The monthly figure. The consumer services side, we have had regulations, although with changing dynamics and with changing underlying product prices. Basically, that's a quarterly impact.
Thank you.
Sorry, if I can just make a small comment to this, from Consumer Services side. This $53 million, that's a combination of all the countries where we had any kind of regulatory impact. It's not just Hungary, it's also Croatia, Slovenia, Serbia, Bosnia, Herzegovina. All the countries in a combination in the first three months of the quarter.
What would be the monthly impact of this? If you were to say there's HUF 53 million in the Q1 , what is the monthly impact equivalent to that number going forward?
Well, that's hard to predict because in Slovenia, just at the end of April, they lifted the ban. From now on, actually, it's market condition. In Croatia, that's a price formulation, so I can't give you an exact number. I don't wanna guess. In Hungary, that's practically a zero margin on a main grade. However, we have a positive unit margin on the premium and also on the high-speed pump. Actually, we can price the fuel on a market condition. It's a kind of very mixed one, very hard to predict. Obviously, $10 million or $15 million would be the rough magnitude on a monthly basis from the Hungarian price cap.
Thank you.
Okay, this is György Bacsa. Regarding the second question, the refinery margin publication, I think as of April, most not unlike other peers as well because of the volatility of the market and because of a lot of external factors which are not represented in the usual calculation of refinery margin. We discontinued this monthly publication of refinery margins. We are now revising both the methodology and the frequency of reporting and the form of refinery margin publication because I think, as I mentioned, even the formula is not inclusive of all profit drivers and practically the high volatility. This monthly periodic, we consider it as too short.
Regarding the third question, the sanctions, I think the first one is that, of course, any sanctions discussions are taking place at the EU level, between among the governments. It's a state-to-state discussions. We as a company are rather subject to this affected party of these discussions, not an actor in this discussion. Definitely we have a strong analysis of potential impact. That's why I think the discussion about any derogation, any time deferral in case of the landlocked countries, we consider as essential. As you mentioned, it has both infrastructural reasons, pipeline and transmission reasons and lack of alternative routing possibilities.
It also has refinery configuration issues as well, which could affect availability of the assets, if changing the supply grade and also the product yield can be affected or if changing the grade. Of course, we don't have precise calculation on the EBITDA impact or on the margin impact because we don't have now an immediate alternate grade on the basis of which we could calculate margin yield and output. Definitely now our main focus is on working out the alternative routing and refining scenarios, for which we need, as you also highlighted, we need time.
We estimate between 3-5 years, but we need a significant CapEx, which we estimate between half a billion and $700 million dollars that we need to spend on all our refinery assets and logistic assets. I here also need to mention that we are not the only ones who are affected by this one. There are more landlocked countries. There are more landlocked refineries which have a serious problem of disconnecting from the pipelines and switching to seaborne or other pipelines because that's just not built out. Also, practically, most of the Eastern European refineries were originally designed and developed based on Urals refining.
The entire intake, the unit configuration, the product yield is precisely can be predicted and calculated with the full utilization only if it works on Urals. Of course, the engineering and adjustment is a lengthy but a work that we are undertaking to be adaptable of any changes. Because as a general statement, we will and we shall comply with all sanctions, whatever is agreed among the member states. That's my answer for your question.
Thank you. There was also a question on this EBITDA guidance, if you could comment please why the EBITDA was not increased.
Yeah. Sorry, I forgot the guidance. Practically in the beginning, I mentioned that we changed the guidance only in respect of the production. The financial guidance is unchanged, first because of the unpredictability of the coming three quarters of the year. We are just after the Q1 , we would consider it's premature to deviate significantly from guidance. All the results are, how to say, the financial results are good. Of course, they are promising. As I mentioned, we excluded UK impact, you can read it however you would like to interpret. Practically, even via the exclusion of the UK portfolio, we didn't change the guidance. The same financial results we expect without UK as well.
I would say that this is a strengthening of the guidance, taking into consideration of the macro environment. Of course, it's unpredictability, but also practically taking into consideration that we made a significant divestiture in the upstream in the Q1 .
Thank you very much.
Thanks, Dan. The next question would come from Oleg Galbur. Oleg, the floor is yours.
Hi. Yes, good morning, and thank you for the presentation. I actually have 2 follow-up questions on my list. The first one is, let's continue with the downstream segment and MOL's reliance or dependency, high dependency on the Russian crude oil supply. Just trying to understand the worst case scenario, let's say assuming that Hungary gets 1 or even 2 years of extension to switch to alternative grades, non-Russian grades. But from what I understand, based on your comments, you're saying that you would realistically need 3 to up to 5 years to actually be able to fully switch to non-Russian grades.
What would happen in a worst case scenario when, as you said, Hungary as a euro, EU, a EU member will have to comply with all sanctions and is obliged to stop importing Russian crude oil, let's say after 2023. Realistically, how much crude oil and what level of throughput could be secured for MOL's refineries in Hungary and Slovakia? That would be the first one. The second one on the price regulation in Hungary, are there any indications when this regulation could be ended? Thank you.
Yes. Thank you, Oleg. Thank you very much for the question. Gabriel Szabó speaking. As Mr. Bacsa mentioned, there are firstly what we have to take into consideration once the Druzhba is cut, then we can use the Adria pipeline, so coming from Omišalj to Százhalombatta and further to the Druzhba in Slovakia, and so supplying our refinery in Bratislava. Firstly, there is an infrastructure issue that the capacity of this pipeline is limited. Firstly, we can supply within this and with this capacity our both refineries fully. There is a bottleneck on the Croatian side, and it will limit the throughput. This is the one side.
The other side is that what we are working hard so we really know what is the plan and once the button is pushed there is a sequence of procedure what and who should do. We are very much prepared for the situation, but it will result in the cutback of processing also because of technical issues in Százhalombatta refinery to 80%. There will be assumed throughput of 80% there, while in Slovnaft the throughput will be just 70%.
Okay. Regarding the price regulation, I think that first I would like to draw your attention that there are different type of price regulation in the markets or in the countries where we are present. Fortunately, we see that in certain countries, they started phasing out price regulations. As it was mentioned that in Slovenia it was not prolonged. In Croatia, there's also a periodical cessation of the regulation. According to my knowledge, 90 days is the maximum period, but of course it can be repeated. In every 90 days, they make a decision whether to reintroduce or to stop. In Hungary, it was extended until first of July. Of course, we are prepared for both scenarios.
That's prolongation or termination of the price regulation or amendment of the price regulation. We prepare ourselves for all potential alternatives, but we still want and look at it as a temporary measure. I mean, I think, in the fuel market, the liberal market is the long-term sustainable model according to our view.
Thank you very much.
Thank you, indeed. Alex Buganski, I'm not sure if you still have a question there.
No. Sorry, I'm done. I will remove the hand. Thank you.
Okay. Fantastic. The next question comes in from Tamas Pletser . Tamas, please go ahead.
Hi, this is Tamas Pletser , Erste. Just one question on upstream and your disposal of UK assets. If you could comment more specifically on the earn-out scheme which is embedded in this agreement. If you assume that the crude oil price stays at $100 by the end of the year, how much you could get for those assets?
I think the way you need to think about the UK divestment is three things that are relevant. Number one is MOL facilitated a clean exit from abandonment liabilities. That's one thing you need to factor into the equation. The second is, you can clearly see and you've seen basically the base consideration disclosed at $305 million. That's your second element. The third element that we have is, for quite some time, for the next, I think three or four years, there's a very meaningful CP in place that shares upsides of this high oil price environment. We decided not to disclose that number, but it's very meaningful for the buyer, it's very meaningful for the seller. That's how you should think about it.
Thank you.
Thank you, indeed. Piotr Dzieciolowski, is there still an outstanding question?
Yes. Thank you for opportunity to ask a follow-up question. I just wanted to understand a little bit better, kind of a different setup of your refineries versus other refineries in Eastern Europe. 'Cause I thought they are technically not very far apart from each other, and the communication from other competitors is that this is not a big deal to switch the crude, while you say, or that you have a technical issue. I just wanted to understand what exactly is that your refineries may be different than the others, and what limits your ability to kind of, fully utilize the asset, you know? Then on the utilization, there was an article in the local Hungarian press where you were saying the bottleneck comes from the Adria pipeline to 900 barrels of daily throughput versus 1,100 on refineries?
The utilization ratios you provide now is 70% and 80% are lower than the utilization indicated by that Adria pipeline. Just if you can help clarify whether the bottleneck on the utilization would be the pipeline or technical ability, and how quickly and what's the CapEx required to really ease the process to have a full utilization?
Yes. Thank you, Piotr. Just for clarification, the Croatian part of the pipeline enables 900 kt per month, while before the full processing, it would be needed around 1.1 million. There is this 20% there. Well, I do not know the setup, the technology setup of other refineries you are referring to. I'm very much aware of the technical options on our side. Of course, that probably you are very much aware that we have a fair experience with seaborne crude, so you know very well that even in the past we blended up to 30% of the total processing of crude for Százhalombatta, and we were around 5% in case of Slovnaft.
I believe we have a solid background and solid experience with different crude qualities. Based on this experience, we believe that there will be some limitations in the technology as well, starting from the distillation. Definitely that the different content of the middle distillate, the light part of the crude and the residue will have a different portion, which will then limit the usage of the, let's say, distillation unit. Just imagine that you have a higher portion of the lighter part within the crude. Once you are putting into the distillation. Sorry for going to technical details, but I think it's worth discussing it.
If I may. Sorry to interrupt you.
Yes.
You see Tüpraş, and they are kind of processing 70 types of different blends. Why is it a problem for your refinery and only yours? What's different about your refinery versus other refineries that you can't process 20, 30 different types of crude? I mean, clearly you will get a different product, right?
Yeah. First thing.
You would adjust the price of crude you pay for it.
Yeah. I know.
It could be even more better, right?
Yeah, yeah. You're right. I believe that first of all, there is the blending options in case of other refineries. I believe they have more tanks to blend. As I mentioned, I'm not aware of the technical setup of other refineries first. The other refineries probably have much more, I would say, flexible usage of their assets there. They invested probably because of their seaborne exposure to the assets dealing with the higher metal content, higher sulfur content, or even the gas processing part, in case they are processing lighter crudes. This is the case. In terms of the CapEx, György Bacsa mentioned earlier that it's around HUF 500 million going up to HUF 700 million. We have the CapEx list.
I mean, our technologists are working on this even today, discussing with even foreign experts. So this is the case.
Okay.
There is a bottleneck of the crude. I think it's logical, and you clearly, I mean, everybody can clearly understand it. Further, there is also a bottleneck in the technology setup of our refinery.
Okay. How much more expensive versus current setup is the logistics via Adria pipeline? Just thinking about, let's say, you take a similar type of a blend from the Adriatic Sea, how much would you lose out of profitability? Are we talking about $1, $2, $3 per barrel? Can you? Have you looked at it? Is there an option to kind of eliminate the pipeline bottleneck in the short term by just using trains? You know, you see one refinery in the region which is exactly doing logistics via train, which is a little bit more costly and so on.
Yeah. Which refinery is it? Sorry.
ORLEN Lietuva.
I don't know what is the processing capacity, but fairly, I mean, from logistics point of view, I can't imagine that this is a, I mean, even.
Maybe on top. You're talking about. Well, look, I don't want to talk about the other side. Can you like this missing 30%-20% utilization top up with that? Because I can imagine that could be ripple effect.
Yeah, so
Of it talking to your petchem and stuff like this.
Yeah.
You kind of may need to have a full utilization to run all the processes.
Yeah. I believe that your question is really right and you go to the right direction. Definitely it's gonna be a costly exercise being on the seaborne only. Yeah, sure that there is the different Brent versus other alternative seaborne crude spread. This is the first one. Then, of course, we have to count with the different yield of the particular crude, so it can be lighter, it can be with higher sulfur content. The question is rather complex, and probably I can't answer it, I mean, with one sentence, but I believe it is going to be more expensive. Currently, we are discussing with ORLEN the transportation cost, and also what kind of measures they can take on their side to ease up this bottleneck there.
Okay. Understood.
In terms of the filter, in terms of the alternative logistics route, even currently we are processing in our Duna refinery the crude coming from the Hungarian part of the Pannonian Basin. In the past it was delivered even by trucks. Today we are using the pipeline connection. But definitely, I mean, to deliver the, I mean, very high volume of crude by trains, I do not believe that this is the optimal setup. From logistics point of view, I believe it's a very, very costly, very, very costly setup. Thank you.
Thank you very much.
Thanks indeed. I believe our presentation, the Q&A as well is complete. Thanks for your attention and, please reach out to IR in case you have follow-up questions. All the best. Bye-bye.
Bye. Bye-bye.