Good afternoon, ladies and gentlemen, and welcome to the OMV Petrom Earnings Call. Today's presentation will last around 30 minutes and will be recorded. By now, you should have received the presentation by email. The slides and the speech are also available online on www.omvpetrom.com in the investors' section. These also include the cautionary statement regarding forward-looking statements. Now, let me hand over to Simona Cruțu, Manager of the Investor Relations and Stakeholder Engagement Department, who will moderate the event.
Good afternoon, ladies and gentlemen, and thank you for joining us. We'll have a presentation followed by a Q&A session. Christina Verchere, Chief Executive Officer, will provide the key highlights about the macroeconomic and regulatory environment, our second quarter operational performance, as well as our progress in terms of strategy. Alina Popa, Chief Financial Officer, will give you more details on our financial performance and the brief outlook. Afterwards, the two EB members, together with Cristian Hubati, EB member responsible for E&P, and Franck Neel, EB member responsible for Gas and Power, will be available to answer your questions. We recommend you to register for the Q&A session during the presentation by pressing star one one on your telephone keypad. You can also register during the Q&A session itself. I'm now handing over to Christina.
Good afternoon, ladies and gentlemen, and a warm welcome to our conference call that will take you through our performance in the second quarter of 2024. Please let me first draw your attention to our legal disclaimer, which you can read in detail on slide two. Let me start by taking a look at the evolution of commodity prices in the second quarter of 2024. Brent price closed at a similar level with the previous quarter, as concerns related to the conflict in the Middle East were partially offset by bearish sentiment from revised demand expectations. Brent quotation averaged $85 per barrel for the second quarter, a 9% increase year-on-year. OMV Petrom's refining indicator margins reached $9.60 per barrel in the second quarter, 14% lower year-on-year, as products quotations did not keep pace with the increase in crude oil prices.
European spot gas prices increased during the quarter despite high gas storage levels due to supply concerns around the major supplier, Norway. At an average of EUR 32 per MWh, the CEGH price was down by 14% year-on-year, however was up 14% quarter-on-quarter. Gas prices on the Romanian centralized market remained broadly flat quarter-on-quarter, with day-ahead prices of around EUR 26 per MWh, 25% lower year-on-year. Baseload electricity prices in Romania increased by 8% quarter-on-quarter to an average of EUR 80 per MWh, but decreased by 11% year-on-year. The average CO2 price increased over the quarter, the first time in over a year. This was due to higher hub gas prices, start of the compliance period, and some increase in industrial demand.
The average price was still 21% down from a high base in the second quarter of last year. Moving to the Romanian macroeconomic environment, the latest available data shows that in the first quarter of 2024, GDP increased by 2.2% year-over-year. According to the IMF's latest estimates from April 2024, GDP growth is expected to be 2.8%, while for 2025 it's forecasted to grow by 3.6%. Both figures are well above the estimates for the EU average of 1.2% in 2024 and 1.8% in 2025. The consumer price index for the month of June 2024 versus June 2023 was 4.9%, on a downward trend compared to spikes in January and February 2024. Looking at the Romanian energy sector in the second quarter of 2024, demand for all our products was mixed, based on our internal estimates.
Demand for retail fuels increased in the second quarter by around 4% year-on-year, mainly driven by warmer weather, car park increases, and higher disposable income. Commercial demand was up by 23% year-on-year, supported by a strong increase in road construction activities, as well as higher jet demand. Gas demand decreased by around 11% year-on-year, with warm weather impacting households and small and medium enterprise consumption, partially offset by increased industrial consumption, as well as higher gas-to-power offtake. Power demand was slightly lower year-on-year, while domestic production significantly decreased by 19% year-on-year, Romania being a net importer of power in the second quarter. Power production from gas and solar sources had a significantly higher year-on-year contribution to the generation mix, while hydro, coal, wind, and nuclear power decreased year-on-year.
As a brief reminder, in the context of gas and power market prices returning to pre-crisis levels, the government took the first steps toward liberalizing the market through Ordinance 32. Starting in April 2024, the cap price for gas sold to households and heat producers for households was reduced from RON 50 per MWh to RON 120 per MWh, applicable until the end of 2024. Moreover, the gas price used for power production is no longer capped at RON 100 per MWh. On the power side, the centralized mechanism for power acquisition became voluntary and applicable until year-end, while the price was lowered to RON 400 per MWh for monthly allocations. The threshold for power over-taxation is also lowered to the same price level. In addition, the CO2 costs for future deliveries are no longer recoverable from the Romanian state.
For both gas and power, the margin allowed for trading activities in Romania was increased from 2%- 10%. Our current estimate of the negative net impact of the regulatory changes for OMV Petrom financials for April to December this year is high double-digit million EUR. Although we support the steps towards liberalization, this must be in the context of a competitive and predictable fiscal regime. For the interim period until full liberalization, which will take place in April next year, the level of taxes on power producers is very high. On slide six, we present the key highlights of the quarter, when we had robust performance in the context of lower gas and power prices, partly offset by higher utilization of our downstream assets compared to the second quarter of 2023. At RON 1.4 billion, our second quarter clean CCS operating results were 15% lower year-on-year.
Our operating cash flow in the second quarter of 2024 reached RON 1.1 billion, 156% higher year-on-year. The clean CCS ROACE remained robust at almost 24 percentage points. In exploration production, the results reflect the lower gas prices and declining hydrocarbon production over the period. The result in refining and marketing reflects strong performance in our sales channels and excellent refining utilization, partly offset by lower refining margins and additional taxes on revenues. As a reminder, in the second quarter of 2023, Petrobrazi Refinery underwent a planned turnaround of eight weeks after five years of operation without major planned shutdowns. In gas and power, the results reflect decreased prices and margins and a negative effect of regulatory changes.
Our gas business result was impacted by reduced gas sales volumes as we maintained focus on value over volume in the context of higher service obligations, while our power business result was affected by changes in legislation. During the second quarter, we had further focus on delivering on our three strategic directions. In our strategic pillar Grow Regional Gas, our Neptun Deep project is progressing as planned. In May, we cut the first deal for the platform topsides in Indonesia, and in the third quarter, we plan to cut the first deal for the platform jacket in Italy. We remain on schedule for drilling the first well in 2025 and for first gas in 2027. We're also making significant progress in our strategic pillar transition to low and zero carbon.
In June, we took the final investment decision for a new SAF HVO plant in our Petrobrazi Refinery, thus becoming the first major producer of renewable fuels in the region by 2028. At the end of June, we announced that we have secured feedstock for the SAF and HVO production in Petrobrazi Refinery starting in 2028. At least 50% of the contracted quantity of vegetable oil under the supply contract with Expur will come from Romania, thus ensuring a sustainable flow throughout the entire supply chain from production to product placement on the local market. In renewable power, in June, we announced that we will expand our partnership with Renovatio with a new acquisition of 50% stake in the renewable energy projects amounting to 130 MWh.
Thus, the transactions announced during the past two years with CE Oltenia, Jantzen Renewables, and Renovatio add up to a portfolio of solar and wind power of more than 2 GW, including partnerships. On alternative mobility, after closing the acquisition of Renovatio Network at the end of May, we are well on track to reach the 1,000 fast and ultra-fast charging points by the end of this year, positioning OMV Petrom as the largest player in e-mobility in Romania. We have already secured EU financing for part of our projects and intend to access further EU funds whenever available. Last week, the general meeting of shareholders approved the distribution of a special dividend of 0.03 RON per share. The payment will be made starting from the 3rd of September. On HSSE, the total recordable injury rate for the rolling period July 2023 to June 2024 was 0.35.
Moreover, we continued our efforts to reduce greenhouse gas intensity for projects in all three businesses. Based on our preliminary data, GHG intensity in the second quarter decreased year-on-year in all three divisions, reflecting our ongoing initiative to reduce carbon emissions. On slide seven, I would like to present our operational performance, and I will start with exploration and production. Hydrocarbon production decreased by 3%, reflecting the natural decline in the main field, partly offset by good results from workovers and new wells. Production cost per barrel of oil equivalent increased year-on-year by 1% to $15.62 due to the combined effect of lower volumes available for sale, favorable forex, and broadly flat costs, with lower costs for energy, materials, and services offset by higher personnel costs. In refining and marketing, we had an excellent refining utilization rate of 98%.
Total refined product sales increased by 24% year-on-year, given the low base in non-retail due to last year's turnaround, with retail sales up 5% year-on-year, supported by higher demand. In gas and power, total gas sales volumes were 18% lower year-on-year in the context of a higher storage obligation and less attractive supply opportunity. The Brazi Power Plant generated 0.5 TWh in the second quarter, covering a 5% share in Romania's generation mix. Moving now to slide eight, total CapEx in the first half of 2024 slightly increased year-on-year to RON 2.4 billion. In exploration production, we increased investment in the Neptun Deep project, which is currently in the execution phase. Moreover, we finalized the drilling of 14 new wells and sidetracks, and we performed more than 270 workover jobs.
In refining and marketing, around RON 0.6 billion of investments were mostly dedicated to the refining business for major projects such as the new aromatic complex, sulfur acid gas treatment plant, and the new SAF HVO unit, and also to retail for the acquisition of Renovatio's charging points network. For the full year 2024, we broadly maintain our guidance provided in February of up to RON 6.5 billion of organic capex, almost 40% higher compared to last year. There will also be capex associated with the closing of our M&A transactions for low and zero carbon projects that will bring the total capex to up to RON 8 billion. Please let me now hand over to Alina for more details on the financial results of the second quarter of 2024.
Thank you, Christina, and good afternoon also from my side. I will continue the presentation with slide 10, starting with some highlights on the income statement with focus on the development of the second quarter of 2024. Sales increased by 4% year-on-year, mainly supported by higher sales of petroleum products and higher sales volumes of electricity. This was partially offset by the impact of lower prices and sales volumes of natural gas, as well as lower prices of electricity. Clean operating result in exploration and production was RON 0.8 billion, 29% lower year-on-year. This was driven by the lower gas prices, lower sales volumes, higher depreciation and exploration expenses, partly offset by lower E&P gas taxation and higher oil prices. Clean CCS operating result in refining and marketing reached RON 0.7 billion, five times higher year-on-year, as the previous year reflected the planned refinery turnaround.
This year's evolution reflects excellent sales channels and supply result, offsetting the impact from lower refining margin. Clean operating result in gas and power was negative at -51 million RON on lower result in both gas and power business lines due to market developments and regulatory changes. The clean consolidation line was -108 million RON in the second quarter of 2024, mainly as a result of significant gas volumes injected into storage linked to the increased storage obligation. Consequently, the group clean CCS operating result decreased by 15% year-on-year to 1.4 billion RON. For the second quarter of 2024, we recorded inventory holding losses of -4 million RON compared with -30 million RON in the second quarter of 2023.
For the second quarter of 2024, we also recorded net special income of RON 46 million compared to net special charges of minus RON 25 million recorded in the second quarter of 2023, in both quarters mainly driven by the net temporary effects from forward contracts for power and CO2. The clean CCS net income attributable to stockholders increased by 19% year-on-year to RON 1.2 billion. Let me go on to slide 11, which shows the major building blocks for the development of the clean CCS operating result. I will start with exploration and production. The market effect deviation of RON 54 million reflects the negative effect of lower gas prices compensated by the increase in oil price and lower E&P gas taxes.
The latter is due to tax-exempted quantities used in the Brazi Power Plant and the volumes put in storage for which overtaxation is due when the gas is sold. The operational effects had a negative deviation year-on-year, mainly due to lower hydrocarbon sales volumes, higher depreciation, and higher exploration costs. In downstream, the negative market effect in refining and marketing reflects the lower refining margin. Operational effects were positive year-on-year, reflecting last year's turnaround, as well as excellent performance in sales channels, supply, and non-fuel business. In gas and power, we recorded lower results in both gas and power business lines impacted by market developments and regulatory changes. The result in the second quarter of last year was positively influenced by the reversal of a provision for risks assessed by the group in the area of sector-specific taxation.
0.5% tax on revenue introduced starting January amounted to around RON 56 million, mostly booked in refining and marketing segment. On slide 12, I would like to continue with the highlights regarding our cash flow statement. In the second quarter of 2024, the cash generated from operating activities before net working capital movements and solidarity contribution was 37% higher year-on-year at RON 1.9 billion. Working capital changes led to a cash inflow of RON 372 million in the second quarter of 2024 compared to RON 494 million in the second quarter of 2023. The solidarity contribution paid in the second quarter of this year due for fiscal year 2023 was RON 1.2 billion compared to RON 1.5 billion in the previous year. Consequently, the operating cash flow in the second quarter of 2024 amounted to RON 1.1 billion compared to RON 412 million in the previous year.
Our net payments for investing activities amounted to RON 0.7 billion, lower by 56% year on year. This reflects an increase of cash outflow for capital expenditures of 23% year on year, offset by the inflow from investment in government bonds. The net cash position, including leases, decreased to RON 12.1 billion at the end of June 2024 versus RON 13.2 billion at the end of the second quarter of 2023. Our record high base dividends for the financial year 2023 amounted to RON 2.6 billion, were paid starting June 5th, 2024. We also remind you that the special dividends in the amount of RON 1.9 billion will be paid starting September 3. Let me move to Outlook on slide 13, and I will only refer to the guidance for this year as the guidance for 2025-2026 from our capital markets day in June remains unchanged.
We expect Brent oil price in 2024 to remain around $85 per barrel. Our hydrocarbon production in 2024 is expected to be above 106,000 barrels of oil equivalent per day, considering no divestment and reflecting the maintenance activities planned in the second half of the year. We expect inflationary pressure on our cost to persist throughout the year, and we see the production cost at around $16 per barrel equivalent for the year 2024. In refining and marketing, we currently estimate an average refining margin of around $10 per barrel in 2024 and the refinery utilization rate above 95%. As Christina mentioned earlier, we broadly maintain our CapEx guidance. Organic CapEx will ramp up in the second half of the year and is expected to be up to RON 6.5 billion in 2024. Additional investments for the announced M&A transactions would bring total CapEx to up to RON 8 billion.
In 2024, we expect a positive free cash flow before dividends, but lower year-on-year, driven by strong operational performance offset to a large extent by significantly higher investments. We estimate demand for retail fuel products and power in Romania to be above 2023, while gas demand to be stable year-on-year. We expect both total refined product sales and retail fuel sales to be higher year-on-year. Our total gas sales volumes are expected to decrease, mainly on lower supply, both from equity and third parties. The net electrical output is expected to be higher year-on-year, reflecting a shorter shutdown of the Brazi Power Plant. With this, I close our presentation and thank you for your attention. We are now available for your questions.
Thank you, Alina. Let me remind you that if you want to ask a question, you need to press star one one on your telephone keypad. We kindly ask you to limit to three questions per participant. Once again, to ask a question, please press star one one. We'll pause for a moment to assemble the queue.
Thank you. We will take our first question, and the question comes from the line of Ioana Andrei from Alpha Bank Romania. Please go ahead. Your line is open.
Good afternoon, and thank you for the presentation. I have a couple of questions. First, regarding the gas storage obligation, you've mentioned an increase in the gas storage obligation. Is this one-off due to current regulatory framework, or should we consider higher storage obligations further on as well? And if you could tell us, what is the storage obligation for the full year?
And second, I have a question regarding the renewables pipeline. You've mentioned the portfolio of 2 GW, including partnerships. How much of the 2 GW are attributable to Petrom? And can you give us a timeline regarding when we should see the additional megawatts being commissioned? Thank you.
Thank you, Franck.
So good afternoon, Everyone. It's Franck speaking. On your gas storage obligation, so we have around 5 TWh obligation this year. We had about 2.1 TWh last year. The increase is linked also, I mean, it's an obligation, but it's also linked to good news as we increase our portfolio between last year versus this year. So we should see it also in this spirit. This obligation is linked also to the EU regulation due to the Russian gas crisis to have 90% of the storage filled by the end of the storage season.
This will terminate at the end of this gas year. So that should not, this obligation, we should not repeat next year. Now, we will look at our storage base of our portfolio for the next year and base also on the summer-winter portfolio. That will be our strategy. I hope I answered your question. Now, on our portfolio, we say we have about 2 GW of portfolio. So we have 1.1 GW with Renovatio, which was in the price already announced, and we are now hopefully very we will close very soon for one of the assets, one of the company. We are developing our own asset also. We have the Ișalnița project, which is a project on our own land, 89 MW. So that's something where we are going to announce very soon the EPC contract for this PV plant.
We have a partnership with Oltenia, which is 450 MW as such. It's on 50/50. And then we have Teleorman, which is a 710 MW PV where we are 100% OMV Petrom.
Okay. Thank you. And regarding the timeline, when we should see these megawatts in function?
Yes. Timeline. So all the projects will have a different maturity, but most of the power should come online 2027, some in 2026, and some late 2027, maybe beginning 2028. Not all of the projects have passed FID yet. So I think it's, but that's our forecast.
Okay. Thank you.
Thank you. We will now take the next question from Laura Simion from BRD GSG. Please go ahead.
Hello. Thank you for the presentation. I have two questions. One, if you had any power sales on MACEE this quarter. And the second, regarding the royalties and the windfall tax that you paid in the second quarter. And in addition to that, just a confirmation, I remember you said in the previous call that you have an official point of view from the Ministry of Finance regarding the applicability of the new royalties that are not applicable to current concessions. Thank you.
Franck, do you do yourself?
Yes. So on the power sales on MACEE, so last year, in December last year, there was a signing with OPCOM as part of this regulation for sales after the 1st of April, for the full year, I would say, which covered about 50% of our power plant. Q1 was much higher because the legislation we run nearly 80% of our output through MACEE. And Q2, much lower because, first of all, we had a shutdown.
Then we didn't have additional contracts. Due to the change of the legislation, now it's not an obligation. It's up to us to decide if we want to sell more on MACEE or not. We just fulfilled the contract signed in December last year. That's our expectation till the end of the year, that we will just fulfill the volume which was contracted in December last year.
Okay. Moving now to your next question on royalties. Royalties Q2 that we paid for Q2 2024 were approximately RON 190 million. In addition, it is covered both crude oil and gas. In addition to this, we had supplementary tax on gas, around RON 75 million.
If the question was referring to the principles applicable for the royalties calculation, as mentioned before, we applied royalties according to our concession agreements, which are basically the ones previously in the law. The changes in the royalty rates, in our view, apply to new concession agreements or to the concession agreements that do not have stipulated royalties in such agreements. Ministry of Finance publicly declared this was that we referred to a public declaration from Ministry of Finance in this respect.
What happened in the meantime in Q2, actually, there was a change in legislation which was approved by Romanian Parliament and by Romanian President, which clarified even further. Now, it's very clear that new royalty rates are applicable for new concessions or for those concessions that do not have the royalty rate stipulated, which is a very important clarification for stability clauses of such agreements.
Thank you.
Let me remind you that if you want to ask a question, you need to press star 11 on the telephone keypad. We kindly ask you to limit to three questions per participant. You can now take the next question.
Thank you. We will now take the next question from Daniela Mândru from Swiss Capital. Please go ahead. Daniela Mândru, your line is open. Please ask your question. Daniela Mândru, your line is open. Please ask your question.
Can you hear me?
Yes. Loud and clear.
Okay. Good. Good. I have several questions. I will start with the more simple one. First, for the ENP segment, please let us know what are the set regulated gas volumes for the following quarters, I mean, Q3, Q4, and Q1 2025, regulated gas sale volumes.
Dana, kindly ask you to address all three questions at once, and then.
Okay. Good. I have more, but okay, more than three. Now, the following question refers to G&P segment. What is the power production estimate for the full year 2024? What were the non-equity power sales in Q1 and Q2 2024? On average, how much power does the group sell from the balancing market annually? And how many CO2 certificates were bought in the first quarter of the year? I have more, but I will stop here.
Okay. I will take your question on the gas sales on the regulated volume. So for Q3 last year, it was 1 TWh. For Q4, 2.3 TWh. For Q1, 2.6 TWh. And to give you maybe for the full year 2024, we expect 7.9 TWh. Q1 2023, 2024, sorry, maybe to be clear, 2.6 TWh versus 2.9 TWh Q1 2024. So full year 2024, 7.9 TWh versus 2023, 10.4 TWh.
So we see a decrease in terms of demand on this segment as such. Okay. And for the first quarter of next year, I understood well, 2.9? 2.6 versus 2.9 Q1 2022. 2.6.
Okay. Good.
Power production, we didn't disclose the number, but what we say, our expectation, because it will really depend on the market, but we expect to be higher than last year. So that's our forecast.
Yes. But here, I want to insist a little bit. I've seen your budget. We have a quantity of 5.9 TWh to be sold this year. For me, it looks a little bit higher if I'm looking at what happened in the first half of the year. So that's why I asked probably will be below this figure, below 6 TWh.
Yeah. Because in fact, it's linked to your next question about non-equity power, because we have also sold power. So let's say around 2 TWh of non-equity sales of power.
In the first quarters, 2 TWh?
No, no. Full year. Full year. Full year. Full year.
Okay. Good.
And on the. What was the last question?
On the balancing market, on average, how much the group does sell? So on average, in order for us. Yeah.
Yeah. It's not that there's a volume which is important. I think it's more our market share in this balancing. And we are looking around, let's say, the last years, between 10% and 15%. We have some peak at 20%, depending on if there is a lot of water available. If there's a drought, we tend to be more than 20%. If it's a lot of water, we are more than 10%. So you imagine we are competing against hydro on that, on this market of balancing. But our market share is between 10%-20%, depending on the situation, on the weather, especially.
Daniela. Yes. Your last question related to CO2 certificate. Is that okay? Okay. So just a bit of a reminder. For the total ETS estimated emissions for 2024 that are to be submitted by September 2025, we have approximately 3.2 million tons of CO2. Out of this, 0.5, now 500,000, are allocated for free, mostly in the refinery. The rest are to be purchased. That's our big picture, so to say. With regards to your specific question, how much we purchased in this year, we had some small spot acquisitions, really small, 15,000 certificates. And we have some forward acquisitions, about 1 million certificates. Half of them we delivered this year, towards the end of this year, and half in the later years.
Okay. Thank you. Now, if I have more questions, can I follow up if it is more time remained?
Yes. Yes. Sure. If not, if you want, you can send us the questions, Dana, to investor relations, and we will answer everything. No problem.
Okay. Thank you a lot.
Thanks.
Thank you. We will now take the next question. And the question comes from Oleg Galbur from Raiffeisen Bank International. Please go ahead.
Yes. Good afternoon. Oleg Galbur from Raiffeisen. I hope you can hear me well.
Yes. We can. Yes. Right.
Thank you for the presentation and for the opportunity to ask questions. The first one is, could you please provide more granularity on the loss reported by the GMP segment? Well, I understand that the operating loss was mainly due to the legislative changes, but it would be helpful to understand how much of earnings decline was triggered by legislation and how much was due to other factors such as volumes, for example.
Also, could you tell us what shall we expect in the next two quarters in terms of G&P earnings? Secondly, could you help us assess the cost impact of higher storage obligations this year? And are those costs booked in the E&P or G&P segments? And lastly, do you plan any divestments of oil and gas assets this year? And if yes, what could be the impact on your full-year production guidance of more than 106 KBOE per day? Thank you.
Franck, maybe you take those first three questions.
Yes. Hi. Good afternoon. On the quarter for gas and power. So first of all, there is a large part which is linked to the reversal of provision if you compare last year to last quarter to this quarter. And so that's quite significant. Then there is the CO2 that we are not able to recover on what has been contracted forward from 1st of April till the end of the year, in fact. So to a bit follow up your question on that. And we say it's a high double-digit impact for the full year as such. In terms of so that's mainly for power.
So two main impacts, the CO2, the lack of recovery, and this reversal. In terms of the quarter, last year, we didn't really produce. We were on shutdown most of the quarter. So it's mainly this link to the regulation and this reversal, not operation as such.
On the rest is linked to gas activity and the high storage obligation. So we had to store 55% more than last year. But yes, it's a cost. It's borne by gas and power. But we will have some, of course, benefit looking forward in Q4. In Q1, when we are going to withdraw the gas and be able to get the spread between summer and winter. So there will be some benefit, an increase of benefit versus last year due to the volume as such. On the forecast for the rest of the year, I think Q3 will be still, I think, better than Q2 because the power plant will run, of course, full quarter, even if still have the CO2 impact. But I think still difficult because of its regulation. So we expect to be lower than last year, Q3.
And Q4, again, Q4, it really depends on the winter temperature, how will be the price in Q4 and the demand in Q4. But we expect, again, to be lower than last year due to change of regulation, but much better, of course, than Q2 and Q3, where impacted in general gas and power due to the storage obligation.
Yeah. And thank you for the question, Oleg. With regard to the divestment plan for 2024, no, we don't have any plans for the divestment for 2024.
Thank you.
Thank you.
Thank you. We will now take the next question from Tamás Pletser from Erste Group. Please go ahead.
Yes. Thank you very much. Good afternoon. Actually, Oleg, exactly the same question I wanted to ask. Just maybe a follow-up over here. Do you expect this regulation to change in favor of you from the beginning of next year, especially, I'm referring to the CO2 cost, which now you cannot recover? So do you expect that cost item to be recoverable from the beginning of next year? Thank you.
Hi, Thomas. And nice to hear about you. Looking forward, this regulation finished at the end of this year, and we have no forward position for next year. So we don't expect any negative impact anymore from this regulation for next year.
Maybe just to clarify, it's not like we will recover in next year. After Q1, next year, we will have free market. So we are not in a position to have this situation.
Yeah. But even for Q1, we don't have a forward position. For Q1 next year, we don't have a forward position.
Okay. But you are generally looking for a positive change afterwards. If there's a free market, you probably have more chance to pass this cost to the end customer.
Of course, we have a positive change. But I think also what we have seen this summer is the government realized the importance of the gas asset to be able to maintain the network, to maintain the frequency and the voltage on the network. And I think our message is you need this type of asset to run. So make sure that we have an incentive to run on the market. And I think that's definitely. We have been difficult the last two months in terms of supply and demand in Romania.
Okay. That's fair enough. Thank you very much.
If there are further questions, please register by pressing star 11 on your telephone keypad.
We will now take the next question from Daniela Mândru from Swiss Capital. Please go ahead.
Hi. Regarding the low and zero carbon operating profit, I know previously when you announced first time the Strategy 2030, you said that by that time, the operating profit from this segment will be around 15% of EUR 1.5 billion estimated for that year. You keep the estimate?
Yes. Yes. Yes. Sorry. Yes. In our structure update, we keep the estimate of about 15%, maybe a little bit higher coming from our low and zero carbon, I would say, pillar by the end of the decade. So yes. But you are aware that is more than RON 1 billion. So that's why I'm asking because from your IR, I received this feedback that my estimates for this segment by 2030 are too high. So that's why I wanted to check with you again.
Okay. I understood. Now, still regarding the strategy 2030, last time, I don't know, I wasn't able to clarify some points from that strategy. What I noticed, but also the other analysts noticed, that your estimate for Brent, for power prices are relatively high versus what the consensus is now regarding the Brent price, regarding the power price. For example, for the Brent price, Bloomberg consensus, it's around $72-$70 per barrel. Why you are coming with an 80, 80 dollars per barrel? What source did you use for this estimate? And what justifies this relative optimism? That would be the question. And does this question apply also to your power price estimates? The EEX power future curve indicates a level of around 60 EUR per MWh, while you are coming with 90, a range with 90-120 EUR per MWh.
I understand that you also plan to sell on the balancing market where the prices are very high. But still, the price, it's much above what the future curves indicate for the power prices. That would be the questions related to the estimates for 2030. And the other question regards to the OPEX estimates, ENP OPEX estimates for 2030. I made a simple computation. You said that you estimate $8 per BOE. But at that time, 44% of the group's hydrocarbon production will come from Neptune Deep gas. And the remaining of 56% will come from current operations. For simplicity, let's put a 50/50. That 50% of $3 per BOE, $1.5 per BOE will come from Neptune Deep. The rest of $6.5 per BOE, representing 50% of the current operation, will come from the current operation, of course.
That would imply that your OPEX estimate for 2030 from the current operation will be around $30 per BOE, but right now is $16 per BOE. Probably the trend is upward, not downward. How do you plan to achieve this reduction?
Thank you for the question. Alina is going to take your prices question and Christina your OPEX for power question.
W ith regards to the prices, we have a market intelligence team that is analyzing basically supply and demand perspectives on the long term, and also they look into geopolitical context and so on. This was done. We also compared ourselves with peers, with market experts, agencies, and so on. And at that time, which was approximately May this year, we were in line with everybody based on all the analysis I have seen.
Of course, in our industry, we are very much used to volatility. Things are changing in a few months. You can be in another situation. And we don't rely to the maximum extreme on these prices. We always test, and we tested our strategy for the downside scenario. And our strategy is robust and then maintains its key principles also in a downside scenario. And that's, I believe, most important.
Otherwise, we publish sensitivities, and we are resilient with our integrated business model in any volatility we might face over the next six, seven years. With regards to power, it's coming the same. I mean, same principle applies. And if we refer to the why we see them so high, we expect a significant growth in electrification, which we believe should drive on a medium-long term the prices up on the power side.
Yeah. On the other side, on the other side, the others are saying that also the renewables will increase significantly. So that will reduce the anyway, these are estimates for the long term. Nobody knows what will happen. Yeah.
Dana, it's also a baseload price we are talking about here. So it's not the capture price ratio. It's for renewable. It's a baseload price. And today, you have a spread between Germany and Romania quite big, nearly 30 EUR. And when you look at next month, for example, and next quarter, you have 30 EUR spread between 30 EUR between Germany and Romania. So we see also with the premium market.
With regards to the OPEX, thank you for the question, Dana. So basically, we are looking to where would the OpEx costs per barrel in the range of $16 per barrel in the next future till Neptune is coming on stream. And this will be done through a very strict cost management. And we're installing different programming in place for that. And as well, very strong management of the deferments and the declines. So we are optimizing all our shutdowns in order to bring ultimate performance also from there.
So basically, you are expecting the OpEx from current operations decline significantly. I've computed exactly because I can send you my Excel. It's very simple. But basically, you are expecting your OpEx from current operations to decline by compounded annual growth rate of around 6%, while the inflation over the period, it's around 3%. And I will.
If you can send us the calculation, it sounds high, what you just said, but please send it to Investor Relations and we come back to you.
Okay. Thank you a lot. Thank you a lot. Thank you.
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