Ladies and gentlemen, welcome to TotalEnergies' first quarter 2026 results conference call. I now hand over to Patrick Pouyanné, Chairman and CEO, and Jean-Pierre Sbraire, CFO, who will lead you through this call. Sir, please go ahead.
Good afternoon or good morning, everyone. Happy to be with you again today. Before Jean-Pierre will go through the details of this first quarter financials, I would like first to make some few opening remarks, in particular on the conflict and in the Middle East and its consequences. As you know, this region, Middle East, holds of course, a very special place for TotalEnergies. It's deeply rooted in our DNA, in our history, in our identity, because it is where the company was born in 1924 in Iraq. More importantly, this is a region where we have established along the years a prime position which differentiates ourselves. Since the very first day of the conflict on February 28, our priority has been first the security of our teams and their families.
We have decided, just through the two days after, to organize the evacuation of employee families and as well as some non-essential employees out of the UAE, Qatar, Iraq, Saudi Arabia, Jordan, and Lebanon. Thanks to the strong mobilization in all our affiliates in the regions, but also around the globe and also at the headquarters, more than 1,300 people have returned safely from the countries concerned by the conflict. I want to thank all the teams who participated to that strong effort. Safety of our staff will remain our utmost priority, but I want also to reiterate here our full solidarity and support for the population of these countries which suffers a consequence of the conflicts. I want to reaffirm TotalEnergies' commitment to all our local partners, contractors, and customers.
From this point of view, I want to underline that we kept a presence in all the countries aside our partners. For example, in Abu Dhabi, all our secondees is working for the ADNOC JVs are maintained on the ground. It's the same situation in Qatar. We have also, by the way, sent some experts to assist QatarEnergy in evaluating the damage and repair necessary to the two trains which were damaged during the conflict. We have maintained a team in Iraq, in Basra, of 20 TotalEnergies staff, who are supervising the progress of the GGIP projects on the ground with around 5,000 workers there. Also in Saudi Arabia, we have of course maintained on most of our secondees in order to supervise the Amiral projects, which mobilize today 22,000 workers.
My message to on this first is to thank all our teams which are again working hard in the region facing the situation. I went myself last week to visit them, and I can tell you I had a strong feeling of a high mobilization of everybody facing these adverse events. Also I met, of course, our partners and authorities to reaffirm our commitment to the region. Of course, we will have to draw some lessons from what happened, in particular to envisage some alternative evacuation routes for the production of oil in the region, but that will come after the conflict. This conflict immediately has some impact on TotalEnergies' operations. We have been, by the way, very transparent, I would say, since day one, to disclose all the impacts on our activities.
At this stage, production is shut down in Qatar, Iraq and UAE offshore, which represents approximately 15% of the total oil and gas production of the company. More precisely, 360,000 barrels per day, because we continue to produce onshore UAE production, oil productions, 210,000 barrels per day TotalEnergies sales, which is evacuated through.
Fujairah.
Fujairah terminal out of the Strait of Hormuz. We also continue to produce the dolphin gas between Qatar and UAE because it's, I would say, a domestic gulf production. While this is a significant portion of our production upstream, these Middle Eastern assets contributes less to our cash flow per barrel than the rest of our portfolio due to higher taxation in the regions. This 15% of volumes, a little less, 360,000 bbls per day, impact account, only account for roughly 10% of our upstream cash flow at $60 per bbl. The company's cash accredited growth expected for 2026 is largely outside the Middle East. You've seen that through the results of the first quarter.
Meaning that the higher oil price observed since the start of the crisis, more than offsets of course, the loss of production in the Middle East. An equivalent of EUR 8 per barrel increase in the Brent is enough to offset the expected 2026 cash flow from the shut-in production. We are, of course, today of more of EUR 100 per bbl, I think even EUR 115 per barrel this morning, which represents, which in terms of our sensitivities to price, represents substantial additional cash flows.
The impact on the LNG production shutdowns in Qatar or in Abu Dhabi on our energy trading activities are in fact, very limited as our exposure to our marketing portfolio is limited to 1.5 million tons for the remainder of 2026. I remind you that most of the energy produced by our JVs in Qatar are in fact marketed by QatarEnergy itself and not by TotalEnergies. Finally, on our refining activities in the region, the SATORP site, which is owned jointly by Aramco and TotalEnergies, was impacted by strikes that occurred during the night of April 7 to April 8 , causing damage to three units. No casualties were reported. As a safety precaution, the units were immediately shut down.
A partial restart occurred on April 14th, allowing to resume production to a 50% capacity, 230,000 barrels per day. The repair work on the first one of the unit, VDU unit, are well underway, and we expect to restart and to increase the production to more than 300,000 bbl per day from beginning of early days of May 5th or around. That's the situation for assets. This conflict, of course, has consequences beyond or only, the only perimeter of TotalEnergies, and now will impact the course of 2026 very significantly in terms of markets. Of course, the damage to upstream assets has been limited so far.
The closure of the Strait of Hormuz constitute a major disruption to the world energy system as it affects around 20% of worldwide oil, crude oil, refined products and of course, LNG exports. There is very limited spare capacity of production outside the Gulf, in reality. The immediate consequence was a surge in oil prices, which are now around EUR 100-EUR 115 per bbl, which have been extremely volatile with major swings in the past weeks. Some days have been the highest days. I think we experienced 8 of the 10 highest volatile days in the last 25 years during the month of March and April.
Given the time required to restart facilities, but also, and more importantly, to reach the markets, you know, because the oil tanker, which will be loaded in Abu Dhabi or in Saudi Arabia, will take 25 days of shipping to reach its customers in Asia, Korea, Japan, or. There is a time lag. Even if the war was to end quickly, prices are expected to remain at high levels. In all the scenarios I can read, and I agree with the scenarios I'm reading, either from IMF or from some banks, at least EUR 80 per bbl is expected for 2026.
In fact, the reality is that the 2026 surplus scenario that was anticipated by the markets and by ourselves, by the way, at the beginning of the year, is no other, is behind us, with global hydrocarbon inventories being materially drawn to balance the market already at a pace of 10 million-13 million barrel oil per day. We have already consumed, I would say, 500 million barrel out of inventories. With the phenomenon I described to restart and to rig the market, it's probably more 1 billion barrel, which will at least be consumed from the inventories. We would exit even if the conflicts, and I hope so, will end in the month of May. We would exit the conflict with clearly some very low inventories.
This conflict also has some impacts on the LNG markets and prices. We have seen that the European gas price have established today at around EUR 15 per MMBtu . Again, we are facing now, by this summertime, the peak season for LNG because it's only the warm summer season in Asia, which will grow and which will call for more LNG demand. Also, it will be a season where Europe will have to replenish its storage. And, as you know, at the end of the winter season, we were at the lowest point of the last five years in terms of European gas storage, around 25%. We anticipate as well, and I was in Qatar, that QatarEnergy will wait for real stabilization of the Strait of Hormuz before to restart the liquefaction plants.
You cannot turn on and turn off these plants easily. It's, it will also impact, I would say, the time it will take to reach the market. That's on LNG. I would not be surprised to see some support from higher prices by summer season considering this timeline or time lag that LNG could go back to the market and QatarEnergy represent almost 20% of the world market. In this context, strategy of TotalEnergies demonstrates once again the ability of the company to capture price upsize, thanks to major strategic strengths of the company. Also, I must say, I compliment the team because of a strong operational performance, which of course is of essence in such markets during the first quarter.
First, of course, we are integrated along the value chains of oil, gas, LNG, electricity, and allows us to capture margins and prices all along the value chains and provide us with a unique combination of activities in oil, gas, electricity, being a low-cost producer, transforming them into added value products which can then be traded on the market and sold to our B2B, B2C customers. Secondly, we are a growing company and a strong organic growth. When we are demonstrating quarter after quarter our ability to strongly grow our production, have you seen a 4% year-over-year organic production growth for the oil and gas business and also, of course, electricity business? 4% for oil and gas was above our annual guidance of 3%.
Which, of course, helps to offset, if not completely during the first quarter, it was completely during the first quarter, will be partially during the second quarter, the impact of the Middle East conflict. More importantly, it allows us to capture the upside of the high prices because the incremental productions, that the new production that we put on stream is more accretive, and generates more cash flows per barrel than the average of the portfolio. Third, we are diversified, and I think this is again a strong lesson of this crisis. Strong diversification or rich and diversified portfolio allow us to compensate again the impact of the crisis in the Middle East for our geographically diversified portfolio of oil and LNG outside of the region.
It notably allow us to activate the flexibility of our LNG portfolio to ensure the security of supply of all our customers. The diversity of the LNG portfolio, we are producing in 11 different countries, allow us to serve our customers in Asia, re-rerouting some non-contractive volumes that we have in our portfolio to them and not to declare any force majeure in our contracts. I can ensure you, because I visited some customers in Asia, that they appreciate very much the value of the contract commitment at TotalEnergies.
We have also, I would say, and it's another example of the optionality and of our diversified portfolio, I would say that more than ever, the decision to restart the Mozambique LNG construction in January is could be fully appreciated because it's a way, a diversification which will be good for our portfolio by 2029. There was an article recently in a journal, that Mozambique will be the Qatar of Africa, and we are proud to be the, to build these projects in Mozambique, and it will help us to diversify. As, and I would say as well, as we are working hard, these events are giving a good momentum to sanction Papua LNG before year-end.
In this context, of course, and, compared to the beginning of the year where we were all cautious, there are no reason not to fulfill all our commitments for strong returns to shareholders. I think the board has taken decisions yesterday that I'm happy to report to you. Considering, of course, the strength of the balance sheet, but also, the environment and taking into account the ability to demonstrate our growth, priority was again given to what I call the sacrosanct dividend by continuing to our strong track record of dividend growth. We have decided to increase the first interim dividend by 5.9%, above probably market's expectation, to EUR 0.9 per share, compared to last year interim dividend, which was EUR 0.85.
We confirm once again the leadership of TotalEnergies, not only in terms of dividend resiliency, but also more important, dividend growth among the oil and gas majors. Secondly, in view, and we are, I would say, very pragmatic and consistent, once again, in view of the current projections of the evolution of the prices, not only the 2Q, but as I said, along the year 2026, the board of directors gave us the authorization to continue, of course, the share buyback program up to the high end of the range that we gave last February, which was $750 million to $1.5 billion per quarter. We'll target the high end of this range up to $1.5 billion per quarter.
The Board also reiterates we had objective to achieve the cash payout ratio above 40% for the full year 2026, and we will monitor buybacks accordingly along the year. Keep as well in mind that in terms of capital allocation priority, Board attach great importance to deliver the balance sheets, and we would be happy to see a gearing in the low 10s by the end of 2026 if the barrel price or if the crude oil price was remaining above $100 per bbl. On that note, I will now turn now to call to Jean-Pierre, who will go through the details of the first quarter financials.
Thank you, Patrick. I will start by commenting on the price environment in the first quarter versus the first quarter 2025. Brent averaged $81 per barrel during the first quarter versus nearly $64 per bbl in the first quarter, up more than 25%. Average liquid price was up by $12.4 per bbl due to the time lag effect, in particular in the Americas. TTF averaged $13.7 per MMBtu versus $10.3 per MMBtu during the first quarter 2025. Our average LNG price stayed at $8.5 per MMBtu . Oil price increase impacting LNG prices with one or two months of lag time according to LNG pricing formulas.
The European refining margins remain at EUR 11.4 per bbl on average over the quarter, with exceptional margin in March and poor margins in January and February. In this price environment, the company reported very strong financial results with first quarter 2026 cash flow of EUR 8.6 billion, increasing by 20% compared to the first quarter, and adjusted net income increasing by more than 40% to EUR 5.4 billion. These results, as already highlighted by Patrick, were possible because of a strong operational performance of all businesses, which demonstrated the company's ability to fully capture the environment upsides. Upstream delivered a 4% upstream underlying accretive production growth, offsetting the production loss due to the crisis in the Middle East.
Downstream, a very good operational performance of our refinery with a utilization rate on average over the quarter above 90% that allow us to capture high refining margins in March. Trading was also able to take benefits from the high market volatility in March and deliver the high performance on crude petroleum products, but also LNG. TotalEnergies has delivered a strong profitability this quarter with return on equity at 14.4% and ROACE at 12.7%. Now moving to the business segment and starting with hydrocarbons. On a year-on-year basis, excluding the impact of the Middle East conflict, first quarter oil and gas production exceeded expectations and increased by more than 4% above the guidance provided of 3% for 2026.
As communicated by the company from the very beginning, the production was impacted by the conflict in the Middle East with an impact of around 100,000 barrels per day on average for the quarter, which correspond on average to around 25 days of disruption during the month of March. E&P, exploration and production. Turning to quarterly results and starting so with E&P division, the segment generated an adjusted net operating income of $2.6 billion this quarter, up by more than 40% quarter-to-quarter, fully capturing the increase in average liquid price of $12.4 per barrel over the quarter and demonstrating the attractiveness of the new projects. This quarter, Lapa Southwest in Brazil, Mabruk in Libya started up and will each, once ramped up, bring an additional production capacity of 25,000 barrel oil equivalents per day.
Similarly, cash flow reached for E&P, EUR 4.6 billion, up 26% quarter-to-quarter. On the cost side, once again, we maintain our leadership with an average OpEx per barrel of oil equivalents below EUR 5 in the first quarter 2026. On integrated LNG. On the production side, LNG production, it has grown significantly by 12% quarter-to-quarter, mainly supported by growth in Australia with it is back to full capacity during the quarter, the United States and Malaysia. First quarter LNG sales reached 12.4 million tons, supported by strong spot activity, giving us a strong start compared to our yearly guidance of more than 44 million tons.
Supported by this growth and strong trading activity capturing market volatility, the adjusted net operating income of Integrated LNG was increased significantly quarter-to-quarter to $1.3 billion and cash flow to $1.8 billion. Given the evolution of the oil and gas prices in recent months and the lag effect on pricing formulas I already mentioned, the company anticipates an average LNG selling price of around $10 per MMBtu for the second quarter of 2026. As we execute our consistent strategy in LNG, the main milestone of the quarter were the full restart of construction activity at our Mozambique LNG project, with more than 6,000 people already on site as we speak. This project will broaden the diversification of our LNG supply, a strength that the current crisis has put an additional emphasis on. Turning to Integrated Power now.
Net power production increased year-on-year to 11.7 TWh, with a 20% growth of power generation from renewables offsetting the lower utilization of gas-flexible capacities in the context of lower winter demand in Europe and in the U.S. TotalEnergies has increased its renewable capacity by nearly 8 GW over a 12-month period, on track to reach its objective of 42 GW gross installed capacity at the end of the year. Cash flow from operation was $0.6 billion, as no shutdowns were registered during the first quarter 2026, unlike in the first quarter 2025. This quarter again, we provide more granularity in integrated power financial performance with a split in cash flow between production asset on one side, renewable and gas-fired plants, and sales activity on the other side, B2B, B2C, and trading.
The former contributed 35% of the cash flow and the latter for 65%, in line with the first quarter 2025, due to the seasonal nature of the marketing business, with more consumption obviously during the winter. Given the closing of EPH deal that we announced this morning, TotalEnergies has now a 50% interest in a portfolio of flexible power generation assets in Europe, and integrated power should then benefit in 2026 from 10 TWh of net production, net power production, in line with the 15 terawatt-hour guidance given for the full year and more than $500 million contribution to available cash flow in relation with this EPH deal.
Moving to downstream and doing the first quarter, Refining & Chemicals was able to capture the exceptional margins in March, thanks again to the high availability of the refineries which recovered their full operational performance. It was particularly the case in Port Arthur in the U.S. and those in France. Utilization rate reached 92% in the absence of plant turnarounds. Trading activities was also very strong for crude and product, taking benefits of the market volatility. Overall, for RC, adjusted net operating income was up by nearly EUR 600 million quarter-to-quarter to EUR 1.6 billion, and cash flow reached EUR 1.7 billion. In marketing and services, results remain consistently strong and reflects the seasonality of the business, with higher margin activities offsetting lower volumes linked to the disposal of some assets in Brazil and in sales in Africa.
Moving to corporate company level and starting with working cap. Working cap increased by EUR 5.1 billion during the first quarter, out of which EUR 2.5 billion is related to guide business seasonality and EUR 2.6 billion that reflects the impact of higher hydrocarbons prices at the end of the quarter, notably on inventories. While the context remain quite volatile, we deploy our investment program with discipline, with net investments that amounted to EUR 4.5 billion in the first quarter, with a neutral balance between acquisition and disposal in line with our quarterly budgets. We therefore reiterate full year 2026 net investment guidance of EUR 15 billion.
As a result, the gearing lands at 15.5% at the end of the quarter, with cash flow growth driven by higher energy prices, partially offsetting, in particular, the impact of high prices on the working cap bills. Looking forward now, we expect to maintain strong momentum with hydrocarbon production, excluding Middle East impact, in the second quarter, expected to grow around 4% compared to the second quarter 2025, in line with first growth we registered during the first quarter. As we speak, as mentioned by Patrick, production shutdown in the Middle East still represents around 15% of the company's total production. We anticipate refining utilization in the range 80%-85% in the second quarter, which accounts for a two-month scheduled maintenance at Donges and the impact of the capacity reduction of SATORP commented by Patrick.
As I mentioned, the company confirmed it expects its yearly net investment to be at $15 billion for the full year, in line with annual guidance. Therefore, this investment should trend downwards in the second quarter. Meanwhile, the company is evaluating options to accelerate short-cycle investment to capture current hydrocarbon price environments. To conclude, the set of growing earnings clearly demonstrate, in our view, the strength of our integrated model in oil, gas and power, which enable us to seize price updates upside in the first quarter and put us in a strong position for the second quarter and the rest of the year. With that, I think with Patrick, we are now available to answer your question, so you can open up the line for questions, please.
Thank you, ladies and gentlemen. We will now begin the question-and-answer session. As a reminder, if you wish to ask a question, please press star and one on your telephone and wait for your name to be announced. Please kindly mute any audio sources while asking a question. If you wish to cancel your request, please press the star and two key. Once again, please press star and one if you wish to ask a question. The first question is from Michele Della Vigna, Goldman Sachs.
Thank you very much, and congratulations on the strong results. I wanted to ask two questions on LNG. The first one is about whether with all of this crisis you're starting to see a resurgence of demand for oil-linked long-term contracts and if that can unlock more LNG projects for you, like for instance, Papua LNG. Longer term, I was also wondering if this crisis may actually be a bit more concerning and reduce some of the dependence on hydrocarbons from Asia, for instance, turn some of those countries more towards coal, solar and energy storage as an alternative. If that could actually make perhaps what already looks like probably an oversupplied LNG market from 2028 last well into the next decade. Thank you.
Okay, I will take the second one first, Michele. It's quite clear, you know, for our customers in Asia, a crisis in 2022, another one in 2026. Reliability, I would say from an affordability point of view of the LNG will be questioned. That's why, by the way, we think we will, we have to promote to them the idea of long-term contracts, not only related to spot price. You know, that's very clear. That's what the Europeans, because their rule are not benefiting from. I think it should influence and put them more on this type of long-term contract. You are right.
That way, the whole planet and only in Asia, I think the governments will look again to, like we were in the 1970s, you know, domestic production first. I would say domestic energy first, whatever it is, coming from coal, when you have coal, coming from biofuels. By the way, Malaysia, Indonesia are beginning to raise.
Their biodiesel content, you know, very logically. Coming to renewables, of course, as well, and from this position of company, TotalEnergies could benefit from it because we are also investing in electricity, I would say. I would say electrification will be also a global answer because you can produce electricity from biomass and not only from hydrocarbon. That will be the other big trend, I think we will see, because security of supply, because again, affordability of energy is of essence. It's not a very good news, I agree, for the LNG markets.
As you said, probably the results of this crisis as well, is that we push back some of the, I would say the famous wave, I think, because there will be some delays in some projects because by the way, we don't know today how long will war will last. We have no idea. I always say that 2026 will remain a good price. I think 2027 will, can be optimistic then. What you said, the oversupply LNG market will come from 2028. I would say, by the way, that it's not bad for customers to have an oversupplied market. You know, one of the observations I've done when I observe what happened today with the crisis, and it's quite remarkable.
I know only two markets today where there will be no impact on the crisis, on the energy price. One was the U.S. domestic gas price, we have still remained at even lower at EUR 3 instead of EUR 4 before, or EUR 3.5. Why? Because there is an oversupply. There is overcapacity. The Permian gas now is connected through pipelines. The other market I observe is French electricity market. No impact at all because also overcapacities of nuclear and renewables, by the way, both. We produce too much. That means that it is a way to secure the affordability.
From this perspective, because of what you said, and the fear which could be generated to a customer, energy customer, the fact that we'll enter at a certain point when probably more summer 2028 than before or winter 2028, will, to, I would say a lower cycle will be good to convince them to come to us. I make a link with your first question. Honestly, today, I think we were happy and lucky to have signed a lot of oil link contracts because in this context, where there is sort of a bullish price overall, we have always quite been bullish, but I think this context, the crisis, will also impact, I would say, the, these oil markets.
There will be now something which was completely even hypothetical, which, in fact, was only putting in this cartography, which was a closing of the Strait of Hormuz became a real possibility to materialize this threat. This threat is materialized. You have in the Gulf more than 20% of the 25%, 30% of the oil resource or gas resource. Clearly, I think this will have an impact on the way that the markets will, I would say, take this threat in, into even if we go down to a stabilized situation for Strait of Hormuz, will have an impact on the, on the markets, on the Middle East markets, I would say. Today, I think we are happy to see that.
We see appetite from Asian buyers for Papua LNG, not only because of the contract, but because of the geographical position, I would say. Of course, Papua LNG is perfectly located, not far from them outside. Any diversity is good. On our side as well, we think that we are, by the way, because of this geography, we will see if we sign long-term contracts for Papua LNG or if we keep some LNG for own portfolio because we like this LNG as well for our own portfolio. We'll be. Again, no problem on, from this perspective to, to sign. We might be, I would say, in this context, a little tougher in the negotiation.
What I've observed the last week, some Asian buyers come back to NREB plus because suddenly they just observe what happens and the stable, I would say, and affordable gas marker is the NREB. I think so there will be quite a lot of new popularity for the NREB plus if some LNG off-takers want to sell their LNG there. Definitely, this crisis has an impact on all these global LNG markets. Having said that, you've seen our results during the first quarter. While you have a strong, diversified portfolio, you can do good results when you have volatility. I think we demonstrated that with our teams during the first quarter. I think we'll continue for the next quarter as well.
Thank you, Patrick.
The next question is from Biraj Borkhataria, RBC.
Hi. Thanks for taking my question, and thank you for the comprehensive overview of your operations. The first one, on the comment in the release around accelerating short cycle investments. Could you just unpack that a little bit more? You know, what opportunities are you looking at? Secondly, kind of what are you looking to see macro-wise or otherwise to put that capital to work? Secondly, just a follow-up on Papua New Guinea. Could you just talk about the steps from here to FID? Are the fiscal terms all now agreed and tendered and so on? Just any uncertainties there ahead of FID. Thank you.
Okay. First question. I mean, you would have been surprised that we didn't mention that. I'm sure I would have a question. It's quite natural from the CEO of the company that I've asked to my E&P teams, "Okay, is there anything to accelerate on the short cycle to benefit from the higher price deck?" Because again, on 2026, I'm quite I mean, be confident is difficult in this world, but to see at least EUR 80 per bbl, I don't think it's, I would put quite a lot of my own money on it for the rest of the year. By the way, it's just, it's an exercise which is moving on. I know there are a few countries like Angola, for example, where they have some ideas.
If we need you to dedicate a few hundred million EUR to that, I would do it. It will be, maybe I will tell you at the end of the day, but it's not EUR 15 billion, but EUR 15 billion-EUR 15.5 billion, but you will accept it if it's profitable on the short term. I think honestly, I'm not sure it's so big because in fact when we built the budget, we did not arbitrate a lot of short-term cycles. In fact, we had a list of what we could cancel in case the price would, the price of oil was going down to EUR 50 per bbl. We prepared in case of, let's say, adverse market.
We have asked the questions, and I know that, because I visited some countries, but they have some few ideas, so I am quite, I can be flexible on keeping the discipline. Again, if we can generate some good free cash flow on the short term, everybody will appreciate it. It is not probably as big as I just mentioned. It is probably some 100, a few 100 million EUR that we could mobilize, subject to capacity to have the rigs, et cetera. We are working on it with some countries. On Papua LNG, I think, you know, it is a big project. Good many partners. Many we have in parallel, some, I would say at least four workflows.
The CapEx side, I would say, and the EPC are progressing very well. We have made some recommendations to our partners. We are waiting for the approval from one of them, so I hope we will get it soon so that we can move forward with the standards. In parallel to that, we have, I would say, the financing of the project because it's there is a project financing. Both are linked, by the way, because as you know, selection of the nationality of some contractors have an impact of the involvement of export credit agencies. We need to do, it's not, there's a little sequence there. We need to have decided the contractors so that we can definitely confirm to the different credit export agencies.
That's also. I think there is some appetite clearly from Asian credit export agencies, but also we discussed with the U.S. ones about it. We are moving on the financing of it as well. The second workflow. The third workflow, as you said, is a discussion with the government. We have progressed, I would say. I could almost say finalized, but I didn't see the ink on the paper. Between the government and also there is a good understanding on the agreement. I consider, of course, it will have to be again approved by our partners.
We are in the, I would say, now in the process to close the loop, I would say, between the partners, governments on these finance and terms. It's called terms. The idea there is somewhere to protect the projects at. The CapEx will be around EUR 14.5 billion, so it's quite, it's not for, it's not, too cheap. It's much better than the EUR 18 billion, but it's still cheap. The idea is to protect the projects when the price of oil are low and to give back some when the price are high, above EUR 90, I would say. There is a sort of trade-off, which is good for the, which would be good. The fourth one is a marketing, on the marketing.
On the marketing there is some progress, quite a lot of progress. Again, on our side, the more we look to Papua LNG, the more we have appetite for the LNG located in that region and diversifying our portfolio. It's possible that we could market out of, because we market not only oil LNG, but the one of Kumul as well. We could market maybe 1 million tons on the long term and keep the other 1.5-2 for our own portfolio. We are looking to different options. All that is progressing. I would say, the target is to sanction the project, for sure before the end of the validity of the offers, which is I think around November.
Because in this market, we don't want to reopen and to negotiate to extend offers. You know, we could face some inflation there. But, I think, and we are aligned, I think, with the partners on moving to the FID, second half of the year, with the governments, for sure. There is a last point to clarify, if I want to be exhaustive. We need to be sure of the way that Kumul financing, you know, there is a Kumul back-in, and we need to know exactly what is a back-in on which will be exercised. There, but all these workflow, we are working on them in parallel to converse to the FID.
Thank you very much.
The next question is from Lydia Rainforth, Barclays. Please go ahead.
Thank you, and good afternoon to you both. Two questions, please. Could you just touch on the early closing of the EPH transaction and what options that now gives you? Secondly, could I come back to the cash return side? I just want to be clear about what sort of the message is around where we see cash returns going through here. Obviously you're at the top end of the guidance that you'd given, but that was at $60-$70. I'm just trying to work out whether you're prepared to, whether you would go beyond that or whether the priority then is the debt side coming down. I just want to be clear on the messaging around cash returns for the rest of the year. Thanks.
First point, EPH. First, I mean, we have been, and teams have been very efficient. By the way, the antitrust supervisors also have been super efficient because even in Europe, we did three calls to get the approval on these transactions, which allow us to close early end of April instead of end of June. That means that we are now entering into this new company, PTTEP, at a time, which, by the way, is not too bad because as gas price are higher in Europe and, you know, the electricity price in a country like Italy, we have a big exposure now to Italy. Italy is facing some increase of electricity price. These gas -fired power plant fleet will have a little higher margin.
In fact, some EUR 2 per MWh beyond, I would say, the normal average margin, so it is positive. The second good news, recently, the EPH team managed to get very attractive new capacity contracts for some plants in Ireland, around GBP 200,000 per kWh. We come with a third time where it is good news. First, I am happy to join to make it earlier, and it gave us, of course, options, as you know. Now we will have access to 50% of the electrons of all these CCGT fleet. This will allow our teams to increase our trading business, but also to go to customers to sell them clean from power.
We've combining gas and electrons coming from the gas -fired power plant, flexible electrons with the renewable electrons. That's exactly the page. We are, we will move forward. We gave you some indications, I think, in the press release about the impact from, because it's from, first of May. I think we evaluate the impact on the production around 10 TWh, and we told you that the cash flow should be at least 2/3 of an annual cash flow, which means at least $500 million of impact, maybe a little more. We'll see. Let's enter in the venture.
It, I would say, give a push to the integrated power business, and you should see next quarter and third and fourth quarter, I would say, in the results, and the cash stay priced compared to where this level where we are today. Cash return. I mean, I will be clear. You know, we are going step by step. We gave you, Yes, you're perfectly right. On the buyback, we gave you at the beginning of the year, $750 million - $1.5 billion between $60 and $70. We told you immediately on the Q2, we'll monitor that quarter after quarter to be clear. We go to the high end of the range to $1.5 billion for this quarter.
I have added in my comments that we are guided by another objective, which is 40% of payout. If you make the math, you will see that if we are at EUR 90 per bbl, for example, as an average, it's an example, we need to go beyond 1.5 for the second and third quarter. I think the idea is to monitor it progressively, because again, there is, I don't know if we will be at 80, 90, 100, but we reiterate this commitment and the board reiterate the commitment in the press release to give you the guidance at least more than 40%. I have added to you that because more than 40 could be 40, 45.
I just added to you another guidance to tell you that if we were in a scenario of EUR 90 or EUR 100 per bbl, if there is some cash, priority will be also to deleverage the company and that if we are able to combine low 10s of gearing and higher buybacks, we will do it. That's the idea. I hope I'm being clear. I will not give you a precise scale. What about at 75, 80, 85, 90, 95? It's mathematical formula. You know I'm not a perfect engineer, so I prefer you to guess now.
That's perfect. Thank you, Patrick.
Next question is from Martijn Rats, Morgan Stanley.
Thanks for taking my question. I've got two, if I may. I wanted to ask you about the two to three month sort of restart time that you mentioned in the release. I was hoping you could elaborate a bit on what really happens in that period. What are the steps that are on the critical path that make this longer or shorter? Is it getting tankers back into the Persian Gulf? Is it well intervention? Are there critical components in some of the LNG facilities? Can you please make that sort of operational, logistical, sort of what, you know, what really drives that?
Secondly, I wanted to ask you about Mozambique, where we are now with the total budget for the project and the start, the timeline. I remember EUR 15 billion, but I also heard EUR 20 billion. Can you just give an update on where we are now?
On the second question, it is EUR 20 billion. EUR 15, it was long time ago. We have told you that there were some interim costs because of force majeure. We have updated. We have been obliged to renegotiate some of the EPC contracts, because four years after, of course, there is inflation. I repeated EUR 20 billion in all my speech for the last two years. I repeat EUR 20 billion today. This is the budget on which we are and which will put the financing, by the way, on the basis of EUR 20 billion. The rest is rumors, but this is the point. This one is, it is a timeline. We have restarted in January. We have 6,000 or more people on the ground today.
I mean, I've been there with the president of Mozambique, and they are already, construction has began on the train, on first train and jetty and all. Timeline is that the objective and the timing is to produce first energy by 2029, the first train. That's where we'll we are sticking to that timeline and as a mobilization and all is on its way to reach this target today. You know, on these projects, we have, in fact, we spent some money not only to save good equipment, et cetera, during four years, but also to progress all the engineering and the procurement. All that has been done at is very advanced compared to, I would say, traditional projects.
We have a progress at the end of March of the project. If I see the global progress of the project at the end of March is 42%, in fact. It's not, we are not starting from scratch. We have progressed on these projects. It's a matter to be able to construct. By the way, since January, the security situation in Cabo Delgado is quiet, I would say, and well under control, thanks to the support of both Mozambican forces, but also Rwanda forces, which are committed to remain in the area. On the first time. Probably the, I was reading the press release same time because in fact, no, to restart facilities, it does not take two to three months.
The two to three months is covering first today, there is no, it's covering the whole cycle that I described in my introduction speech. It's also the fact between the way you will restart oil production, you will bring tankers. Because the tankers which are today in the Gulf are all full. You have, I think something like several hundreds of tankers. You need to exit, you need to bring some empty tanker back, then you need to ship the new oil to, I would say, some destination in Asia. Like I said, it's 25-30 shipping. It's longer if you know to go to Europe. It's a matter of the delay. It's not only, because restarting the wells is not very complex.
You know, in the Middle East, production is generally quite easy production. We don't expect difficulties from restarting the wells. It's more restarting the whole system to restabilize it, to go, to come back to the flow where before the war, you had every day, 50 oil tankers moving in, moving out the Gulf, et cetera, and charging and loading oil or loading products. That's this cycle where we estimate two to three months to have. It's not exactly what the world is restarting. It's not restarting production facility. It's restarting or coming back to, I would say, a normal mode, which should have been more correct in our statement. What I said on the LNG side, I spent some time in Qatar.
On Qatari side, it's clearly, of course, we cannot afford to, I mean, start on again liquefaction plants, then start off again if the crisis come back. I think Qatar very wisely wants to observe, I would say, some certain stability in the situation before to be able to restart. That might take a little more time, knowing that, LNG tankers fleet is not as strong, I mean, as big as oil tankers. We need to move the LNG tankers. You know, we don't use the Red Sea, for example, with LNG tankers. The tour to the voyage to come from Middle East, from Qatar to Europe is longer. You go around Africa.
This is again, an estimation more about the time that it will take to come back to a, say, a normal situation.
Thank you.
The next question is from Doug Leggate, Wolfe Research.
Good morning, everyone. I wonder if I could also squeeze into Patrick and Jean-Pierre. Maybe first for maybe for Jean-Pierre or for whoever, whichever wants to answer this. You're getting an opportunity with these windfall oil prices, obviously, to address your capital structure, perhaps. Obviously, working capital bumped up your net debt, but you also, I guess, added another hybrid bond pending the redemption later this year. I'm just wondering, where would you like to see the capital structure? In this environment, why hold any hybrid bonds, given those were something of an emergency issue during COVID? That's my first question. My follow-up is just very quickly, Patrick, I wonder if this environment, as it relates to refining margins specifically, has changed your view on Port Arthur as a core asset.
Perhaps on hybrid. You know, we do not increase the entity so as not to increase the hybrid bond portfolio. We are opportunistic at TotalEnergies. The hybrid market was very good in January and February. By the way, it was before the crisis, before the $100 per bbl price. We decided to do liability management. Just to anticipate, in fact, the bonds that will mature end of this year by replacing it at good condition. It was EUR 1.5 billion. That's all. It's not, our intention is not to increase this portfolio. Just benefiting from good markets, beginning of the year, to in fact, to anticipate the redemption of the bonds. Okay. That's all. Yeah, great.
Yeah. What about the capital structure generally, Jean-Pierre? I mean, why not take the opportunity to lower the net debt?
I said that. I think I told you that, I just told you that, the objective, if I want to reach a gearing of low teens, it's that means lowering the net debt.
Yeah.
Fundamentally. That's the way to go.
Okay, sure.
To reach low term. I told you that one of the objective, primary objective, and that will be if we are at EUR 90, EUR 100 per bbl environment, the board to. I convey to you the message of the board. In the arbitration, we have on one side the 40% of payout to shareholder, that will stick on. If some of you ask me to go to 50%, I might answer to you no, 40%, more than 40 is our commitment. The other, the extra cash, we prefer to deleverage and to lower the net debt going down to gearing of 10%, 10 terms and maybe lower, in fact. For me, that's clearly the trend that we of the, of.
I would say the direction we want to give you today. We share your view. On Port Arthur, yes, you have a buyer for Port Arthur, Doug, or what? You have an idea in the head or? I mean, honestly, Port Arthur is a very good asset, you know, it's by the way today making good results, I can tell you. It's a very positive asset in this environment. It has a value for trading teams because it's the only asset. You know, trading is not only, is not, in our companies, it's in fact optimizing, I would say, our assets, the molecules, and there are flows around of assets. They optimize molecules around of assets. It's the anchor point for.
We have a strong trading arm in the U.S. and Port Arthur is, I would say, an anchor point, is a tool for them. It is on one side for the refiners, a profitable asset where we have also, I remind you, integrated a lot of petrochemical assets with BTP and Baystar crackers. It is an integrated platform. Today we benefit from good margins. You know, for example, today we have engaged, and we are on the verge to sign some trading contracts with Venezuela, with PDVSA. Part of the destination of PDVSA heavy crude oil will be Port Arthur. Our traders are developing a trading scheme around the flows from Venezuela to the U.S. Gulf Coast. I think that is, that is the idea on Port Arthur.
Yes, it's a good, it's a good asset delivering and contributing to the strong downstream results that we have experienced.
Very clear. Thank you, guys.
The next question is from Lucas Herrmann, BNP Paribas Exane.
Thanks very much. Patrick, I wondered if I could ask you about the UAE news overnight and the decision to, you know, exit OPEC. What your personal thoughts are, how it leaves you thinking perhaps about the future and the robustness or otherwise of oil prices. Just general, you know, comments. Secondly, if I can be greedy, any observations on Namibia over the last three months or how your sentiment towards that opportunity may or may not have changed as you've continued to look at, you know, the data? Thanks very much.
Yeah. On UAE decision, you know, I mean, it's a sovereign decision by a state, which we are heavily involved. We knew for some, not today, but for some years, that the UAE were not specifically happy with the quota which was allocated to them. I think it's quite public by the OPEC. UAE have made, and we are contributing to it. We're contributing to it. We are one of the most exposed company to the UAE, you know, onshore and offshore. They have involved. They have the program to raise their capacity from one to four and then to 5 million bbl per day. Where we have, there was a test in January, an official test for the OPEC, where we reached during a week 5 million bbl per day.
It's, by the way, it's contributed before the war to the good production that which was delivered by TotalEnergies in the first quarter. This is their decision. On our side, you know, as the CEO of an oil and gas company, we supported the OPEC role in the market. I think that OPEC or OPEC +, I think that Russia will continue with OPEC, with Saudi Arabia in OPEC +. I think the UAE has also said that they will coordinate with the OPEC on the market. I think, clearly, the statement, when you read the statement of the UAE, they are investing for growth and they want to benefit for the growth, I would say. That's the way I'm reading their statement.
Future for oil prices, honestly, Lucas, what happens today, you can see that the oil prices are not only relying on oil, on supply and demand, you know, and pure logic. I think it's we have, after 11 years of CEO, I've seen more period of, I would say, external events to the market than really the market itself. We'll see what will the way that the different countries and the role that each country will want to play in that, in that, in that context. On Namibia, I would say, good news for me in Namibia. You know, we have engaged in January with the authorities at the highest level. I went myself, the chairwoman of [inaudible], together.
For sure this, I would say this combination of TotalEnergies and gas in Namibia has been very welcome locally, very welcome. Because it will help everything. First, the sanction of Venus. Then on Venus, we have an agenda with the government, which is to make our best on both sides to sanction the project by, I would say, end of July, because we have, there again, some offers by end of July, tenders. Why is it positive? Because they see our company as being the operator of choice, and we can discuss with them not only on one project, but they see not only our commitment to one, but to at least two projects, if not more, with Mopane behind Venus. The plan is clear. We want to sanction Venus this year.
There is a discussion with the government to amend, which is a very old oil and gas law, in fact, from the beginning of the 2000s, which has never been really used in Namibia. In fact, we are the first to be, I would say, to develop a large, a very large project and an ultra-deep water project. That's the point on which I think the authorities understand that these ultra-deep water projects require some, I would say, amendments to the standard terms. This is on what we work today with them. Again, there is a very, very good dynamic because we are both sides in a win-win situation, and both we see the perspective of the second project.
On the second project, Mopane, our plan, and again, it will be approved soon. The plan is to, in fact, you know, to make sort of an appraisal program with three wells. We want to drill the first one. It's an appraisal program, and be clear, not to check if there is a development. There is a development. The question for us, do we have 800 million barrel to develop or do we have 1.2? You know, it's a question of which. We need to appraise, not to miss some resources by rushing to a first development, which will be not optimal for getting, if there is more than 1 billion barrels, we might adapt geographically when you look to the map.
It's linked to the last well, which was drilled by Galp, by the way, which opened some doors. We want also to drill some seismic, OBN seismic, to be sure that there is some resource. Resources are rock on Mopane is better. I would say the permeability is much better. If we are more on a standard development, which will not require some fiscal discussions, I would say. We could do that with the terms because it's more classic. This one, I would say the idea and the plan, which is approved with Galp, is to drill 26, 27, finish the appraisal, and then to move to sanction by 2028. One sanction in mid-2026, one in 2028, and maybe more because on these licenses are also still to explore.
There is a for me, Namibia will become for us a new anchor country, I would say. By the way, I know that I will have some question about the Middle East, but it's a good diversification again, you know. To have options and to develop the options is a big lesson of what is happening. We'll on Namibia, we are on a good momentum. I hope I will be able to report to you by end of July that we have really materialized the first project.
Is that still the completion date, Patrick, for the transaction?
The transaction should be completed the same time or a little before, in fact. A little before.
Thank you.
It's more on the transaction, it's more paperwork, to be honest. The partners have listed their preemption rights. We are more on the paperwork with the Namibia government in order to move forward, and that's it.
Thanks very much.
The next question is from Alastair Syme, Citi.
Hi. Afternoon, everyone. Can I get you to talk to the profitability of chemicals in the current environment? I mean, oil and gas looks pretty clear, but I'm not sure how to think exactly about your chemicals business. My other question, and this might be a very, very short answer, but what is your trading business doing with tankers and the Strait of Hormuz? I mean, do you have any traffic moving or do you see any arrangements where traffic can move? Thank you.
I have good news on the second one. We had 10 tankers before the last weekend stuck in the Gulf. Now we have nine because one of the tanker has moved out of the Gulf during the weekend. You know, when Friday evening, I think they both parties announced that the Strait will be reopened. We gave instruction immediately to our traders to try to get out. There were two tankers which were in the queue. The first one exited. The second one, unfortunately, was just after the Indian tankers, which was attacked. You know, in fact, all that was governed by the way by the insurance companies. In fact, we get on the Friday evening the insurance, we are insured to go through the Strait on a Friday evening.
When there was an attack in the Sunday afternoon on the Indian tankers, the insurance company told us there is no more insurance. We went back to the Gulf. This is the situation. Honestly, we are following on this one, of course, if we can exit the best. We are following the news and we depend completely on the discussions between the different parties to the conflict, you know. That's the situation for us. This is where we are. We have done a small business within the Gulf.
You know, we managed to offload one of the because we had some a refined products tanker which was stored, we managed to offload it in one country and then to load it with some other crude oil. We try to do what we can inside the Gulf, as trading inside the Gulf with these tankers, which is limited. On chemicals, obviously, in fact, there are two different impacts there. First one, naphtha is more expensive because it's it's rare. It's because it's scarce, we've seen that the cracker margin went down much. The good news is that at the same time, there is a scarcity globally of naphtha on Asia.
As you have a scarcity of Asia, you know you have some people in Asia with crackers looking for naphtha. The price of the polymers have increased. In April, for the first time, for long, I've seen a positive results coming from my polymer business. I would say, by the way, I've observed in April, but on all our business, including biofuels, everywhere, in fact, the beginning of the scarcity implied by the crisis is pushing all our products in the, in the green, I would say. We are benefiting from that, and that's the beauty of the integration we know we have. I see that on the end product. There are on the, on the chemicals, some downside with the cracker, but the polymers are much better.
In particular, in the U.S. as well, by the way. That's the advantage to be on the petrochemical, not only on naphtha, but you know, part of our chemicals in the U.S. is on gas. When you have polymer price going up and you are up on ethane in the U.S. is stable, the margin is much better. I see some good signals on the chemical business, which are completely the consequence of this crisis.
Net positive earnings in chemicals?
Yeah, exactly.
Thank you.
The next question is from Mark Wilson, Jefferies.
Thank you very much. I think one area we haven't covered yet is refining. You are the only company that breaks out your refining very clearly in the annual report. In total, it's grown to just under 1.5 million bbl a day. Jet fuel, aviation fuel is about 10% of that, just over. Could you give us the dynamics between the different main products? Do you have the ability or desire to move the amount, for instance, of aviation fuel that is produced versus diesel and others? Do you see cost headwinds as well as margin as we move through the year and into Q2, has been mentioned by other companies? Thank you.
Very clearly, I mean, to be clear, all our refineries today have been, there was an instruction with the limit of a refinery. A refinery, unfortunately, you know, you distillate, you have a slate of products, but there are ways to optimize. All of them in Europe, the instruction is max jet first, then max diesel, and then result in gasoline. We try to maximize the two cracks, and in particular these days, which are the better. Jet fuel, even is better than the paper jet fuel, is really high. Maximizing jet and then maximizing diesel in particular, because in France, we are a big consumer of diesel, and diesel crack was quite high. Gasoline, we know that we have enough European. European refineries are producing a lot of gasoline, so there is less incentive to do it.
That we do at the max. It's, it's not, we don't go from 10% to 20%. It's a matter of adding 2%-3%, but each percent, of course, is good for the global refining margin. That is clear. We do it. We have done it immediately and systematically in order to be able, because these are the critical, I would say, products, jet fuel and diesel, well, which we are more relying on imports for the European continent. Of course, the margin is better. It's very logic we've done that. I'm not sure to have understood, the question of the cost headwinds, what it is related to.
There's obviously been a lot of talk about the availability of feedstock and competition for crudes and certain grades of crudes. Is that any any impact?
In fact, today, I understand. Some feedstock are scarce, and they are more expensive. Again, it's an impact. We see some, the refining margin were exceptionally high in March, around EUR 25 per bbl. I would say the, I think Jean-Pierre Sbraire told you that it was very poor in January, February, and the 11.4 margin was a result of very non-linear, I would say, margin. In April, there was some volatility in the margins linked partly to more volatile, linked partially to the feedstock which were coming in the refinery. That's true. That's true.
Again, on this one, clearly, I will tell you there is a very strong connection between refining in the company and trading. All that is optimized between both of them. In fact, by the way, the suppliers of refinery are exactly on the same desk next to the traders. We interface between both of them in order to optimize the slate which will go to our refineries and what we should sell among all our crude oil that our traders have access to on the market. We make it as an optimization for the company. It may be not optimal for the trading itself, but if it's optimized, if it's an optimum on the refining and trading as a combination, then we will take the feedstock to the refinery.
This is one of the advantage, I would say, to have this strong integration and to think in particular in this type of period. I know some people were thinking that we might have a lack of crude. No, we will never have a lack of crude. We optimize the type of feedstock we need to our refineries, according to the access to many, I mean, flows that our trading can generate.
Thank you very much. I'll hand it over.
The next question is from Kim Fustier, HSBC.
Hi. Good afternoon. Thanks for taking my questions. Firstly on Qatar, how are you managing the force majeure situation in Qatar as it relates to your LNG portfolio and your commitments to customers? Just noting that one of your IOC peers is also a partner in Qatar LNG, had to declare force majeure. Related to that, what is your view on the timeline of the Qatar LNG expansion project? I also wanted to ask about SATORP. What's the repair timeline for the damaged units? Again, linked to that, what is the potential impact on the timeline of the Amiral project? Thank you.
Okay. QatarEnergy, I mean, again, it's, I repeat, I don't know why people do not believe us. QatarEnergy has declared force majeure to its customers. That means that, you know, in Qatar that we have some JVs with QatarEnergy, and the marketing of its JV is done by QatarEnergy. Our JV, which are reported in the upstream part, which are, I would say, like the rest, but it's, are not producing today. There is no production, no revenue, and very logically and very professionally, I would say, QatarEnergy has immediately declared force majeure to its customers. That's one point. From this perspective, TotalEnergies is a customer for QatarEnergy only for our own offtake.
The difference between our competitor and ourselves is that because we are very exposed, and we know where to Qatar through the JVs, we have some limited contracts with Qatar or for our own offtake, for our own portfolio. The amount is around 1.5 million ton per year. We have this 1.5 million ton per year. We received the force majeure from Qatar because we are a customer for them. We decided that we will not transfer it because by the way, in the way we work with our LNG portfolio, when we sign a contract with a Korean or Japanese buyer or Thai, we don't assign, we don't tell them it is coming from Qatar because we are a portfolio company. We took on ourselves.
By the way, we told them we are a portfolio company. We produce in 11 countries, so we secure user supply. We decided, yes, we receive the force majeure, but we will take it for us, We could have done it, probably, but we decided that it was, in terms of commercial, in terms of what we advocate every day, for their customers, the best position because probably 1.5 million ton is absorbable in a portfolio of 40 million ton, you know. We will deliver. We will not transfer the force majeure to any of our customer. That's what we've done. I know that our competitor is more exposed because, if I read correctly in the press, it's more 6 or 7 million tons than 1 million ton, 1.2 or 1-2.
Probably with 7 million tons, it was for them, more logic. To be honest, my energy traders were ready to exercise the force majeure, but the management said that, "No, be careful what we do." We've done it like that, so no problem. Timeline on schedule expansion, I think the QatarEnergy themself, they have said that today the impact is evaluated to two months or something like that on the expansion on NFE first train because NFE underground technique and the teams are continuing to work, in fact, offshore, onshore. The offshore works have been stopped. You know, I think it was planned for Q3 2026. Probably today we are more on Q4 2026.
Again, there is a difference in all this wording between when you put the gas in and when you offtake the first LNG. If you want my bet in my plans, I would say first LNG offloaded from NFE is probably right on the end 2026, beginning 2027. That's if I'm taking a bet on that. You know, that's where we are. Again, this is completely linked to of long will this war will last because as long as we cannot restart works offshore, of course, this might impact the timeline. Set up, there are three units. One, I told you the first unit will be repaired very quickly, the VGO. That means that SATORP is able to produce some VGO from in 10 days.
We could produce full, in fact, full capacity VGOs, but then you need to find a market, somebody who buys VGO. As we cannot export VGO because the Strait of Hormuz is closed, we will be limited to something like 300, 330 thousand bb l per day. We need to recover the two other units. The two other units are the conversion units, which allow us to transform the VGO in, I would say, diesel and other products. This one, honestly today, it's, we don't know. We have sent some experts, and we are working together with Aramco. There have been some damage to this unit, so it's a matter of at least 6 months, maybe more. We don't know. We are working on it.
As we have been very transparent since the beginning of the conflict, we'll have better new news on it, but I would say not Cafe du Commerce news, we will report to you. At this stage, the teams of Aramco and TotalEnergies are working to evaluate the damage and more to evaluate the repair that we need to do. By the way, TotalEnergies, we have an insurance on this type of war events, which we will, we might activate if the damage are higher than EUR 150 million. This is our own limit, I would say, our threshold for ourselves. Impact of Amiral? No. Amiral, there are 22,000 people working in Amiral today on the ground. That's why we have also again, Aramco.
I went in Riyadh. We discussed a lot about Amiral. We have the full support of the authorities for Amiral. Amiral, again, is progressing. The progress of Amiral is today at 70%, this project. The startup is planned by end of 2027, I would say, beginning 2028. Again, it's, of course, the context might, what I just tell you today is the conflict was worsening, which I don't talk could change. This is just an update today with validity, but this is the situation for Amiral.
Thank you very much.
The next question is from Matthew Lofting at JPMorgan.
Hi. Thanks for taking the questions, congratulations on the performance of the integrated model in what's clearly been exceptional times. I wanted to ask you guys engage extensively with host governments globally. It's early days, but are you seeing any change in the tone of conversations as a result of recent events towards greater urgency, let's say, from some countries to develop domestic production and better secure energy supply? Second to the more specific to the financials, price and timing lags are an inherent part of several parts of TotalEnergies business. Wondered if you could just talk a bit about how that impacted Q1, given the sort of surge in commodity prices more kicked in in March, and how that then sort of plays out as we look forward to the coming quarters. Thank you.
Okay. On the second question, the obvious case is the LNG because most of the contracts on LNG are based on a time lag of one, even two months. Obviously we don't see, by the way, the average price of the quarter was EUR 8.5 per MMBtu , exactly what we planned in February in the trading statement. The third year on the guidance that we gave in February. That means that there was no impact on the March oil prices or gas prices. We expect to see the impact of the March high price clearly will be in the second quarter.
That's why we gave you a guidance, by the way, of $10 per MMBtu , which again is reflecting price of March, an assumption for some other months of $80 per barrel and a TTF around $40, $15 per MMBtu . Again, if it was, if the crude oil was higher and remain higher, that could impact positively the $10 per MMBtu . This is the obvious case. On the crude oil, we have some few things. We have one country. We have, by the way, it's which where we have a formula which is with one or two months delay.
It's the UAE, which creates, by the way, some difficulties when we, and we are trying to solve them because when we have a two months delay, that means that we could face the day that it will reopen, and the price could go down. We would have to pay with two months delay, not a good situation. We are discussing on that. Honestly, these are the main two. There are also some impacts on polymers and things like that. You know, in plastic world generally, it's also you have also some delays in all the formula. For example, answering, I should have commented that March we suffered the naphtha that we bought was on the spot market. The polymers and all the pricing do not reflect immediately the increase of the naphtha, you know.
That was negative for the naphtha, and this will be recouped in the second quarter. The time beyond one to two months, we don't have many time lags longer than that. Maybe exceptional situation with the six months or so, but it's very rare, in fact, in the portfolio. Host government, I think I answered in my first answer to government to Michele Della Vigna. That was more or less the same question. Yes, I said to Michele Della Vigna, look, it's quite clear that today you begin to see for sure again the governments are looking to, what could we, could we develop our domestic production? Could we, that's obvious, securing the energy supply. I said electrification. I said more, more coal for countries who have coal, you know. They will develop their coal. That's true.
India is more coal. Renewables as well. That's positive for renewables, I think, in many countries, including in Europe. Nuclear will be again, I would not be surprised to see, there was already a good momentum, but to see a country like India again or China, it's already done, but with nuclear programs, like some European countries. So we'll be new France, you know, after 73, we are French and Japan where we see no new country, you know, coming to it. That's obvious to me, which is, as I said to, for sure a challenge for the gas, you know, because it's a competition. You produce electricity, gas to electricity. Gas is not only used for electricity, also used for heating, by the way.
You know, it's, it will be some for sure a challenge. The other governments where I see a change of tone, it's as I told you that I visited, of course, our friends in the Middle East. It's clear that on the agenda today, you have the question of can we get around the Strait of Hormuz, you know? Or we are discussing again on projects to build some pipelines, to double the pipeline to Fujairah, to double pipelines through Saudi Arabia. Iraq, obviously, is in a situation where we need to revive some old pipelines which are stuck today. You know, where the pipe was a pipeline crossing Syria. You have the pipeline through Turkey.
It's, for me, these countries for sure today, the question of their own, not security of supply, but security of delivering and of evacuating and commercializing will become high on the agenda of all these countries. Yes, this crisis, and again, because it's not only an isolated one. We had 22, now we have 26. You have this question of security of supply and affordability, which is linked to that. Again, for me, it means how do we remunerate more capacities? We need to invest more in all these energy capacities will be high on the agenda and in many countries around the world.
Super. Thanks, Patrick.
The next question is from Jason Gabelman, TD Cowen. Mr. Gabelman, your line is open. Maybe you're on mute. Mr. Gabelman line got disconnected. The next question is from Christopher Kuplent, Bank of America.
Yeah, thank you very much. Good afternoon, everyone. Just two more questions remaining. You know, when we think back to February, you gave us your outlook for cash flow during the year, you were referencing a 60-70 Brent range, refining margins at 5, et cetera. We're now in a different world. You've talked yourself about 80 as a, you know, good starting point for the year. What can you tell us, how should we adapt your sensitivities that you've published, which I believe were meant for a 60-70 world rather than for an 80-100 world?
Where would you like to make some adjustments or give us some warnings other than the volumes, of course, that you're not able to sell right now in terms of the validity of the sensitivities? Maybe as a quick second question, considering you haven't been active in the farm-out market, maybe I can ask you my favorite question, Patrick. What do you think is the current state of M&A? I know it's not one market. Power is very different from oil, from gas, where would you rather be right now, a buyer or seller? Thank you.
First question, Chris, I invite you to read page 13 of the press release, I think. You have the stable, the sensitivity. Fundamentally, they are between 60 and 80. You can extend 60, 70 to 60, 80. I have no doubt about it. The only point is that as we have lost, as we can if we remain in a situation of today, which we bout the Middle East production, of course we must correct it. That's why we gave you a sensitivity of 10% on the Middle East production.
I made the math, if we were just for you, just to give you, if we were in an environment around EUR 80 per barrel, EUR 15 per MMBtu , EUR 7 per margin, per refining margin, without the Middle East would be around EUR 32 billion of cash flow. EUR 32 billion. It's again, if the situation remains the same and my scenario is not good, to be honest. If it remains the same, we'll not be at EUR 80 during the whole year. If we lose really the production of the Middle East during the next nine months, I think you can correct my EUR 80 to EUR 100 or EUR 110. Again, you can take around EUR 3 billion for.
It's 2.8 officially, but $3 billion for. It's a little more, you're right, because in fact when we go high at $100, the Middle East impact of the production, the loss of the 15% is no more 10%. It will go down to 6%, 7%. Which means that the higher we go, the more the sensitivity will rely on the barrels outside of the Middle East. Your question is good, but we need to make the math correctly at 100. We will do it. I think Renaud and his team will give you the. We might publish it if you want because this information is important. We might publish it on our internet site.
There is less impact on the production of the Middle East at 100, that we have on the, at EUR 60. That's true as well. That's what I can comment. All that is, to be honest, any high scenario is a good news for integrated companies like TotalEnergies.
Great. Thank you. Looking forward to that, Renaud, your great work.
No, no, it's okay. I mean, it's not so complex. Renaud Lions is not able to make the map, but the budget guy is able. Don't worry, we just need to correct it. No, with what I said, he should be able to do it. Just a joke between us. Okay. No, M&A. M&A, M&A, you know. M&A on oil, honestly, today is difficult, because where is the right price there for the oil assets in the next three years? You know, and, you know, there was a sort of consensus until the crisis, I think oil was more or less, assets were more or less exchanged around EUR 70 per barrel, I would say, in the market. It was more or less the market, and it was some few could debate, but it's more or less the average assumption.
Today, to put EUR 70 for the next 2026, 2027, 2028, I wouldn't agree if my teams are proposing me to sell at EUR 70. You know, I would say, "No, no." It's very difficult because there is no certainty at all about where we'll establish the market. You could say it's EUR 80, it's EUR 75. You could say also maybe it's EUR 100. I think M&A on oil today is not an easy game to play. I'm sure Of course, the buyer would love to buy at EUR 70, but I'm sure the seller will be a little more difficult to convince. That's where I see that. On the gas, different. You know, we are looking on our side to the gas, U.S. gas business on the other side.
The U.S. gas market has been stable, I think that means that we. By the way, when you look to the assets on their side, it didn't move a lot valuation. That's more easier for on this side. Power, you know, they are all crazy in the U.S. with gas-fired power plant. It's not a good market to buy gas-fired power plant. They are more reasonable in Europe because, you know, we don't, we are not in love with gas in Europe. It's good to continue to buy M&A, to make M&A on gas plants in Europe. We are looking to some opportunities to complement the portfolio. An obvious country for us to look at is Germany in Europe from a power point of view.
That is the situation. If I continue, M&A on renewables, by the way, I have good news for all of you. You didn't ask me the question, but we got the money from the U.S. government on our account yesterday. We have the famous $928 million. By the way, the share for TotalEnergies out of the $928 million, because we had some partners on one of the concession, is $550 million. We'll have this cash incoming. It's already came. On renewables, the market is influenced by higher interest rates, so it's not so, but it's much, you know, the multiples in that field are quite high compared to burning gas.
I see a sort of impact on raising interest rates on the valuation of these assets.
Okay. Thank you very much.
The next question is from Henri Patricot, UBS.
Yes, everyone. Thank you for the update. Just one quick question left for, from me. Going back to the trading great performance in the first quarter in both oil and gas. I was wondering if you have any comments on the second quarter. Should we be expecting a potential of a strong performance given we've seen already one month with significant volatility and maybe a full quarter of significant volatility in both markets? Thank you.
I cannot answer that question. No, we just, you know, that we have no idea. You know, trading is not a matter of running a plant and taking the production, multiplying by a price, an assumption of the price minus the cost. It doesn't work like that. I can only comment that there is a very volatile market. The traders generally are quite happy when they see volatile market up to a point, but when it's too volatile, there are some danger. When the volatility is not related to supply and demand, but to the tweaks of some authorities in the world, it's even more dangerous because you could face suddenly a reverse situation. We are not betting on price.
The trading of TotalEnergies is an asset-backed trading, and is fundamentally not, we are not betting on the oil price. You know, we don't make, we are not exposed with flat price in the trading we do. No, it's impossible. I wish we will reiterate a strong performance. You know, what we've done in, when we say in a press release that there is an exceptional performance, a strong performance to qualify it compared to the normal run rate. The normal run rate of our trading is quite good, by the way. Again, we'll, I have no information. They are booked. By the way, there was a lot of comments in newspaper on one specific position, which was taken by all crude oil traders.
You know, when they take a position on one side, they have some other position on the other side. You know. It's not one-sided. Yes, they made a position which was long in the Gulf at the beginning of the war, that's true, but there were other positions which were not as positive. By the way, our products, our product team, our product trading team made was quite good to benefit from the fact that in Asia there was a scarcity of products, and so then to be able to supply Asia with products, there were a strong performance there. It's different, I would say different markets, different flows. We'll see, and we'll see. By the way, when I...
Just to confirm to you, I don't know, when I mentioned a figure to Christopher, I think I said EUR 32, EUR 32 billion of cash flows. I have normalized the trading to a normal run rate or run delivery and not an exceptional one. If there was repeating quarter after quarter same performance, then my EUR 32 billion is a little short of the reality. Okay. I cannot answer to you more than that, Henri. A book of trading is plenty of trades, and we see the results at the end. What I can confirm is that the trading division of TotalEnergies is quite successful and I never see them underperforming the market. Either they are, I would say, on the average, or they make strong performance. That's it.
Okay. Thank you.
The next question is from Fergus Neve, Rothschild & Co Redburn.
Yeah. Hi there. Thank you very much for taking my question. Just one from me. I just hoped you might be able to provide us with a bit of an update on some of the key projects which are due to come online this year. Perhaps if you could comment on Ratawi phase one, which I imagine is affected by the current situation in the Middle East. Maybe also Tilenga, due to come online later this year. That'd be really helpful. Thanks.
Ratawi, you know, Ratawi, we have, I said, that we have 5,000 people working on the ground, but there is no way to export the crude oil. We were planning to start up by Q2. I would say, logically, what I can answer to you today is that Q2 more to Q3 than Q2. The question will be, not only to build the plant, and the plant is almost done. In fact, it was a question of one and a half months on Ratawi. But it's more a question to be able to produce the oil and to export it, which is today, I would say, the limit to allow to start up Ratawi. As quick as we can, obviously, and no problem, the wells are drilled, easy oil to produce.
Restarting Ratawi, it's a matter of few days, and we have teams on the ground, so it's easy. By the way, we have started up just before the conflict. We started up the solar plant in Ratawi. The first project which came on stream was the solar plant and the 300 MW phase. The authorities were quite happy because facing a lack of gas for making electricity, we are supplying some solar e-electrons to the Basra area now, since end of February. Tilenga is moving on. I mean, we told you that the startup of production for Tilenga will be end of Q4, I would say. We were explicit in February, I think. There is no change on this part. What is progressing well is EACOP.
We think that EACOP might be completed, September, October. As Kingfisher, the other project in Uganda where we are partner, is also, it will be probably ready by summertime. It's possible that we'll begin to flow the oil from Kingfisher first through EACOP. It's a long pipeline to fill. Operations and crude oil productions from Uganda might start up, just now, say September, end of Q3, and then Tilenga is Q4.
Brilliant. Thank you.
The next question is from Jean-Luc Romain at CIC Market Solutions.
Thank you for taking my question. It relates actually to the offshore U.S., where you just announced you had the cashback. Do you consider offshore wind U.S. as a dead zone for the foreseeable future, or do you still see it as a future development zone in case an administration would become more receptive to this kind of development?
No, I was clear. I commented that in a U.S. newspaper, I think. I could use a word of Darren Woods. It's non-investable. It's non-investable because the cycle of an offshore wind project is much longer than the duration of a U.S. administration. You know, offshore wind requires a long cycle of permitting, developing, negotiating. If every four years you are stuck, you know, because you have a change, now it's not possible. But more fundamentally than that, you know the story that we, when we studied all these projects in front of New York to Jersey, frankly, it was very difficult. The offshore part was quite in line with what we expected, even if there was some cost increase from the, I would say, the turbine point of view.
What was very expensive was the subsea cable and landing a cable, subsea cable to serve New York, very urban city, New York, New Jersey, was much more expensive than planned. At the end of the day, you will, we would be able to deliver electricity of around EUR 150 per MWh. It's much more expensive than what you can do in the U.S., you know. In terms of allocation of capital and considering the various ways to produce electricity in the U.S., with plenty of gas, with solar, onshore solar, onshore wind, it's better for us to develop our position in the U.S., but with the most efficient allocation of our own capital, and for consumers as well.
That's, so no, the answer is definitely, it's not a matter to the U.S. At TotalEnergies, we consider that it's not a good market for developing offshore wind. In fact, what I also say, I think developing offshore wind requires some specific market. It's a question of cost merit curve to produce electricity, and it's linked as well. U.K., Germany, France might be, are some interesting countries. Because they have less capacity to develop onshore renewables because limited space, in fact. There is a market there. We will concentrate on these projects. The other lesson we draw is that on offshore wind is that it needs to be big to be profitable. We are cleaning our portfolio. We had the small projects in Denmark.
We are just exiting it because it does not fly. Market, honestly, Brazil, Philippines, India, forget all that. There is no interest. There are plenty in Brazil. You can produce plenty on onshore wind in Northeast with gas or venters, which cost much less to than offshore wind. Offshore wind is more expensive, so it should be dedicated to markets which could afford it and which need it. That's the conclusion which we draw for ourselves. We'll concentrate on some projects which are large, by the way, which are on which we believe that the fundamentals are good. That's the reality. You will not see newspapers and press release that Total is back in U.S. offshore wind.
Thank you very much.
At least as long as I am CEO and Chairman of the company.
Thank you.
The next question is from Anish Kapadia, Palissy Advisors.
Thanks. good afternoon. I wanted to ask about battery storage, and especially in the context of seeing Europe having its earliest curtailments of renewables this year, the record level that's expected this year and the extreme negative pricing. I just wanted to get what's your view, what's your view on battery storage growth in Europe, how you see the Iran conflict accelerating this, and then, you know, what's the role of TotalEnergies and Saft within this context?
I will tell you, fundamentally, it's not linked to the conflict. When you develop renewables, you should put batteries. Good news for the last on the last two years, in fact, the cost of batteries are dramatically lower. They have been divided almost by two, battery cells. Thanks again, by the way, to Chinese suppliers, but it's a reality. You have a strong decrease of batteries. I think it's absolutely necessary in order to not only in order to avoid curtailment, but also it's a matter of grid management that when you develop a renewable farm, you should have some battery. I'm against the CFD scheme in Europe because in the CFD scheme, the developer, solar or wind developer, has zero obligation to build a battery. You know?
He's securing a price from the state. Sometimes the states are smarter. They say, "We don't pay you if it's negative." In fact, it's just a strange scheme, in fact, the CFD. The scheme which is in working in the U.S., where you have some fiscal support on your CapEx, ITC, or PTC, is much better because, in fact, if you are facing the market and you develop your solar plant, and for sure, you always build a battery storage with the solar plant. Otherwise, you are dead and your profitability will be low. I think it's obvious that.
The more we see, by the way, as you said, investments and development of new solar farm or, like in Spain, for example, but even Germany, we begin to see the limits and the curtailment is higher and higher because there are no batteries. Yes, I think it's time to really incentivize in battery storage. On our side, we are investing in batteries. We have, in particular in Germany, where it's a good market because there is a lot of renewables. We have a company which we acquired two years ago, and we are developing 2 GW-3 GW of batteries. We just farmed down part of some of them at 50% to Allianz with a good profitability.
Yes, we think there is a real market, in particular in Europe. It's not only because of the Iran conflict. It should be accelerated. If Europeans are serious about, I would say, developing the penetration of renewables in Europe, it's absolutely fundamental to do it together with batteries to, even for, to stabilize the grid and to be able to absorb the most of this renewable production. Saft, to come back, Saft is good, is strong. It's developing very well on the energy storage system business. I think they are number four or five in the world, and they are making quite a lot, taking quite a lot of markets. It's, it was one of the reasons why we acquired Saft.
It was a little long this market to, I would say, to take off, but now it's really full speed on it. There are also some technology improvements which allow to think that the cost could also, when we were discussing with the Saft CEO, he thinks that the battery storage could, has already diminished by 50%, but another 30% decrease is possible on the cost, thanks to a higher density of energy storage, et cetera, et cetera.
Thank you.
The next question is from Bertrand Hodée at Kepler Cheuvreux.
Yes. Yes, hello. Sorry, my mic was off. It's a follow-up on my question on refining.
One of your competitor explained yesterday that, because of various factors like, major dislocation and crude differential, product yields or freight costs, its realized refining margin in April was about EUR 5 less than its headline margin indicator. Do you see that? Can you also tell us, what is the average of total refining margin indicator so far in April? Thank you.
I'm, I didn't see such a dislocation, to be honest. I know that the ERM, I was looking. Normally we have an indicator internally, but my team does not have it. Okay. There was the, in fact, the realized refining margin in the first quarter was around 10.5, while the indicator we gave you was around 11.4. There was a little lower, but not EUR 5. We suffered. That's true, but honestly today, one of the issue, to be honest, and including today in April. Yes, and it's true. I will tell you, I'll give you another figure just because I want to be solidarity with my colleague.
In April, the ERM was, the indicator was around 25, and the MCV of refining, your, the realized Margin on Variable Cost was around 21.5. You had not five, but EUR 3.5 different. Why? Because honestly, these paper markets today, these indicators are difficult to follow. Are difficult. That is going that way. The other months it could be the other way, you know. Each of us are trying to trace an indicator to give a sense of what is happening on the market. There is a dislocations, and it's perfectly true today, between the products and. By the way, it was an extraordinary situation, by the way, the March, where you've seen high oil price and high refining margins.
Normally, you have a, it's rebalancing, you know. It's, it's countercyclical, but not the case. Again, at the end, what I know is that I've never seen in my life such high, margins on the paper, so it's good. That we can, even if there is a little difference between the paper indicator and the realization, it's, still delivering very good and strong results. That's the situation.
Again, I know we have a debate internally, but because the daily, our teams are calculating this famous refining indicator based on the market, and we have some big doubts because on the other side, when we saw that, we see that we can sell fuel at more than $200 per bbl, we are not sure that all that is completely consistent, you know. It's, it's today. You have, in fact, as you have a dislocation between the physical market and the paper market, which is quite astonishing. At certain point it should come, it should converge. These type of indicators are not so, I mean, they are not so reflecting the reality of what is happening on a day-to-day marketing of the products.
Thank you very much. Very helpful answer. Thank you.
Thank you, Bertrand.
As a reminder, if you wish to register for a question, please press star and one on your telephone.
Yes.
There are no more questions registered at this time. I turn the conference back to you for any closing remarks.
Okay. Thank you for your assistance. Thank you for your comments. I think it was a quarter where once again, we demonstrated the strength of our model. I think we will not disappoint you in terms of return to shareholders. The share of TotalEnergies since we have been listed in the New York Stock Exchange on December 8, I'm looking to that as a starting point of the renaissance of the company, has over performed all our peers by quite a margin. I hope that this set of results will help to maintain it. Again, if we can attract more shareholders to this to TotalEnergies and to globally the sector, it's good. Thank you for your attendance and I think we'll have opportunity to meet in the coming months.
Our shareholders for sure will meet that on the 8th annual general meeting on May 29, I think, in Paris. Thank you again.
Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may now disconnect.