Hello, everybody, and warm welcome here in New York at the New York Stock Exchange. For those who do not know me, I'm Nadys Lasz Pazkevic. I'm in charge of Investor Relations for Total. So, we're going to have a full day today with 3 different presentations. I'm not going to go through.
I just want to mention to you that there is an app application that I encourage you strongly to load on your mobiles where all the presentations will be there. There are valuable information that you can have access to and you'll have the full program for the day. There will be 3 sessions, they will be followed by churney. So of course all questions, the questions from the floor will be taken care of. And without further ado, I think I have to hand the microphone to the person from the New York Stock Exchange for just a safety enhancement.
Good morning, everybody. My name is Frank Rivera. Welcome to the New York Stock Exchange. I am one
of the Fire Safety Directors here in the building. Just going to
give you a couple of important points information regarding fire safety and fire emergencies. If there is a fire emergency, if you look around these white devices, notification devices around the room, you'll see them flashing. There's also speaker capabilities from those devices. We will make announcements from downstairs in the lobby,
just in case if there
was a fire emoji during the
time that you guys are here. There are 3 egress points on the floor, 3 stairways. Elevated cars
are not an option in a fire emergency. They're getting to the lobby automatically tied into the fire alarm system. We have a fire alarm system in place for the building and a fire safety evacuation plan approved by the New York City Fire Department. The 3 main to Egress to the south end of the floor are the C stairway. Behind me,
I have the B stairway and the A stairway. The A stairway was terminated in Wall Street, the B stairway in Broad Street and the C stairway in Broad Street.
There will be fire warnings assigned to the floor
in case of a fire emergency to direct you to assist you to get you to the proper ingress points in case of a fire up emergency. Any questions? Thank you very much. Enjoy your stay here today. Thank you very much.
As regard to total, as safety, of course, is a core value of the group, I propose that we review a safety moment before we start the presentations. All right. Well, now with no further ado, let me hand over to Patrick Pouillone. Good morning, everybody. Welcome to the inaugural strategy day for Total.
We are back in New York City, like it was a first milestone. We are very pleased and impressed by the attendance. And so, we have decided to transform the trial. It's a rugby World Cup in Japan. France will play against the US in coming days, no doubt about the results for once.
And maybe it's a new tradition in Total to be in New York, but I think it's also recognition that I said last year that 33% of our shareholders are here in the U. S. This event, this Strategy Day, is happening at a time in the city where there is quite an activity, quite a busy week with UN General Assembly and in particular the UN Climate Summit, which took place yesterday. It gave us the opportunity to meet many stakeholders and to explain how an oil company gas companies are adapting ourselves to these new energy markets and to the climate challenge. It's also happening this day with event today at a time where the world is in the middle of quite a number of uncertainties and the recent attack on the oil facilities in Saudi Arabia were absolutely quite a big shock in our industry.
It's a shock from a geopolitical point of view because this Middle East region needs to core off a lot of energy supply in the world, but it's also a measure for the oil market because, obviously, it's increased somewhere as there is premium in the oil price and it might also force the market to reconsider what are the acceptable levels of inventories and spare capacities in the world. Like last year, we come into force in New York with most of the executive committee members and, course, 2 new executive committee members, which are Helard de Stortherson and Jean Pierre Strobair. You will see them, both of them, because they will be together. We will make the first presentation, the strategic presentation together, free voice this year. Ella, as the Head of Strategy and Innovation, we present a macro environment of the market and Jean Pierre, our new CFO, will recover the financial performance of the company.
And then, in the afternoon, we have the opportunity to listen to the other executive committed members which are there. We have 2 focused sessions, 1 on the 2 key businesses for us and you will understand through the statutory presentation why we selected these 2 domains, which is the LNG with Arnaud Royac, our President, E&P and Philippe Saucquet, our President, Gas Renewables and Power together with Laurent Viger, President Gas, will explain you all the what we developed as a portfolio in LNG and we'll see that LNG will be a strong contributor to the future growth of the cash flows of companies. And then, we'll have a session about downstream with Bernard Pinedeau, our President of Refining and Chemicals and Monmar Enger, President of Marketing and Services, will present you how they will also develop their businesses. And more than that, of you will have opportunities to interact with all the management of the company during the seated lunch and seated dinner if you can stay with us. Coming back to the presentation of today, I would say that last year, we emphasized on the fact that Total was a strong capacity to deliver consistently on our objectives.
We also explained to you what was the strategy for the future. On one side, building on our strengths in oil and gas activities and on the other side, we will be willing to develop a low carbon energy business, mainly on electricity. Since last year, of course, we have implemented that strategy and with some important events, we will come back on it. This presentation, I think I will focus on 2 I would say there are 2 main message this year. First is that we are in a situation where we can go beyond the 2020 guidelines and 2022 guidelines.
We've got to go we have developed enough portfolios, sanctioned some projects, capture some measures, which I would say give quite a lot of clarity of the roadmap of TOTAL until 20 25. So, we will describe this roadmap along the presentation and give you the key indicators of the way we intend to develop our activity, our strategies and to invest and to generate cash flows and return to shareholders and to enter along these coming 5, 6 years. So, this is first objective. The second objective is that for this presentation, we want also to demonstrate how we build a sustainable and profitable company and growth. We recognize that there is in the market quite a lot of questions about the sustainability, long term sustainability of the oil and gas industry because of all these climate challenge and new energy trends.
So, we believe that the strategy we develop is a good answer to the sustainability of the cash flows of the company and also, of course, to the weight and to our shareholders. So, you will and now we go to the first slide. These were sustainable probably many times today. We try to emphasize on what in the way in our business model is sustainable and of course profitable. We have, of course, our answer and the phenomenon is for us it can be in different aspects.
The first one, of course, and it's important, is that we have to cope with a volatile and changing energy market as we will come back on it. And I think it's important that it's a moving environment. We can adapt ourselves and this is what we have tried to describe today. The second part, when we speak about sustainability and resilience, is that, yes, these markets are overpriced. We have put in place since 2015 a clear reaction to the volatility, focusing, I would say, on 2 pillars of the financial performance.
1 is to lower the breakeven. We managed to get it under 1st developer power. And the second one is to have a strong balance sheet in order to be able also to face this volatility. And Jean Pierre will come back on the levers that we intend to we've done in the past that we intend to maintain in the future in order to continue to focus on these two pillars of the financial performance of the company. And then, we have sustainability means also to continue to for us, If we want to have sustainable returns, so medium and long term, it's primarily in our oil and gas traditional business to build, to play to our strengths and also to continue to have the integrated approach that we have developed through the value all value chain.
It's also meaning that we want to take benefit from the growing energy market. It's mainly natural gas and LNG in particular. It's also electricity. And we will come back on the strategy that we want to develop in these two fields. All that being, of course, the aim of all that is to continue to increase the stability of shareholder return.
And I think you've seen an announcement this morning that we are doing it in a strong way by the growth support of the growth of direct, which is to accelerate accelerate the dividend growth in the coming years in order to share with us to revolve our shareholders the additional cash flows that we can generate, but we will come back on that in the presentation. So, that's for setting the scene. It will not be complete, as always, without a word on safety. Safety, as you know, is a core value for the company. It's a matter of commercial efficiency, but it's also, I would say, a matter of sustainability.
A company cannot be sustainable if we have neither these assets nor these people if we don't have a very high level of safety. Of course, we have been able to we continue to improve our statistics at the workplace. Like you can see, we are in the middle of the pack among the majors and we target 0.8% as an injury rate for a total recovery injury rate for group staff and not contractor staff. By the way, statistics is more or less the same between both categories of employees, which means that it's also part of the social responsibility to be sure that everybody is treated in the same way. Having said that, it's always about in safety because it's always fragile, all the efforts we do.
We had to suffer 3 tragedies, 3 fatalities in 2019. It's really a lot, and which led us to react strongly internally. We were mobilizing everybody around campaign, and not only campaign, but working groups. People are thinking to that 0 fatal accident become it's not acceptable to have a better performing company like Total is suffering fatalities. And this, of course, is a permanent, I would say, journey that we go into the company.
So, there is improvement, but it still have to be increased. That is part, I would say, of our commitments in terms of social responsibility. I will add a second slide this year and I think it will come back in all our presentation, which is, obviously, safety is a value, but other commitment we have to do to the planet and to the environmental challenges and topics that are CO2. So, CO2 is clearly something on which we want to exercise. We have taken a symbolic decision in the company, which is at each site, in the same way that we display the entrance of the site, the offices, the statistics, for safety statistics.
Now, we will you will see in all our sites and display the CO2 emissions. We want everybody to be aware of it. It's a first step to be awareness of our staff, of our management and also in order to take some actions. In February, we take a commitment on the emissions on which we are directly responsible. We have the operated emissions on the oil and gas perimeters.
We are emitting 46,000,000 tons. We have put a target of less than 40,000,000 tons. It's an absolute target. And at the same time, of course, as we will fix the company, we will continue to grow. And so, it is a challenge.
Last year, 2018, we were at 42. So, people could say the gap is not very big between 42 and 40. In fact, it's bigger than it seems because in the meantime, we have new facilities. For example, Bernard could speak to you about petrochemical cracker in Port Arthur, out this represents 1,500,000 tonne of emission. So, we need to continue, in fact, on the historic perimeter to to lower the base and, in fact, we ambition it to go down to the 46 or supposed to become 36 if we want to leave the space for the new facilities that we will put into production in the meantime.
So, it's a real effort, a commitment, which will come through different actions, Reduction of gas, carrying reduction, it's obvious. We have done already a lot, 80% of reduction of floating flame. We can do more. Methane reduction, as you would see, we strongly believe that the future of the energy of the future will be a mix of natural gas, renewable energy storage and other carbon neutrality tools like CCUS and others. But if you want the natural gas to be to play this to have this share of the energy mix, methane emissions is a challenge that we need to tackle.
We are already on a good way on our operations. We are less than 0.2%, 0.2%, 25%, so which is very low. We continue to drive down and we need to target more 0, like in safety, on miscellaneous emissions. There are possibilities, there are technologies to do better and we'll put that in place. Energy efficiency is also, of course, something on which we continue to improve.
All our sites have to work. And by the way, one way to do it is that we put in place a CO2 fighter squad in the company, which has the objective to go around all the places, all the sites of the company and, in fact, to leverage all our competencies in energy efficiency, in renewables, in energy storage, in order to be the best pupils among all our customers, I would say, in the company and to have some business case to show to our customers tomorrow that we can be more efficient. And the last area of improvement for future projects is process electrification. In all our businesses, we can use electricity as a way to, of course, lower our future emissions. So, safety, CO2, throughout my introduction, I would say, on the E of the ESG challenges that we face.
We'll come back, of course, on the social part in the presentation. Having said that and setting the scene, I will leave the floor to Helene, which will come to discuss and to present you our vision of the market. And then Jean Pierre will follow on the financial performance. Thank you.
Good morning, everyone. Happy to be here with you this morning. So a few drops on the macro environment, and the timing here really says it all. Our markets are volatile and are changing. In fact, energy markets are in transition.
Here is a recap of the world energy outlook that we presented to you in February with the 2 scenarios for the evolution of the primary energy demand in the world between now and 2014, 2 scenarios benchmarked against the IEA 2 degree scenario. What does it say? Oil still has a sizable share of overall energy demand in 20.40, around 25% in the 2 degree scenario of the IEA, even if oil may no longer grow when we reach 2,040. Gas will continue to grow over the period in all scenarios because gas is abundant, affordable, it has multiple uses, power generation, heating, burning, feedstock, mobility and natural gas is an essential complement to intermittent renewables. Power consumption will grow more than 50% in all scenarios and much more in certain scenarios.
And at least 60% of incremental power demand is expected to come from renewables, be that solar, wind, hydro, biomass, geothermal and so on. So that's really the long term picture and let's now move on to the short term. First off, oil markets are fundamentally volatile, and it works both ways. We saw the price of Brent drop by 25% between end April early August, and then of course came the attack on the Saudi installations 10 days ago, with Brent jumping 15% in one day and geopolitics and oil security being back on the center stage. The chart here talks about market fundamentals, which is supply and demand, food and geopolitics on the side just for a second.
Where do we stand? Short term, there are several questions around supply and demand balances with more questions on demand than on supply. And as you can see on the graph here, OETB inventories of oil began to grow in the summer of 'eighteen, which is generally perceived as a sign of market deterioration. Let's look at demand and then on supply. The 10 year trend for oil demand continues to
be very good. As you
can also see on the graph in orange, demand has grown from $88 to $99 per day roughly over the last 10 years. But what about short term then? Short term oil demand is of course sensitive to prices, but also to overall economic growth. Right now, people question the health of the global economy due to weaker GDP outlook in certain countries and due of course also to the impact of the ongoing trade tensions. The net result is that lower demand growth is expected for 2019 2020 compared to recent years with the latest outlook from the IEA showing $1,100,000 per day increase this year.
On the supply side, the prevailing feeling until the latest events in Saudi was that supply was sufficient to cover weakening demand. And therefore, there was very low risk premiums, as Patrick said, factor into prices, which was honestly a little strange since the OPEC plus discipline is working well. Several countries like Iran, Venezuela and Libya are experiencing long lasting production disruptions or production cuts. The growth of U. S.
Shale is expected to slow down and the industry is globally under investing in new oil capacity. But that was before, of course. Now geopolitics and spare capacity tightness are back as a top concern on the supply side of oil. Adding all this up, there is for sure a lot of uncertainty out there and price volatility will of course continue to be very high. When it comes to Total, you know the conclusion we draw from volatility.
We focus on assets and projects that have low breakevens. Moving on to gas. Worldwide gas supply is abundant and has been boosted in particular by the output of the U. S, which has translated into growing U. S.
LNG exports. And these exports have in turn increased the liquidity of worldwide gas markets, facilitating global gas trade. On the demand side, worldwide gas demand has been excellent over the last 3 years, and you can see that on the graph, almost 4% CAGR since 2015. Demand has been stimulated by lower prices and the switch from coal to gas, supported by CO2 or air quality policies both in Europe, China and India. Let's just remember that China year to date demand at the end of July for gas was up by 12%.
That being said, gas is a seasonal market and the winter has been mild pretty much everywhere. So when you combine ample supply and low seasonal demand, gas prices have indeed come under severe pressure in the first half of twenty nineteen. Even if more recently, spot prices have been impacted by the Saudi event and the forward curves show of course seasonal uptick in prices as we move into the next winter season. The good news is that the lower gas prices will continue to stimulate demand. Our strategy in gas is to prioritize integration along the low value chain to capture margins, and you will hear more about that in just a while.
Coming on to LNG, what's the picture? Sales and your title, very strong momentum. LNG markets have grown by 9%, almost double digit in the last 3 years, which is of course simply huge. On the other hand, there is a clear softness in prices right now because of the numerous project startups or ramp ups, especially out of the U. S, Russia and Australia.
In addition, storage levels are high in Europe. So there is a feeling that markets are oversupplied right now. But prices won't stay long forever. As shown on the graph to the left, markets will be tightening from 2021 plus and onwards. This chart shows you the lines, which is expected demand evolution and the buyers is available supply or expected supply to become available.
So market tightness will be true even if the current LNG demand growth were to slow down from the 9% to say 5% or 6%. And of course, there will be a much bigger shortage in supply if the current 3 year trend in LNG demand continues. The pace of demand growth will largely depend on Asia, which you can see from the graph to the right, Asia leads LNG demand growth. Given this outlook for LNG between now and 2024, 'twenty five, there is clearly room and even need for competitive new projects, moving projects with low breakevens. As you know, the fundamentals of our portfolio are very strong.
And in addition, we benefit from integration all along the LNG value chain. A few words now on low carbon power markets, which are another strategic area and focus for us. Let's start with Europe. The liberalization of power markets in Europe over the last 10 to 15 years has created a wonderful opportunity for newcomers like ourselves to take positions against incumbents. At the same time, the European power mix shown here based on Total's momentum scenario is changing rapidly as you can see with the collapse in coal and a shift towards low carbon, meaning natural gas and renewables.
Gas is growing in the scenario shown here, a little less than 3% per year and solar wind are growing more than 3 times faster. This trend is triggered by various EU policies supporting the substitution of coal, biogas and power generation via emission trading schemes for instance, and also supporting renewables through multiple incentive gains, contracts for difference and so on. When it comes to us, we are pursuing a strategy to become an integrated low carbon power payer in Europe with activities ranging from power generation all the way to the end consumer, excluding regulated markets, but including trading activities, of course, which are very important in the power section. Outside of Europe, our low carbon strategy revolves around profitable growth in renewable power generation, so call it power upstream only. As we've discussed before, the overall power market is increasing very fast, especially in non OECD countries due to economic growth, rising living standards, electrification of other sources of energy and so on.
This is certainly true in China, India and a whole range of other countries. In whatever mid or long term scenario that you look at, renewables are capturing the lion's share of incremental worldwide power demand. And what we're showing here is again Total's momentum and rupture scenarios between 2018, 2030, 2014, And you can see how the growth of natural gas in dark orange and renewables in lighter orange, how the growth is increasing both in absolute terms and in relative terms in the worldwide power mix. We'll hear more about how we're investing to create value in this market opportunity a little later. And finally, a last chart on petrochemicals, another key area for us illustrated here through the PE market.
The market fundamentals for PE are very strong. In terms of demand, we're more than 3% growth per year expected between now 2025, which effectively means no deceleration in demand versus historical trends. Demand in petrochemicals is sustained by population and GDP growth, rising yielding standards, for instance, in Asia and also very importantly by a structured shift towards lighter materials. That being said, the PE market will be impacted in the coming years by a list of new capacity additions, which are expected to create excess capacity, assuming that all these new units run at high operating rates, which of course is not entirely granted everywhere. But we do expect new capacity to come online in Asia and of course here in the U.
S. There is the ongoing start up of the first wave of Gulf Coast projects. As far as Total is concerned, we focus on securing access to low cost feedstock and on integration. Physical feedstock integration and also monomer polymer capacity integration. You'll hear more about that from Bernard in a while.
And with that, I'm done with the macro Huaying and I hand over to Jean Pierre. Thank you.
Thank you, Alain. Good morning, everyone. This section of the presentation focuses on our performance to date in terms of reducing the cash breakeven and strengthening the balance sheet, which we regard as the 2 essential elements to coping with the volatility of our markets and preserving the Group's long term sustainability. At Total, discipline is the key. First, we control cash equivalents to minimize the impact of recurring items and downturns.
And second, we maintain a robust balance sheet to provide the Group with solid foundation and financial flexibility, allowing us to weather cyclical lows and possibly to add countercyclical push on opportunities that might arise. We are committed to maintaining these high standards in order to consistently deliver
on long project elaboratives.
Let's start with breakeven. We think we achieve the same basis of the strategy to be resilient in volatile markets. As you see, we have made remarkable progress. In 2014, the pre dividend organic cash breakeven was around $100 per barrel. Since 2017, we need less than $30 per barrel to cover our organic CapEx.
We achieved that through combination of 1st, constant discipline and spend on both OpEx and CapEx and second, by maximizing cash flow generation by enhancing the operational efficiencies of all our assets and by upgrading the portfolio through countercyclical amenities. And as you
know, we have a best in class on
stream that generated large and sustainable cash, which is, by the way, partly non cyclical. I will come back on that later. Our fundamental objective is to maintain the pay dividend organic cash breakeven below $30 a barrel. At this level, we are more resilient to downturns in the environment. And of course, the low breakeven and the high grade portfolio also increase our upside in a rising price environment.
We have clearly imposed discipline to our CapEx, which has been trending down since 2015, while at the same time we have delivered a very strong production growth. To summarize, we did more with less. Obviously, the discipline of CapEx grew hand in hand with strict economic criteria to sanction projects, using a 50 rubber barrel oil price scenario. Of course, since 2018, we have started to sanction again some projects in order to capture the benefit of industry wide cost deflation. As a consequence, organic CapEx are increasing, but we tend to control them at around $40,000,000,000 to $15,000,000,000 per year for years to come.
Sustainability is also a matter of
operational excellence. Total has
been the fastest growing major in part due to strong execution on major projects. 2018, 2019 startups include FPSO in West African countries and in Brazil, representing around 600,000 barrels per day of capacity, plus 6 LNG trains, so in Russia, in the U. S, in Australia, representing around 30 1,000,000 tonnes a year of CapEx. We are always exposed to cycles of volatility, so we have to be good at what we control, like costs. You see here the significant progress we made over the cost reduction trends since 2014.
We have developed a strong cost cutting sculpture at Total and we are keeping constant pressure pressure on protect. Compared to our 2014 days, we target cost saving of $4,700,000,000 this year and more than $5,000,000,000 next year. This is a company wide effort. All the business segment contributes to this effort, even if a majority of cost saving comes from BS 3. It is important to point out that at the same time, we have been growing the company.
We have achieved this by creating opportunities to leverage near this. To add example of a medical address, we have been able to deliver quicker and greater synergies. We anticipate now deliveries of $300,000,000 per year of synergies coming from Mercurial Assets, savings coming from, 1st, the merger of the 2 subsidiaries in the UK, which includes a 30% staff reduction. The reduction in corporate overhead is unmarked and leveraging on our purchasing power. We improved at the same time efficiency across the group.
We simplified our processes, our organization. With total Google services that was created 3 years ago, we have made sustainable sustainable improvement in efficiency by centralizing shared services for the group. We are on track to deliver ambitious cost savings thanks to TBS of $450,000,000 last year to $1,000,000,000 by 2020. Centralized purchasing is one of the most important aspects of Piraeus. It has consolidated and streamlined 30% of our procurements last year from 15% in 2015, and the target is 40% by next year.
The cost reduction story is an important part of maintaining the low breakeven and preserving our financial strength. So, we will continue with it beyond 2020. We will maintain the pressure on costs, moving forward, and we have a new target for 2023 of $1,000,000,000 of additional savings. That means that our target is to reduce operating costs by more than $6,000,000,000 by 2023 compared to the basis. Again, this will be a company wide approach.
For the upstream, as a result of this cost cutting program and also the upgrade the high grade of the portfolio I mentioned before, we will be able to reduce the production costs by half between 2014 and today. In 2014, our OpEx was about $10 per barrel. It will be below $5.5 per barrel next year with a target of $5 per barrel. And I think it's a good position to the next slide. Part of this next generation of test reduction will come from digitalization.
So, digitalization is one of the levers we will use more and more in coming years to improve performance and retailing. We have successfully started the digital transformation in all segments at Total. But now, we have the ambition to scale it up and to accelerate. Few examples of programs that we have already implemented.
We have
a partnership with Google for artificial intelligence on geoscience. We are working with Sata on Refinery 4.0, digital twin technology. To accelerate this digital transformation, we Total with about 300 dedicated engineers, and this digital factory will be in place mid-twenty 20. We are confident that through digital, we can capture significant savings on both OpEx and CapEx and step operational performance up to a new level of excellence. Digital will help us to increase the availability of our upstream and downstream assets and ultimately will contribute to increased production and, as a consequence, revenues.
For our customer facing businesses, such as GFE, Marketing and Services, digitalization can be used to expand the services to our value
creation
from digitalization will be value creation from de retailization will be $1,500,000,000 a year and the split will be $1,000,000,000 per year coming from upstream and $500,000,000 a year for midstream and downstream. This includes increasing revenues, improving availabilities and reducing costs. We believe in the integrated modular approach to achieve long term success and sustainability in volatile environments. And the downstream plays an important role in ensuring stability across the highs and lows of market cycles. Our downstream provides a sustainable cash flow from a diversified portfolio, more or less 50% of the cash flow coming from non cyclical businesses.
Cash flow has been consistently strong over the 2015, 2018 periods, despite, by the way, dollars 8,000,000,000 of asset sales. Our refining and chemicals has been restructured and upgraded. And as a consequence of that, the breakeven for our European refineries is now below 20 grams per tonne. Marketing and services is largely non technical, with a unique position in Africa. We have successfully actively managed our portfolio and developing marketing and services in growing markets.
In addition, we are increasing the non fuel sales, which further diversifies the revenue stream and strengthens sustainability. Finally, refining is ready for IMO 2020. Our refineries have been upgraded and now they have reduced their high sulfur fuel oil output from 7,000,000 tonnes a year in 2017 to 2,000,000 to 3,000,000 tonnes now. Turning down to the balance sheet and the importance of financial strength to sustainability. We maintain a robust balance sheet to provide the Group with a solid foundation and financial flexibilities, allowing us to weather laws and possibly act perfectly on opportunities that might arise.
Since 2016, we had the ability to maintain the gearing below 20%. It gave us the flexibility to be agile and try, for example, the Maersk and Anadarko opportunities. In 2019, you observed the increase in our gearing linked to the implementation of the famous IFRS 16 to continue, that means, the capitalization of the deliveries in our balance sheets. As all our peers do not report the leases in outcome the same way, you see on
the right side of the
slide the benchmark excluding leases. The bottom line is clear. Total continues to rank as 1 of the strongest measure in terms of gearing. Not committed to maintaining a strong balance sheet. We target gearing during 20%.
Although, and we have said that before, there may be brief barriers when gearing is above that level. As the news airport, I am convinced that financial strength is the foundation of long term sustainability, particularly in our industries, which is marked by strong cycles. Our objective is to build and safeguard future flexibilities. I know there will be times where successful companies have to rely on a strong benefit. Finally, the benchmark is very clear.
It shows that discipline of talent and operational excellence have positioned Total at the forecourt of the major oil peer group. As a result of consistent execution and delivery, we have increased production far faster than our peers. That's more important for the long term. This production growth, coupled
with the
underlying improvement in our portfolio, has driven the increase in cash flow. To the right, you can see that during first half twenty nineteen, we outpaced our peers in cash flow generation. Our assets are performing at the best interest level. This is
true for our downstream, but it's also true
at the level of group with a group OHA and group 10%.
That concludes
my presentation, and I leave the floor to Batya. Thank you.
Good. So now we come to the 2 sections where we describe the strategy that we put in place for the future to build a sustainable profitable company and then the outlook 2020 5. 3rd section is about oil and gas, our businesses, E and P and Refining and Chemicals and Marketing and Services, which are traditional businesses, particularly as they are, can be on the majority of their cash flows and they are the core of the company. And as we said for the last 2, 3 years, strategy is to build on our strengths. It is clear.
It is strengths around the 2 offshore deepwater, the LNGs, the petrochemicals, retail lubricants. We have developed a strong competence expertise in this field and we consider that this is a place where we are comfortable to invest. It's also a matter of geographies in the Middle East and North Africa, in North Sea, where we have built also strong positions. So, if we strongly believe that this is our strategy in our oil and gas businesses is because this is where, again, we can leverage your competence in order to deliver value. So, try out rather than filling the gap.
We prefer to continue to build on this strategy and this is the reason why we have demonstrated that we have been able to be agile in seeding opportunities because, again, and there is a strong support of the Board Director, this strategy somewhere is less risky than trying to develop in new areas. So, the way this strategy is at the lowest to build a very large portfolio of new profitable projects. On this chart, on this map, you have around 30 projects, 50 different projects. And since 2018, if you remember, 2015, 2016, we were spending time to, I would say, work on the foundations, which have been low cycles. We need to to benefit from the low cycles.
We need to put in place this capital cycle strategy. So, we have been active by Minerals Coal, by BNG LNG. And beginning 2018, we said now it's time to sanction again new projects because we have space in our capital expenditures after the large projects which will be delivered. And so, this is the main activity, the main target for Arlo Vodak and his team in E and P to sanction their projects. 12 projects have been sanctioned since beginning of 'eighteen.
There is still some work to be done. We target 6 of us for the next 6 months and more and 12 more in 2020 and maybe some of them could go on the beginning 2021. You have the list of the projects. I will not comment on them. A lot of deep rooted projects, logically in line with the strategy in Angelica, in Brazil, in the Gulf of Mexico and also several LNG projects on which we will come back during the presentation.
Together, all these projects represent 800,000 more than 800,000 barrels per day of new production, which will fuel the growth plus 2023, and you will see the impacts on our production profile. On the top of these large projects, I would say we have some what we call some true cycle projects on which we also have been active because it's a way to increase the short term cash flows. The payout is very less than 2 years. PTO is about 20%. You have the examples here of Angola.
These are brownfield projects, mainly in seed wells, which can be developed and produced from existing infrastructures. They are slow cycle because of flexible CapEx. We can interrupt the drilling in case of, I would say, a drop of the oil price, but it's also giving, of course, additional cash flows, which are welcome in the present time. All this activity of developing resources, of course, is taking place over time where we are leveraging favorable supply chain. It's clear that the market is still favorable and we consider we have already the opportunity to comment that, but it will remain like that for quite a long time.
You see that we've seen a decrease in the cost of 30% in deep offshore or in conventional offshore compared to 24 1,000,000,000. It happens in what we call international E and P business, where we are mainly focused. It's not the same situation in U. S. Onshore, where you have quite, I would say, a large activity.
But on the international E and P and in Pfizer, it is that there is still significant spare capacity according to our statistics around 40%. There is less competition, less activity, in fact, because a lot of U. S. E&P independent, which were working internationally before 2010, are very focused on businesses on the U. S.
And you have also spare capacity because you have new contractors and Chinese contractors are offering clearly a competitive alternative like we've seen on Yamal in LNG of offshore projects. So, we took the assumptions in the figures that we will present it to you, in particular CapEx program, but this type of environment will be maintained for the coming years. And in fact, if we are able to sanction the projects now that results in 2018 and for the year to come, we'll be able to lock in our CapEx these favorable oil and gas costs, I will say, in our portfolio. In order to be sustainable, an oil and gas company did not close to renew our resource base, and we have 2 engines to do that: exploration on one side, access to discovered results on the other side through M and A. I begin by exploration and maybe seasonally resolved today, but it's just to pay tribute to the results of the teams.
We are under the leadership of Kevin McClendon in 2015. We have launched a new situation strategy. We have been able to have access to high quality acreage around the world and we have some interesting results, more interesting results, which sizable results, which will allow us to feed our future growth in post-twenty 20 3 ex Ro. So, in North Sea, we have Glencore this year, which is around $250,000,000 next to Killeen and in fracking in this part of the North Sea. We have made a new province discovery in South Africa with a group pilot discovery, which will be not appraised, which will be followed by 2 new exploration wells next year in order to just apply the size of the resource, which can be in this province.
We have also discovered main discoveries with Chevron in the Gulf of Mexico, Balimo, which will be probably tied back to existing infrastructure in order to show the time to market. And the last but not least, recently, and I'm happy to in Guyana, we have made our first two wells. It's a very prolific province that some of our peers announced to have discovered more than $5,000,000,000 We have been active in order to take some participations in all the licenses around these discoveries and the first two wells on the Orindrick license are positive, in vitro and in Joe. Joe is by way a playopreneur on a new Chozoicol layer in Pliocene level. It will be followed by another world before year end and the Cano Crew license.
And next year, we should also do well in the CanoE license operated by Exxon and I hope that they will continue the successful story in Guyana with us. So, this is a promising start in this basin, which again explores our level, but also business development which have been able to capture these activities to which have to be, I will say, complementary. The other enzyme to fuel our resource base is M and A. Quite clear that we have been quite active, but not only to acquire, also to divest. This is so this chart is interesting.
We have on the period 2015, 2020, including with the assumption that we'll prove the Innovac growth, or some of them next year, some of them this year. We will have acquired around $30,000,000,000 of assets, but for the same period, we'll have divest $20,000,000,000 of assets. Dollars 10,000,000,000 of more acquisition than Teva's, but by the way, divided by 68, more or less, $1,500,000,000 to $2,000,000,000 around net acquisitions. And most of the net acquisitions, let's be clear, are in the new energies where clearly we are not divesting, we are building a portfolio, we have acquired $6,000,000,000 So, if you keep that in mind, the activity has been quite strong. It gave us access to $11,000,000,000 of resource, up less than $2,500,000 per barrel.
Fact that we have today this large portfolio and Arnaud is happy because he has 22 years of reserve life that he gave us room to continue to make a portfolio of management, which means to divest assets, some of which we are either too small. So, in terms of human resource allocation at Optimo, which have some high costs. So, we will continue to make this agility on both sides. So, we have announced that we want to divest $25,000,000,000 in 20 19, 2020. It's already underway.
Dollars 2,000,000,000 will be done before year end. And this activity, I think, is very important in a large corporation like Tata, where we have 150 W. For our assets, it's very important to permanently review our portfolio. We're already changing. Our markets are changing.
We need to adapt ourselves. We need to be flexible in order to avoid to become a dinosaur. And 40% of the portfolio of Upstream has moved, 40% of Downstream. Cash flows are continuing to increase, which is a proof that we are evaluating this portfolio and, at the same time, we are investing in new energies. So, of course, I have the opportunity to comment during the call or the Q2, end of July, why we have moved on this opportunity of acquiring the African assets of Anadarko.
Clearly, it's a very clear strategic fit, which was, by the way, the reason fundamental reason why we are able to move quickly with the Board of Directors on this opportunity. It's LNG, it's Africa, it's deepwater, so exactly fitting with the chart I showed you before about the fundamental strategy to build on our strength. Mozambique Area 1 is a one of a kind asset. It's a giant high quality resource. It's a project which is direct.
It's sanctioned. Contracts are in place. It's also direct. By the way, from a marketing point of view. I know people have some questions about LNG exposure, but this project is 90% sold under long term contracts, which are largely oil indexed, so which is an advantage.
The acquisition price, higher view and but it was quite an interesting price, dollars 150,000,000 per percentage compared to $200,000,000 to $250,000,000 on the same license in the past and for the project, which is derived and marketed already. There is a high quality resource, so more to come beyond the first two trends. Of course, the project team will focus on the execution of the project now, but there will be also another team which we are able to be able to go beyond to prepare the future as we have very large resource, more than 60 Tcf, the first two trains mobilizing around 18 Tcf. So, this project will contribute to future cash flows, dollars 1,000,000,000 per year by 2025 and beyond. In the portfolio, we have also other assets which are high quality, large resource base, like in Algeria, the Basin.
Ghana is a growing deployable asset. As you know, the combination of all the assets makes that beyond the acquisition cost. In fact, we will receive its cash positive cash flow coming from Algeria and Ghana will more than cover the injection of CapEx in the Mozambique project. It's also, again, a source of additional profit. I'm sure that Laurent Villier this afternoon extend you that he's quite happy to have a position in East Africa to serve some Indian or East Asian customers.
So, we will be able to optimize this portfolio with this position in Mozambique. And also oil traders, which are we have quite a big oil trading in Africa. We have a number 1 in trading oil in Africa. The fact that we have access to oil in Ghana, I'll tell you for them. Where are we, by the way, because I will have the questions, so we are, of course, integrated in PA.
It will be a staged cleaning. So, we are on the road to close Mozambique, our flight to Mozambique end of the week and we should be able to close, if not this week, beginning of next week. So, Mozambique will be the first to come, which is important because the project has started. So, we'll be on board with the project team immediately. And then, because there are different approval delays, we've got different regulations in different countries, Algeria will come and then Ghana.
Probably, the 2 the last 2 could be closed by probably end 'nineteen, probably beginning of 2020. So, in our strategy, we had Oil India. Of course, we are integration. The damsel is important. Refining and Chemicals, Bernard will come back, sorry, not demilitated, but I think our key pillars, which are constant in this strategy phase.
1 is to invest priority to the large integrated platforms. We have 5 around the world. They capture 70% of the capital employed by 2025. We agree on the 2nd axis, it's growing in petrochemicals. Petrochemicals on low cost feedstock, which means, in fact, natural gas, I mean, ethane, propane, butane.
So, it's a natural gas to material strategy. We leverage the Google roof of image market. It's also, let's be clear, a strategy where we want to integrate the monomer capacities, ethylene, propylene and the polymer capacities, integration is key in petrochemicals. If you are long in monomeroes, you could face hard times like some of our peers today in the U. S.
So, integration is a permanent we have in all these oil and gas value chain. And the 3rd pillar of refining and chemical is to invest in the new low carbon economy, biofuels, bioplastics, recycling polymers, the objective to recycle 40% of our polymers by 2,030. All of that is very important and it's a way for refining chemicals to find some relays for future growth in the future in this low carbon economy and it's part of the global sustainable strategy of the company and definitely Fresnel and Chemical as our part of the sustainable future of the company, if we can continue to develop these 3 pillars. I have made something wrong. The most important information on this slide is that it's not just for investing, it's also for growing cash flows.
And so, the financing chemicals, as you will see, will contribute to growth of the cash flow between today in 2025 and DKK1.5 billion will come mainly for the 4 large projects that Bernard and his teams are developing. I will not detail the projects. Bernard will come back on it. As you can see, we are each of them have a return of an hour of about 15%. Each of them are on low cost feedstock.
Each of them are integrating monomer and polymer capacities, but I will let Bernard give you the detail this afternoon on these projects. The other segment, of course, of downstream, the marketing and services business, Mama will also give you some detail, but there we have also, obviously, a strategy which is clearly in the 3 pillars in order to deliver non cyclical cash flows, we like this business. So, first part is to continue to expand our retail activity in large transgaling markets, which means China, India, Brazil, Mexico, to say not the lowest, but just plus 1. I should have forget Saudi Arabia or Angola. So, we target to expand our number of stations by more than 4,000, but Momar will give you the details.
Another pillar of it is to develop a nonfuel revenue. It's important to know in a market like Europe, where we have like 1,000 retail stations, I have some time questions about the future. I can tell you that we are developing there, but only 40%, in fact, of the cash flow from the European network are coming from non shoe revenues and shops are very important and it's simple. So, this is we continue to develop it and to leverage this BioLogist competence in other continents like Africa. We have the largest return network, in fact, in Africa, not only for fuel, but globally speaking, compared to other businesses.
And we can leverage it by developing additional revenues. And the key pillar, like we have done now, is to also grow in this low carbon economy, on low carbon fuels. Clearly, we see trends where petroleum products maybe will be substituted in the future, even if it's the case of it will be decided as a society. But there are new businesses like EV charging and we are actually around 20,000 EV charging points. We want to develop this business, not only in our retail network, but beyond.
We are also developing alternative fuels and natural gas for trucks or LNG for bunkering and hydrogen in the future. Remember, the headlines of the slide is that there again, we invest and we will grow our future cash flows, an increase of around $500,000,000 $600,000,000 in the period, dollars 100,000,000 per year from 2019 to 2025. I will leave to Maumab the path to comment this slide of the development of the networks. Thank you. So, this concludes the strategy for our, I would say, traditional oil and gas business.
And now let's go to the other part, which is to invest in growing energy markets for a sustainable long term and it's mainly of course about LNG and electricity. I will not comment on the right, the left part of this chart. He has done it already, but we just insist on the consequence we took for our full strategy of Total. Climate change for us means there will be an evolution of the energy markets. So, we have to take that into account in our strategy.
All projects, it was clearly developed that we focus on a breakeven in order to avoid in case of lowering demand situation where we could be facing lower prices. But we want also. But on the other side, there is a growth on the natural gas. So, the idea is not only to be a gas producer, LNG producer, but to, again to develop the full value chain of natural gas, I will come back on it, and also to take the benefit from this low electricity growth of electricity demand to develop a profitable and sizable low carbon electricity. And last but not least to also invest in future businesses, new businesses which will arise in the low carbon economy world with a carbon value, UEC Businesses, UEC for natural based solutions, which will have a lower profitability.
So, let's embark into this presentation of strategy and first what we call integrated gas renewables and powers, which is a segment on which we report financially. There are 3 pillars of the strategy. I did a 4th one, but let's think about the one in which we invest the most. At least, first, Global Energy is a portfolio that I will extend to 50,000,000 tons per year as well by 2025. I will come back and with Arsen and Philippe and Laurent will also detail it together with Arnaud.
2nd, in electricity in Europe, we have built a position. Europe, we want to be a producer of electricity and we are either from natural gas or from renewable gold and a distributor to the end customers. We are not a utility. I will explain you why, but we want to be on both parts of the chain, including also the trading of electricity, I recommend it. And then the last part is renewables worldwide.
As Eliott told you, there is a clear growth demand for electricity. Renewables are the core of it and we have the capacity to invest in selectively in projects in order to be a renewable electricity producer to worldwide scale. We have this business on the period 2019, 2025, so the cash flow from all these businesses will grow by $3,500,000,000 So, it's a big part of the increase of the cash flows that we will show you, mainly of course coming from LNG, but the electric power will also contribute. And the other figure that it's a line of strategy that we will invest 1.5 $1,000,000,000 to $2,000,000,000 in low carbon electricity, which represents 10% more or less of our CapEx. So, LNG position, as you see, it's on one side, yes, we are growing our LNG sales by 250,000,000 tons.
Last year, it was around 20,000,000 tons, so the 20,000,000 tons contained 5,000,000 tons more or less of spot. We didn't put spot sales on 2020, 2025, but we obviously Laurent will explain what you will do. It's difficult to plan. It depends on the market. It is part of the activity, obviously.
So, we are today with these figures will be the 2nd largest player among the majors in this LNG business. As you can see, in fact, the portfolio that Laurent is in charge to optimize is 40,000,000 tonnes in 2025 because 10,000,000 tons are sold through the equity JVs of the upstream. Most important from my point of view is that you see that it's quite it's a multiplication by 2.5 of the cash flow by between last year and $235,000,000 going up from $2,000,000,000 to around $5,500,000,000 by 2025 and in an environment which is around European gas, dollars 5,500,000,000 and we have $2,500,000,000 So, not very I'm not too optimistic, but we have many questions. So, we have been cautious since we appreciate the future cash flows of LNG business. It's clear, but it's a very contributive part of the delivery of cash flows we'll do in 3, 3 years.
I would like to make some moves on 3 areas. 1st, Russia. I know that when we launched this Russia adventure in 2011, they are acquiring a stake in military, there are some DAS. They are spending money, which will be the cash out. Today, of course, it takes in our industry, everything is a little slow, but 9 years after, we can show this slide where we will begin to deliver cash out of our Ocean Investments.
Of course, Yamal LNG has been a success. Some of you have the opportunity to release the plant. We repeated it. 1 year It was in the budget. It has been delivered 1 year in advance of the planning and it works.
The capacity to the is about reproduction is about the nameplate capacity, so beyond expectations. We are then working a new project on Arctic 2 with a different, by the way, concept. I know we explained you that why it's more efficient. But the result to remind from Telal Group on the cash out, we have really good cash flow from Russia to around $1,000,000,000 This is the average on the period 2019, 2025. So, in fact, by end of the period, it's higher than that, coming, of course, mainly from Yamal for $500,000,000 but also from the increased Novatek dividend, which is active.
And as a shareholder, we encourage Novatek to increase the dividend, but no difficulty to do it. In fact, fact, of course, this company has a growth profile, which is really attractive. And so, it will put other than 1 $1,000,000,000 of cash flows with Russian ventures for the coming years and I think it's sizable. And it's a reward to the risk that we took by investing in the country. The second position we have built, maybe it's just to I don't want to make any geopolitics here, but just to show the other side of the Atlantic, it's here in the U.
S. Where we have proof since the last 2, 3 years, we have been quite active. Of course, with Cameron coming from the ENGIE portfolio, but Cameron, this acquisition allowed us to develop an alliance with CENTCOM in North America. And in particular, we have not only to extend Cameron together, but also to build new LNG facilities on the Pacific Coast in Baja California, project called Energia Costa Rio. We have been also dynamic by CZ the opportunity to receive $800,000,000 from Toshiba against 2,000,000 tons of U.
S. LNG, which in the large portfolio that Laurent Vise will manage is a big share, but it's manageable by the hotel teams. And with $800,000,000 obviously, when you divide by 2,000,000 tons per year over 20 years, I think, It lowers the cost of LNG, makes this LNG very competitive. Again, by 2021, we will have 10,000,000 tonnes per year of U. S.
LNG and will be the largest exporter from U. S. LNG by this time and it contributes of course to the increase of the cash flows. The last comment in that region I want to comment is Europe. And sometimes people ask us what does it mean to develop an integrated strategy on natural gas.
I think it's clearly there. It's just a demonstration that in New York, as I told you and Philippe will insist, you have domestic production, gas domestic production decreasing. So, we have room for more LNG. And we have a pool strategy. It's a demand pool strategy.
By developing in Europe some portfolio of customers, either from marketing, we have around 3,000,000 gas customers in Europe representing 8,000,000 tons of LNG or through our gas cycle plants, which are feeding our electricity business, which will consume around 2,000,000 tons of LNG, only 3 gigawatts. So, 3 gigawatts, we will have them beginning of next year. This represents 10,000,000 tons of LNG. We have the oil gas capacities. We have acquired them from ENGIE.
And so, half of the oil gas capacities, which were not fully used by ENGIE, in fact, will be used by our internal value chain, I would say, by our own consumers and consuming capacities. And of course, we have the LNG portfolio, south of a 50,000,000 tonne, 10,000,000 tonne of LNG, which today are not long term committed. LoRa will be able to direct them to Europe to feed this value chain. So, it's really the idea beyond integrating and going down to customers is in order to be able to take the maximum value of LNG in our portfolio. Moving to electricity.
So, again, what do you want to do in electricity in Europe? LNG told you, Europe is a liberalization. It's a liberalized market, which means that you don't need to aim to control infrastructures. So, you don't need to be utility to invest in that business. That is the main message today.
So, we clearly do not intend at all to invest in any infrastructures, which have really a very low profitability because we have access, equal access in these European countries. The market is organized to leave new payments having this equal access. And so, there, we are building a business around the 3 activities, which are generation, so production, either from natural gas or renewables. I should also speak about energy storage, where we develop a business with Saft, a robotary company. Also customers and customers, so today we have around 3,000,000 to 3,500,000 3,500,000 to 4,000,000 electricity customers in France and Belgium.
We target to upgrade by 2025 and to continue to grow this business. We have also, also, I mentioned, a strategy to develop some charge points for EVs in the future. So, that gets a lot in the mid as I would say, intermediary, you have a trading business. And this is already a big activity in HPC Trading, which linked to our gas business. And we have more centralized point of production.
Clearly, there will be a new business about aggregating all these really, we don't have the same approach. We want just to be a renewable generation producer or a generation producer, renewable producer. And so, it requires some investments. But we want, of course, to be able to give to our shareholders the same level of returns that we can have in our other businesses. I know we have, so we have made the chart to answer to many questions we have.
It's clear that when you invest, the typical project, renewable project, ROI is around 6%, 7%. And then, you will have different sources of revenues. You will develop it and, clearly, we have the capacity as a branch to take the risk of development. You can, of course, put some place of leverage on these projects because there is quite a high appetite. You can also farm down part of these projects when they are buried.
You have many financial investors today who are looking to in order to have access to these type of loan regulated assets, which are ready to pay in PV4 and PV5. So, and then at the end, we can operate and maintain them. When we add all these different flows of revenues for the equity that we inject. The target is to obtain 15%. We've done that in countries like Japan.
We are on the way to do it in France with a portfolio that we have acquired last year from Direct Energy. And in fact, the business model is to be able to have a pipeline of projects, which we like to be a pipeline of projects to divest 50% of them, rigivally, in order to have a permanent sort of cash flows coming from VITAS as well and to leverage your equity. So, it's a capital light problem at the end. So, you can see a good investments in 100% of $1,000,000,000 per year. If you made enough, you will find around $600,000,000 to $800,000,000 per year of capital invested in this business by Total.
And so, this is the way we want to build this renewable portfolio worldwide. Last pieces of this presentation on the new energy, the low carbon economy, is that there are overall areas, overall businesses which are today very early stage, but on which we believe we should invest as well. These are what we call nature based solution, what we call CCUS. This represents more as each of them 1 as we on the last year of investments, either R and D and pilot projects from CCUS. We have pilot projects in Norway, in UK and we are studying others, our nature based solutions.
It's building position for the future. But in a world where people want to a lot of people want to give value to carbon, this will become profitable businesses in the future. So, don't see that as compensation. We don't try to compensate at all. We want to reduce our emission.
We see that as investing in business, which are linked to the evolution of the energy market and to anticipate on the carbon pricing. I should or we couldn't add on this slide of what we do in storage, energy storage and batteries. It's also for us a way to develop business, a comfortable business on this new energy trend. And FAST is working out. We are pleased that it's a comfortable business where we contribute more in the future.
So, all this strategy can be sensitized, I would say, in one indicator, which is what we call this carbon intensity of the energy products sold to our customers. It's a sort of scope free indicator, which we introduced last year. We are not alone to manage it. The difference of scope 1 and 2 where we are clearly responsible of our operations, This one we can achieve it either society, either customers are changing their behaviors. And we are not car manufacturers.
So, it's a car manufacturing industry, which will change the pattern of the type of fuels which will be used by our customers. But having said that, until 2,030, we have a strategy and it's, of course, some of what I developed this morning, which should help us which will allow us to reach an ambition to lower the carbon intensity of these energy products we sell to our customers by 15%. You can see that between 15% 2018%, we have already made 5%, but we will continue to work in the various direction I gave you. Beyond 2,030, it's more difficult to plan. I know that Alida is a new trend to announce that everybody could be neutral in 2,050.
To be honest, maybe I'm too pragmatic, but I would like Total to deliver until 2,030 and to be judged on the capacity to deliver, rather than just explaining that we can do something else and none of us will be there tomorrow in 25 years. Coming back to last part of the presentation, which is to summarize all what we said and to, as I told you in solution, we have much better visibility on road map until 2025. And I want to show a few slides to summarize it and to this will be, I think, the key slides of the presentation at the end. First, the production. The production, of course, follow our investments.
We will continue to experience quite an high yield more than 5% per year between 2018, 2021. So, the year to come, 2019 is around 80%, but 2020, 2021, we still have an interesting view because projects are still ramping up because we made some few M and As, for example, the Anadarko M and A, even if we sell some E and P assets. So, this is why the balance. So, this is a close phase. Then, of course, there is no miracle.
2022, 2023, we will see a form of plateau. It's a counterpart of the fact that in 15, 2016, 2017, we didn't sanction new projects. So, in this industry, you have a 5 year timeline, we will stabilize But from 'twenty three, we will experience another period of growth with all the projects I mentioned to you, which are being sanctioned, which were about 50%, mainly of course driven by LNG projects. We expect this growth as well because we have quite a low decline in our production days. 50% of the production of Total will be from long plateau with no decline, either LNG projects or these large concessions that we have in Abu Dhabi in the Middle East, for example.
So, of course, it's an advantage. It's an advantage for our future production profile. What investment do we need to make this program? We need and the guidance we give you today is $16,000,000,000 to $18,000,000,000 which includes around $1,000,000,000 to $2,000,000,000 of net acquisition like before. So, that means the organic is around $15,000,000,000 $16,000,000,000 The premium guidance was $15,000,000,000 $16,000,000 So, it's honestly the discipline is absolutely maintained.
We can feel that we will be, as I said during the call, end of July, but in 'nineteen, 'twenty, considering Fiannavelco acquisition, will be at the high range of this guidance, around $18,000,000,000 as an average on both the year. It will depend on that, of course, capacity to close the various deals that we have either on the acquisition side or on the divesting side. So, that's why we give you an average on both years. So, 2016, 2018, the discipline is maintained and we spend with this money, this capital and that we spend to choose on exploration and exploration for 55% of it. IGRP will cover around 25% of its CapEx, 15% in LNG projects and 10% in NutriBullet Electricity, dollars 1,500,000,000 to $2,000,000,000 so 10%, 15%, 55% and downstream, we maintain around $3,000,000,000 of investments, which means 20% of the global CapEx.
This production profile, this CapEx stance resulted in strong cash flow growth. And during the presentation, I identified the main source of driving this growth of cash flows, the LNG. We mentioned the LNG. We mentioned also the downstream, dollars $2,500,000,000 from IGP, which means and it will be more or less regular along it's regular from 2019 to 2025, it gives you a charge of $60 per barrel and the assumption you have the assumption on the gas price that we use, 5.5 for Europe and 2.5 for US. And so, this is quite an impressive year for cash flow.
We have also the sensitivity over the next 2 years around 3.2 $1,000,000,000 for 2019, 2020 on this chart. Just to illustrate the strategy, this chart actually gives you also the split of the capital employed and the cash flow by 2025. And you can see that, clearly, we invest more in coming years in the growing market, LNG and electricity, as we said. And this will represent a speed around 50% for E and P, 30 downstream and capital employed. And the cash flow by 2025 should be around 55%, 20%, 25%.
So, iGRP, of course, is a growing segment. The cash flow will be delivered by 2025 and will be cash positive, of course, largely because of LNG and the other segments are taking place. So, this is, I would say, a chart which illustrates the way we move towards a sustainable long term businesses take out a step. So, what do we do with the cash flow, which is of course an important chart. This chart we presented to you in February 18.
There is no change of the priorities of cash flow allocation. Board of Directors again reviewed all these projections for 2025 and confirmed that the priority must be given to capital investments because we are able to generate opportunities with high returns. We speak about 15 percent. And we have a target and we are online with the target of 12% on return on equity. So, we want to continue to be able to see the opportunities.
And we said that we have confirmed a framework of $16,000,000,000 $18,000,000,000 CapEx, which means organic CapEx as acquisition minus diverse groups. 2nd priority is the dividend. And clearly, having discussed with many of our shareholders, they appreciate the dividend growth. So, we had the previous guidance on 10% over 3 years. You've seen the announcement.
I will comment it afterwards. There is a new guidance to accelerate the dividend growth considering the higher cash flow generation of the company. The final priority, as explained by Jean Pierre, is to maintain a strong balance sheet and gearing under 20%. Under 20 percent is clearly a full Pilar on cash flow allocation. And then share buyback, as we announced it in February 'eighteen, We consider share buybacks as a way to split, to share the additional revenues that a company can generate about $60 per barrel, let's say.
We are committed and we are, of course, we will execute a $5,000,000,000 program on 2018 from 2018, 2020. The 1st 2 years, we'll have buyback around $3,000,000,000 and so we have $2,000,000,000 to buyback next year. And beyond that, we will continue with the same policy to share buybacks to share extra cash about $60 per pound. So, when we have a little guide as a thorough discussion about this perspective of cash flow growth, I would like first to remind you that when we speak about increasing sustainability as a dividend in Total, it's a long distillery. We have, I would like And if we look even for the last 20 years, average rules was around 6% in euro.
In dollar terms, it was a little higher. It's clear that there was a strong period of appraisal of dividend between 2,000 and 2,008 and then after it was lower. But the Board, we considered all this policy and is comforted clearly by the capacity of the company to deliver strong cash flows like we've done in 'eighteen, in 'nineteen. And so, I've decided to I've given itself a guidance of a dividend growth of 5%, 6% per year. And we will walk the talk and leave an immediate effect.
Next decision is to increase the next interim dividend for the Q3 of 2019 by 6%, so it's €0.68 per share instead of 0.64 €0 per share. If we continue on the same level for the 4th quarter, which is a high probability, I think, That means that the dividend on the year 2019, because we already made 2 interim dividends, should be increased by 4.7%. But then the guidance will continue to be followed by the Board. I know that for our shareholders, there is also a growing concern about ESG and I've been we have a lot of questions doing some more shows. I would like again, I mentioned of course commitment to the environment.
I would like also on this year to remind you that I think you all know that our commitment to AG is quite recognized by a lot of rating agencies and the CDB and climate change and the water security, we have a great A- which is a very great mono and gas major which has been distributed. For our other classifications, which are important for some of you and which we are recognized. I would also insist that, in fact, on the social part of it, the social part of ESG, the S, 8 part of the DNA of the company. When we speak about investing more and more in Africa, for example, it's because we have a special way to work wherever our teams have a good relationship with all the stakeholders, local stakeholders. We create jobs in these countries like in Nigeria.
Now, the Ejina project, which has been delivered, by the way, with a budget 10% under the initial budget, which is a good result for the teams, 77% of the hours have been spent in Nigeria on these very large projects. So, we do lots of specific knowhow. We are supporting entrepreneurs in Africa through different ways. We are also investing in education. And so, this gave us, I would say, a scarcity no matter which means that we consider what we have a sustainable ESG commitment in this company.
This is the end of this presentation, which was longer than We try to maintain a strong discipline and organic rate event in balance sheet which gives us room, of course, to improve and increase sustainably, and I insist on this world to also share the return as I just explained to you. This is the end of the presentation. I thank you for your attention, and we'll be ready together with Helene and with Jean Pierre to answer to your questions.
Thank you.
All right. So, time has come for the Q and A session. I will ask you to raise your hand and introduce yourself when you have questions and there are some microphones that are going to be distributed. Okay. So we have a question here.
Thank you. It's Jason Gammel with Jefferies. Appreciate the comments that you made at the end, Patrick, about growing shareholder returns. Back at the Q2 conference call, you did mention a target of around 40% of cash from operations potentially being used for shareholder returns. And I just wanted to inquire whether that was still a target that you consider reasonable and should we then think of buybacks as making up the gap between the dividend and reaching that 40% target?
Yes. If you make the math, you will see that you are not far from the 40%. By the way, if we have 1 6% growth of dividend, it's more than $500,000,000 So, out of $1,000,000,000 it's more than 40%. So, the trend is there. So, all that is calculated, but as Paul has expressed, this guidance has a dividend growth, which is, I feel, more tangible for everybody, linked to the yield and etcetera, the valuation of the company rather than just a percentage of a cash flow allocation.
Right. Here is Thank you. This is
Sam Margolin from Wolfe Research. On the CapEx for the next 2 years, as you mentioned, there's an offset between disposals and acquisitions, which includes Anadarko. Anadarko is a little bit higher than the disposal target. So just wondering if you could flesh out the underlying organic side of that CapEx. It might be going down
a little bit to make up that offset or
is it just within the range because you hit the top of the range?
We gave you I told you that at least 2 years CapEx level will be at an average of 18,000,000,000 so it's high end of the year, dollars 16,000,000, dollars 18, which means that you take the $3,000,000,000 you divide by 2, dollars 1,500,000,000 that means that we have the organic is around $15,000,000,000 $15,000,000,000 So, there is no impact. It's just the range that we gave you where the CapEx is taking into account with this one. But again, we didn't try to match the $8,000,000,000 or $9,000,000,000 of acquisition by the $5,000,000,000 of sales. We introduced $5,000,000,000 of sales because, as I said, we have a very large portfolio. It's part of the dynamic internally.
We didn't make the deals of Anadarko to grow. We made it for the value, not for volume growth. So, it gave us the opportunity to continue to evaluate the portfolio by divesting part of the F3 portfolio. You will see some sales. We've done the North Sea.
We have over to come. But at the end, it's taking into account into so there is no lower organic CapEx. The organic CapEx, which were, I think, around $14,000,000,000 will continue to grow $14,000,000,000 to $15,000,000,000 and you are adding these additional which means, by the way, we don't expect a large acquisition by Total during the next 2 years. All right. A question from Antoine.
Thank you very much, Oswald, Clinter Bernstein. Two questions. But first, I just wanted to talk about coping with volatile markets. And I know it's a 6 year plan you're giving, but I just wanted to focus in on 2020, please, if I could, because you spoke about spare capacity rising in chemicals. I think on your exhibit in 2020, 2021, you talked about LNG markets not tightening until 2021, so 2020 could still be soft.
There is a lot of oil supply still coming next year from your own projects in Norway and Brazil. So I just want to get an understanding. The dividend steps up, you've a commitment to it, but if 2020 happened to be a particularly weak macro environment, what steps would you take here to protect that commitment? Would you spoke about Angola tiebacks being cut back, but what else? Can you cut back elsewhere?
And or do you just rest on terms of balance sheet to pay the buyback, the $2,000,000,000 buyback plus the dividend?
Of course, we will not if we do that commitment today, not to extend you in 6 months as we announced it. I mean, otherwise, it's so clearly, we did because we have the room and space in the balance sheet and the cash flow to do both. And so, we intend to execute the buyback. I remind you, the oil price since the beginning and to do the dividend growth. So, dividend growth is a priority and will be done.
Having said that, yes, you're right. We can have a visibility of the soft market unless we have over events like the one which happened last year, last week in Saudi Arabia, which suddenly has tempt and have a soft tension in the market. So, okay, it's clear, but the fundamentals of the cash flow generation are strong enough to give us confidence that we can execute it. So, 2020, again, I think and which was clearly the consideration by the Board of Directors, if because as we always said, what we announced is sustainable. We don't do it just for coming back on it next year.
Question from Irene.
Thank you. Irene Khimann of Societe Generale. I had two questions, please. Obviously, gas and LNG is a core part of the strategy of growing and increasing sustainability. On Slide 49, you give us your sensitivity to the oil price, making certain assumptions on gas pricing.
I wonder if you can give us an insight of your gas price sensitivity in terms of either earnings or cash flow?
There is a special slide, which is in Nanex because we knew we the question because we have the question accord. Could you put a slide on the tailwind because we tried to it's in the annex. So, you will have it for all of you. We did not comment it during the presentation because of the dynamic of the presentation, but you have the answer, maybe Jean Pierre will comment it.
Yes. So, during our production, so 50% oil, 50% gas.
On the gas portion, lower 50% gas. For the undergas portion, more or less 50% is pro index,
25% linked to NBP. And so, you see the sensitivity
5% linked to OEAP, so very small portion,
and remaining 20%. So, the
global market is the case in Asia, in South America.
So, not very sensitive to gas price internationally prices. So, all in all,
Thank you. My second question, a more general one. I mean, 10 days ago, we had the Saudi attack on very large infrastructure. And I wonder how you, the leadership of Total, begin to think and analyze that event in terms of risks to you because clearly you're a company of very, very large infrastructure around the world. Does it change how you look at risks?
The first point is that I gave instructions to be sure that we could have emergency plans for people in the Middle East because I'm a little afraid about reactions in that region, even if there is a lot of political leaders trying to calm down. But honestly, it's a huge event. We never seen such an attack on even during 'seventy nine, which was a real severe in the issue of the Middle East, including the Iraq Iran war. We've never seen such distractions of all the facilities. So, it's a fact.
I think this will be taken into account, as I said, in my introduction by the market. So, there was the idea that perfect security of supply is not true. That's the reality. I mean, my answer to you will be that, as always, we it's the best one of the inconvenience, disadvantages of the portfolio to try is that we have many plants in which we produce. So, sometimes it's a disadvantage in relocation of human resources, and we have a temptation to try to refocus our people to the main countries, which is another summary
of the part, the fact that
we have a large portfolio of countries from this perspective is a better advantage. We suffered already in Total Air when we lost Cement somewhere. We didn't lose it because it's still moveable and preserved. But we had to face a situation where suddenly a large portfolio and it was a if human is coming back, my cash flow will grow by another $1,000,000,000 So, and we did not anticipate human coming back in these figures. So, we supported it.
But I think the answer to your question is don't focus too much on one country and be careful not to overexpose the company to one specific location, which, of course, the limit of that is that the large fields in this world are located where they are. I cannot move them. And so, I had to face that situation. But it's clear that this is the main question, but I have to answer that I could add to your questions. All right.
Another question on the left. All right. Thank you. It's James Evans from Exane BNP, Couple of questions. Firstly, sorry to go back to the shareholder returns.
But one thing I want to talk about is
about this evaluation of going higher on the dividends versus more buybacks.
I mean, obviously, over the
last year, the conversation has sort of increased in volume around transition pressure. There's probably more talk about decapitalization or not increasing the overall dividend burden too much in dollar terms. And I think, Patrick, when
we sat together in June in Paris, we surveyed the audience, there
was a lot of greater focus on buyback than before. So So, is that conversation evolving at broad level? Or do you still see maybe the change in the next few years coming with a greater focus towards buybacks versus dividends as maybe we get towards the middle of the decade?
I think we have spent a lot of time on this question. We also discussed with some large shareholders of Total. And each time I ask a question, what they observe, they love the dividend. So, at the end, I know that some markets in the U. S.
Have a trend today that is quite fashionable to increase buybacks. I hope so that some of my peers are doing that. The Board clearly does not want to over constrain the company and we are in honestly, we are in a period of time where we have to invest for adapting the company to the new markets and we prefer to keep flexibility for the future. Having said that, and again, we consider share buyback as a tool to share additional revenue. So, if price is coming up again, $70 we'll have much more revenues.
We will use the share buybacks. There will not be this period, but I think the discussion was clearly and spent some time about what is the best tool. And at the end, we think that today, the appetite from our investors is even larger for having more investors is even larger for having direct cash. They like the cash flow coming in their portfolio rather than just the buyback is an indirect cash it's an indirect return. We buyback, but then we have to eliminate.
The share buyback, the dividend is a direct access to the cash flow. And this is, so I mean, it's quite simple. And in a world where the money is not program? So, this is the way that the Board has discussed it. And the second consideration, obviously, is it a sustainable dividend because obviously when we do that we increase it.
We increase by $500,000,000 per year. We are planning at least half of it, the 3%. And the answer was clearly when we look carefully to all these figures that we show you about cash flow growth generation, but yes, it is sustainable. We are very confident. And the fact that, again, every move we have done and including the last one in narco is giving us a strong visibility of this production profile.
There is almost no notion over there. Projects are identified. It's a matter for our teams to be able to deliver them, which of course is a challenge. And as always, if we commit to something, that means we have some margin, it's too many, we will not commit. I think we have his reputation.
No, we constantly deliver on our objective. And if we do that today, it's because we will deliver on these objectives and we can sustain this growth of the dividend. And I think, again, it's also a reflection of the Board of Directors of the valuation of the company, I would say. And we think there is, by the way, like most of $0.59. So, there is room for improving.
And I think I strongly believe that the value of the company is discounted value of future cash flow, of the dividend cash flow, it's a way to appreciate it. So, this is all this combination and the results of the work and discussion with our shareholders to decide what is the priority. And again, we could have stayed today telling you we have announced a program February 18, we will execute it. It was when we saw all these cash flow growth coming back and being confirmed, we think it was the right time to accelerate this dividend growth in September 'nineteen and not to wait another 1 year in life.
Okay. Thank you. We have a question on the very left. Thank you. Hi, it's Peter Low from Redburn.
I just had a question on your commitment to reduce your scope 1 and 2 emissions to less than 40,000,000 tons in 2025. How do
you view spending in this area?
Is this simply a cost to
the business or do these initiatives around energy efficiency and process electrification also contribute to your operating cost reductions that you've outlined in the presentation today?
Of course. It's not a pure cost. I mean, all that is a logic. In Europe, I mean, I have a strong belief that you progress, I mean, the environmental matters, it's in many things economically. And energy efficiency, when you are in refineries, it's just lowering your burden, your costs, in fact.
And so, people are motivated. What we will tell what we are telling them is that the return on it, you can take into account cost of carbon, you can take into account the cost of energy in order to invest more efficiently in that one. So, yes, it's clear. It has a return. It's not just a burden, I'll be clear.
Otherwise, we will not. But I think having said that, it's also a responsibility by the society. That's why we are calling for carbon value. We are advocating for that because it will be much easier for all of us. We are using internally $30 per ton and $40 per ton in high price.
And $30 per ton, I can tell you, we have product. Yesterday, I had a discussion with my colleague of a big company about LNG projects in the Far East And I told him, we will implement CO2 reinjection because it's less than $20 per tonne. So, we'll do it in this project. And I have his support by the way, even if the teams could discuss. But I think it's important that some that we take actions from this once and this is in our hand.
Okay. Question from Vivienne Wright.
Thanks, David. It's Lydia Van Good from Barclays. Two questions and one clarification, if I could. And Patrick, thank you for the visibility that you provided. Can you check on the dividend increase, that 5% to 6%, is that all the way up to 2025% or is that just through the 2020 period?
No, no,
It's clearly for coming years, it's written. So, for coming years, it means the board that we have the guidance for coming years, so it's not a short term one. And the translation immediately is actually to show you that we will do talk. I mean, like the Board told me, we will do it immediately. No, it's clearly for coming this, not a 1 year guidance.
Okay. Thank you. And then just the actual two questions. Firstly, on the cash flow growth that you've outlined, if I run that much
through, it looks like
it's about 4% per year growth in cash flow, which is very similar to the level of production growth coming through. Given everything you outlined around the digitalization trends around the global services, cost savings, I would have thought there would have been more cash flow growth coming through. Is that fair or is it just in terms of the cash flow leakage somewhere else? And the second question was on the gas side and clearly you've had worthy AGTI stuff yesterday. And so there is more of your pushback about gas being a low carbon fuel.
Is that something that you think that the industry is doing enough to address in terms of the methane emissions and then you will actually get the policy support to deliver growth in gas production Will that
demand You can. I was trying to check the figures. You said that cash flow was at 4%, but the production growth from 2019 to 2025 is not 4%. You have a plateau during 3 years, you know. You have 5% in 3 years, 3% at the end.
So, it makes more 2% to 3%. So, in fact, the math are okay. Case, the cash flows are growing quicker as a production growth, but you will have time to look at it. But frankly, I think all that is quite consistent. Let me clear the cash flow growth that we announced.
You've seen that we have taken a cautious assumption on the gas price. We are but we are the gas price sanctions are quite cautious as well because of the environment. And yes, Nissan, obviously, I think it's a clear point. There are 2 things there. 1 is what you can do at the level of the major companies and yesterday, we had a presentation with my colleagues of the Oil and Gas Climate Initiatives and clearly this group of leaders are committed and we will reach 0.25%, which is very low.
In fact, the question is more how do we end up with the industry in that move. And remember that the new information is not only a matter of our own operation, it's also a matter of the full chain. And after that, there is 2 roads downstream because emissions could come also for infrastructure from distribution networks in cities. So, we need on this path to work as well. It's a full approach that we should have, not just the Freme 1, on which clearly we can move, but it's not we have already made progress, we continue to make progress, but it's only a small part of the food chain.
So, yes, it is clearly a poverty, I think, for the gas industry. Again, it's well identified and we are also investing quite a lot to better measure it to be sure that we are not overstating these missed and emissions globally. But it's something to which the gas industry has to answer. But NFT, at the end, look at continents like Europe. We are phasing out coal.
We are phasing out nuclear. We want electricity, I think, in Europe. So, the system, honestly, I'm convinced that there is no way to make an energy system working without having a reliable source of supply, which is natural gas. Yes, it will be more renewables, but we need energy storage, which today you don't know or you can to face a seasonality of the demand for electricity, you don't need just with batteries. It doesn't work.
You need to have other ways. And because you're natural gas, you have to invest in this carbon, I would say, neutrality business. But a continent like Europe, the future will be from natural gas and renewables. It cannot be a renewable. It doesn't work to face a similarity of the demand.
And energy storage technologies still have a lot to be developed and we know that quite well. We've got fast companies in which we develop. So, there is something which has to be which, of course, we have to advocate for it. We have to demonstrate it. And we think it's a challenge, but we really can tackle it.
Okay. We have the questions here.
Thanks. Hi. It's Henry Tarr from Berenberg. Just to come back on the cash flow. I think that's a $1,000,000,000 a year.
The bulk of it is coming from
sort of integrated gas, that's $3,500,000,000 then another $2,000,000,000 from downstream refining and chemicals and M and S.
Does that imply to a
fairly limited growth in the upstream
cash flow portion despite the production growth that you're are.
In the E and P, I mean, upstream is covering LNG as well. So, we've segmented what we call by RGRP, the LNG part of the global production of the LNG from our fleet. We're going from production of the LNG from Alteryg is going from $350,000 to $800,000, so really big growth there, which by the way is part of the stabilization of the low decline. So, this part is relocated to what we call IGRP, and it's clear that it's even not going up. Besides that, let's see that we have a profile which is in fact quite stable in terms of cash flows.
But again, if you eliminate LNG, this production is declining not by 3%, but by 5%, 6% because LNG is contributing to. So, that is stabilizing, and it's in fact somewhere growing by 5% of the cash flows and the underlying assets.
Great. And then just secondly on LNG.
As you say, the bulk of your contracts now are all price linked. As you go forward in sanctioning the new projects, do you see that oil price linkage holding through the next decade?
I think you have more on this this afternoon through the focus session on LNG. And so I invite you to ask again this afternoon if you didn't get the answer from Philippe and Laurent, but I think you will.
Okay, thanks.
This question on your sustaining CapEx. So I think clearly the dividend increase shows confidence in your portfolio. Have a low decline rate as you highlighted. So, how should we think about, just given how volatile the commodity market is, the sustaining CapEx that you need for your current dividend?
Of course, you have sustaining CapEx in Refining and Chemicals, which were around $500,000,000 and marketing and services, selling CapEx is very limited. So, I'm not sure we speak about the savings. So, selling CapEx, which means what we're going to maintain just the existing base.
Yes, I'm thinking of it from you commented on about $15,000,000,000 for organic CapEx. And so if you were not going to grow up the dividend and we were in a downside volatility environment, just thinking about how much
we could select CapEx to
still maintain your cash flow?
It's another question. The flex CapEx is different because part of the CapEx is committed to projects, you know. So, it's a different approach, this one. I will come back to you with the right hand side. I don't want to give you a long feel.
We'll come back to you before we ever do it, but we did this after
you're kind of it sounds like moving away from that guidance, aligns with the macro view that you laid out there. You're seeing signs of underinvestment in the oil market. So, I'm wondering what exactly what data points you're seeing that suggests some new investment
going on in the market because
it seems like a lot of the investor community is worried about the opposite right now, but some of your peers are suggesting
a similar evolution in
the market where a view down the road you could see somewhat undersupply.
Thanks. I'll make sure to have Catra the question. Yes. I think the fact that the industry has done everything is quite clear. By the way, what we see on total side of a micro level, you see this plateau of production, it reflects the fact that in 2015, 2016, 2017, we are not sanctioning projects.
And I think the rest of the year, that's a mic, yes. Of course, you have the U. S. Shale impact, which has contributed today, but I'm convinced by that from what we observed on our profile, which was limited by the way for Total because we have been active on some M and A activities, which are, I would say, field, some holes of this profile, we will observe it at the industry level by 'twenty one, 'twenty two, 'twenty three, 'twenty four, the same impact. And because, by the way, if we continue to see the growth profile of shale oil is beginning to slow down a little, you will see this impact.
There is no miracle in this industry. The fact that this industry did not sanction new projects in 2015, 2016, 2017, it was generally the case not only for us, for most of the colleagues, we will find that impact 5 years after. It's an industry where you have an impact which is delayed, which will appear. So, I'm convinced that this will come. Yes, if you can have the microphone.
Hi, Prashant Brown from Citigroup, President, on behalf of Alsra Sime. I have a question I wanted to ask specifically on the upstream. Your Brazilian portfolio, you'd spoken and said earlier about the big acquisitions. I just wanted to get a sense of your strategy for exposure in Brazil and especially in the context of this Q4 of 2019, we're going to see several licensing auctions coming up. So any color there as to how you think about your exposure and how it fits into this whole portfolio?
Thanks. I would say, first, we have been the early mover in Brazil. We made a deal, a large deal with Petrobras in 2016, acquiring a position in the Yara sales, becoming an operator in Lapa. And by the way, we've done it in good financial conditions because we are the early movers. So, first point.
Since we have been quiet on the exploration route and frankly because spending huge amount of bonus for exploration, this is out of I don't I'm not sure to share these views that some peers have followed. I know that some of them have spent a lot of money. They discover a lot of CO2. We have CO2 risk in exploring in Brazil. It's well known.
And so, between spending money, big enough amount of money on exploration and adding access to already discover the results where you have the data. I prefer to spend my money on the second one rather than the first one exploration. You create value, which compensates the risk that you take because it's a risk when you do exploration. You don't know what you will find. And across the Brazilian basin, I can tell you, between Lula, between Jupiter, between Libra, you have different fluids and you observe very different.
So, we have the truth of we are all geologists are the theory and they try to tell us, if this don't go there, you ask CO2, about to be the best with you, I have one disappointment along the last 2 years to have Capture 1 license. So, rest, we have no regret. So, coming to the TR, because it's your question, this is a main question of economic conditions. And we are in total, we
have a chance, we have
been active active on opportunities. We have a large resource base. So, we are not obliged to do a deal to participate if we don't consider that the economic conditions are satisfactory. And so, we are observing and we are calculating, working on different opportunities. We already mentioned that we are a partner of Yalla, where is one of the first fields which is called Atapu, which is in the business of the art.
Obviously, all teams are working on it. Otherwise, we will not do a job. Then, at the end of the day, we will see exactly what are the conditions. And honestly, it's complex to understand because it's a very smart mechanism. I don't know how many economists and engineers have worked on that because you have to pay a bonus, which is announced in state.
And then you have to negotiate with Petrobras. That's a way to equalize all that and so this negotiation is going on and maybe it will depend on the results of this negotiation. But clearly, I would say, if the basic supply assumptions behind it are $70 plus, this will be a problem for companies.
Sorry, I would like to ask 2, so I left my last one to the end. Just on your digital factory, that's some new data today, $1,500,000,000 out to 2025. I think as you described, you spoke about availability improvements. So I wanted to get a sense of what is availability currently in upstream, downstream? What are you trying to get that to?
I guess you also said return on capital employed is still high because your assets are already performing quite well. So what's the uplift here that you're expecting to deliver $1,500,000,000 please?
I think I will give the floor to Arnaud and Bernard because this deja vu factory came from them. They came to us and from it came from the people. We have been we mean there's been a little show like always in scale up and to accelerate. And by the way, I think that we propose you to make in February a field trip in Aberdeen because we have a lot things to show you in Aberdeen. But what is happening on the ground, killing has started and is the first digital sale that I really see in the company.
It's I was there 2 or 3 weeks ago and I've been impressed. So, I think it's good to see that. Teams are working on various cases, business case, where they can show you the concrete answer, but I will leave the floor to Arnaud and to Bernard because they are behind all these digital factors and they are the motivators. So, please. So, just to answer quickly on this very big subject, we believe there is a huge field for improvement, in fact, in our industry and we want to, of course, capture that.
On the E and P side, Patrick was speaking about Celine and how as a smartphone, we can really on cyclical wealth in order that we close the web a bit earlier so that we can restart them faster. And it turns potential to higher, but there are also some very positive aspects coming on costs. And indeed, also on capital. I mean, CapEx is not just going to be OpEx, it's going to be also on CapEx. So just to scratch the surfaces, it's a very important subject.
Thank you, Amnon. So, for refining, can you include just a few figures, maybe I could share with you. This is utilization rate of the So, it shows that we have very significantly already improved our utilization rate in RC through operational excellence through also some asset management. But again, I think it's sizable. When the teams told us we are able to generate at least $1,000,000,000 dollars We have pushed them a little more, of course, because then people come to you $1,000,000,000 you ask for more, but why don't you jump.
So, we decided clearly that it's also, by the way, for me, We have been very stringent in the way we manage our human resources. We did not mainly lay off plan that did not recruit during 2, 3 years. So, we are back to the level where we were and say, now it's time to invest in human resources in the field where we feel important for the future and making this effort to attract young talents in our industry, in the company, through digital technology, I think, has also attractive value. People are asking us, how do you continue to attract people to come to oil and gas companies? If we offer them the capacity and they discover this industry, who these new technologies and I strongly believe it's also for mobile and marketing.
You can generate more of the news like in electricity, the direct energy, all the business we do with BTC is a lot of digital tools. When I spoke about aggregation platforms, it's just a word. But beyond aggregation platform, we are today a team of 20 people, 20 digital guys who are working in order to optimize all the flows coming from various producers and customers. So, it's a rich we're tracking time to our companies. And when we will embark them in our companies, I'm sure they will be convinced that they can participate to developing the energy of the future.
So, it's also what so we said, okay, as executive committee level, it's worth to invest and let's make sizable 300 new talents coming in the company. It's also a way, by the way, to adapt the way we manage and to new ways, obviously, young people, the ones who have maybe less vertical management rules and more horizontal ones. So, let's engage in this future. So, attractiveness as a company also is important today in this world. All right.
As I don't see any other hands raised, I think that closes this first part of the presentation this morning. And so, there is lunch, which is going to be served and we'll resume at 2:40 this afternoon. Hello. So, we're going to resume our day. Please be seated.
We'll start with the presentation on LNG with Philippe, with Arnaud and with Laurent. So, leave the floor to Philippe Schoet. So, we will be free to try to explain you what are the attractiveness of the energy market for Total and how we are going to generate value in this challenging business. So, I start by the LNG market and the first, of course, feature of the market is the air growth. What is important is that the growth is not, I would say, energy growth.
The growth is coming from gas. And what we have seen over the last years was a very robust growth of gas demand, 4% per year between 2015 2018. And as you see on this chart, we continue to anticipate growing CASIB at minimum of 2% per year up to 2,030. Drivers are clear not to you, call to get switch, including in power gen, bid for economical reason such as in the US for regulatory environment, for environmental reason in China or for both such as in Europe. And the time that the gap is growing, it's giving much more depth to the
growth of LFG, LNG being
the most dynamic part of the market. We have seen, as we are commenting here this morning, 9% of growth between 20 15% and 2018. And this growth for us will continue to be very high growth as the markets will continue to benefit from large and cheap reserves and discovered sometimes very far from them in Middle East, Russia, Australia, Africa or U. S. And another important message of this slide is that Asia is clearly a very key market driving the growth.
It's true for
foreign gas, 50% of incremental gas
between 2018 and that 30% will come from Asia and 70% of the incremental LNG demand will come from Asia. So, high growth, Asia is one key and this is of course driving the attractiveness of the market. As a way of concern to all of you and of course to us is the drop in gas prices. And as you see on this slide, the gas prices have dropped. And first, the energy to us towards in the future is that gas and energy demand have reacted to its low prices.
And as you see, the forward markets are anticipating a price recovery in Europe and Asia as of 2020. So, we are currently around 4 for the European spot price, around 6 for Teekay and the spot price in Asia and for the coming year, the forward market are giving more than 6 dollars per million BTU, which is that's, I would say, the highest level that we have done historically, but we know that where this is a cyclical market. What we believe is that the bottom of the cycle is now. And on the chart which is on the right side that Helmut showed this morning, what we see for the 2020, 'twenty four horizon is that beyond the new start of the equation that are today under construction, the liquidation capacity is not enough to avoid some market tightening beyond 2021, even in a demand scenario that would be less than an impact than what we have seen recently and to see that we have indicated in terms of gas demand a bracket between, let's say, 5% and 9%, 9% being once again what we have had during the last 3 years. These trends are also in the LNG market, are also of interest and I showed you the forward curve on the spot LNG price in Asia.
2, 3 years ago, you could have questioned the economic relevance of both spot market. But since then, we have seen it growing and spot at shorter represents roughly 1 third of physical market, twice of the spot indices, GKN for Asia or spot gas Europe for Europe and this is making the LNG market more attractive. Of course, don't be the best on me. We like, we love and there are still large portions of the sales that are done through long term contracts that are all indexed. But what is clear as well is that the market and the buyers need some flexibility and the greenfield suppliers such as Total can benefit from the spot market to optimize and balance the flow safely through petrol hedging on forward markets that are more and more liquid.
So, you should consider that this is positive for the development of the market. What did you say? One key feature of the market is Asia, as I said, and we see strong growth in many countries around Serviced Asia, which will be contributing to the growth. But clearly, we have identified 2 key markets for the future, which are of course the 2 giants, China and India. These are confronted to the group for their emerging needs for very large population, you know that.
They are also confronted to the same need to decrease their high dependency on coal today for air quality, maybe tomorrow for climate. This has defined ambitious to the 3rd key targets for increasing nearly doubling to 50% share of gas in the energy mix. Both are investing in infrastructures. You have noted that since many years in China, but it is starting also in India. And these are taking measures to simulate market growth through higher current competition and legalization, including once again in India with the CTS distribution.
So, clearly, both of these markets could be a real game changer, much beyond our forecast and they could speed up the LNG growth much beyond in 2030. Europe is also an important market, but maybe in terms of quantity as far as gas demand is concerned. You see that on this chart, even if the gas demand has grown in Europe by 11% since 3 years, Europe price is not a gas market where we anticipate real further growth. We would like to be wrong, but this is how we see the market. But, I will anticipate a decline.
Gas, clearly for us, a role to play to complement the intermittent renewables that will represent more or less 40% of the power mix in 30. And I mean only intermittently, so a lot less with 40% of the power mix in 20 30. And at this time, nuclear and coal will have started to be phased out in many countries or several countries in Europe, including Germany and Belgium. And what we actually drive growth for LME is domestic gas production, which is to decline. We are foreseeing decline of 60,000,000 tons between 15 and 230.
As you've seen that now the decision is definitive about Groningen. Groningen will have to stop in 2022. We don't see any tight imports going. So, there is still room for LNG to fill the gap, which will mean that 2 30 LNG market in Europe of 100,000,000 tons. And this is not neutral at all in global LNG market, attractive as for global LNG players such as Total.
We have we get capacity to import LNG. Actually, when the Nord in Asia is seasonally low, the demand is high in Asia, we can reboot our LNG to Asia. So, Europe being a kind of swing market for all the global players such as Total. Now, more difficult exo5, absolutely the future because, of course, the prices are low such as today, we see as oversupply, as you can see, Emily, I have question about
how long the oversupply will last. My experience,
like in any COVID-nineteen variable cycle. And the nice thing about gas and LNG is that the group is taking care about the cycle. If you have to be too hopeful to bear now, but when you have an overcapacity in refining,
you have it forever.
When you have overcapacity for a growing market such as petrochemicals or such as LNG, there is one moment where the growth will have eaten the overall capacity. And here, we are remaining optimistic about the supply demand balance for LNG. You see on this chart, we have introduced 2 scenarios of demand, low5, i7 after the low5, i9 of the first half of twenty twenty to twenty twenty four. This of course will be impacted by the prices. We'll see clearly higher demand when the prices are low and the opposite when the prices are high.
And when you compare these demand needs with the forecast of the need for capacity, which are in fact the bar, you see that we have a kind of basis of $460,000,000 that are the assets that are either already operating or that are at the construction that will be operating starting in 2024 onward. But you see that there is clearly beyond 2024, there is a need for new projects, there is a need for new FIDs to be taken in 2020 in order to be supplying the additional demand starting 2024 and beyond. At the same time, we have to acknowledge that there is not enough room for any of the projects that are under study, especially in a low demand scenario. And in the current environment with these low prices, we should know very soon if promoters and bankers that are willing to launch high cost projects without forever or long term contract are really ready to spend the money. On our side, strategy is always the same, life for any kind of commodity.
We want to focus on developing low breakeven projects because they are the cost progress that will be profitable even in the low phases of the cycle. On this chart, which is not made by totality, a publication by Ruth Mackenzie on the competitiveness of different LNG projects that are either under construction or that are just being contemplated for FIDs. And what you see is those different projects, you can rank them into different categories. On the left side, you see under $5 per 1,000,000 BTU in the current environment delivered in Asia, brownfield of existing dry plants, Nigeria, Qatar, of course, the most competitive. After, between, let's say, dollars 5 to $6 delivered, you see the Greenfield Giants project, world class, Russia, Mozambique, another example.
And in the straight range, you have also the Broadfield U. S. Project. If you go a bit slower, dollars 7 to $8 delivered,
you have the U. S. Greenfield.
And more than $8,000,000 you have the Greenfield of the North American Pacific Coast. And as you see, you see in red the projects that are the ones that Total today is comprehensive to develop And you see that all of these projects are really in, I would say, the safe part of this curve. And this is why we remain optimistic about the profitability of our future business. And I will leave the floor now to Ardo so that he can entertain you a bit in more detail about those nice projects that we are today developing. Arnaud, I leave the floor.
Thank you, Philippe. So, the objective in my presentation is to focus on Total's the future or onshore location of Mozambique LNG facilities in the northeast of the country, which is about 40 to 40 kilometers So, Energy Production will take a growing share in the group's production from 14% in 2018 to more than 22% by 2025, obviously, came from $400,000 per day to $800,000 per day equivalent. These new projects will contribute as illustrated on the right part of the chart and you will be seeing a business manual to the visibility of good cash flows growth and ePegated by CFFO will be growing 2.5 times from $2,100,000,000 to more than $5,000,000,000 by 2025. We are set to review our production with highly competitive projects in all of the key producing basins. Today, we are shareholders in 27 trends in 12 LNG plants, which represent 25% of the global production of LNG.
And by 2025, we will have 30,000,000 tons of ATC production in 38 chains in 15 LNG plants that will represent 1 third of the LNG global production. Of the quality of the projects we have in our portfolio. This is a new cost opportunity with a brand new 4,200,000 ton train, this will be the Train 7, and an additional liquefaction unit to debottleneck the recent trend, adding 3,000,000 tonne per year FID is expected by the end of 2019, with 1st call of production by the end of 2023. Of gas in an excellent reservoir with $5 per MBtu and this project will generate around $200,000,000 per year at $60 per barrel from 20.24. Let's go 40% below that of Yamal on this project.
1 of the main features is the gravity based structure design. There will be 1 structure for each of the 36,600,000 tons per year train. And this solution has enabled to have more work done on the yard and less work done in the air shaft environment. Moreover, instead of still digging the part that we've done on the M and LNG with 15,000 piles, In fact, the gravity that secure will be sank on the border of the other estuary. And in Arctic condition, where you have a river, Leveraging on Of course, U.
S. Is well positioned to supply new cost LNG and we have been actively expanding our position through a strong partnership with Sempra. First, with our entry into the 13,500,000,000 tonnes per year Cameron LNG Train 1/3, LNG yard room by the end of June of this year, and 10, 23 are due to start up next year. 2nd, we have signed an agreement with Sampan to enter into DC LNG, the competitive ground seal project on the Tatiksis Coast in Baja, California with a 3,500,000 tonne train to be sanctioned at the turn of 2019. This project will be set with low cost plans to cut from the Permian and is ideally located to secure the Asian markets.
From those two projects, Tamon LNG and ECE LNG, will amount to 3,500,000 tonnes by 2025. This project has the potential to be expanded further at very negative costs. Now, let me move to Mozambique Energy. So, with the acquisition of Anadarko African Assets, we have been able to access to 26.5 percent operating interest in Mozambique Area 1. This channel gas resource is estimated at more than 60 Tcf of gas with a gas proposition that is very well adapted to the production.
And so considering the excellent reservoir characteristics, we expect high productivity per well with more than $40,000 of oil equivalent per day from each well and the cost effective 40 kilometer, Subsidile Match sanctioned last June, and we developed 18 TCF with 2 LNG trains of 6,400,000 ton each and a start up planned in 20 24. The liquidation costs are competitive at less than $100,000,000 resource yet to be developed, studies for country are expected to be around $300,000,000 per year in 2025. The fixed studies are about to be launched and AFIB is planned in 2021. I would like to add that the market environment 14 and more stability of cost since 2016 for Decatur and offshore European cost, We have a situation with spare capacity, about 40% on yard and rigs, for example. And this is due to the fact that the lack of the independent be up to 50% summary, we expect 16% reduction of the CHG emission associated with shipping by 2025 compared to 2,007.
Good afternoon. Following our presentation, I'll move a bit downstream on this LNG value chain and just to describe how building a more global, a bigger LNG portfolio, more integrated, will allow us to capture the market development that Philippe has been describing. The LNG department has been busy in the past year since the acquisition of the ENGIE LNG portfolio. So, Toshiba, just to name a few FIDs in Mozambique and Arctic 2, but some downstream elements that I will highlight. It gives a picture of a global and integrated portfolio.
Firstly, we are global because we are now positioned in all major hubs, starting from the historical ones like the Middle East or West Africa to the one to charcoal into developing. We have Australia, Russia and the U. S, of course, and the future hub, which we develop, which will complement our position, which is East Africa. So, we are able to, through this global presence, to arbitrage between the different basins, I think can be exemplified by the Mozambique project, which is exactly at equal distance between Asian destinations and European destinations, allowing us for existing and for the trends to come as well to make a nice arbitrage between those two markets. So, the engagement footprint also makes us more resilient.
And for example, we are able to overcome local social media or geopolitical risks as they exist today. And we are on diversity of supply, we are able to offer clients safety of supply through the size of our portfolio. So, Data Poly is global, increasing this year, and we are as well an integrated player. We have a 13,000,000 ton of equity per option, which is able to come in 20 25 as described by Arnaud. We have as well a shipping fleet of 20 vessels.
We have 5 vessels under construction and very low charter party rates, which I think have lost to reach the bottom and we're able to capture this opportunity with ordering those vessels. And they are well best in class in terms of technology, allowing us, as Arne was talking about, JG emission, well as the lowest cost possible. We have decreased in the past 10 years standard written trip from the Gulf of Mexico to Asia from roughly $2.5 per McEwen to $1.6 per McEwen. We are integrated as well with our 20 medium term per annum reclassification capacity, which is secured for Europe, which is guaranteeing access to an important market, as Philippe was describing, and securing access to this market for our future E and P projects. And we are developing our downstream presence through new long term contracts, and we'll discuss them afterwards, and as well demand creation through investments in import infrastructure.
So, I'll turn to you before the growth of the portfolio, through the development mostly of our upstream project, will allow us to reach the size of 15,000,000 tonnes in 2025. When you combine this growth for the period 2020 to 2025, it's roughly 8% per annum growth, which is in line with the market growth allowing us to maintain our market share in the LNG market. The market this study will change in terms of structure. It will change as I'll turn to you here. We have an increasing share of this portfolio, which will come from our own liquefaction facilities, from quantities that we are purchasing from liquefaction facilities where we are a shareholder.
This share will increase at the extent of purchases from 3rd parties. 3rd party And as well, we have a constant share at the bottom, which is the development of equity JV sales to 3rd parties, I. E, U. S. Physical balance between supply and demand together with flexibility.
On the right of the slide, you have a bar which shows for the year 2020 the structure of the supply that we have in our trading portfolio. We have 6 European quantities, which are delivered to us in Europe, which are feeding our U. S. Reclassification capacity. We have fixed Asian volumes, which are delivered and supplying part of our existing long term contracts in the area, which have 60% of the supply portfolio, which remains flexible.
There are some we start from a physically balanced portfolio where in 2020, each single cargo which is regional portfolio has got a physical home which is secured either through Regal or in term contracts. And we are able afterwards to add additional margin through this flexibility, through this optionality by optimizing the destination of the cargo according to the pricing of the different markets. It follows exactly what we've been describing to you last year by, in fact, the increased commoditization of the market is offering a lot of opportunities to portfolio players like this with a visibility and more credibility to a geographical market, for example, in Asia, we are able with the flexibility that we have in our portfolio to monetize the optionality of AMG cargoes. And this activity as shown on the left is not only preserved but increased despite the increase in size of our portfolio, with flexible supply reaching around 80% in the coming 5 years. The flexibility, it has to be noted, is not only coming from volumes which are coming full of destination on an FOB basis, for example,
in the U. S, but
they are coming from increasingly flexible terms that we are able to get from our own projects and our own E and P production. Talking about price references and price balanced. We have preserved an oil upside on the volumes going through the LNG portfolio. So, you see on the left, on the supply side, we have equity production, which is reaching our portfolio. Of course, we are at group level, we are not exposed to 20, just the cost of production.
And we have additional quantities, which are being secured on the 3 main references, which are used in the energy market, which are oil based price references, mostly France, European Gas Hub prices, which are increasingly TTS replacing NBP, and the Henry Hub. Looking at the balance between the sales which have been contracted and the purchases, we see that we have reduced by half our exposure to HanoiWeb by reselling roughly 50% of the quantities we are buying on HanoiWeb on a similar HanoiWeb formula. We are balanced and we are neutral in terms of European gas hubs. And the 80% which is remaining in our sales structure are equally spread between oil related price formula, which is maintaining a lower position against our supply and volumes, which will be optimized according to spot markets, which are prevailing at the moment, optimizing the destination, able to go into recast contract or the best prevailing market conditions. This portfolio of long term contract is resilient in the current price environment.
What you see on the right, we have only a limited share of quantities which are exposed to price reviews. And those price reviews will only take place in 2022 and beyond in a market, as shown by Philippe, which will be the most favorable supply and demand balance. Our effective increase will be fed in the future erosion by Arno by the future projects, which will increase the share of revenue coming from our own liquefaction account. We have used as well external growth and most of the most notable asset has been the purchase of the ENGIE LNG portfolio. We closed the operation 1 year ago.
It's time to show you 2 different synergies which have been we have been able to achieve. Firstly, on the left, on the shipping side, we have modernized, as per our existing portfolio, the shipping requirements of the total portfolio on its own in terms of number of days of shipping which are required to transport the quantities. We have an energy portfolio on its own and we have converted to a joint portfolio. What you see is that we are able to save roughly 27 percent of the number of days which are required to transport quantities which are the current size of our portfolio is an equivalent of roughly 5 vessels. And the openings of $0.20 per MBtu that we've shown are coming from lower shipping requirements, possibility to capture additional arbitrage between different basins and as well a better fit between the vessels which is used for each transportation, playing in on the diversity of vessels which is now within our fleet.
On the right, I think mentioned this morning when we are talking about regasification, the integration along the channel has better usage of the regas capacity in Europe. What you have in the green area is a range between 2017 2018 of the usage of regratification capacity in North West Europe, it grew below 25%. The market shift, which has redirected cargoes to the European market, plus our trading expertise, have allowed us since the beginning of the year to utilize the weaker capacity at more than 65%, which is 10% more than the industry average. Our policy and our strategy to do it through 3 different ways. Firstly, the gasification capacity, I was shown to you before, as well in a more classical way, doing long term sales contracts.
We then say to this year, with 2 new counterparties, which are joining the LNG world, Wanghui in China and Thai Power in Taiwan, and the other very favorable terms. Let me say that it is through the side of our portfolio, the flexibility that it can bring, the seasonality of delivery that we were able to match some very specific requirements from those vials. We have as well secured a contract with CMS AGM for the delivery of LNG for Benkroyne, which is an investment, which is a development, very important for us in the creation of this new market and new outlet for LNG for the future. The third way that we are using beyond regasification, long term contract, is human creation through investment in downstream infrastructure. We have been selected and awarded by the Republic of Berlin the development of import facilities through MFS RU in order to replace fuel oil by natural gas in existing and future CCGTs in the country.
We are continuing our partnership with AES in the Caribbean Island, mostly in the Dominican Republic for redevelopment step by step and replacement of once again fueled by natural gas and power generation creating a potential of 1,000,000 ton per year of outlet for LNG. And we have as well partnered with Aden in further development of import infrastructure in the Demrat terminal in order to create an import terminal on the East Coast of India and working with them in the development of demand downstream of this terminal. As a conclusion, we are strengthening our number 2 position in the global LNG market, including our portfolio up to 50,000,000 tonnes in 2025. We are increasing the purchase from our own projects also group where we are shareholders, securing the next phase of projects in key supply basins, whether USA, Russia, Qatar, Oceania or Mozambique, we are confident that a large portfolio gives the opportunity for economies of scale and optimizations, and all this contributes to the visibility of the Group cash flow growth with integrated GAAP growing from $2,100,000,000 to $5,400,000,000 from the year 2020 to 2025. Thank you very much.
All right. So time has come for the Q and A session. Please.
This is Jason Gammel with Jefferies. You've had quite a big increase now in the volumes the LNG volumes you'll be shipping from the U. S. Coast. And I was trying to get kind of the margin that you're able to generate on that.
So are we talking about you're buying Henry Hub, you're paying reservation fee, you're paying for shipping regas, what type of price would you need, let's say, in Europe to be able to achieve positive margins?
And the monetization that you can have of the flexibility and the optionality, which is embedded in those contracts. As you know, those contracts are full of destination where we take delivery at the load import with a free destination worldwide. You have to date on liquefaction fees. Patrick, we're talking about the Toshiya contract, which is a lump sum payment, which roughly at, I would say, dollars 3 delivered into Europe. What we had through optimization with our trading portfolio, the tight sales that we've been able to develop, our trading expertise as well that I have described.
We are roughly able to do close to $1 an ETU of extra margins through optimization and capturing the extrinsic value of those contracts. Yes. Hi. James Evans at Exane BNP Paribas. A couple of questions.
Firstly, I guess, on maybe some fantastic low cost LNG projects. There were a
lot lower than what was on
the Wood Mackenzie's number. So could you just help us, I guess, correct the difference a little bit? And the second question is about all of these future projects you've got at Columbia. We've got PNG, Nigeria. You've not even mentioned Qatar, Mexico, Telauri and Cameron.
What's the contracting strategy here? Do the lowest cost projects go without long term contracts? Or should we just be thinking about portfolio type approach now that's more progressive?
Okay. Thomas with the impact. Just answer the first question. I think some of the same in Asia to have 10% rate of return. Are we speaking about the cost, it's a cost of production, 2 regions, but it's not the same metrics.
On top of that, this is our number say, long term buyers in Asia that are expressing their interest. But it's clear that if they do to give us a level of price, which is, I would say, attractive to us, we will go through it. If not, we can clearly keep PAP or bit volume on the top. So, we do that on a nicely basis.
Hi. It's Sam Marglin from Wolfe Research. So thanks for that distinction about the delivered cost versus the cost curve of the project. But I think when you talk to investors, at least with respect to the recency bias of the current LNG market, the prevailing view is that you have this wave of supply at very low cost half cycle marginal pricing. And that's
in our experience,
the cost curve isn't something that helps you out in a commodity business. And so the question is, if we're stuck in this oversupply environment in LNG for longer than expected, it was mentioned that there's a whole list of potential projects that you have that aren't captured in the slide deck here. What is the flexibility of the LNG initiative broadly? How much is driven by UB user returns versus being compelled to manage your carbon footprint or any other factors at work here?
Well, but we see that clearly a driver for us. We really do that on pure economical This will be a clear demand for our sub project today, but cannot complete to make profit on the basis of the pricing that we see as of today. And for us, big as the threshold of the project over the in Europe. The full cost of this is already at $6.2, dollars 6.4, but for the projects in the U. S, this is not enough to make money.
And just a quick follow-up on the pricing chart that you have, the open position that's not set on an index to any underlying commodity. Can you just walk us through the mechanics of
how you optimize it?
Is it different spot price conditions in different regions that you're watching? Or is it something else that you're that there's a predictive element to it? Or are you moving things around between contracts?
What you have on this graph on the right in terms of the sales is what is already contracted and fixed. So, there is a part which is going into Europe and the whole point of the tax able to remove those cargoes away from Europe to better destinations. So, that's exactly what it's saying and it's quite well. It's about capturing at the time the best LNG price available on the market. So, it can be Europe, but if we can generate some additional margin, it will be Latin America, it will be some product that we have in Africa, it can be Asia.
And those are the quantities which are free of distribution, not contracted yet until long term contract.
Thank you. Philippe, actually, you told us before, I think, that because of your scale, your size, you make about $1 per NMBTU because of this optimization. That's generally a good rule of thumb. Is that still the right number? Is this 0.2 here on shipping that we hear about today, the 0.25 and the lower shipping costs.
Are those additional to that old number you gave us? And are you actually doing a little bit better than that number? And secondly, I just wanted to ask about the derivatives market in the JKM, the Platts market. Are you now using that to
express a view of some you think winter is going to be soft,
you can lock that in and get rid of your cargoes over time and not having to dump them within a soft market? Thank you.
Increase of the spread between Europe and Asia in winter. Clearly, we are making much more than what the So, the saving is a kind of a one off that we're showing you in terms of fleet, dimension of the fleet. So, it's not linked to the optimization of the cargo. Rigatification, yes, it is in terms of optimization through physical trade of assets. And we are thinking in terms of JKM, we have an increasing visibility now on the JKM, which allows us to have visibility, I would say, in the coming 2 years.
It hasn't expanded extremely quickly. We were maybe 1 or 2 years ago, we would have talked to you about maybe a 6 months visibility. The volumes have increased. We are participating in this. We are trying in fact to create as well a paper market for shipping.
We've done the first paper shipping trade in LNG in the month of June, so trying to boost this market as well. The whole point for it is that as we have flexible portfolio and we are able to monetize the optionality within this portfolio, more tools we have in order to hedge at some point the situation and build up from this situation, but that is it. So, we are using yes JKM in order at some time according to market view just to see what's going to happen in the months to come. And first, what examples from there was the effect on the oil price reacted, but the net prices as well. And we have our US cloud position mainly or Europe.
In one day, the European gas price went up by 10%. The GK and the price in Asia went up by 38%. So, it's a kind of a movement, but you can really look when you are paperbound market should GKN when one ends up. Okay. A question here, Olivia?
Thanks. Two questions, if I could.
Just maybe making that to Oswald question around the idea of optimization and shipping load. The idea that you brought that down by 27% is quite impressive. Is there more that you can do based on an absolute standpoint, but as you get bigger, there's an advantage of scale that
I can start with shipping optimization. Clearly, there is a one off, as I was saying, about putting together 2 portfolios which have, one, separated, might be extra requirements in terms of shipping. I would say it is a one off and I do feel that numbers you've seen is pretty optimized and I think we've done our job right. The next step is with industry. It is a development of the spot market in the industry, which will help to gain the next level in terms of CV, which is absolutely necessary for the LNG industry because we know that when you look at the fleet worldwide of LNG vessels, it's typically suboptimal with a lot of vessels supporting each other.
And it is like the development of the top market and the right pricing now on the gas market being given in the Atlantic basin and in Asia that the cargo will be able to be rerouted and optimized at the global and industry level. Just try to answer your question on the CAG emission. So remember that you saw in the chart of the for typical LNG production and just to have a split of, well, the mango to refer on average. And then, we are trying with this example to notify some folks and we are working on each part to try where we can say, say considering that we are our whole journey on the shipping and you see the way we are going. And I was on the liquefaction process, But if we take an example of Tocco LNG, Tocco LNG has native CO2, about 20% in the gas composition.
So, there, there will be a bit outside of the liquefaction. But for this specific project, we will have, of course, higher potential CO2 emission
Thank you. Eiry Khymon, it's Cite Israel. On Slide 10, you show us that LNG gas production grows from 14% to 22% of total by 2025%. If we think about gas in total, not just LNG, but natural gas, which is currently around half your production, what does it grow to by 2025,
please? I don't have the exact number, but I think indeed, it grows
Hi, thanks. It's Henry Carr from Berenberg. Two questions. 1 on LNG costs. So you said at the moment costs remain extremely low
to sanction some of these projects.
We have seen a record number of LNG projects sanctioned this year just terms of capacity. There's a limited number of contractors who are capable of doing this type of work. How confident are you that when you come to the Nigeria or PNG, the costs are going to remain sort of stable given the sort of backlog growth we've seen for some of
these companies in the past 12 months? As I told you, in fact, for the Nigeria LNG kind 7, which is a commercial claim and an expansion. And we've already locked in the contract on Rolat and most are nickelNG. So, those very large projects are already adopting with the current derivatives. What's not trying to say on the side is that the fact that moving forward, for the next project set up for LNG, we still consider that the vast majority of the costs are going to be in very several markets because there's still enough capacity available.
When it comes to contractors who have a specific LNG
And then just on LNG bunkering, what do you see as the opportunity there? And how should we think about that as a growth opportunity over the next 5 years?
I'm sure that, as overall, we will have more information But,
it looks like there's a lot of capacity for growth beyond 3 and 4. So what's the optimal size or the maximum size for that asset? And then secondly, just on your demand growth outlook balance sheet, 5% a year, I noticed on Slide 5, it looks like European gas piping for its state lab. So, I'm wondering if that will end counterplay Seward Stream coming online and other things like potential for Japan to increase nuclear capacity or restart some nuclear plants, I should say,
Hi. This is Kim Fitch, HSBC. Just a couple of questions for me. Firstly, a significant portion of your LNG sales is still oil linked. Could you perhaps talk about the trends that you're seeing on the oil slopes and that is the long term contracts?
We're hearing folks for REIT contract have been in the low double digits and that's quite a long way down to the mid teens, which we used to see in the past. Any color on that would be great. And then secondly, Laura, you've highlighted the high utilization rates of Total's European regap terminals versus the industry average. Why is that a good thing given that Europe is currently the same for global LNG and that's where LNG realizations are currently the lowest? Thank you.
Firstly,
markets in Asia are key mostly in oil related with most of the buyers still insisting on oil related contract. We are, as you are saying, not at the need, it seems, as was the case before. The market can be estimated not a manner at roughly 11.5% today. What you have on average, what you are able to do and that's what we are trying to do is escape from vendors sent to the overall industry is coming from seasonality, flexibility. And usually, I hope to beat those market those prevailing market conditions and trying to settle a bit better.
That's what we are trying to do in Asia in the context we've done and that we're already testing. You are talking about the high utilization rates in Europe. Firstly, you are pretty happy when they are utilized and when they are actually like increased rate. You could argue that, of course, Europe is a sink. It will it is true that when cargoes are coming to Europe, it is, at the time, the best market.
The extra flows by spot trade or buying from third parties because you saw that sometimes we are having 100 percent utilization rate. So, Okay. I don't see any other questions in the room. So, I think we're going to stop here. We are perfectly on schedule and so we'll resume at 4 So, we're finishing the day with this downstream presentation with Bernard and Beaumont.
And so, Bernard first. Thank you, ladies and gentlemen. As Patrick mentioned this morning, And of course, we keep working on the operational excellence and I will come back on this one. So, first choice, integration. If we can change, we have no clear needs to grow in petrochemicals, not in refining.
So, let's now move into petchem and see where we're progressing this It grows by 3% a year. It has been the case in the past few years. We see it, of course, all of that drives the growth in plastics and polymers. And of course, we see also, and I will come back with So, 3% a year, a good business to be in terms of growth, I would say, frankly, strong fundamentals. Of course, if we look So, we'd say the bulk of it is now almost almost, but all of this weigh on the supply.
And at the same time, But it is not so much a matter of concern for us because most of our projects are going to start what do you see? You see a strong discount of issuance compared to Kineska. When we look at competitiveness, we, of course, think about this topic. We are also to think about the assets, of course. And of course, we keep on saying we are keen on our operational excellence.
We mentioned this morning all the plans around the cost saving. We mentioned this morning all the plans around the digital acceleration plan. All of this will, of course, further contribute on this chart these projects. I will detail them in the coming slides. But keep in mind that the whole of course we to be balanced between the monomer and the polymer capacities.
Is that these assets are fully integrated in terms of monomer and in house. In Kyiv, we are pre integrated. All the styrene we produce is transformed into polystyrene and the same way with APM used of course, benefiting from the integration with the refinery with existing cracker and the TPs and that helped us reduce our CapEx level. This project is well low on track. It's already 70% completed and we will start up later in 2021.
So, first, first So, this is a very nice combination that I brings in this joint venture with integration, So, that's what today a well balanced system and extremely competitive in terms of fixed stock. And of course, in terms of CapEx because we leverage the existing 3rd large project, Saudi Arabia. You made this joint venture with Saudi Aramco. Here, again, tremendous success story. It's a magic number, but $1,000,000,000 the lives of our cash flow from an asset that we want to further integrate downstream with the petrochemical concept.
We are executing the 2nd phase of this project, which is to build the downstream complex 1,500,000 tons a year. More than 50% of the fixed stock will be based on low cost heat stocks, which fully comply with our strategy. We have downstream and we crack 1,000,000 tons of PE as well, again, to be balanced more than that. Have taken the extension of FID. So, it's a very it's a good project.
When I'm flat, And more than 3 years, just maybe 2 that this project is attractive is that 2 idle, have to attract partners downstream from the project and we see that, for example, Eros has joined the project, has committed to spend $2,000,000,000 downstream on specialty chemicals and that's having the composite and the tailings service industry. This vision, obviously. And is also growing. So, basically, we have 2 segments, the virgin polymers and the recycling polymers, which grow, enjoy a steady growth. And how will we achieve this target?
That we will achieve started by investing, of course, organically, may sound a little bit contradictory, but we support the balance in the use plastic because we've seen that in our industry, and it's a business which also will help address this new user of plastic then because when you have a better deliverable polymer, you may bring a solution to this challenge. So, as you've seen since we met last year and many have a lot of progress, we have progress diamond geographies, developing business netfield retail activities and building some of our local home fields. With that, we will deliver the $100,000,000 CFFO additional per year till 2025. 1st, we are going to grow aggressively in large emerging markets, namely China, India, Mexico, Brazil and Saudi Arabia. 2nd, we will be building on existing retail network, non fuel sales, short fuel and services.
This nonfuel power will represent 40% where market is still growing, we are going to increase our market share to reach 18%. We are going to leverage on our presence there. 2nd point. 3rd point, we grow our low carbon business. For all this, we are going to we are today, we have 15,000 charging points we are operating.
We are wishing to have 150,000 charging points we will be operating come 20 25. We Laura and Philippe Harris said earlier, but on natural gas for vehicles to energy markets. 1st, how are we going to invest in those large emerging markets? 2nd, what are you going to do in Europe, windshield revenues? How are you going to improve the windshield revenues?
3rd, how are you going to leverage our position in Africa? And first, the net energy at the we are going to have for the market. Now in large, this slide has been presented by Patrick earlier, and I'd like just to comment where you're going to be here on these 5 big markets. The 5 big markets represent if you assemble them, they represent 25% up to few sales worldwide in 5 markets. And these markets are markets where the consumption capital per car is increasing.
The ambition to have 4,000 service stations between 4,005,000 service stations in these five countries in addition to our 14 existing 1,000 service stations. We are going to build that through mainly franchise models, which are very light in terms of CapEx. In Mexico, for example, in Qatar, in Gas Red, they have new group of that they have built a group of dealers. They have 250 sales stations. They have created JV reserves where we are going to build our they are outbound and they are building their assets.
In Brazil, In Brazil, we acquired a company called Zema with more than 200 service stations. And 22 and additional stations we are going to have would be franchised as station there too that will be quite light in terms of CapEx. In Saudi Arabia, it's a dispensary. There, we've partnered with Saudi Aramco. We've acquired a network of service stations.
Half of the service station will be branded Aramco and the other half will be dented Pedal, and he will be the one with expertise. So that's what we are going to do, basically increasing the number of substations with a very large CapEx model because financing is not an issue today at the price at the cost of tax rate. In Europe, where the market in that is the demand of transport of goods in Europe. That market is increasing by between 0.5% and 0.9% per year. And we are quite strong in that segment because we have cut trucks in our sales station, our main sales stations.
But in addition to the total valid sales stations, we have a set by a next year called A24, which is dedicated to that sort of business that is growing. So we are present in that segment of transport of wheeled trucks in Europe and that market will be increasing. The second thing we are going to do in Europe is to develop our business in that makes sense quite different from other countries is that because the retailers, AT and T in the early 80s, there. Shop, the full start. And then in addition to our card asset now, we are moving to mobility services, which means that when we buy a fuel card, we are not only buying a fuel card, but services associated for locally of life you to pay the toll fees on the highways in Europe.
And that is generating quite some revenues. We have 3,000,000 cardholders today, In Africa, we are We have no competitive initiative demand in terms of number of sites in Africa. We have 2,600 shops there, food at restaurants, and our stations in Africa, meaning if you visit a certain place in Africa, subscribe for it. If you want a TV subscription, you can get there and get it. So we are sending a lot of services again, places that are open 20 fourseven, but most of the time I need that are quite Africa.
We've launched, for example, we have a company where one of the investors started. They have a touch point they have today. And close to 10 1,000 merchants that are using the services in our sales stations. Now, just one slide and let me agree with that one on these emerging markets. We ambition to have 1,000 services by 2025.
We made acquisition of a company called Zema. One thing that is interesting that doesn't, of course, is the 30% bio in gasoline. So today, we have 2 80 stations. We ambition to reach 1,000 service stations either by acquisition or because you have invested, you have 40% of the service stations certifications. So there we see a lot of potential with the we The main markets being France, Germany, Belgium, Netherlands.
And to be a leader in B2B and B2B and B2B business there. To do that, we've already taken major steps. 1 year ago, and to B2B Business. This summer, mid June, we installed the first high power charging in cell stations in France and in the Netherlands. And December 10, we won a contract in the Netherlands is at the forefront in terms of electromobility needed, and we won the contract to install charging points in the Great Amsterdam this summer, and we're going to install 10,000 charging points, and we are going to operate in further for the Greater Amsterdam region.
So we've already taken major steps there. Our aim is to operate operate And in addition to that, in our own sales stations, we aim to have charging high power charging points, 8 50 kilometers in Western Europe in the E5, which means that come 2025, we are going to have more than 1,000 high power charging points in our network in Europe. So give access to our customers to the maximum of in terms of charging points, operate a maximum number of charging points and have those customers quality in our sales sessions because we'll be able to deliver them deliver to them this high speed charging. Natural Gas, we are the legal engineer in natural gas. We made acquisition of a company called Putten in 2017 that is a Dutch company, one of the 3 MGD players in Europe.
Today, we have 100 more than 150 stations under our operations operated by TOTEM, selling natural gas for vehicles. We ambition to have 500 of them come 2025, and our goal in Europe will have 50% minimum In the U. S, we have 20% shareholder in the need of natural gas in the U. S. Clean Energy, we acquired at Participation in 2018.
The gains are growing. The intention is to reach more than $1,000,000 in 2025. On hydrogen, we are looking at that. We see it as probably for the I told you earlier that we acquired a major player in transport of those hydrogen will play a major role in the future. That JV has 75 sales stations today.
Out of the 75 sales stations combined, there are 20 sales stations that are under the present tense. On LNG, is 0.4000000, 0.5000000 ton today. You are going to see probably that market that will be getting to 1,900,000 to 1,000,000 The first models in that and we assume that with one of our clients who signed with this, of the volumes they are consuming are quite high. That market, you can say, it's a market of between 80,000,000 to 100,000,000 tons. So thinking that, that market, when we move to IMO 2020, you're going to have 10% of that market that will be LNG reach between 10% 50% market share in 2025.
We see the market and that is coming from to a global market of roughly 10,000,000 tonnes in 2025, out of which we ambition to do $1,000,000 to $1,500,000 Neto said earlier that we quoted the securing $600,000 We are going to continue on our legacy business and on the growth areas we are going to leverage on large energy markets, wind fuel business in Europe, position in Africa and alternative energy. With that, we are confident that we've delivered this. Thank you. All right. So we have the last round of Q and As for Bernard and Mobile.
Jason Gammel with Jefferies. I may diverge a little bit from the primary topics and ask about refining. And you talked a little bit about IMO, but specifically, how are you positioning for a post IMO environment? I know you already have very low fuel oil yield, you have very high mill distillate yield, but you're trying to position for a low sulfur fuel oil market and are you already starting to move compliant fuels out into storage right now for 100 days from now?
So, there are actually 2 dimensions in your question. There is a new system already once again, has been 3 fold. 1st, in Anzac, our refinery in Belgium, its crude. And the last point, which is the largest part by the way, 2,000,000 tons, we have been able to do something pretty smart and with a very low CapEx is to just invest in storage capacity to be able to segregate the which is well below 5%, which basically is said that we don't have very significant exposure to the actual ISO structure. We consider the new vessels that will be coming will be again 4 of the and then the container business.
That's and we see the market moving to and there is some consensus, the market going to 10,000,000 in 2025. And then from there, increasing significantly to 2,030.
And are you actually marketing a low sulfur fuel oil compliance bunker fuel? Or will you just be manufacturing middle of the slips
and moving up on it as they flow?
Can you take it again? Yes. Are you marketing a compliant low sulfur fuel oil bunker fuel currently?
Thank you. I have 2 questions again. On the petrochemical side, you talked to think about 60% of the business being low cost feedstock by 2025? And still not 100% or entirely sure, what happens to the other 40% in terms of how do you deal with the broad based low cost? And then the second one was on the marketing side.
If I look at that $100,000,000 of uplift in cash flow and the idea that you want to open more than 4,000 stations, that implies it's about $25,000 in cash flow per station. I was just wondering how that compares to or how the cash flow from those new stations compares to the existing cash flow per station?
On the first question, yes, so 50% of feedstocks we will process by 2025 will be low cost, mainly get paid, linked to NASHDA. So, it's going to be, I would say, nice balance and we will have a completely flexible setup in Europe from that standpoint. Today, it's exactly the contrary around now. Today, we have 60% NAFTA, 40% realistic. And by 2024, it's going to be exactly the areas going down, the beginning margins are great.
So there, we are going to be there 30% and the rest of 15% are what we call specialty products, which we said of bitumen and other products. That's how we think about the 3% to 5%, percent, you have the impact of the new site, but you have the impact of neutral Phase 2.
I had three questions actually. First, I have another on petrochemicals. I think you referred to the current down cycle as short term, what you expect in the short term. Some of your peers are talking about previous cycles lasting a very long time. So my question is, obviously, we have 6 years to go to turn to
the fire. But if or
when you risk your target CFFO of €5,000,000 for perhaps a longer duration downside globally. What sort of numbers or what range do you come up with? Then I had 2 questions, if I may, on the marketing side. So first of all,
a few
years ago, you had mentioned in a similar event that, you know, how can the banking system is very undeveloped and there are no ATMs and you aspire to sort of use your service stations to provide that.
Is that
included in your plan for nonfuel? Is that still happening? And the second question on the non fuel growth strategy. Obviously, your peers are doing exactly the same thing. Clearly, selling food or insurance is not necessarily your area of expertise.
So I wonder when you think about the risks or the threats surrounding that strategy, what are they? Thank you.
So, maybe I'm going to answer the first question. Of course, we are the member, Larry, as you may guess. 2025, so this period of time we are looking at, today, we have 13,000,000 tonnes of new capacity coming in The assumption that we are taking on petrochemicals are very conservative. There is 143 digital services, be it rural areas where they don't have access to building pumping system. So that's what is working and we are part of the system and 2nd, we have outlets, because to sell the facility, we need outlets, and we have 6,000 outlets in Western Europe, part of the things we are going to be in the addition factor.
How are we going to manage yield management in terms of
Yes. Jason Gabel from Cowen. Since Patrick mentioned it, I guess I'll ask, what is the underlying chain margin assumptions that you're using for this kind of $1,500,000 of cash flow growth to 2025 as this year, which has not been so strong for a 10. A good year to benchmark against. And then just to follow-up on the IMO 2020 slide, there's a portion of group flexibility that you point out between
you have the ability to switch
between high sulfur and low sulfur crude. What's kind of a level of that throughout your portfolio? And where do the prices need to go? Could that be economic for you to do in terms of the low sulfur, high sulfur spreads? Thanks.
So, the first question is going to be pretty fast to answer. I'm not sure I'm going to give you the margin underlying assumptions. So, that will be for another time. It's Henry Tarr from Mereberg. Merrivate.
Two questions. Just to come back on the franchise retail stations versus the equity, I guess. What's the economics of franchise versus owning your own retail in terms of CapEx, the value per station and returns profile of the 2, that would
be helpful. And then you're entering Brazil on the retail side as well. Have you any interest in going there upstream to biofuels in the country? Look, the franchise model works like this. The
refining and particularly as you
get into the middle of the
next decade and you think about the challenges to European refining system.
Do you have any plans around divestments or repurposing of some
of those refinery assets, but other means that maybe is not talked about today that we should be thinking about?
So first, we have done that already. If you remember, since true. We see it. And we just need to stick to what has been our success so far, which is to focus on net and you don't need to run it when it's right afterwards. And the more you run it, the more you learn, and the more you will be able to adapt it real time.
Activity, you know, kind of Okay. I do not see any other arms being raised, just 2 minutes walking distance from here on 25 Broad Street. Thank you. At it's 545.