Good afternoon, everybody. Welcome to our Q1 conference call. Let me start by saying that I hope that all of you and your families are safe in front of this pandemic, which is COVID-19, and that you are coping well in these extraordinary times. I really think that the word extraordinary is the right word, the literary sense, I would say.
None of us never thought we could experience such a macro environment, such an oil price crisis at the same time. We have a lot of ground to cover this afternoon for this call. It's why I joined Jean-Pierre, not to leave him alone. To cover the various crises that we are facing. We are facing, again, this healthcare crisis, and our priority is that the health of all our people and the continuity of our operations.
I would like just to say, to pay a tribute to all the efforts and commitment and responsiveness of all our teams around the world, who are working together to ensure the continuity of our operation during the crisis. Really, they are doing a great job. Thank you to them, all of them. The second crisis, the oil price crisis, it's unprecedented, I would say.
In my speech, I always said that there is volatility, and we experience volatility. It's difficult. I know that the oil industry would like to see a stable world. I think we are absolutely unable in this industry to stabilize anything. We'll come back on it, and it has, of course, some consequence, that it stretches the financial frameworks of our company. We will come back on it with the update of the action plan.
I just would like to tell you that, of course, over the past five years, we have strengthened our balance sheet. We have high-graded our asset base. We have lowered the break-even. Fundamentally, and I will come back on that, we consider that Total is very well positioned to weather this storm. I would even add that myself, I've become a veteran of tough times.
I took my position in 2014, just before the first downturn, very young, so we begin to have some good recipes to face the situation. Fundamentally, in what we believe, it's that priority should be given to self-help. This is, I think, the essence of all the plans we will present to you. At the same time, as you know, we are also to prepare the medium and long term.
We are sure that we have these immediate and short-term challenges, which means, of course, the evolution of the energy landscape and the climate policy. That's clear that we have worked and together today, by the way, I think it's a good symbol that at the same time we speak about the immediate challenge and action plans, and also in medium and long term.
We have issued a renewed climate policy, which is a result of quite a lot of work with the board of directors and including the engagement with some investors of the Climate Action 100+ coalition. I will come back on it. I will address that issue as well in a second part. In order to avoid to mix all the Q&A, we propose to have two separate different session.
After Jean-Pierre has introduced the Q1 results, and myself, the update of the action plan. We'll have a first session, then we'll go to the medium and long term, because I'm afraid if we mix both, all the questions will be more on the short term than the medium and long term. I think it's also important to have some time. I propose to dedicate around one hour and 10 minutes for the first part and 45 minutes for the second part. Now I will leave the floor to, before there was P2 now it's JP2, I am P1 and JP2, I need to give him a nickname as well. JP2 is to give you all the Q1 results.
Thank you, Patrick. As you know, the first quarter environment was marked by a 30% drop in oil and gas prices, a 20% decrease in European refining margins, and a collapse in product demand in line with the COVID-19 crisis. In this context, Total nonetheless reported resilient results. The debt adjusted cash flow was $4.5 billion, down 31% year-on-year, and the adjusted net income was $1.8 billion, a decrease of 35% year-on-year. Let's move to the production.
The upstream production was 3.1 million barrels of oil equivalent per day during the first quarter, an increase of 5% compared to a year ago, and stable compared to the previous quarter. We continue to benefit from ramp-ups, mainly for the major offshore fields in the North Sea, Culzean and Johan Sverdrup, and Egina in Nigeria, as well as our LNG giant fields like Yamal and Ichthys.
The contribution of these ramp-ups were partially offset by the security situation in Libya, the redevelopment of the Tyra field in Denmark, and natural decline of about 3% per year. Our Integrated Gas, Renewables & Power segment, so iGRP, reported again strong first quarter results. Adjusted net operating income was $0.9 billion, an increase of more than 50% year-on-year.
In addition to higher volumes, these strong results reflect the resilient pricing of LNG in our portfolio, notably the contract sales. It reflects as well the value of global integration, including the increased use of European regas capacities and the strong performance of LNG trading. Renewable activities increased their contribution as well during this quarter. As you know, we are committed to pursuing high quality growth for this iGRP segment, which is key to the energy transition and to further diversifying our integrated model, notably into low carbon electricity.
I know that Patrick will come back on that later. The stability and sustainability of the iGRP contribution strengthens our performance, particularly since the low carbon electricity business is outside of the oil price cycle. In the first quarter, we continued to expand iGRP along the entire integrated gas and low carbon electricity chain.
LNG sales increased by 27% year-on-year, close to 10 million tons in the first quarter, thanks to the ramp-ups of Yamal and Ichthys, as well as the start-up of the first two Cameron LNG trains in the U.S. Growth in installed renewable power generation capacity increased by almost 70%. Low-carbon electricity generation increased by 10%. We continue to grow our customer base rapidly, up 9% in the quarter, and we announced almost 6 GW of new projects. Let's move to E&P segments.
This segment generated adjusted net operating income of $0.7 billion in the first quarter, down from $1.7 billion a year ago. How can we explain this 1 billion decrease? It's due mainly to the price environment, of course, and the deterioration of the oil and gas prices that has a negative impact of about $1.2 billion. This effect was partially compensated by the increase in volume, mainly from the output I mentioned already.
Important, I think, to point out is that E&P maintained continuity of normal operations throughout the quarter. We had no virus-related stoppages and significant supply chain issues. We are making progress on the major projects under construction, and we announced, by the way, two discoveries in Suriname, plus one in the U.K. North Sea. Refining & Chemicals generated $0.4 billion of adjusted net operating income, down 50% compared to the same quarter last year.
R&C was impacted obviously by the 20% decrease in refining margins, reflecting weak product demand and by the reduction in refinery utilization to 69%. The Feyzin refinery in France, the SATORP refinery in Saudi Arabia, were both shut down for planned maintenance in the first quarter. As you know, the distillation unit at Normandy remains shut down after the fire incident occurred last December. Petrochemicals held up better than refining, benefiting from the lower feedstock costs.
Steam cracker utilization was above 80%. Marketing & Services generated $0.3 billion of adjusted net operating income, a decrease of 12% compared to the first quarter 2019. M&S, Marketing & Services , was also affected by low product demand, notably in China during the quarter because of COVID-19, but also in France in March. Sales were down 10% year-on-year, driven mainly by 11% decrease in Europe.
For the group, the first quarter adjusted net income was $1.8 billion compared to $2.8 billion in the same quarter last year. As already explained, this reflects the impact of lower prices, lower refining margins, and lower demand. The group net adjusted cash flow was $4.5 billion compared to $6.4 billion in the same quarter last year.
This 2 billion decrease was driven mainly, once again, by the drop in oil and gas prices, more or less $1.5 billion effect, and a decrease in downstream cash flow for an effect of $0.6 billion. In addition, dividends from equity affiliates were lower year-on-year due to the environment and timing effects. Let's move to investments. Net investments during the first quarter were at $3.7 billion. Organic CapEx at $2.5 billion, down 12% compared to the first quarter 2019. Net acquisition were $1.2 billion in the first quarter.
$1 .6 of acquisition, mainly for Adani Total Gas Limited in India and the second tranche on Arctic LNG 2 in Russia, and asset sale for $0.5 billion. Mainly the Block CA1 in Brunei that we sell to Shell, and interest in the Fos-Cavaou regas terminal in France. Since the start of 2019, we sold $2.5 billion of assets and we announced a further $ 0.7 billion, which are still to be closed.
Given the less favorable context of asset sales, particularly for upstream assets. We are refocusing the asset sales program to infrastructure and real estate. The balance sheet remains strong, with 21% gearing at the end of the first quarter. Gearing was negatively impacted by the working capital built in the first quarter of $2.7 billion.
This working capital build is mainly due to seasonal or temporary effects. I will give you three elements that contributed to this working capital build during the first quarter. First, our gas and electricity B2C business generates more receivables from our customers in wintertime when consumption is higher. The second element of its explanation is directly linked to the environment.
The tax liability of our subsidiaries, particularly in Marketing & Services segments, were reduced in Q1. On top of that, we have our trading entities that were building their stocks to benefit from the contango in the market to prepare the future. We hope that, of course, that it will be translated in additional results in the future.
Having said that, as the working capital is a critical element for group cash, we have put together an action plan focusing on working capital release, and we made the decision, by the way, to incentivize our manager on their performance regarding the working capital. By year-end, in a $30 per barrel environment, we anticipate $1 billion working capital release.
Let's move to our net liquidity. This net liquidity at the end of the first quarter was $21 billion. It is $9.5 billion of net treasury. I mean, the cash minus the debt that has a maturity less than 12 months, + $11 billion of undrawn credit lines. In April, we reinforced this liquidity by adding sorry, $10 billion of additional funds.
We issue more than $3 billion of long-term bonds on the market at competitive terms, and we drew $6 billion out of newly negotiated credit lines. Summarizing the first quarter results, our business segments were resilient in a weaker environment and the strong balance sheet, the low cash flow breakeven, puts us in a favorable position to cope with the challenges ahead. I leave the floor to Patrick to describe the way forward.
Okay. Thank you, JP2. We are good. Like the results, which were quite resilient in this difficult environment. The Q1 results, to be clear, are maybe the best of the year. We don't know where we go, but I can anticipate that the Q2 results will be much lower because in fact, in Q1, when we look to the impact of the COVID-19, it was mainly for business in China and M&S during the two months.
I would say since March 6th, for the rest of the group, so it's more or less one month, I would say, which has been really impacted, plus some inventories effect by the end of the quarter. I think Q2 will be more complex. It's why, by the way, we made something today.
I will make something today, which is quite unusual, which is to give you more guidance about how we can see the year. To be honest, it's not a very good, easy exercise because these extraordinary circumstances are characterized by a lot of uncertainty. The way the economy can exit, European economy, U.S. economy will exit from this special period of confining will be as quick as in China or not. Lot of question marks, but I think it was good to give you more guidance and to correct a certain number of anticipation compared to what we told you in February. First, I will use a few slides.
The first slide is, of course, to tell you that we are facing, with all the teams of the group around the world, this COVID-19 challenge and priority being, of course, the health of all our people and again, the continuity of all our operations in a safe way. A lot of people or lots of our employees are working from home and it works.
I would say the IT systems of the group are also resilient. We can have more than 20,000 people working same time from distance. It's working well. We have also, of course, reorganized all the operations on the ground with more rotating teams in order to be sure that they don't cross each other. We have taken some measures in terms of protective equipment. Masks are mandatory in the company.
You cannot enter into any site of Total without having, if you have a temperature which is abnormal, we take the temperature of everybody coming. Of course, we dispatch in all the company sanitizer gel. We reorganize. We are, by the way today in France, reorganizing all the offices and on all the sites in order to be able to keep the social distance between the people, which is I would say, what is required by the health authorities.
This is of course obliging us to find new ways to work, but it seems to work, thanks to the efforts of everybody. Our operations, we have implemented some business continuity plan, which means that we have, in our subsidiaries, limited the staff to what is essential people, looking to how we can ensure, again, all the productions on the sites and maximizing the availability.
We control, of course, strictly the access to the sites on all the offshore platforms. There are some, if we think there is a risk of PCR testing, we put the people in quarantine before they go offshore. Actions have been done in order to ensure that continuity. Customers is also important. Our retail network is open at 95%, which is quite high.
Unfortunately, to be honest, when I would look to the statistics. The business is not at that level in France. We have lost about 70% of the business in marketing. In Germany, it's around 35%-40%. Our people are there, and we have reorganized that to keep the social distancing. We continue to supply gas and electricity, and we take care, of course, of our communities as much as we can. We are providing some masks in some of our countries.
When we acquire some of our masks, we give some of the masks we acquire to our communities. We have put in place some special program, in particular in France, but in other countries as well, in order to provide free gasoline to some healthcare professionals. It's a strong move in France. 1.2 million people, healthcare professionals, have received cards containing EUR 30 of gasoline, and they appreciate a lot.
It's strong. It's good to demonstrate, I would say, the solidarity, mutual support in these difficult times. It's a value of the company, and we have to demonstrate it with our communities around us. That's the COVID-19. Again, everybody is on board, and we are on the first line of this war. Of course, following slide. The oil market. This is a crisis we face. I will not make you a lot of lessons.
You read everything. What I would just say is that, of course, you know that we are facing a clear overproduction. We have really, in our industry, a difficulty to adapt our production capacities and our production levels to the demand. We have even done the contrary during one month, growing our supply instead of lowering it.
I think, well, thank God, the various producing countries have seen the dramatic effect on the oil price, and they have decided to take actions by putting in place some quota. Not only the OPEC+ country, with almost 10 million, but other countries are joining the group, including, by the way, a country like Canada. We'll come back on the Total case, where obviously today it makes little sense to produce oil when you have a negative margin on variable cost. The industry is facing the situation.
I met a journalist this morning who was telling me, compared to 2015, I told him it's much more an unprecedented situation, because in 2015, we are facing inventories growing from 58 - 70 days. Today, we have jumped to 90 days.
This is, of course, the most difficult part for all of us, is that not only we could face a shortage of inventories, but more fundamentally, that means that it will take time before to be able to decrease these inventories. By the way, I was in the announcement by the OPEC+ countries on April 10. What was interesting was not only the quota of 10 MMbpd immediately, but it was the fact that they have fought to maintain quotas until the end of 2021, 6 MMbpd .
Of course, this is the fact that we face really these inventories, which will put pressure on the price. Again, difficult to anticipate, but this is the natural feeling we have. This is why, again, we took very seriously the situation. March 21st, we presented to you and we communicated immediately a first action plan that we need to reinforce today. Next slide.
On the next slide, that's the fundamentals, which I want to remind you because it's very important. Each company is entering into this crisis with different, I would say, fundamentals. Ours today are much better to weather the storm than the ones which we are facing in 2014. Low gearing, excluding lease, around 17%. More fundamentally, a cash breakeven, which is under $25, even $22, $23 per barrel. In the action plan we will put in place, we even lower this breakeven.
These two fundamentals on which I was insisting as being really at the core of the strategy of the company are giving us today competitive advantage. It is time, of course, to use this advantage compared to other competitors.
I would also say that, like you see this table, that our CapEx today, organic CapEx, are half of the ones which were there. We've also some lessons learned, which was to keep some flexibility. Flexibility in our CapEx. What we will present you is if we can quickly decide to cut the organic CapEx is because, again, in organic CapEx, part of that, we're flexible, and it's around $ 3 billion.
We can activate quickly, and we can activate them because we have the contracts designed to be able to activate, so we can stop some rig contracts in order to stop to make i nfill wells , in Angola, or elsewhere in the world. This was the lessons learned from 2014/ 2015, which has been implemented in the company in a disciplined way that we can leverage today.
The crisis is there, and the chart on the right, on the side, demonstrate that it's quite a big gap in terms of cash. In March, when we made our first action plan, we evaluated the pure price impact. We have taken an assumption, can be wrong, of course, but the average of the coming nine months is a $30 per barrel. We took the first quarter, which was around, I think, $50 plus the three coming quarter at $30.
It's an average of $35 per barrel. In March, we only evaluated the price impact with our metrics, I would say the sensitivity. It was around $9 billion, taking into account a lower refining margin, gas price. We gave that figure to make a plan. What we have done since, after this action plan, we have asked our teams to rebase their budget.
There was an intense work to be done everywhere in the company. I must thank all our teams for this hard work. The idea was, of course, for them, one, to absorb the cost action plans on OpEx and CapEx to confirm our first plan and to put it in the figure so that it's shared and accountable of it, also to better evaluate the impact of the crisis on, I would say, the activity.
On the production on one side, on the refining on the other side, and the marketing and sales. They came back to us, and today, with the assumption we took, we evaluate the cash gap, not of $9, but around $ 12 billion. It is why we need to reinforce our action plan today. Next slide. In terms of production, you had a guidance in February that we could raise our production by 2%-4%.
The 2%, between 2% and 4%, I remind you that it was linked to the closing of the Anadarko asset. Today, we are reevaluating all these guidance on production. We say 2.95 MMbpd- 3 MMbpd . It will depend, of course, on the way that the OPEC countries will implement with discipline their quota.
Let me be clear, the policy of Total my instruction in the group is we apply the quota everywhere it is required by the country. It is our interest, honestly. Of course, we have some countries where it will hit Total, like Abu Dhabi, Iraq, Nigeria, Angola, Kazakhstan. Less, not so many, in fact, when you look at the list. We have the quota of OPEC+.
We have voluntary reducing our production in Canada together with our operators, on dividing more or less by two, even more on one of the fields. I think that is part of the contribution. We had also an effect which was, by the way, taken into account at Q1 production already, the Libya conflict, where we have two fields, El Sharara and Waha, which are closed down, shut down. Only the offshore production is producing.
Some impact on some gas local demand that we can see because of the COVID-19 as well. We give that guidance of 2.95-3. Honestly, if all the quotas are really well implemented, it should be next to 2.95 rather than 3. It's difficult to understand all what will happen during the coming nine months. Second slide, in terms of impact of activities, the downstream.
There again, clearly we have an impact of the lower demand. That's true that all refineries had some, I would say, availability issues during the first quarter. Like Normandy, what was mentioned by Jean-Pierre, was lost because of a fire at the end of last year. We had also some turnaround in some of our plants. Today, in fact, our refineries are running in Europe at, I would say, around 60%, more or less.
We have some of the refineries, like Grandpuits, which was going out of the turnaround. We decided not to restart it for the time being. Feyzin as well. The demand will come back, when the business, the economy, will wake up again after this, we say confining. People are today closed. They cannot really work. The demand will come back. We will see with pace.
What we anticipate is a utilization rate of a refinery, rather around 70%, 72%, 75%, compared to what we had done last year around 85%. It is a decrease of, I would say, around 15% of utilization rate, which of course will impact the cash flow from refining. On the contrary, on petrochemicals, we have clearly better news, I would say. It is more resilient business for two reasons.
In fact, the demand is not so impacted. Demand for plastics, for food, and for hygiene are quite strong today for obvious reasons. Also petrochemicals, we have some flexible crackers, and we benefit in that business from low cost naphtha or low cost ethane. We have a capacity to have a certain resilience, and the results are fine and are good.
That's the good news, which we compensate, even not fully because the size of business is not the same, but that's a good element. On the M&S, clearly, we are suffering hardly today during this second quarter, in particular in Europe. M&S is mainly run for retail network around Europe and Africa. In Europe, we observe, we think around the demand decreased by 50%.
As our fixed cost on variable cash margins is around 50%, that means that if you lose 50% of your revenues, you have no cash flow out of this business during the quarter. That's why we have an impact, more or less, we evaluate around $600 million. All in all, when we look at it, the guidance we give you for the downstream cash flow for the year is around $5 billion-$6 billion.
I remind you, in February, it was $6.5 billion. I think we gave you $6 billion-$7 billion. It's $1 billion of difference. We see maybe we are a little pessimistic with the $5 billion, but it's difficult to anticipate, and I think it's good to give you such a better vision of where we go for the right of the year.
That means that we have to upgrade, I would say, or to update and to upgrade the response to the environment. In Total, we strongly believe it's a philosophy that we have to help ourselves, we have to take actions by ourselves. Maybe you have noticed, I was one of the first CEO in France to say that we will not ask anything, any help from the state.
I think it's good to have this self-set, to keep our independence and to be able to, because the company is strong enough, the fundamental is good, and we know that we can have some resilience internally. On the capital side, the reduction, we announced $ 3 billion in March. Today, we are increasing this capital savings by $1 additional billion.
We have activated there again, on the organic CapEx, it's more than $ 3 billion, I would say, or what was flexible CapEx. We have also stopped some few FID projects, which are not maybe in the least priority today. I would also say that, and I will come back on it, Occidental officially told us that we cannot acquire the Algerian assets.
That, of course, release part of the acquisition budget. On the same time, maybe we are prudent. Algeria was around $ 2 billion. We release today only $1 billion because we also know that the, I would say the divestment budget is much more complex to execute. It makes no sense to me to try to sell an asset like Bonga in Nigeria, it was public when we put on sale.
We stopped the sale because we don't want to lose value on the upstream asset, an upstream asset of high quality like this one. We are replacing it with other ideas, but it could take time to execute it. $ 1 billion additional is coming from, I would say fundamentally the M&A, the net investment budget, the net M&A budget, net acquisition budget.
At the same time, again, I repeat it, and it's linked to my second part, we maintain our low-carbon electricity investments at $ 1.5 billion-$2 billion. On the OpEx savings, we announced $800 million. Difficult to increase it a lot, but together with the bottom-up approach coming from the teams, we have set a new target to $1 billion.
To be clear, I announced this morning that I have proposed to the Board to reduce my salary by 25%, and the Executive Committee has decided to follow this effort with me with 10% until the end of the year. I think for us, it's a message of exemplary within the company. We are asking big efforts to everybody. We don't want to release to no idea to decrease the workforce.
We have freeze the recruitment, which means reduced a lot, to be honest. We'll more or less recruit in 2020 the level of people that we recruited in 2015/ 2016. We are back to these tough years, but we trust the people who are today in the company to execute all the saving programs, and we show some exemplary by applying this decision on ourselves.
You can see on the slide that the Refining & Chemicals will benefit from $1 billion of energy savings, which will be, in fact, good for their margin, which is not so high because of the demand. It will help Refining & Chemicals or refining business to face the situation. We don't add this $1 billion as a clear saving because it's part for me of the refining margin, of the assumption of refining margin.
We have shareholder return because, again, we have to help by ourselves, but we are also to ask to our shareholders some effort. We are planning at $60 per barrel, like we announced in February, a cash shareholder return around $9.5 billion, $7.5 billion + $2 billion, more or less. You know that we have decided immediately to stop the buyback in March.
I will come back on the shareholder return mindset of the board at the end of my presentation list. I will not describe it now, but the message that we have proposed a limited, a one-shot scrip option, and I will come back on it on the last quarter of the 2019 final dividend. At the end, the result is that we will give back to our shareholder return $7 billion instead of $ 9.5 billion.
$7 billion, if you take slide number four, you will see that the cash flow from operation is around $15 billion, so it makes around 45%, so it is not so bad. That means that we praise a lot and we attach value to shareholder return despite these difficult circumstances. I will came to the next slide. This one, I will not comment it long. It is the same slide we used in 2015/ 2016.
The four keywords, which are the mottos of the company, HSE, delivery, cost, and cash. Be excellent of what we control. Everybody, I think around the company is motivated. H because of health, COVID-19. S because safety, of course, that's a fundamental. It's been more fundamental when difficulties are there not to have any accident. E, and I will come back and say on the other part, is CO2.
Everybody is mobilized on this challenge as well. Delivery because it's the only way to generate cash flows, increasing the availability, the use of assets. The cost I've already explained. The cash, no need to say that it's the heart of the work, the blood of the company.
Because the cash is the blood of the company, yes, we have decided to clearly reward the people and our top executives on their capacity to release this $1 billion of working capital because it's also part of what we must manage in the company. To summarize this next slide, the 2020 action plan. Four or five key figures today.
Cash preservation, $7.5 billion cash savings plus a $1 billion of working capital release. Guidance, production guidance 2.95-3. Downstream CFFO $5 billion-$6 billion. Liquidity, which is obviously very important to what Jean-Pierre explained to you, I think it's key. We have increased it. We have taken actions as well. We never know where the financial systems could go. We prefer to have some cash in our pockets, in our treasury rather than outside.
I think it's a net liquidity, which means it's a gross treasury plus overall credit facilities, minus the short-term debt under 12 months of $25 billion. And you know that we attach some value to maintaining our Grade A credit rating, which where we are today. I would like some, before to give the floor to Q&A, to make some comments. Next slide.
On what are the mindset and the discussion at the Board level on the shareholder return. I'm sure that it's clearly a debate that has been, put on the public domain with one of our colleagues, and I read a lot of papers during the weekend, interesting papers. I would say the way we look at it, we discussed it. Of course, the first responsibility of the Board is to preserve the future of the company. That's important.
At the same time, the Board has strong trust in the fundamentals of the company. I think if today, the investment case in Total is offering two major differences compared to some of our competitors, which are these low break-even under 25, and the low gearing under 20%. That means that we can use our balance sheet to weather the storm and towards the shareholder return.
Really, the discussion of the Board is that we are conveying that it's a good time to show the difference and to use our competitive advantage to demonstrate why the investment case in Total is superior to those offered by some competitors. The second element of the debate was, yes, at the same time, unprecedented market condition, extraordinary circumstances. What is the level of cautiousness, but also no overreaction.
The feeling of the Board, yes, we have a lack of visibility, but we should not make premature decision and overreact. Let's wait. We can resist. We are resilient. We have some resiliency. Let's see better visibility. Maybe not Q2, by the way, I think it's better by Q3, because at Q3, we will see if the U.S. economy, the European economy, the speed to recovery to more normal level.
We'll have also better ideas of the way that the OPEC+ countries are really implementing the discipline of implementation of the quota, so a better visibility as well on the oil market. We think that we have, again, the balance sheet to resist, so no overreaction on our side.
I would also say that, in the timing issue discussion, it was clear to us that, yes, we can be very quick in Total to make some M&A deals. When it comes to shareholder, it's better to think twice, and we value the long-term relationship. It's a matter of trust. We build trust with time, and we know we can destroy it quickly. I would say that's the point.
On cautiousness, of course, there is a dose of a certain cautiousness as well. Stopping the buyback, I think, was obvious. You have observed that we have decided that to offer the scrip option for only, and it's a one shot of scrip option, so 2019 final dividend to the AGM. You can see that. It's, again, $1 billion of cash savings.
We have, by the way, bought more than $500 million during the first quarter, so there is a balance there, more or less. Having said that, what is important is that, what the Board has decided as well, is not in the resolution, which means that we have rejected the idea to offer the scrip dividend for the full year 2020, because we don't have any resolution.
You know, in the French legal system, it's the AGM have to decide a scrip dividend. On the AGM of May 29, only the scrip dividend for the final quarter will be offered, but not for the rest of the year, again, because we have the fundamentals and we are ready, and the Board is clear that we can use this leverage balance sheet.
I would also say with the same idea that, in fact, when we look to the size of the dividend of Total, around EUR 7 billion-EUR 7.5 billion depends. It's in euros, it depends on the exchange rate between $7 billion and $8 billion. When we make our test, about $40 per barrel, there is no problem. We can finance our investments, we can pay the dividends, we are comfortable, again, balance sheet is up to weather the storm.
At the same time, it's true that, I have read some interesting papers from some of you, there is an opening debate in our industry. We all have, I would say, a progressive dividend policy during several years. Today, there are some voices about should we switch to more variable dividend linked to payout policy like some mining companies.
I think, this is a dialogue we cannot debate, which we need to share with our shareholders. Again, it's important to have their input. In the same way that we have engaged with our shareholders about the climate policy, I think it's even more important to engage with them on such a topic, and to share it. That's the mindset of the company, of the Board, and that's why strong confidence is the fundamental of the company.
We prefer to wait and to have a better visibility of the macro environment on the oil markets and to engage and to have the inputs of investors, because if we have to face a longer crisis, if the price remain at $30 per barrel or under for long, obviously we'll have to take action, and that has to be shared with our shareholders. I've been a little long on this one, but I think now we can enter on the Q&A.
Thank you, sir. Ladies and gentlemen, we will begin the question and answer session. To ask a question, please press star one on your telephone keypad. Your first question comes from the line of Michele Della Vigna of Goldman Sachs. Please go ahead. Your line is open.
Thank you. Thank you very much. Congratulations on the resilient results in such a difficult environment. I have two questions, if I may. The first one is about LNG. We are seeing a clear divergence between LNG prices and Henry Hub, which are leading to negative margins, at least this summer. I was wondering if some of these movements perhaps have made you more wary in terms of increasing the exposure to U.S.
LNG and have made other projects like the one you're developing in Mozambique actually more resilient and less risky from a basis perspective. The second question I wanted to ask you is, if possible, to break down organic versus inorganic in the $14 billion budget. To clarify on the Occidental Africa acquisition, if effectively the second part of the transaction with Nigeria and Ghana has been canceled or just delayed at this point in time. Thank you.
Okay. Thank you, Michele, for your questions. Always very interesting and challenging. I will take the first one. On LNG first. You have noticed that our LNG activity has been quite resilient. By the way, the second quarter from this perspective should be quite resilient as well because, in fact, on our long-term price, we have a sort of six months of delay between the oil price and the energy formulas.
It's the second half of the year, we should see more impact on the lower oil price. It is clear that, yes, we face today, people speak a lot about the oil market, but the gas markets are suffering a lot. It was already because since last year. We have an exposure to the Henry Hub, that's clear.
We are on the way to, I would say, cancel some of the LNG tankers during summertime in order to limit some losses. It's true that we have, on all sides, I would say, we have projects. We are working still on one project, the ECA projects in Mexico, because it's on the Pacific Coast. Together with Sempra, we see a lot of value. You save more than $1 per million BTU of just the trip to Asia.
This one is not a big project. This one, I think we are aligned with Sempra, and Mitsui, we should move forward in coming months. Other projects, the answer is no. I mean, to be clear, today the priority is not to invest more in merchant projects in the U.S. Clearly, we have the expansion at Cameron. We'll see with Sempra where we go.
The greenfield project, like the option we have with Tellurian, I think there is no reason to be a strength to move forward on this one. That's true as well, like you said, from this perspective, the acquisition of the Mozambique LNG project was a different nature. We always explained that it was a project which was developed by Anadarko, I would say, in the old way, with long-term contracts, linked most of them to oil prices.
That was the big interest for us on the Mozambique, not only the size of the resource, which give space for many developments, but also the quality, I would say, of the portfolio of values. That's one of things. That's true that we have, I already said, I think in February, we have a lot of LNG in our portfolio. We have enough projects.
It's not time to add on it, maybe except the ECA. The status of Occidental , as I told you, no, nothing is canceled. To be clear, there is an SPA which is valid, and the long stop date is one year after the Mozambique closing, which means end of September 2020. You know the issue, everything is public because all that has been disclosed to the SEC, so you can find all the contracts.
The Algerian sale, Occidental notified us that they cannot deliver to us the Algeria asset because of the position of Algeria authorities. We want, in fact, fundamentally to keep the operator as it is today. Occidental will remain as an operator. They did not approve, in fact, the change of control of Anadarko to Occidental . They approved it, but just under the condition not to sell it.
That means that Algeria will not be done unless Occidental finds a way to come back to us, according to the contract. On the Ghana, things are moving on. Again, I will not elaborate more on it because we have a contract with Occidental , it's between the two companies, but we have to decide the way forward. Organic versus M&A, I would say, in the 14, I'm not sure to have a figure. It's probably something like 10 to 11, and three to four. No? Yeah.
Yeah.
All right. 11 and three or 10.5. I don't know exactly the figure, just to give you some range.
Thank you.
Thank you. Your next question comes from the line of Jon Rigby of UBS. Please go ahead. Your line is open.
Thank you. Yeah, just to follow up on those two questions. Is it possible, there's obviously a lot of moving parts in iGRP, and results held up very well in 1Q. Assuming everything else is held flat, what would you estimate would be the effect on 3Q or 4Q results from the fall in oil prices in 1Q? I guess as a way of you being able to make that estimate, just arithmetically.
Then also, just to follow up on the comments you made about Ghana. Is that deal still alive, even with you not being able to complete, on Algeria? Particularly, I guess, with all the other things that are going on that were not conceived of in the original contract.
It would seem to me is that what you're attempting to call, what Occidental will be attempting to complete on, is a very different transaction to the one that you thought you were getting into a little over a year ago. Thank you.
Okay. On, iGRP, the part of the reserve which is linked to the LNG plant, LNG-
Assets
assets, is around, out of the 900, around 400, I think, more or less. This part will be impacted, and you can imagine that if the oil price is divided by two, it will be impacted in a way which has to be evaluated more or less proportionately. I don't have exactly the figures, Ladislas will come back to you, but it's more or less the order of magnitude. It's not so big in fact, but there will be an impact mainly on the results of the LNG assets, on the second half of the year. On Ghana, again, I think I just answered to you. Again, a lot of things have changed, including the new environment. We are working with Occidental on it.
As I said before, I think, all that is also linked to position of the Ghana authorities, and also linked to the environment that you knew and you know very well, I think, that the attractiveness of Total of Ghana was not at the same level than the other assets because it's non-operated asset. We have less appetite for this one than we had for the other one.
Okay. That's clear. Thank you.
Thank you. Your next question comes from the line of Irene Himona, Société Générale. Please go ahead. Your line is open.
Thank you very much. Good afternoon. I had two questions, Patrick. Firstly, if oil were to average, not 30, but around 25 for the rest of the year, and given the lack of visibility, and if you need this environment to save another $2 billion or $3 billion, what is the process of introducing a further dividend scrip? Would you call an extraordinary meeting?
Why not get authorization now, given the uncertainties, just in case it is needed? My second question, just in terms of short-term guidance in the second quarter, what can we anticipate for the group tax rate in Q2 in the current environment, compared with the 30% you had in Q1, please? Thank you.
Okay. I will leave the second one to my CFO, expert in tax. For the first one. Let's be clear. I am very clear. We know the negative impact of the scrip. We know that there is a dilution, that our institutional investors do not like it. We know that we have used it from 2015 to 2017. Maybe by the way, we keep it too long. You take some lessons from the past. By the way, today when the share price is around $32 or $30 per share, the dilution effect is even larger. It is not for us the right tool. Be clear, the decision is clear. We will not convene any special AGM to introduce a scrip. It is why it has been very clear.
Clearly, in fact, for us, it's not the right tool, if we have to face the higher storm, like you describe. Again, we think that the fundamentals of the company are strong enough, and we are comfortable with what we said. I think we have other flexibilities, like the one we discussed just before about M&A, which could come to help the company if we need to help more the company.
That's clearly for me, it has clearly been a negative decision from the Board about this idea because again, the dilution is too hard and has a negative effect. By the way, in fact, at the end, you borrow money at 8% or 9%. It's quite expensive. No, it's not the right way to reorganize the shareholder return.
And so-
On the tax rate, Jean-Pierre
I can take the tax rate question, Irene. At $30-$ 35 per barrel, we could expect group tax rate around 15%, one five t aken into account an E&P tax rates in the range 25%-30%.
Thank you.
Just to complement Irene, you know that in France when we put a resolution, it's not an option for the Board, we are obliged to use it. It's complex. That's why we don't want to be tricked to be trapped with the scrip for one year, because once it's voted in France, we cannot decide not to use it. It's not like some of our colleagues, in U.K., have an authorization and an option, but we don't have it like that.
I see. Thank you.
Thank you. Your next question comes from the line of Biraj Borkhataria of RBC. Please go ahead. Your line is open.
Hi. Thanks for taking my questions. I have two, please. The first one's on some of the details you provided. Thanks for all the comments on the levers you're pulling. One of the big ones is obviously the balance sheet. You'll be adding to debt over this period.
I was wondering how you think about the upper limit on the balance sheet. I think within your compensation scorecard, there's a 30% ceiling on your net debt ratio. Should we consider that as a hard ceiling? Second question is on production volumes. Regarding the shut-ins that you referenced in the near term, can you comment on what this means for your production capacity into 2021, and how much you lose there? Thank you.
Okay. Good, clear. It's not the right time to change the variable pay of the CEO, to be honest. These criteria were put in place a few years ago, when I took my job, on the gearing, incentivizing the management to pay attention to that level of debt. 20% maximum, 30% zero. I think, the objective was clearly under 20%.
We do our best to be under 20%, and I think we are far from going to 30%. We have some room to maneuver there. I think, in the simulation, with what we said about the working capital release and, despite, by the year-end, at $30 per barrel, we should be around 21%. I think this is what we have simulated. Maybe it's a little higher than that.
Yes, 30% is more of an hard feeling, but my personal objective is to maintain it lower than that. Again, we don't take decision and the Board does not take decision only linked to one of the criteria of the CEO. When we came to use the balance sheet and in these exceptional circumstances, we are able to take decisions independently of the criteria.
Production guidance, I think yes, there will be some impacts, the fact that when you decide to not to drill some short cycle wells, but you don't have the benefit last year, so it's probably around I don't have a figure. I think I read something around 50,000 bpd. Again, these are short cycles, so if we want to reactivate them, we'll be able to do it as well. That's clear that this could have an impact, let's say around 50,000 bpd to give you an idea.
Okay. Thank you very much.
Thank you. Your next question comes from the line of Lydia Rainforth of Barclays. Please go ahead. Your line is open.
Thanks. Good afternoon, everyone. Just one quick question, actually. In terms of the approach that you're taking around keeping New Energies' CapEx, and I know we'll talk about that a little bit later, but also the digital recruitment going, can you just talk about how you're actually seeing that, whether that's changing in terms of the update that you've given this morning? Is the intention still to keep those two businesses largely unimpacted? Thanks.
Yes, New Energy CapEx, which means what I call low carbon electricity, and it's fundamentally it's either renewable or marketing B2C or B2B business, like the one we have invested in India. We have a budget which was announced between $ 1.5 billion- $2 billion. I can give you probably between nearer than $2 billion than from $ 1.5 billion.
This year in 2020, because we have already done some deals. It's not only organic, it's also inorganic. We are building a business, we need to be serious about it. I think it's part of the future of the company. We keep that, and again, we should be around $ 2 billion because we have done already these investments in Adani. First quarter has been very active.
If you read the key facts of the press release, there is more key facts on this part than on the rest of the company, I think. 2 GW in India, 2 GW in Spain, 1 GW in Qatar, 1 GW in France. Yes, we think it's part of the strategy and this one could be considered as flexible, but we don't consider it as flexible because we are building the broad energy company that Total wants to become. By the way, I would add another element which is important. When you look to this type of business, I know that they have a reputation not to offer the same profitability.
When I see 10% of return, which is what we are able to do today, after in our low CapEx model, when we invest in 100% of an asset, a renewable asset, and then we resell 50% of it and we leverage from these, I would say, farm down, part of the profitability. This type of assets, 9%, 10%+. Compared to an upstream asset, which is volatile at $30, it's good to have this type of asset as well in the business.
Fundamentally, I see these new low carbon energy, low carbon electricity assets are bringing to the company, and to the group, a sort of more stable balance of revenue. It will take time before it will be at a size, will influence fundamentally the global business model. That are the reasons why we intend to stick to this investment. That means that, if we make $2 billion, let's by the way, this year, out of $14 billion, it makes something like 13%. We are slowly growing the investment, the share of investment in this business unit.
Okay. Thank you.
Thank you. Your next question comes from the line of Christyan Malek of JP Morgan. Please go ahead. Your line is open.
Hi. Thank you, and thank you, Patrick, and also hope you and JP2 too are staying healthy, especially with the stress of navigating the company through this crisis. A couple of questions. First, regards to capital frame, the logic of sustaining dividend at these levels in the context of CFFO. The second question is on the impact of the CapEx cuts on the future oil production.
Regarding the level of the dividend, now your dividend as a percentage of CFFO is one of the highest of the peers of the European oils at just under 40%. Regardless of the impact from this current crisis, do you think this is a relatively high level and it limits your ability to spend more on energy transition and your oil growth, as some of your peers have argued that cutting the dividend is a key enabler?
The second question sort of links into that, which is to understand how much oil production has been deferred as a result of the CapEx cut this year. If you were to raise CapEx, so flipping it around, if oil moves higher, would you allocate it into New Energies or oil? Can you give us a sense of how you sort of reallocate that marginal growth in CapEx? I'm just trying to understand on whether the updated energy transition policy comes at the expense of lower market share and oil over the medium term. Thank you.
Today, again, as I said, in my presentation, we are very comfortable. We know that in oil and gas company, we'll have some volatility, and we have to access a certain period of time to use, to leverage the balance sheet in order to maintain a certain level of returns to the shareholders.
Again, as I said, is a barrel at $ 30 for longer, for very long, there is a certain limit to what we can do. At $40 per barrel, the cash flow generation, if in a stable activity, I would say, is around $19 billion per year. $ 7 billion of dividends. I have $ 12 billion for investing. I think we are fine with that. That means that, yes, we have to make some choices.
From this perspective, on the second question, I think with $ 1.5 billion-$ 2 billion as an average, we are fine to grow it steadily. This morning, you notice probably in the, we'll come back on it in the climate statement that we said that we reach 20% of our capital allocation by 2030 or sooner, which means we have time to grow it.
We think that there is also a certain level to build. I don't think that this, and I understand perfectly the question, that this dividend at this level is impairing the execution of our strategy. The CapEx cuts impact on this year production are really minimum. When you have a CapEx program of inferior, but you cut as a second quarter and third quarter, the production it could produce is, I think some matter of 10,000.
By the way, this would have been done in countries like Angola, where we have some quota. I think our decision was just maybe anticipating the OPEC+ decision. I think it's almost very limited impact, in fact, for this year. For next year, it has a better impact. Where should we allocate capital if we have more cash? Again, I think to be clear, we have a roadmap of growing steadily this low carbon electricity business.
It will take time. We need to learn. We have to identify the right opportunities. There is no hurry. We are releasing a roadmap for climate until 2050 with some steps. I will come back on it in my next presentation. I don't feel that today we have the necessity to free some cash from the dividend to transfer it on increasing the CapEx of this business unit.
If we have more, I think priority will be to allocate the capital to where we have the higher return. If my short-term wells in Angola are quite by the way, they have a good return, 20% or something like that, providing the price come back to an acceptable level, we will reactivate this flexible CapEx. It's part of the business model we have defined to have a sort of flexibility of the CapEx we allocate also to the upstream part.
Thank you very much.
Thank you. Your next question comes from the line of Martijn Rats of Morgan Stanley. Please go ahead. Your line is open.
Yeah. Hey. Hello. It's Martijn Rats, Morgan Stanley. I had two questions as well. I wanted to ask about the downstream guidance, this figure of cash flow of $ 5 billion-$6 billion for the year. Last year, I think both the various downstream divisions together generated $ 7 billion. This year we still have multi-millions of barrels a day of demand destruction. I know Q2 was particularly weak, but across the year, it seems like a very small drop for the dramatic events that have just unfolded.
Which I was hoping you could sort of explain that to us. Why isn't the downstream weaker given the level of demand destruction? In 2009, we saw very weak downstream results across the industry, that was based on just 1 MMbpd of demand destruction. Honestly, I generally sort of don't fully understand how that works. If you could explain that would be much appreciated. Secondly, I wanted to ask JP2, what his estimate is of the amount of headroom that exists within the current credit rating. That would also be very useful.
Okay. On the downstream, the downstream is a mix of different cash flows. We have the refining, where clearly we'll have a lower cash flow, a lower utilization, which is directly impacted by the lower demand. The M&S business, what we observe in China is one month after the end of, I would say, the full closure of the country, we have reached levels of business which are around 80%, 85% back to the normality.
If we have that back level coming back quickly in Europe, which is why I told you, we think that we could. We are generating normally yearly around $ 2.5 billion of CFO. We give you that we could lose $ 600 million, maybe we are missing there by $ 100 million, $200 million, but not more. Petrochemicals could do good, very well. We are optimistic on it.
Don't forget that in refining and all this business, the downstream are also traders. The trading business loves times when you have a lot of volatility and contango. By the way, they have borrowed some money to the group. Part of the increase of the working capital is linked to our traders who are storing. I'm more optimistic than JP2.
I think that the working capital of today will be the big benefits of tomorrow before the year end. They have to deliver. All in all, my view, Martijn, is that to give you the full story, I was the one who put $ 5 billion-$6 billion . My downstream people are a little more optimistic. They look more to the $6 billion-$5 billion , but I'm a little like you. I would be surprised to have less than the guidance that we propose you.
Regarding the credit rating, as Patrick mentioned to you, of course, having a good credit rating is very important for us. To maintain A credit rating is part of our priorities. What I noticed is that, despite the revised price deck from both S&P and Moody's that was revised in March or in April, we maintain our rating. That's true that our perspective changes from stable or positive to negative on both S&P and Moody's side.
It was, by the way, the same for all our peers. It's true that if the prices remains at $30 per barrel, I think as our peers, we lose one notch probably. It's not what has been confirmed until now by the agencies, and so let's wait and see. At present time, S&P, it's my understanding, makes its calculation using a $30 per barrel price deck for 2020.
That's good. For 2020/2021, they use a higher price deck. Once again, if we remain at $30 per barrel over a long-term period, probably we'll not be in a position to maintain this rating, but we will definitely keep Grade A rating. That, once again, it's one of our priorities.
Yeah. The A rating has always been linked to the gearing and all this business. It's important for us. We have some room there to manage that.
Great. Thank you.
Thank you. Your next question comes from the line of Oswald Clint of Bernstein. Please go ahead. Your line is open.
Obviously, very tricky to call demand recoveries. Let's think about next year, over the next five years. Some of your peers are finding it obviously very tricky, and some of them have a bit more comfort around the path for demand recovery. I just wanted to know if you, as a team, have, with your experts and with your people on the ground, have formed some view of how demand might recover from here.
I mean, jet fuel, traveling, people flying, people traveling by car and public transport, et cetera. That's my first question. Secondly, obviously quite impressive to see another counter-cyclical acquisition here in terms of Uganda. It's characterized as low-cost barrels. I just wanted to maybe test that assertion. Is it truly low cost, including transportation and pipelines?
I mean, at least at the forward curve, I seem to be getting around 10% return. I just wonder what I might be doing wrong there, or is there some type of expression of oil prices recovering, potentially back up to the $50 or $60 level, please? Thank you.
Recovery, I would love to be able to answer to your questions with part of the uncertainty. To be honest, I'm more optimistic about the cars than the jet. The cars that we observe in China is that, in fact, people are using more their cars because they are afraid to use public transportation than before.
I think once, again, people are free to move, and that's a question mark, I think they will come back, to use their cars. We expect, I would say, the retail business to come back to a certain normality. The jets are more afraid. For me, as long as we don't find a vaccine, or I don't know which medicines, I'm afraid the countries will close their borders, and that there will be It will be difficult to fly again around the world.
Because each country, each government, will have a first priority to safeguard the health of their people. I'm more pessimistic about the jet fuel business than for the gasoline and diesel business, which is more, I would say, continental business than a world business. Honestly, I would love to have a precise answer to your questions. On the second one. Yes, there is a huge amount of barrel, 1.5 billion to 2 billion barrels, so it's onshore. It's not very difficult to produce.
Yes, there is a pipeline, it's true as well. We all know that. We know that when we look to this type of projects, we have some thresholds. If we have done this acquisition, which is quite a good compare to the previous deal we have done, we have divided almost by two the cost of acquisition. We have been quick to find a solution with Tullow. If we have done it's because we expect at least 10% return, yes, even at a lower price.
Okay, fair enough. Thank you.
I will take a last question. Maybe after the second session of Q&A, we could take the one, but I would like to move on time. Last question maybe.
Yes, of course. Your last question comes from the line of Thomas Adolff of Credit Suisse. Please go ahead. Your line is open.
Sure. Thank you. Just one clarification on the dividend. I guess the decision on the dividend today, as well as some of the commentary you made on the call, suggests to me that your view on the macro for the medium and longer term has not changed. Basically what you're saying today is, in the let's wait and see, COVID-19 may not have any structural implication on how oil is consumed.
I want to wait until maybe 3Q 2020, see how economies recover, and what the outlook may be for 2021 before making a fundamental decision on the dividend. Is that how I should think about the dividend and the dividend decision? Secondly, just going back quickly on LNG. LNG, or integrated gas, contributed very strongly again, and it did so in the fourth quarter as well.
I wanted to know a little bit more about U.S. LNG, whether it contributed positively in the first quarter, and how we should think about the rest of the year. Clearly, when you look at prices today, it's out of the money. Thank you.
Okay. Thomas, you did not listen everything what I said. I told you that we have strong fundamentals and that we have time we can use and leverage the balance sheet to maintain the dividend. I think it was a more fundamental message that I delivered. I also told you that we think that, and the board think, that it's premature to take decisions when we see nothing.
Which doesn't mean that we'll take, but we put a question mark on the dividend policy on the Q3. I just told you that we think that we'll have a better visibility by Q3, and that it changed some fundamentals. I'm reading, like you, a lot of papers. It can change, the visibility and the price could remain, as I said, because my inventory is at $30, $40 per barrel.
As I told you also, $40 is very different from $ 30. It's a question of appraisal, of how long it will take to recover the oil price. On the medium and long term, no, I think, again, what we said about oil, of course, linked to the demand, but when you don't invest or you invest, the investment in E&P will again be lower than before.
The shale oil, which was the way to ensure the production, will be impacted and quite quickly. According to our model, if you have a decrease of shale oil production by 2MMbpd this year, and people are more or less reducing their investment, it could become four next year. It could accelerate the miss in terms of production.
All that is linked to the pace at which demand will come back. That I don't have a crystal ball. We think that, again, these type of decisions, we have the capacity with our balance sheet and our low break-even to be resilient, and not to overreact. That, for me, is the main message. I didn't give you a meeting point in Q3 to tell you we take another decision on dividend. It's not what I told you. I told you that we can be resilient. The fact that, by the way, we decided to give up on any scrip option for the coming year is, I think, a clear signal of trust in our fundamentals.
On U.S. LNG, I don't know if we know the answer. We know we are short.. on ou r purchases represent 25% of our sales, around 10%. I would say that for me, this part, what I know, that in iGRP, I can tell you that in first quarter, the trading of energy has been quite positive.
It's also linked to the capacity to have all these world network of sources of energy, in the U.S., in Australia, in the Middle East. It's part of the system that we have established. What I observe is that quarter after quarter, they are improving the results. I think this is also part of the business of arbitration between the different sources of energy, and which is a business model they want to develop.
There are some pluses, there are some minuses, but what I observe, and it's that, again, and even when we acquired the LNG capacity in Europe, it was considered as a burden. Today they are full at 80%, and we make money out of all these type of assets. I think, the message around LNG and one of the strength of what we have built is more to have a global system with productions and outlets and customers and regas capacities which allow them to optimize it.
Okay, maybe I should move to the second part of the presentation, which is on climate. Again, if some of you want to ask questions on the first part, I will be able to take them, but I think it's good to jump a little more to the, I would say, medium and longer term, and to give you some flavor about what we have announced today. I think, in Total, sometimes, we believe more in values of doing than of speaking.
We are not so good in advertising and speaking. That's true that we have a strategy that we execute. When I observe what we have done since 2015, we are by far among the major companies in terms of reduction of our net carbon intensity, the best ones. We have reduced on this carbon intensity by 6%. None of our peers have done so well. They are far from them. We are really in action.
At the same time, because we are pragmatic, we don't like to put objectives which are too much aspirational. We are people, maybe a group of engineers. We like to be able to see what is the way to achieve the objective or the ambition we put on the table.
It's why we had until now, put two years ago, and we are ahead of the pack, an objective to 2030 of 15% of reduction, an ambition of 40%, 25%, 40% by 2040. It was also clear to us when in September last year, the new message from the scientists that the world should be neutral by 2050, we have to also to ask ourselves some questions. We have worked together with the Board of Directors.
We have also, as is important, decided, because after roadshows in February, we have met investors, more, to be honest, in Europe than in the U.S., which were willing to engage with us about this topic, what is your climate ambition?
We have decided, with the support of the Board, to engage in that dialogue with some representatives of some investors which are participating to the Climate Action 100+ in a positive way. Of course, the dialogue was fed, I would say, by all what we have prepared at the company and with the Board. The idea is that, yes, we share fundamentally the ambition to become carbon neutral by 2050 together with society. I will come back on all the words of the statement.
Because also we observe in all our tools with our shareholders, investors, that more and more the ESG movements are gaining credits. We don't want to suddenly to become a laggard from, I would say, a investor's point of view, while at the same time, in terms of investment, in terms of actions, we are leading the pack. There was a sort of disconnect.
It was, we say, okay, we need to express this ambition. In the thinking of the Board, I want also to say that we see clearly two different packages. There is what we call the Scope 1 and 2. Scope 1 and 2, you all know that now, is all what is under our control. These are the emissions of our own operations.
Clearly on this one, there is no doubt for us that we should go to carbon neutrality. We are responsible when we produce, when we refine, when we transport of these emissions, which represent 45 million tons, more or less today, going to carbon neutrality, which means that on one side, we work on the technology to reduce our emissions, mobilizing our teams. The net carbon neutrality, which means as well that we can use some carbon sinks in order to get to the neutrality. That, for us, was a clear since last six months, was clear that this was the easy part of it.
We had a debate about the Scope 3, which is the global, I would say, ambition, where obviously we are, as you know, we are not the only responsible of these emissions because we sell products, energy products to customers. They are used by our customers. We don't sell a plane, we don't sell a car, we don't product cement. At the end, we are not the experts in how should we design the engine of a plane. Rolls-Royce or Safran are better than us, and we don't know if they should use petrol or oil or gas or hydrogen or I don't know which other energy means. What is clear as well is that this is on the table.
That means that Total, which has an expertise in all this energy business, should work and must be proactive in helping the world to, I would say, adapt its demand frame for energy. We said to ourselves, okay, we need to be able to express this ambition on the Scope 3. It's not we are not alone, we'll not do it alone. If we express, we say to ourselves, we'll be carbon neutral in Scope 3, that means that clearly I'm just telling you I will quit this whole business because there is no way to do it. This is not the mission we have. We think that we have to deliver energy to the world.
At the same time, when we observed that there is one region of the world, which is Europe, which is, I would say, at the forefront in terms of societal willingness to go to carbon neutrality. Society in Europe is willing to do it. The governments in Europe are expressing it through a real movement and ambition, objectives.
They want to put policies, they want to put incentives, they want to put regulations, even in some countries. For Total, Europe is very important because it's 60% of our sales today and 60% of our Scope 3 emissions. Around 280 million tons of our emissions are in Europe. Fundamentally, we say to ourselves, okay, on Europe, we propose to our shareholders to become a European company by statute on our next general assembly.
We have to be proactive and there is no way for us, to Europe, we can't carbon neutral. That means there will not be many thermal vehicles in 2050 in Europe. We have to adapt ourselves and to be proactive. Carbon neutrality in Europe, we can take this commitment on Scope 3. That's a big step towards European continent.
That's the pieces that we put on the table. For the rest of the world and the global Scope 3 ambition, we consider that today it's premature. It's premature because Europe, yes, has expressed a clear willingness to be like that, but some of the parts of the world are not there. They maybe take more time.
We hope, let's be clear that Europe will be, I would say, the light of the world and more regions will join the same policies and regulations, and then Total will commit to do it on this region as well. On the global world, we said the best way to express our ambition is through this net carbon intensity indicator. What we propose today is to decrease it by 60%, and I will come back on it. That's really a comprehensive framework with some three clear steps to go to carbon neutrality. We really share the ambition to get to net zero by 2050, but in step with society.
We'll not do that alone, and we'll not do it against the society, because, to be honest, I could get rid of my oil suddenly, but I will sell it and somebody else will produce the oil. It will not help the global climate if Total just decide to leave this business. It's not at all what we think we should do. We have some expertise.
We think we can be one of the prominent player of this new energy world, and this is what we want to do. It's a little long introduction, but I think I set the scene in the way that we have the mindset of the management. It took us some time, yes, but now we are clear of what we put on the table together with, again, investors, and this dialogue was very valuable to us.
Just next slide, I will be quicker. Just to remind you, and if we take that commitment on the new climate policy, it's because it's sustained by the strategy. The strategy, I repeat, is to become a broad energy company, a multi-energy company. Clear that we prove this, what we express today, we say, yes, it will take time, but we'll grow, and I will clarify the timing of this strategy.
We do it because there is an evolution of the energy market. You all know that. I will not repeat it. Natural gas, low carbon electricity will become predominant. All petroleum products will diminish in the carbon mix, and we'll need some carbon sinks. We do it because we believe this low carbon strategy is giving a competitive advantage for long-term shareholders value. That's, I would say, the key message.
The ambition is sustained by the strategy. If I go to next slide. It's just what I just expressed during my introductions. It's a summary of what we are committing and what we express today as the ambition getting to net zero. Yes, we share the ambition to get to net zero by 2050 together with society for our global business. We take three major steps today.
Net zero on our operations Scope 1 and 2. Net zero on all our activities, Scope 1 to 3 in Europe by 2050 or sooner. Globally, a net carbon intensity reduction by 60% by 2050, 60% or more. We have expressed it in a swing factor in absolute value, 27.5 g of CO2 per megajoule.
Which by the way, if you compare to our peers, is the lowest absolute value which has been put on the table by 2050. Next slide. We also in this paper, it's a comprehensive approach. It's not just about metrics and 2050. It's also, of course, it will impact our capital allocation to be consistent with this ambition. In particular, in the company today, we are using $40 per ton of CO2 pricing in all the investments. We also ask our teams to test all these CapEx with $100 per ton from 2030, which will raise the ambition and which will, of course, will direct part of the capital allocation.
As I said, mentioned before, we will reach 20% of CapEx in low carbon electricity by 2030 or sooner. We also made annual review of progress, and we engaged with all the professional organization on this climate policy. That was already, I would say, done by Total. Next slide. These are slides which are just illustrating the three steps that we are taking today.
I will not be very long. The Scope 1 and 2, of course, this net carbon neutrality, there will be still some emission because in 2050, I will come back on it, we'll continue to produce gas, to produce oil. There'll be some emissions. We will reduce it through technology, because, for example, we'll electrify part of our process. We are lowering or we are decreasing our methane emissions, I will come back on it.
We'll need also some carbon sinks. We think that more or less, the emissions will be on the high side, around 20 million tons-30 million tons. Thinking that we can develop carbon sinks of 20, 30 million tons at the horizon of 2050 is perfectly achievable. This, I would say, target objective is clear, and I think this will be the easiest one to reach.
The next one on Europe, so you understand the logic. We are actively supporting the EU emission. By the way, all Europe is not only EU, it's a Europe which is extended, sorry for British colleagues. It's EU plus U.K., plus Norway, because obviously, if we take a commitment on Europe, we have to include the North Sea, otherwise, it would have been something a little tricky. We include the whole.
We think by 2050, production in North Sea should not be very strong, to be honest. Most of the decline of this area. We think by 2050, again, that the policies will be put in place. We observe already that some countries have taken legislations to eliminate any thermal vehicles. That means that we have to take it seriously because, of course, it will influence our business, so we have time, but we'll have to adapt.
30 years is long. This represents a decrease of 280 million tons of CO2, so it's a very strong commitment. Third one, I will not comment my net carbon intensity, it's just for reference. Honestly, our definition is very near from the one from our Dutch colleague, I would say. We are working together to align, and I think it's a strong message.
I know from Ben, I'm repeating the message. I think it would be very good if the industry could, I would say, use the same metrics on this type of net carbon intensity. We have aligned the way we calculate our fuels. We have very limited difference, and we are making the work together. I would call that it would be good if everybody do the same.
I will not comment it, but this one is more important. It's more important because it's not only we have raised the ambition in terms of decrease, we have so put an ambition of 2050 of 60% or more. We put some intermediate steps. The 15% of 2030, is there. We have realized 6% in five years. We put an intermediate step in 2040 of 35%, in order to be consistent.
The absolute value of 27.5 g of CO2 is today the lowest absolute target. I would like to illustrate that more. What does that mean in terms of business for Total? No, let's keep it. In fact, what is a mix of supply, what Total could provide, by that horizon?
Just to give you a flavor what the company could become. This is why it took us some time, because we wanted to understand if when we put this type of ambition on the table, we can really achieve that. It was the idea that it's a serious matter. In 2015, Total, on Scope 3, the sales of Total were 66%, two-third oil, petroleum products, one third of gas. 2015. Less than 1% of electricity. Nothing.
In 2019, the mix of the sales of Total, 55% of oil, 40% of gas, and 5% of electrons. In five years, we have already introduced this 5%. Half of them are from renewables, half from them from gas firepower plant. Thanks to this evolution, but it's an evolution, we have managed to decrease by 6%. If we want to, in 2030, the 15%, what does that mean?
That means 45% of oil, 40% of gas, 15% of electrons. This is achievable. We have done 5%. Without suddenly accelerating, to come back to Christyan's question, to be obliged to rush. We can go steadily along this pathway, that means that we should do in the next 10 years at the same pace what we have done in the last five years, as we have more experience, more teams, more ideas, we better understand.
I'm convinced we can do it. By 2050, if I try to describe you what does it mean, a company like Total, which will decrease by 60% or more worldwide, its net carbon intensity, we should still sell 20% of oil, but out of the 20%, not the same oil. One quarter of that should be biofuel. That means it's a different product. It's, I would say, 15% of oil, 5% of biofuel, but liquids represent 20%.
Gas, still 40%, but there again, the gas should be around 80% natural gas and 20% green gas, either hydrogen or biogas. This is achievable at that horizon. The last 40% should come from electrons. To be neutral, to reach it, we also take into account some carbon sinks, because it's part of the business model, and this is compatible. We have around 50 to 100.
It's more uncertain. Technology has to be developed. Let's say between 50 million tons and 100 million tons of carbon sinks. 50 million tons, I think is achievable. 100 would be more challenging. The type I wanted to describe beyond what is written there in terms of describe what could be. Honestly, in terms of business model, what does that mean?
That means that really Total will remain. Again, we continue to produce oil, we continue to produce gas, we'll produce more biofuels, we produce more biogas. Yes, we'll invest steadily in some electrons coming mainly, by the way, 40%, obviously, in 2050 should come mainly from renewables. That's the evolution. It takes time. Again, in 2030, what I just said, we are still 85% hydrocarbon and 50% electron. That's important from this perspective.
We can offer this ambition today because it's linked to something which seems to be realistic and on which we can allocate capital year after year without disturbing, honestly, the capacity of Total to deliver value from this area of expertise in hydrocarbon, but also by preparing the future. Next slide is just, again, I will not comment to show it in February. I told you that Scope 3 requires from us to act on products, which is exactly what I expressed with biofuels and green gas. To act on demand, yes, we need to work with our customers. We cannot do it alone.
We need to work, we have engaged with plane manufacturers, more or less, by the way, more, I would say the companies we are designing the engine of planes, which are more interesting, to work with them to see if we could really help this use of energy to change. We can also take actions on the demand on our emissions.
Today, I want to confirm to you two news, which were not in the press release, but we have decided to influence the demand, but we will not sell any more fuel oil to power generation in the world worldwide from 2025. We'll give five years to our customers to find alternative solutions. We think it's feasible when we look to what we've done, what we have in our portfolio.
On the gas, we know that gas, there is on emission, always a debate about methane. When we look to really our operations, and in particular on the gas fields, because it's key to produce gas, we can observe that we can commit to lower our emission from methane emission from the gas fields less than 0.1%, which is really minimum. It's another target where we put in our roadmap, and we'll come back on these two, giving more flavors in the coming months on these two commitments. Next last slide, I think is a conclusion of my introduction, repeating our ambition.
Again, keep in mind that it's clearly a link between the strategy of the company and the way we want to establish and to become this broad energy company producing and selling petroleum products, gases, and electrons, and in order to be able to fill our mission, which is to deliver affordable and reliable energy to our customers around the world. Now I'm ready to take some questions, either on the climate mainly, but also if some have some regrets on the first part.
Thank you, ladies and gentlemen. If you wish to ask a question, you will need to press star one again and wait for your name to be announced. Your first question comes from the line of Bertrand Hodée of Kepler Cheuvreux. Please go ahead. Your line is open.
Yes. Hello, everyone. Thank you for taking my question. Two, if I may. One on LNG. You disclosed some very useful new indicators for those Q1, and it is your LNG average selling price. It is something that is quite difficult for us to model given the some S-curve on long-term oil pricing contract. Can you give us a flavor of what could be, assuming spot LNG, say, at the same price point, could be your average LNG selling price, in Q4, let's say with $30 a barrel in Q2?
The second question is on LNG, but that relates now to the energy transition and your ambition of getting to net zero Scope 1 and 2. LNG activities are quite, I would say, CO2 intensive. There is a methane, CO2 venting and also a liquefaction process, highly energy intensive. How can you improve the carbon effectiveness of your existing LNG plant? Do you have a view of the LNG plant of the future? Thank you.
The first question I already tried to answer before. I told you that, in fact, this indicator, by the way, yes, we thought it was important due to the size of the LNG business, to give you more information, because the gas price, honestly, is the average of many local business, LNG business. You will have this indicator from now on every quarter.
As I said before, very little impact. I think should stay around $6 more or less for the next quarter because there is a time lag within the formula, more or less of six months. Then after, of course, we will see the impact and let's say around $4 from the second half probably, because the impact will come from the lower oil price, will come the second half. $6 during the quarter and then $4, average of the year should be around $5.
The second question, LNG. Yes, that's a very important question, of course. By the way, I'm always amused about the debate about LNG is more CO2 intensive by oil form. LNG plant is like a refinery for oil. When you compare both chain, you should compare oil and a refinery to gas and LNG. That's true, but for the existing plants, to be honest, they are already built.
It's not easy. You can work on part of the emissions, in particular between the wells and the plant itself. The plants itself are designed, so it will not be improved. You can also improve, and lower the emissions from the transportation part, from the LNG tanker part. It's easy to improve the technology.
It's an industry where we are losing some energy during the trips, and we can do better, and there are really some improvements on the way these LNG tankers are designed, and that's part of what we work on it. The new plant should be electrified. This is the one we want to build in Oman. We have a small project in Oman, of LNG plant for bunkering.
The beauty of this plant, for me, the big interest of this plant is not only to produce an additional 1 million ton of LNG and to develop the bunkering, the business. It's a full electric plant. It's designed like that, and it's a way to test this technology. A full electric LNG plant is lowering the LNG emissions by a lot. That type of, and again, by the way, it's a very clear example for me.
The best way in most of the processes of the oil and gas industry to eliminate CO2 emission is to go to electrify. The process is like what is done in the North Sea by one of our colleagues. I think it's the future of this industry, and this is our engineers in the E&P are working on this type of technologies.
Thank you.
Next question.
My apologies, my microphone wouldn't come on. Your next question comes from the line of Christopher Kuplent of Bank of America. Please go ahead.
Yeah. Thank you. Good afternoon. Just a few more questions and perhaps clarifications, if I may. Patrick, your CapEx cuts that you've announced for 2020, how quickly do you think you will go back towards, let's say, the originally intended $1 4 billion organic CapEx number? How related is that trajectory to the macro environment? In other words, what can you do in 2020?
Sorry, 2021. I'm particularly thinking about FIDs that I suppose will be coming up over that timeframe, whether it's Uganda, whether it's Papua New Guinea, Suriname, Nigeria. If you could give us a little bit of flavor there. The second question linked to your net carbon footprint outlook a little bit longer term. It wasn't so long ago, you talked about a DPS CAGR commitment of more than 5% per year.
I'm assuming that, when you look beyond the next one, two, maybe even three years, that's still something that you will remember in a few years' time. If you could let us know where you stand on that dividend outlook. Thank you.
It's quite easy to answer your question. You make the math. If you want me to spend $14 billion, I have $ 7 billion-$8 billion shareholder return. I need $ 21 billion-$22 billion, and I need something like $45 per barrel, $50. I will come back to this level of investment, when we'll have this type of, outlook for the price. That's part of it.
Again, keeping some flexibility in the organic CapEx. For 2021, honestly, I have no idea today. It's premature. I know what figures we had in our long-term plan last year, we'll do again the business plan. We'll do again the exercise. We are very comfortable, like I said before, that at $40 per barrel. Again, you would tell me today, it was a discussion of the Board, what would be your guess for next year?
I answered, if I had to give to my teams an assumption for the budget. Thanks God, I don't have to deliver it today in March or in April. I will do that in July. I will probably give something like $40. At this level, we know what type of capital allocation we can make. That's the first answer. On the second question, what was it? The question? I lose the second question, sorry.
It was regarding your longer-term outlook regarding the DPS.
No. Okay. Let me come. No. It was clear, the dividend. The dividend was clearly linked to both. We are more in a stable environment. It was above $50 per barrel. It was linked to the growth of the volume as well. Remember, we are speaking about a production growing from 3.1 to 3.2, 3.3, and stable during two years.
With that outlook today, we are no more above $50 and we are no more at the same level of production because of quota. I have two sources of lack of growth. A little lack of, I would say, cash flow. It's affected. It's not affected by net zero at all. Let's be clear, no. Net zero will not influence that, to answer to your question.
I'm still committed to it, but obviously, we stopped and you have observed that the Board has decided to stick to the stability of the interim dividend compared to the one last year ago, because it makes no sense in this type of environment to go by 5%, something that there is no more growth. It would have been very odd to take such a decision when others are just deciding to decrease it by far more. It's still there, it's still in my mind. For the time being, honestly, in these market conditions, maybe let's wait 2022, 2023. I'm optimistic one day or the other, the world will come back to a certain normality.
Thank you.
Lack of investment will translate in higher oil price.
Okay. Thank you, Patrick. Can I just quickly double-check on your first answer? What is a lower budget? Let's assume $40, as you said, into 2021. What does it mean for a number of those flagship projects and how quickly you think you'll be able to FID them?
At $40 per barrel, I have $19 billion of cash flows. I serve you $7, so I have $12 for CapEx. If I want to invest
Sorry, Patrick.
if I want to invest more, I will have to divest more.
Okay. I guess, I may not have been clear. Maybe you can prioritize a little bit those projects that haven't been FIDed, I guess.
Okay. Yeah, sorry. I missed that part of the question. The top projects, honestly, typically, the projects we have sanctioned, we don't stop them. Mozambique is moving on and that part. I think for me, among the top projects, we'll have, obviously, Uganda. We are investing in Uganda, the idea is fundamentally to move on Uganda and, as soon as we can, I think we made that investment is to deliver it now.
I would say also, we have to look to projects like our discoveries in Suriname, which seems to be quite promising, it could become as well. The way to run the project will be obviously like always in Total by their, I would say, break-even cost of each of them, we'll invest the money on the ones which are the most efficient. On the other side, as I answered before to Michele, I don't think we'll add a lot of energy projects, except maybe ECA, in the coming year in terms of sanction.
Okay. Thank you very much.
Thank you. Your next question comes from the line of Lucas Herrmann of Exane. Please go ahead. Your line is open.
Patrick, afternoon. Thanks very much for the opportunity, and, I'm glad you're all well. Can I ask one on the former presentation and then to move on to climate? In your presentation earlier on, I just wondered to what extent what we've seen over the course of the last year, three months, particularly the behavior of suppliers, not least the commencement of a price war at a time when it really didn't seem hugely appropriate.
There is influence the way you think about the commodity and the upstream business going forward. I guess that becomes increasingly relevant, given everything around climate change, shifting in portfolios, because clearly as the growth opportunity in hydrocarbons starts to moderate, you'd expect the competition for the business that is actually available to intensify.
Sorry, long way of putting it, first question, just how, what's happened in recent months among the suppliers has influenced your thinking. Moving to the portfolio going forward, just a couple of simple questions, if I might. When you talk about your sort of sales to customers, I'm never quite sure whether that's products that you source or that you produce yourself or whether it's inclusive of products that are bought in, whether it be electrons or whether it be oil barrels itself.
Do you expect to grow energy supplied to the market? I guess, own energy supplied to the market over the period to 2050. The question's simple, it's purely that there is an awful lot of energy associated with an oil molecule. You need an awful lot of electrons to substitute. Thanks, Patrick.
Okay. Lucas, as always, very good questions to make oblige me to think. Thank you, Lucas. I would say, the first one, it's clear that honestly, what I've observed and my first reaction is that this industry, the oil industry obviously, has a real difficulty to manage itself and has a good capacity to create huge volatility. Frankly, when you observe that at a time where the demand declines, people decide to increase the supply, you are a little, you say to yourself, "We have an issue."
I'm not in control. We are not in control of it. We are as a company. That means that it's clear that it oblige us to think and the conclusion I first raised, I said to my colleague, when we said that we sanction at $50, it's clear that we sanction at $50.
Stop coming sometimes to me with a $55 or $60, because that means that all this math that we do in economic models with a $50 flat are just wrong. You can be hit when you start a project with suddenly a $20 per barrel price, and the value is not the same.
I think the first lesson for me is, yes, there is a strong volatility and what I said before, when I answered to one of your colleagues, from this perspective, it's clear that in the business model of groups, energy companies, to try to find some less volatile businesses which are offering acceptable profitability could make sense. When you have access to some long-term renewable PPAs, it may be less risky, less volatile, and it give a balance within the business model of a company like Total.
I think it's clear that it gives some momentum to develop this type of business. Today, in the company, we have this marketing and retail business, which gives this type of stable revenues. If at the same time, around the next 20 years, 30 years, people do not want to use petroleum products to run their cars, we have to find some substitute in our portfolios, to these type of more stable cash flow businesses.
That's why I'm there. It's true that it has influenced, I would say, the feeling that it's really a very volatile business and that you need to be very stringent on the way you approve a project, more than ever. It accelerates from this point of view, the fact that economically we could face oil business with lower demand, a decline of demand.
That means that let's be very selective on the project we sanction. On the sales to customer, now a little bit clear. We think about in Total, we strongly believe that you need to be along the chain. It's not only selling, but it's also producing. Still there could be some imbalance at a certain point of time.
The strategy within the company, and it's clear, if you want to develop a pure B2C portfolio in electricity and you just go to the market to provide your supply, you will not make a lot of money, I can tell you. Maybe your traders will be happy, but you don't make a lot of money. Again, I think it's the same idea fundamentally that we have in the oil business or the gas business.
We want to have some customers, but we also want to be able to produce. In electrons, we produce it either mainly from renewables probably in the future, but also from gas-fired power plants, and we make money out of it. Especially in Europe. A continent like Europe, which is willing to exit from coal, more or less from nuclear, at the end, if you don't have a base load from gas, I don't know where it comes from.
It has a flexibility to cope with the intermittency. The ambition is on both sides, even if the famous Scope 3, to come back at hand. It's why we don't like the Scope 3. The Scope 3 only reflects products we sell. We could also sell from third party, but the strategy is more to integrate the value chain.
Energy growth? Will you be selling more energy?
Yeah, we are selling more energy in our model. Yeah. I gave you the percentage of the portfolio. In fact, if you want to reduce by 60%, at the end you sell more energy.
Thank you.
Thank you. Your next question.
We have to wait until September to have more clarity on this sentence. Okay. Next question.
Your next question comes from the line of Lydia Rainforth of Barclays. Please go ahead.
Thanks. Just two from me, actually. The first one is just in terms of the interim targets that you set of, let's say, 15% for 2030. It does seem to be a slower pace of improvement than you've had for that first five years. If I think about the 6% reduction in carbon intensity for 2015 - 2019, it's then only another 9% over the next 10 years.
Again, the ambition for your Scope 2 emissions doesn't seem to have the same pace of improvement coming through. Is that just an effect of you did the easy stuff very early on and it now gets more difficult? I'm just trying to work out whether that's a cautious assumption around where the carbon emission reductions come through or whether it just gets more difficult.
The second question was, in terms of the net zero ambition for Europe, does this work without a material step up in carbon prices? I know you talked about $100 a ton in terms of that from 2030 onwards, but do you actually think there's a realistic policy chance of getting that through in Europe to make those changes? Thanks.
Good question. The first one is you are observing our figures. At the end, the fact that we are already at 6% will become detrimental to us. In fact, no. We had some easy, so low-hanging fruits. We decided in 2015/20 16 to exit coal. When you exit a business like coal, it gave me immediately 2% or 3%.
It was a decision which we decided also to eliminate some cash flow from operations because we are making more or less $ 50 million or $80 million per year. That's the reason why. At the end, no, we don't slow the pace of CO2 reduction. It's more, again, the capacity of allocation of capital. I don't think we are cautious. Even when some people around the table have looked to the figures, they think we should really continue to work like we have done.
If we can do better quicker, we can do it, we'll do it. We are not alone in this business. I think we are facing competition, and the bigger we'll become in this business, the more the competitors will also be aggressive. There are quite a lot of people working on the same ideas around decarbonized energy, renewable business.
So we have to also be pragmatic. No, some steps have been done. We have already made some investments. We'll have to do more, obviously, to continue to develop, to grow the business. It's more or less, if you remember the figures I gave you, I told you that it's increasing every year an additional 1% per year of electrons in the portfolio, in fact. It's 5% after five years, 15% after 15 years, and then you continue.
It's not a reduction, but it's not an acceleration as well. It's to do it in a pragmatic and profitable way. On the second one, yes, you are very true. I don't see, let me be clear. I think Europe is serious about climate. If you want to be carbon neutral in Europe by 2050, there is no other way to step up the carbon pricing. That's clear.
We will develop, I didn't mention, but we are participating with Equinor and Shell in Norway to the first large-scale CCUS projects, the Northern Lights project. When you take out, there are some lot of subsidies from the Norwegian state, but more or less, the dollar per ton, the production is around $180 per ton of CO2.
Which means that this type of project, of course, we can think that we will improve them in terms of efficiency in the future, even if, to be honest, there is no room for improvement. It's a plant which is treating gas. Maybe on the transportation system, we can do better. That means that this type of CCUS project will require a price of $100 per ton if they want to become commercial businesses. Europe is serious about climate change, about carbon neutrality, that means carbon pricing. We have to take that into account as well when we think to a future allocation of capital that this will become a reality.
All that will take time because if the society wants to be neutral, as you know, the citizens are always looking to their pockets, and they don't want too much to pay for it. They know the best business that we had in the last quarter for Total in Europe was fuel oil, heating oil. The French people have rushed to fill their tanks because it was a very low pricing.
I'm not sure it's good for the climate, this is the reality of the energy business. This is where you have a debate. How do you manage at the same time to have an affordable energy and a clean energy? That's more energy with less carbon, but the strong challenge of the industry.
Perfect. Thank you.
Next question or no?
Thank you. Are you ready for the next question?
Yeah.
Thank you. It comes from the line of Martijn Rats of Morgan Stanley. Please go ahead.
Hey, hello. I've had two, both related to the discussion on the climate and the move into low carbon electricity. I was wondering if you could talk perhaps a bit what you think are transferable competitive advantages from your traditional oil and gas business into this new business. Electricity markets do not look like oil markets.
One is more global, the other one is more local, regulatory changes. Total is in many, many businesses. I was wondering what your view on this issue is. The second question I wanted to ask when it comes to this transition, I was wondering if you regard your own cost of capital as a disadvantage building out a New Energies business.
There's quite a lot of money sort of chasing these renewables opportunities, and it seems very, very competitive, and quite a lot of auctions for offshore wind projects, for example, seem to be simply won by people that have very low levels of cost of capital. I was wondering whether you believe that coming from a traditional oil and gas backdrop, cost of capital is a source of competitive disadvantage.
The advantage, one of the advantage, maybe what we have done in the last quarter is a good example, is that a world company like us is able to deploy all this business in many different countries, finding the best opportunities.
Look what we have done. We have been able to have access to 2 GW in India, 1 GW in Qatar, some in Europe. I think the capacity that we have, because we have a world footprint to work on many geographies and to identify the right opportunities because we have several links. By the way, in India, it's interesting because we developed this relationship with because of the natural gas, LNG, and then we moved to renewables.
I think that's something that when you look to people who are more, today, dedicated to this, I would say, electricity business, the leaders are more focused on Europe plus generally the Americas, South or North. The Qatar story, of course, it was linked to the capacity to develop in Qatar. I think that's an advantage. Having said that, when you speak about offshore wind, this is very obvious, but there are some technologies.
And in Total, for example, what we have decided is that the offshore wind team is embedded in terms of technology and projects within the E&P division. By the way, it's very good because the E&P guys, who were afraid to have less jobs, today they are very excited by developing all their knowledge about floating units for this offshore wind.
There is some links which can be done, the scalability of it also. Okay, that's true, but offshore wind is giving more technology, so it's more obvious. On the solar field, obviously, there it's more the size of the capacity that we have to finance large projects. We execute the projects themselves are less complex. We can also, within this industry, we made, for example, some new recent deals in Spain.
What we bring in Spain is a capacity to mobilize financing because we have a lot of developers today. We have a lot of ideas, but not money. We can come and bring their ideas to reality. I think we have some advantages. Of course, we face some competition, but it's also, I don't see why we could not manage by diversification.
On the cost of capital, again, that's true that today with the yield we are offering to our shareholders, it's quite expensive. I hope that the fundamental idea is that we will rerate the share of TotalEnergies by being disciplined on our dividends, but also by developing this low carbon business. Today, that is a disadvantage.
Again, that's true, I'm asking my teams to be able to deliver to the group more than 10% of return, which oblige us, like we described the business model, when we develop 100% project to farm down 50%, so companies who are ready to pay NPV 5, like we've done again recently in two or three countries. Honestly, it's not a real issue for us, to share this project at 50%. To keep a certain discipline of profitability, I think is also good for the global future of this business.
Today it seems quite easy to obtain some long-term PPAs with, I would say, stable revenues. When you go to more merchant renewable projects, the volatility could be stronger. The level of profitability will be really higher, requested by the investors. It's not a disadvantage. It's a matter of managing the business in another way. Okay.
Okay. Thank you.
Thank you. Your next question comes from the line of Anish Kapadia of Palissy Advisors. Please go ahead.
Good afternoon. I had a question on the impacts of COVID. Obviously, seeing some short-term impacts, but I really wanted to know what you think some of the structural shifts will be on the supply side for oil and gas, and how you see that influencing your longer-term strategy. Things like decline rates, the change in production from the U.S., both gas and oil, and any permanent supply disruption in LNG markets. How is your thinking on those affecting your longer-term investment strategy?
The second question was on your net zero presentation. If you're talking about a $100 per ton carbon price in terms of the testing price, can you talk about how you get to that kind of price? With the assumption of 50 million to 100 million tons of carbon sinks, is that implying a kind of cost of that of $ 5 billion-$10 billion over the long term?
Okay, the first question, we can take a lot of time to answer to that. I think, okay, COVID first has an impact, a short-term impact on the demand. Once we'll find the vaccine or the tools, I think we'll manage to exit it. I think this will have clearly an influence on, I think, the development of the shale oil in the U.S.
I think my view is that already last year, since last two years, we've seen investors more prudent about investing in shale oil, requiring cash flows out of it. Obviously, on the top of it today, it appears to be that it may be flexible, but it's not a low-cost source of oil. I think this could influence the global landscape of the oil supply in the world more fundamentally, but just during the COVID period.
People forget, but maybe not, and I think it could impact the way that people will be ready to invest in this industry. It does not change a lot at all, my view. It's even gone more comfort to the views of Total that we will not invest in this one. On the gas in the U.S., it could have a different effect. If you have a lower production of shale oil, which means that the gas associated to shale oil could diminish, then it could influence the same time the price of gas in the U.S. in the other way.
We have to look at it, and in particular, because as we are investing in LNG in the U.S., should we integrate on the gas for the longer term? That's a question mark. I'm not sure to have implied to have fully understood your question about $100 per ton.
The fundamental idea is to ask our colleagues when they present an investment case, in particular in hydrocarbon, which will go beyond 2030, to test to the base case is a $40 per ton. To check what it gives if the carbon price is reaching $100 per ton, to see the influence. It's a way to test them against, I would say, a carbon neutrality business. I'm not sure to have captured correctly, Anish, your question.
Yeah. Given that you'll need to invest in around 50 million tons + of carbon sinks, what's the expected cost that you're thinking that will be associated with that? Based on carbon price, could that be $5 billion per annum in terms of cost?
No. It's not that, no. 50 million tons of carbon sinks at the horizon, some are, I would say, natural-based solutions. The natural-based solutions, we begin to work on it, are more around less than $10 per ton. You have plenty of projects of natural-based solutions. If you consider that half of them are natural base, it's something like $250 million. If the other half is coming from CCUS, that means that you will use 25 million tons, let's say $100 per ton, because the technology should more or less be at this level. It adds $2.5 billion, so it's more around $ 2.5 billion-$ 3 billion. In 2050, we have time.
Right.
Thank you. Your next question comes from the line of Irene Himona of Société Générale . Please go ahead. Your line is open.
Thank you. Patrick, I had one question on climate. As you said, you cannot control the emissions of industries like cement or autos and so on. Do you see any advantage in partnering with some of these energy-intense customers, let's say, to help them address their emissions, the emissions produced when they use products that they buy from Total? It is something that one of your peers is.
The line appears to have disconnected, sir. There are no further questions.
Okay, I will close. Irene, I understand you asked a question. Sorry, we have been disconnected, I'm afraid. It was a mistake. My mistake. Irene, your question about partnering with industrial clients, cement producers. Yeah, I think it's a fundamental idea. We need to act on demand. To act on demand, we need to work with others.
I have pushed my teams to take some time, for example, with plane manufacturers or marine industry. Still we are working with steel companies to see how they could think and change the way they produce energy, and looking to other source of energy rather than only oil. That's part of what we want to proactively work on.
The commitment we take, by the way, it's well expressed in the joint statement that we have signed with Climate Action 100+ is also part of the commitment which is to bring some of our competencies and capabilities to help the change of energy use of our customers. Thank you for this long call. I think it was the last questions.
I know we have been quite long this afternoon. We've covered many topics. Maybe in these extraordinary circumstances, we need to have extraordinary calls. I hope we have answered to most of your questions. Again, I think the message that we want to deliver to you is that, Total, I think even if these times are very turbulent, we need to stick to our strategy, the fundamentals of the strategy.
I think more than ever, the fundamentals of actions are clear for a commodity company like Total. Looking to our delivery, looking to our costs, managing our cash and staying the course for the long-term strategy. I think it's a good signal that today, not only we speak about the short-term, but also about the medium and long-term strategy for this climate ambition. Thank you again for your listening, for your support, and we hope to meet you soon, all of you. Thank you.