Ladies and gentlemen, thank you for standing by, and welcome to TotalEnergies Second Quarter 2021 Results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star one on your telephone. I must advise you that this conference is being recorded today. I would now like to hand the conference over to Mr. Patrick Pouyanné, Chairman and CEO of TotalEnergies. Please go ahead, sir.
Hello. Good afternoon, or good morning, good evening, everybody, for this second quarter conference call. I'm happy to join you together with Jean-Pierre, our CFO. It's quite unusual to have the CEO coming to the second quarter call, which generally is a very short one. I wanted to make it a little longer for you before to go to holidays. No, more seriously, I think it was also because it is the first conference call of TotalEnergies. I wanted to celebrate it by participating myself, also because as you've noticed, we have, with the board of directors, taken yesterday an important decision that I wanted to share with you. First, I will just introduce the call with a few comments. Then Jean-Pierre will review all the results. Then we will go to the Q&A together.
As you all know, our shareholders have voted unanimously, almost 99.9%, to adopt our new name and to embrace a new identity, very colorful. Every journey begins with one step. This is an important step that marks a transformation of Total to TotalEnergies. As TotalEnergies, our name pays homage, of course, to our proud history as Total. By expanding it to TotalEnergies with an S, we declare our ambition to become a broad energy company, a company producing several energies and the world-class players in the energy transition. At least as important as our new name, the shareholders also voted strongly, more than 92%, in favor of our ambitions for sustainable development and energy transitions towards carbon neutrality. Knowing that we have the support of our shareholders gives us comfort as we move forward to implement our strategy and transform TotalEnergies.
I would like to emphasize that this resolution is very important for our futures, as it contains clear guidelines for our next 10 years, not only in terms of decarbonization targets, but more importantly in terms of the evolution of our portfolio. First, increasing our renewables and electricity portfolio and building an integrated production, trading, sales, electricity business. Second, consolidating and growing our LNG productions and sales by a third. Third, lowering our oil product sales by 30%, while our oil production will be peaking during the next decade. Also in this resolution, in terms of capital allocation criteria for new hydrocarbon projects, low technical cost or low break-even, and a lower CO2 intensity for all our new projects, lower intensity than our portfolio average. It's a continuous improvement scheme in which we engage the company.
TotalEnergies has clearly an important role to play as a major energy provider in the global community, and a responsibility to all our stakeholders to continue to grow, to succeed, and to create value. The challenge we face is to find the best path that manage the risk inherent to our industry, but also the opportunities, and to maximize the probability of our success, and this path shapes our strategy. First, I would like, by the way, to underline some of the progresses we have made in our energy transition roadmap during the second quarter. For example, joining a new offshore wind development in Taiwan, acquiring a 5GW solar portfolio in India through Adani Green, in which we own 20%. More original, having our first bunch of corporate PPAs successes with Amazon, Microsoft, Air Liquide, Orange, Merck, which will support our renewable development.
Secondly, I would like to comment on the decision to exit from the Petrocedeño asset in Venezuela, which is in fact a way to put our roadmap in action. I would like to underline that it's not related to the political situation in Venezuela or the sanction situation, even if this situation the last three years has not make our life very easy and put some constraints on the capacity to maintain the assets according to TotalEnergies standards. In reality, this exit is to show the consequences of the strategy of TotalEnergies as approved by our shareholders. Petrocedeño would indeed require, in the near future, significant amount of CapEx to restore the production with new wells and to rejuvenate the operator.
Clearly, allocating CapEx to the development of extra heavy oil projects in the Orinoco Belt would not be consistent with our hydrocarbon strategy in terms of CO2 intensity of new hydrocarbons CapEx. Together with Equinor, which shares the same ambitions towards carbon neutrality, we engage with PDVSA, which offered us a possibility to exit, yes, for a symbolic amount, but against a broad indemnity in relation to all past and future liabilities arising from TotalEnergies' participation in Petrocedeño. This results in the recognition of an exceptional capital loss of $1.4 billion in the financial statements of TotalEnergies for this quarter. Again, it is indeed the way to put TotalEnergies strategy into action. This was the first specific item I wanted to comment. The second one, of course, is related to our cash allocation framework, putting more color on it as there is more color on our new logo.
In February, in a more uncertain crude oil price environment, we were clear that our priority was restoring balance sheet strength, which we define as a minimum A debt rating and a gearing below 20%. Thanks to the strong second quarter performance, and the first one as well, particularly in terms of cash flow, we reduced our gearing much faster than expected beginning of the year, down to 18% at the end of this first half. This, combined with a more positive economic outlook, improved our financial flexibility substantially over the first half, and clearly much quicker again than anticipated at the beginning of the year. In terms of performance, as it will be demonstrated by Jean-Pierre, I'm confident that we are back stronger than we were before the crisis, thanks to the action plans implemented last year.
Given our stronger financial position, we are ready to move onto the RICH path, the solution that addresses and combines our top cash flow priorities. Investing to maintain the powerful cash flow machine of today and to develop the profitable new energies for tomorrow. Deleveraging the balance sheet to increase financial strength and flexibility, and returning cash to shareholders. Includes showing the benefit of higher prices. As we stated it in February, if you remember, in our clear priorities for cash flow allocation, there was a fourth box in which it was written, "Flexible at higher oil prices when gearing is under 20%." This was in fact, and it is true, that since the beginning of the year, we have captured the benefit of quite a high price environment.
While respecting the implementation of our strategy, the board debated about the return to shareholders and which color could we give to this fourth box that I just reminded you. First, before to speak about it, I would like to remind everyone that TotalEnergies is the only European major who decided to support the dividend through the crisis. We are convinced that we were right to maintain trust of our shareholders, and the quick financial recovery confirms that belief. I remind you that all dividends represent, let's say, 33%-35% of our cash flow from operations, which is returned to shareholders for dividends. Return to shareholders will continue to be mainly in the form of dividends. The board has decided it is time to use part of the surplus cash flow linked to higher prices for share buybacks.
The concept is to allocate up to 40% of the cash flow, the surplus cash flow above $60 per barrel to buybacks. To be clear and to clarify, since the start of the year, oil prices have averaged $66 per barrel. We have a sensitivity that we gave you in February, which is $3.2 billion of additional cash flow for $10 per barrel. 66 minus $66. 60% of 3.2, it makes $2 billion. 40% will mean share buyback of $800 million in 2021. If the average price is going up to 68, for example, so we are not far, it could go up to $1 billion. You can move on. If it's even higher, the more the price will be, the better it will be in terms of the highest share buyback will be.
In this favorable context, not only I think we clarify this element of our cash flow allocation today, but we want also, of course, to confirm our priorities in terms of cash flow allocation, invest in profitable projects to implement TotalEnergies transformation strategy to a broad energy company, support the dividend through economic cycles like we have done it and we continue to do it, to maintain a solid balance sheet, and a minimum A long-term debt rating by sustainably anchoring the gearing below 20%, and increase the return to shareholders via share buybacks in a high price environment. Now I leave the floor to Jean-Pierre, which will review the second quarter results.
Thank you, Patrick. Let me tell you that first, that we are proud to have a strong set of numbers for this first conference call as TotalEnergies. TotalEnergies second quarter adjusted net income increased to $3.5 billion, or $1.27 per share, which is 20% higher than the pre-pandemic second quarter of 2019, even though Brent prices were essentially the same in both quarters, and despite the lower production this year. The increase in results reflects, as Patrick mentioned, the benefits of the action plans we implemented in response to the crisis, and it emphasizes the importance of ongoing discipline on costs and on net investments. Analyzing the second quarter adjusted net income, return on capital employed is close to 11% at 10.9%. That means that we are back with double-digit profitability in such an environment.
From this point, for obvious reason, I will focus on a sequential comparison rather than looking back at last year, which was completely different due to the crisis. TotalEnergies benefits from oil and gas markets that were 13% and 28% higher respectively in the second quarter versus the first quarter. Brent continued to rebound, reaching $76 per barrel end of June and averaging $69 per barrel during the Q2 versus $61 for the Q1. Our average LNG price increased by 8%, which takes into account the lag effect on oil link contracts and the increase in spot prices. Refining margins in Europe, although higher compared to first-quarter levels, remained weak at $10 per ton. Petrochemicals performed historically well, thanks to very high margins on polymers.
Operationally, oil and gas production was 2.75 million barrels per oil equivalent per day in the second quarter, down 4% from the previous quarter, mainly due to major maintenance shutdowns as often planned in Q2, but higher than last year. For the 2021 full year, we anticipate production will be around 2.85 million barrels per oil equivalent per day as the production will progress in Q3 and Q4. In terms of results by segments, first, the iGRP segment. It confirms its first-quarter performance with adjusted net income and cash flow of around $900 million. Renewable project farm out activity, which is as you know, an integral part of our model, was lower in the second quarter compared to the first quarter, and this explains some of the difference quarter to quarter.
There was nothing unusual about our Q2 gas trading activities. I remind you that in comparison, gas trading was stronger than usual in the first quarter due to the winter storm in Texas. Gas and power sales are seasonally lower in the second quarter than in the first, mainly due to weather. Looking ahead, since most of our LNG sales are under oil link contracts, we have good visibility and expect the price to increase to more than $7.5 per million BTU in the third quarter. Looking now at the renewable and electricity activity, we are continuing to grow this business with more than 500 MW of gross renewable power generation capacity commissions in the second quarter. We have more than 8 GW of gross installed power generation already online and more than 40 GW in the portfolio.
We are on track to achieve our objective of 35 GW online by 2025. Net power production increased to 5.1 TWh, reflecting higher outputs from both renewable and CCGT. Notable among the highlights of the quarter, Ichthys restarted this month after a maintenance shutdown and delivered its first cargo of carbon neutral LNG to Japan. We acquired a 23% interest in a 640 MW offshore wind project in Taiwan, as Patrick commented already, that is already covered by PPA and expected to start up next year. Adani Green Energy, in which we have a 20% interest since January, acquired a portfolio of 5 GW of renewable power generation capacity in India that will contribute 1 GW to TotalEnergies target of 35 GW in 2025. Moving now to the E&P segment, which is, as you know, the cash machine of the company. The story here is positive and straightforward.
Capturing the benefit of rising oil and gas prices, the segment reported $2.2 billion of adjusted net operating income, up 10% quarter-to-quarter, and $4.3 billion of operating cash flow, up 11% quarter-to-quarter. Operationally, we had a successful well on Sapakara South in Suriname, and we started production in Zinia Phase II in Angola. The downstream delivered good performance as well. Refining and Chemicals, plus Marketing and Services, reported combined adjusted net operating income of more than $900 million in the second quarter, up by more than 75% from the previous quarter. Operating cash flow recovered significantly in the second quarter, increasing to $1.5 billion, up 67% from the first quarter.
Indeed, thanks to the strength of our integrated model, the downstream was able to overcome depressed European refining margins and benefits from very high petrochemical margins, as well as the rebound in marketing and services results to pre-crisis levels. As the global economy continues to recover, and particularly as demand for aviation fuel comes back, we expect refining to improve. Polymer benefits from historical high margins, and we expect this situation to continue as it is a result of a high worldwide supply chain stress. Finally, at the group level, the main takeaway from the second quarter is that we are back with solid results and strong cash flow, which is the lifeblood of the company.
Adjusted net operating income was $3.5 billion, a 15% increase quarter-to-quarter. Debt adjusted cash flow was $6.8 billion, the 18% increase compared to the previous quarter. For the first half, it reached $12.5 billion. We had a working capital raise in the first quarter and a larger one again this quarter. Cash flow from operation after working capital was $7.6 billion in the second quarter. The $2 billion increase over the first quarter. For the first half, it reached more than $13 billion. As a result, we reduced the net debt to capital ratio, the gearing, faster than expected to 18.5% at the end of the second quarter. It is a major step towards anchoring gearing sustainability below 20%. Once again, analyzing the Q2 adjusted net income, we are back to double-digit profitability.
In terms of cash flow allocation, net investments were $3.2 billion in the second quarter and $7.2 billion in the first half. The board decided to distribute a second interim dividend of EUR 0.66 per share, stable in euro, but representing an increase in dollars compared to a year ago. Now Patrick and I, we are ready for the Q&A.
Thank you. Ladies and gentlemen, as a reminder, if you'd like to ask a question, please press star and one on your telephone and wait for your name to be announced. You can cancel your request at any time by pressing a hash key. Once again, it is star and one for any questions. Your first request is from the line of Christyan Malek of JPMorgan. Please go ahead.
Hi, Patrick, Jean-Pierre, and congratulations on this result. It's great to see TotalEnergies back on the front foot and a buyback frame to cement that. Two questions if I may. Patrick, I know in the past you've talked about the impact of underinvestment exacerbated by COVID-19, energy transition trends and so on. Can you update us on your thinking of how you'd frame the next few years on the oil market? We've clearly had some constructive comments from your peers. Has it influenced your decision to launch a buyback arguably sooner than the needle anticipated? The second question in some ways relates to that is on CapEx. Net CapEx remains guided within the $ 12 billion-$13 billion range, and half of it's for maintenance, half of it's for growth. Of that growth element, half of it's renewable and electricity.
If the oil market is getting tighter and looks more attractive, is there a case to allocate more investment within oil and gas, potentially to benefit from that through higher oil volumes, given that is what over the years Total's been exemplary at? Thank you.
Thank you, Christyan, for your comments and your questions. First about the industry and the underinvestments that we have observed. I'm still on that mood. I know that at $75 per barrel, obviously, people will try to forget, but you have a global environment. You have all the climate debate, which puts pressure on many players, and which gives, I would say, when you are listening to the last, Net Zero IEA report, even if we disagree with the conclusion, obviously, it puts some pressure on many players. My view is that, probably the industry will be more prudent to relaunch a bunch of projects. Making a link, by the way, with your second question, obviously, linking to even what we will do in TotalEnergies is being able to relaunch some short cycle CapEx like we have.
In fields, last year with the crisis, we stopped, I would say, $2 billion of infield wells and short cycles in Angola, in Nigeria, in Congo. Obviously, today the instruction is that we can relaunch that and probably next year in our budget, we will not stick to $12 billion , $13 billion , but probably more to $13 billion , $14 billion . There is $1 billion extra CapEx which could come, might come. Let's say, just to give you the magnitude. We'll activate that. Considering, I would say, the larger projects, I'm still more cautious. I think we have observed quite a lot of volatility. By the way, it's also true that if you have less investments, you give some support to higher prices for the oil price. My view is the atmosphere today is more to have less investments, more prices. Cycles can come back.
One, of course, of the key question for the market will be to observe what will happen in the US shale oil players, which will have an influence. My view is that by end of next year, we might come back at the level of the production we had before the crisis. Even there, maybe we are wrong. As you know, we are not a direct player in that game, and we do not intend to become one. My view is that investors and financial investors which are giving equity to these shale oil players are also because of ESG and all these, I would say, trends and market trends, strong market trends, are probably also more cautious to deliver equity and money to oil and gas, oil in particular.
I don't think, of course, at a higher price, you see more investments, but I don't think will be as much as before, and that it will not compensate quickly the underinvestments in which cycle in which we entered. Considering Total, I think, yes, this year, $ 12 billion, $13 billion, probably next to $13 billion, more next to $ 13 billion than $12 billion. We have been a little more active on the renewable and electricity than anticipated at the beginning of the year, which leads to the split that you mentioned. Honestly, I think this level is quite okay, around $ 3 billion for this business. It's an acceptable level, but not much probably.
It's clear that, I told you, I think the company, with this type of environment, keeping in mind that we plan our CapEx on a $50 per barrel for, I would say, large greenfield projects, and we'll continue to stick on that discipline. I think the right figure for the global financial balance of the company is around, let's say, up to $14 billion. This is probably a type of figures that we will confirm to you at the CMD in September. Again, it will be more on short-cycle oil projects rather than on large greenfield projects that we might do it. We have quite a lot of, and we'll come back on that in September, we had 1 billion barrels of oil reserve to activate. We activate only part of it, when the crisis we stopped, so we can do it again.
We have, for example, put into production Zinia 2, but Angola is specifically a case where we can do it. There is one limit to my comment, which is that COVID is still there. We have teams and we have been obliged, for example, a country of Angola, where we have a lot of opportunities to drill. The limitation is an operational one because our teams are under stress for almost 18 months, so it's not so easy. We do not want to overburden them, even if themselves they would like to benefit from the high oil price. This is a challenge we face as well.
We should keep that in mind, that we still are, even if the environment is brilliant. COVID is still there. Safety is of course a value. We have that in mind when we allocate CapEx capacity to deliver in a safe and healthy environment.
Patrick, just sorry to follow up on this. We've gone from $ 12 billion to $ 13 billion to $1 4 billion . Is there a cap on CapEx or is there a framework that you're sort of referring to here, just on a sort of medium term, just to help us understand the cap to frame better?
No. For 2021, I repeat, $ 12 billion , $ 13 billion, next to $ 13 billion . I was more giving you the framework on which we work, considering your second question, that it could go next year to $ 13 billion , $ 14 billion rather than $ 12 billion , $ 13 billion .
Okay, clear. Thank you.
Thank you. Your next question is from the line of Jon Rigby from UBS. Please go ahead.
Thank you. Hi, guys. Two questions. One sort of jumps out at me with the narrative around the withdrawal from Venezuela and then some of the additional disclosures that companies have been making about new FIDs and the sort of carbon emissions per level of production. I wanted to ask you whether you could just sort of talk a little more about how you balance the sort of economic returns of new projects, sort of around IRRs and paybacks, NPV, et cetera, versus the carbon emission or emission profile of those projects. Does it lead you to certain projects, maybe some offshore or deep water, and away from others? Is that shaping both your FID pipeline but also potentially your sort of review of your existing projects? Hope that makes sense.
The second is, can we just have a quick update on Mozambique, and current thoughts there and whether there's any further thinking around timelines, et cetera? Thanks.
Thank you, Jon, for your two questions. First, it's clear that, and again, it was the core of the resolution which was putting to the vote of our shareholders of our AGM when we described what will be the ambition of TotalEnergies in terms of sustainable development, climate portfolio for the next 10 years, and allocation of capital. It was probably the most important alinea of it, where we described that the criteria to sanction new greenfield hydrocarbon projects. We put two criteria on the table. One, which is in line with our strong economic belief, which was low technical costs under $20 per barrel, typically. I think it's written like that, or low breakeven in case we could benefit from specific fiscal terms and a breakeven typically under $30 per barrel. It's a technical aspect.
Which was, by the way, in our strategy for the last five, six years, since 2015. There is nothing fundamentally new. Why did we do that? Just because if you think that you are in a market, oil market, where demand might decline in the future, it's obviously very safe to have your projects being on the safe side in terms of technical cost or breakeven. That's an obvious economic case, this is the right bridge between the climate and volatility of the oil price. We have added another criteria, which is that we consider that each new greenfield project's carbon intensity must improve the average of our carbon intensity today. To be clear, the average of CO2 intensity of our oil portfolio today is at 20kg per barrel. Each new project must be below it.
It's the case for Uganda, it was around 13kg. It will be the case for projects which we just are approving with our partners, which is Mero 4 in Brazil, where we are around 18kg. That's true. In the way we appreciate today, and this is a change for sure, in TotalEnergies compared to Total. The way we appreciate the new projects we have on one side, the IRR, the NPV, keeping, again, the same fundamentals that you knew, adding my two elements of technical costs and low break even, but the company has run like that since 2015. We are also considering for each project as well, this carbon intensity impact. What I describe for upstream is true in all the business. It's true as well for marketing people.
When we look to growth projects, we speak about Scope 3 in the same way we speak about Scope 1 for upstream. It influence the new project and with the future projects. This does not lead to a full review of our portfolio, even if, in the case of Venezuela, I think we look at, okay, we are with asset for long. As I said, the context is not so easy. We stayed in Venezuela in 2008 when we were partially nationalized, I would say, by the government because of, in fact, fundamentally because of the huge potential to develop new projects in the extra heavy oil Orinoco Belt. This today is no more in our agenda. It's no more consistent with TotalEnergies because, developing extra heavy oil in the Orinoco Belt, you are above my 20 kg per barrel.
You have a low technical cost, but a high intensity content. The board and ourselves, management is very consistent with what we submitted to our shareholders. We decided because there was an opportunity and also because together with, as I said, Equinor, we share in fact the same views. We decided, and we had the opportunity offered by PDVSA to exit. Rather than dragging our feet and not willing to participate in the new CapEx, it's better to leave PDVSA the capacity to do what they want. This has clearly an influence. I know that you are not a big fan of our position in Venezuela, so you know it took time to us to execute your command, but sometimes it came one by one. If you have another question, do we have other ideas like that? My answer is no.
We don't have so many assets on which we like that. Deep offshore, of course, again, the example of deep offshore Brazil, a large portfolio of large project like Mero is fitting with the criteria. By the way, again, Jon, we have taken a strong commitment in our resolution, which is that every year you will see a report coming from TotalEnergies demonstrating that for each of these projects, hydrocarbon projects, if we yes or no, we respect this criteria. If we do not respect, of course, we'll have to explain why we consider that it was still acceptable to make a sanction. This is a clear guideline for all our teams. Mozambique. Mozambique, you know the situation. You can read the newspaper like me. We have been quite clear. There is a war in Mozambique. It's a civil war.
It's a war in this area in the north of Mozambique. We have been forced to declare force majeure. We have decided to stop and even to, I don't know, how do we say that? Dismantle. To stop the project and dismantle the teams, because we don't see a clarity of timeline. I said publicly it will take at least one year. In fact, today it's no more in our hand. The government of Mozambique is taking actions to reinstate the stability in this Cabo Delgado region. It's not just, by the way, only the area where the project is. It's not only the Palma and Afungi area. It's the Cabo Delgado as a whole because these insurgents are everywhere, I would say. You've seen that they have taken decision at the SADC level. The Mozambique government has asked SADC to mobilize some military help.
You've seen, or probably you are right probably as well, Rwanda is involved now. To be clear, TotalEnergies is not involved at all in these military actions. It's no more. We are out. Of course, we are following, but my view is that it will take time. What I can just tell you is that I had the chance to discuss with President Nyusi in May in Paris. He told me his willingness to solve the issue. What I can observe is that months after weeks after week, he's respecting and taking the actions that he described to me. Let's see if they can get out. This issue is beyond. It's not a measure of gas development. It's beyond us. It's the question of peace and stability. When we say that, there was quite a lot of casualties.
The population there is suffering and, of course, this is a priority for them. As TotalEnergies, if we can support, we continue to support the population as much as we can, including by keeping some means to evacuate some people when there are difficulties. This is the situation in Mozambique. I have observed that Area 4 has just this last week recently joined or declared a force majeure declaration. Again, the gas is there, the project is there, so let's be patient. Timeline, I said at least one year. We hope that, again, the military actions taken by the government will be able to restore peace in that part of the planet.
Okay. Thank you. That's very comprehensive. Thanks a lot.
Thank you. Your next question comes from the line of Irene Himona of Societe Generale. Please go ahead.
Thank you very much. Good afternoon. Thank you, Patrick, for clarifying the investor distribution policy and the amount. My question is really regarding the dividend. Obviously, as you said, it's a flat euro amount, it's an increase in dollar terms. How does the board think around dividend progression? If it is a progressive policy, what would drive an increase in that quarterly euro amount going forward? I had a second question specific to the second quarter result in marketing and services, where your sales volumes remain around 21% below pre-crisis levels, yet the NOPAT is pretty much the same. Clearly, unit margins are exceptionally strong. I wonder if you can talk a little bit about the sustainability of this in the second half of the year. Is it likely to be sustainable as demand recovers post-COVID? Thank you.
Okay. Yeah. Irene, your first question, I'm always amazed by your capacity when we announce something on 1 side to go on the other side. I think we are quite clear. I said that we will support the dividend through the cycle. We've done it when it was down. Today, obviously, we have not the capacity to serve both peers, who divided the dividend by three to announce the increase, because it will be not reasonable. We have decided the policy, which is to a continuous We never decrease the dividend for 30 years. We progress when we have the feeling that we are able, but where fundamentally the dividend will grow, it will be linked to a structural increase of free cash flow. It means by, as you know, within the next three, four, five years, we will have some increase of productions.
We have large projects, then we will be able to deliver an increase of free cash flows. We told you last year, between 2020 and 2025 or 2026, we have an increase of cash flows of $5 billion per year. That will be obviously the source of dividend increase. Dividend increase for me is linked to a structural increase of cash flow of operations. That's fundamental. Today it's not the case. This year we are benefiting from higher oil price, which is good. The tool that we want to use when we are in such a situation, as we announced it in February, again, it was quite clear with share buybacks, which is when we benefit from higher oil price, we want to return part of it to shareholders. Today, we give you the clue, which is above $60 per barrel.
We give up to 40% of the additional cash to the shareholders. Our policy will be on the dividend increase only if we link that to a structural increase of cash flows linked to better operations, not only upstream production, but it could come from downstream as well, where we have new projects and a strategy which aims to deliver additional cash flow, we will come back on that in September for sure. That's the dividend part. For the buyback, it is a way, and I think it's a legitimate request from our shareholders or oil and gas shareholders to see part of the returns coming from the high volatility of the oil price, which we are in the high range.
Of course, when we are in the low range like last year, we define that as a $60 per barrel threshold between high and low. This is the message of today. The second question is about marketing and services. I think there are two sources. That is true that with yet we did not recover all the volumes, but it's coming back. Volumes, there are two sources, I think, because the network, for example, on the retail networks, the volumes are down only by 5%, not 20%. These figures of oil product sales is a mix of retail networks where we have quite a good margins and of businesses with very low margin.
To be honest as well with you, the TotalEnergies vision, when we said that we will reduce our oil product sales by 30%, obviously we have discovered that we can clean our portfolio of oil product sales by not losing much margins in some areas of the business. This is the way to cope with the Scope 2 objective. It's beginning to be in action, I think somewhere in this marketing and services company being more efficient, that does not impact margins. The source of the margins of the good, very strong results is twofold. One is not only given by the market, but the margins, which by the way, it's linked also to the low refining margins. You have a sort of counterbalance effect there when margins in refining are low, marketing is benefiting.
It's why we put always the downstream business together. It's the best way to look at it. The other source, it's a positive one, is the cost. You know last year, and this is true for the whole company, might comment, we launch, because of the crisis, some strong saving program action plans, $1 billion last year. We move on this year, to more an additional $ 300 million, and it will move to next year an additional $ 200 million. The teams are very focused on that. We did not, I would say, stop this effort, on the contrary, and Marketing & Services in particular have been very strong. For part of it, for me, it's structural.
To your question, I am not sure we can repeat every Q2 a $400 million or more performance. Clearly this is the objective on the Marketing & Services, to continue to improve very soon. That's the reason why. That's the fundamental reason between these results.
Thank you. Your next question is from the line of Biraj Borkhataria from RBC. Please ask your question.
Hi, thanks for taking my question. Apologies if this has already been asked, but I got cut off for a little while. On the buyback front, I just wanted to ask, thanks for the clarifications there, but to the extent that you generate free cash flow, and the oil price is below $60 a barrel because refining margins are high or chemical margins are high, et cetera, are you assuming all of those excess free cash flows go to the balance sheet? Because I'm looking at your financial framework and thinking in a year or two, you may be under-geared. I'm wondering if the 40% guidance maybe should move up over time if your balance sheet continues to de-gear. The second question on that is just timing-wise. Do you need to wait for approval at the AGM for the buyback to start, or is that already in place?
Thank you.
First question, and thank you for the question. It's clear that the board considers that below $60 per barrel is for the benefit of the company, and fundamentally to strengthen the balance sheet, like we said. If I give you the framework, in 2021, we are spending, I'd say $ 12 billion- $ 13 billion. Let's say next to $ 13 billion of CapEx. Dividends more or less $ 8 billion, a little more. At $60 per barrel, we might be about $ 22 billion, $ 23 billion. It's part of what has been allocated already to the debt, in fact. It's clear that that's the way to think to that. Yes, we have free cash under $60. Our breakeven is lower than that, but it will be allocated primarily to strengthening the balance sheet, as we explained that in February. We don't need any AGM approval.
It's in our decision. The decision is taken. To answer to your question, when it will take place, you know we are going to holiday, it will not take place in August because we don't work during holidays. There are other holidays which are Christmas holidays, so it will take place between end of August and Christmas. We will execute it. It's a commitment. My colleagues told me this morning there was some questions about, are you sure? In TotalEnergies, and that's not changed from Total before, because you have the same management, I think we have a strong track record of saying what we tell, executing what we tell. I can tell you that it's quite clear we will do it. There is no trick there. We will execute this buyback.
Of course, the price is moving, but when I look to end of July, we are already a little more than $ 66, and I think that August will stay as strong. We will execute that, I would say, before year-end according to our market allocations. No man, we'll do it.
Understood. Thank you.
Thank you. Your next question is from the line of Martijn Rats of Morgan Stanley. Please go ahead.
Hi. Hello. I also have two questions. First of all, Patrick, I wanted to ask if you could say a few words about the Fit for 55 package from the European Union. I know there's a ton of measures in there. I was wondering if from your perspective, there was anything sort of unexpected or something that caught your eye or something that impacts Total sort of disproportionately. It can be quite difficult to really sort of oversee the full implications of this. I'm sort of very keen to hear what you think of it. The other thing, it all follows a little bit of a similar trend, to be honest. I noticed that you're now disclosing greenhouse gas emissions on a quarterly basis, even down to the level of Scope 1, Scope 2, Scope 3. I think this is sort of very interesting.
I also noticed that actually from 1Q to 2Q, the Scope 3 number was already down quite a lot, I think from 88 to 77 million tons of CO2 equivalent. Just to sort of start to understand these numbers a bit sort of going forward, I wanted to ask you, what level of sort of quarterly volatility should we be expecting those numbers? Because they're clearly not going to trend down like this every quarter. There'll be quarters where they're going to be up. There may be several quarters in a row that they're going to be up. I just want to make sure that we understand that if they go up for a couple of quarters, That is normal.
I wanted to ask, so how variable are these quarterly numbers in these CO2 emissions so that we can understand them and when they come in quarters ahead?
Yeah. I think, Martijn, as always, you want to go quicker than us. We have decided it's true with the board, and I think it was a good remark for board member to tell us, okay, now TotalEnergies, we have this resolution. Part of the strategy is driven by Scope 1 and 2 and Scope 3 objectives. It's good in your financial results, and I think it's a way to speak pragmatically, of ESG, to disclose your emissions. As you notice, we were not able because it's new to us, and we have not a full system. We were not able, by the way, to have the historic figures. We have decided to begin from 2021.
You will see, and I think the question of volatility, as we don't have a track record also for quarterly results, we took a risk, I will not answer to you easily. My view is that there is a fundamental why Scope 3 of Q2 is under Scope 3 of Q1. It's just linked to, we are selling less gas because it's not as cold in spring than in winter. There will be a seasonal effect, which is just linked to our gas sales, fundamentally our gas sales or CCGT are running more in winter than in summer, but as obvious as well. You could expect some seasonality from the Scope 3 according to just the consumption of energies because in fact, Scope 3 is just consumption of energies.
On the Scope 1, we begin, of course, to why do you have a decrease? First, because one refinery has been sold. Lindsey is out of the perimeter now. Also, because we have some continuous effort. On the Scope 1, normally you should see more declining, even if, be careful, Scope 1 might be impacted by a new project coming in, coming on stream. For example, in Q3, we are just on the verge to start up our new cracker in the US. I think it's a matter of days or we put them a challenge to be able to start it up before this call, they failed, I still supported them. No, I mean, this one obviously is adding, I think 1 million tons of CO2 on Scope 1 immediately.
It's why you could have the Scope 1 and 2, where the rhythm will be a global continuous improvement and decline because we are engaged to lower our emissions by 40% between 2020 and 2050. Each time you have a new asset coming on stream, when we operate it will increase. Thank you for recognizing the effort, and I think it's again, a pragmatic way to speak, to do what we propose to remind to our shareholders. The first question is a little more complex because, to be honest, I have asked my teams to deliver to me a summary of 55, and I think I received 55 pages. I asked them a second summary. No, I think what is interesting for me is the political debate which seems to emerge now in Europe, because now we are entering into the hard part of it.
Everybody was quite brilliant to say, "Okay, let's go for the reduction of 55%." Now we put the real world, and the real world means that people are discovering that if you want to get there will be an impact on energy prices in Europe. I think this is when the commission proposed an ETS on heating, urban heating or this begins to, of course, governments begin to realize what it means. We'll see how it will be able to manage all that. For TotalEnergies, I think, we are following carefully, obviously, all what is linked to plane, the plane industry and the targets for jet fuels because it seems that it's very ambitious. We have to check if all the conditions, it's quite technical.
Today it seems that, for example, some of the animal fats would not be possible according to the scheme, which is very strange to us because if we do not have access to this source of lipids, I don't know if we can make all these jet fuel liquids, new jet fuel be possible. We just have, I think, to engage now with governments and Commission to check, from an industrial point of view, how we can deliver the various energies which are required. It's a package which obviously I will be probably more able to answer to you in September but in July. I'm not sure I will use my holidays to read the hundreds of pages, but at least maybe the small summary. We'll come back to you.
Wonderful. Well, if your team could share that short summary with all of us, that would be terrific because frankly, we're all struggling with it. Thank you.
Thank you.
Thank you. Your next question is from the line of Christopher Kuplent, Bank of America. Please go ahead.
Thank you. Good afternoon, gentlemen. I want to echo what Martijn said. I think this is great detail in your disclosure. On that point, if I may ask you for clarification, and widen the debate, not on a project by project, but including inorganic moves. You've been famously, I think very successful in counter cyclical acquisitions over the last five years. Do you think they have become particularly more difficult considering their direct impact, particularly from producing assets, on your progress regarding decarbonization? If you wouldn't mind including M&A in your answer for a bit of clarification, please. Thank you. Otherwise, Patrick, I just wanted to ask you about the name change. What's been the feedback? Do you feel Total under the old brand has been misunderstood and is becoming a company that is associated with more than just oil and gas?
If I may, add a sneaky comment, then why link your buyback to exclusively oil? Why not link it to other metrics? Sorry, that's just a stupid aside, but those are my two questions. Thank you.
Yes. If I'm linking today just to even for results are increasing to our electricity business, I'm afraid the buyback will not be very high, but it will increase in the future. I took the suggestion for the future. On the name change, I think we have been clear. I think Total is perceived as an oil company, if not an oil and gas company, oil company. We are an oil major, which is our history. It's true, but fundamentally, and it's fundamental change. The strategy is shifting to become a multi-energy, a broad energy company encompassing not only oil and gas, but also electricity. I've explained several times why, because we see some growth in this market, and we think we can build a profitable and large business there.
We wanted to have, again, our name in line with our new strategy and not hiding. TotalEnergies, I think was a perfect choice because it says everything. In a name, you describe the strategy. The feedback, of course, it will take time, I think to including in our share price to people to understand it. For example, this morning, we gave you another aggregate that which is quite unusual, like Jean-Pierre told you, which is the EBITDA. Why do we give you the EBITDA of Total? By the way, it's almost $9 billion, I think for a quarter, is just to help you to compare it to the one of the utility because it seems that today, the new energy major are the utilities.
Just compare the magnitude of the figures, and you will see the capacity of being able to become a world player in the energy transition that we think will drive our strategy and a profitable strategy. Coming to your first question. To be clear, no, we are very pragmatic people. We look to different opportunities. For example, you have probably noticed in newspapers that we are working in the Middle East countries. When everybody exits, we come in, and we look to if we can get some access to good resources in the framework of a very profitable contract. We are working on it. It means that our strategy does not imply at all our capacity to move on a new hydrocarbon project, providing, again, that when we look to some projects or new assets, it must fit with the idea that it's a low-cost asset.
Low cost in terms of technical cost and new project beyond in terms of development or and the capacity to. Of course, if they are older assets, the capacity to drive the emissions down. Honestly, I would be surprised to see Total moving on mature assets with very high emissions tomorrow. If it's a very good opportunity, we'll think. Again, it's a question of comply or explain, and if things make sense for the company, for TotalEnergies, because TotalEnergies is a company which wants to continue to deliver the energy of the present for the planet, which is oil and gas, and which prepare to deliver the energy of the future. We have two feet, one in the present, one in the future, and the present is still there. We have been quite agile to capture opportunity. There are good ones, we will look at them.
Understood. Thank you, Patrick.
Thank you. Your next question is from the line of Lucas Herrmann from Exane. Please go ahead.
Oh, thanks very much. Patrick, thanks for taking the time to do this call. It's just always enjoyable listening to you. Couple of questions, maybe a little abstract. The first one, Acorn CCS project. My understanding is you've decided not to remain within that consortium. I just wondered whether there was a particular reason. Was it just balancing projects? There's a lot going on. This was not right where something else was. The second question, how do I think about the EBITDA numbers that you present us with from the renewables business? Do I just look at them and think, well, they're too small to mean anything at the moment. It's just a trend, I guess.
It's the thought that you're building a business, and yet at the present time, I see the EBITDA falling between 2Q20 and 2Q21 or indeed 1Q21 and 2Q21. It's trying to make sense of what those figures are actually saying to me.
Okay. Acorn. Yeah, last year, we made a review of all the CCS projects we had in the North Sea. We had four projects in our portfolio. We had Northern Lights. We had the one with BP, in the UK North Sea, which is called Net Zero Teesside, I think, NZT. We had another one, Aramis in the Netherlands. We look at the map, we look at the potential, and the potential for us to use these projects because we want to develop CCS investments, not only for customers but also for ourselves. We made an arbitration, I would say, to say, "Okay, with three projects for the next years, we have enough.
Let's concentrate on efforts on the NZT, the Aramis, and Northern Lights. We decided to leave the Acorn one, where we had, in fact, less direct interest to use the capacity of storage of Acorn due to our activity in Scotland, in fact. That's the reason, Lucas Herrmann. It's not against the project. It's a good project, but it's just an arbitration within our portfolio of the capital that we want to dedicate to CCS in the coming years. The second question is about proportionate EBITDA. I think Jean-Pierre will explain you, but I think he gave you the clue.
Yes
in his speech. It's about this quarter, there was less farm-down. I think let's explain that.
Yes. As I explained to you.
Okay
Of course, farm-down is part of our model.
Yeah.
In Q2, we are less farm-down compared to Q1.
That's all.
That explains why the EBITDA, it was $ 314 million in Q1, and now it's $ 290 million.
So it's just a-
It's just a matter of a farm-down. Of course, the underlying trend is an upward trend, and it's reflected by the capacity that now we reported on a quarterly basis and the fact that we have increased the renewable capacity by 500 MW.
It's just a limited quarter effect.
Yes.
Nothing structural there. As we have more and more portfolio projects, we farm down more and more, and so it will just increase. That's the point.
As Patrick mentioned to you, we use this metric because it's metrics used by our competitors, and we want to give such metrics to allow you to compare our performance with.
Yeah. I think in Q1, we farm down something like 50% of 200-
Yes.
Almost 300 MW.
Yes.
Q2, we had no farm down. Again, it's not a permanent activity. It depends quarter by quarter.
Yes.
That's the limit of it. Okay?
That's great. Thank you. Have a great summer.
Thank you. Your next question is from the line of Bertrand Hodée from Kepler Cheuvreux. Please go ahead.
Yes. Hi. Thank you for taking my question. Two, if I may. One on your LNG portfolio and one on your remaining oil sands portfolio. First on LNG, can you update us on current status of negotiation with QatarEnergy on Qatar North Field Expansion and your current thinking on the potential return you can make here? The second question is about oil sands, your position on oil sands in Canada, Surmont and Fort Hills. If you've announced today the exit from Venezuela, you made no secret, and correct me if I'm wrong, that you are looking for divesting at some stage, your Canadian oil sands position. Are you making any progress on that divestment process? Do you see an appetite for any buyers out there?
Qatar, there is no negotiation. It's a tender, so we have submitted a tender, I think five or six of our companies. Qatar, I think is just looking to all the offers and, of course we have put, I think, quite an appealing offer. I don't know the offers of my competitors. I cannot comment on something I don't know. Just that I can confirm you that Total has submitted an appealing offer to Qatar. Appealing is only on my view. Maybe they don't have the same view. We'll see. The returns from, okay, Qatar is offering, I think they have made public the CapEx figure of $29 billion for four trains. When you make the math, it's quite an efficient LNG scheme.
We consider that it's a good opportunity to expand our portfolio in LNG, and we have a clear strategy on this side. We'll see if we are successful or not. I remind you that we have many opportunities to grow LNG within our portfolio with PNG, with ECA, with Mozambique, with Russia. It's question of generating optionalities, but we are committed to Qatar if we are successful. Oil sands, I don't know where you read that we have announced that we want to exit from Canada, and I'm not sure we have ever said it. We just, last year, when we made a review of all our assets, according to our climate ambition, the board made a review of what could be, I would say, the stranded assets. It was the criteria used were very long reserves beyond 2050 and high technical costs.
In fact, that's true that in this category, we didn't have many assets, but we had the oil sands. We made publicly a write-off, I think of almost $6 or $7 billion on the oil sands. We have put back in our portfolio in our assets, the value of the oil sands projects we are down to what we consider is the right value for these assets within an acceptable timeline. We have also committed, and we have announced that we'll not sanction any new project. That's true. We have limited our ambition. Again, today at $75 per barrel, it makes sense. It makes money. I'm a happy shareholder of the assets today. It makes money. As I've also explained, I think to many potential buyers, who maybe think that Total is in disarray.
We are not at all. We are very patient. These assets will have more value, and there will be more buyers the day that the pipeline between Calgary and Vancouver will be built. You see that day, you begin to be able to export your oil sands to nice markets, and then I think new buyers will be potentially there. Again, we are not in a hurry. It's part of the assets on which we'll not invest new projects, but these assets have a value. The value will increase, again, with these new outlets for Alberta, and so we'll wait for such a point. We'll wait for that.
Many thanks, Patrick, and have a great summer holidays.
You, too.
Thank you. Once again, it is star and one, if you wish to have a question. Your next request is from the line of Jason Gabelman from Cowen. Please go ahead.
Hey, guys. Two questions from me. First, on the announcement today to buyback stock with oil over $60. Can you just discuss, is that based on a backward-looking basis for the entire year, or what's the timeframe that you're assessing that buyback for? Is it quarterly, or just any guidance on the period? When are you going to give the first announcement in terms of the figure that you plan on buying back? Will that come with next quarter's earnings? Secondly, on chemicals, I know it's reported as part of the Refining & Chemicals segment, but it'd be great just to hear any insight on how much chemicals contributed to the quarterly results, just given the strong indicator margins in the quarter that have persisted into 3Q and the outlook for that segment. Thanks.
Yeah. Yes. The first question was Buyback. My announcement is for the year. We are not just looking to the forward quarter. You gave me an idea to save money. Which was to start only from this quarter. In fact, we will consider the full year. At a certain point, we'll have to decide at which level, but we can easily, month after month, manage it. Again, it's up to 40% because it's not a mathematical figure. It's look to 40%. Just before I said the $67.50 per barrel to make 960, which means $1 billion, in fact, fundamentally. You know we are rounding the figure. We will monitor it. I will not describe to you all the mechanics, because I think you need to be sometimes not to know all the mechanics, but it's a commitment.
It's based on the yearly average, and we'll monitor it from, as I said, not in August because we are on holidays, but between September and December, we'll monitor that point before year-end. It will be down. On the downstream. I think Jean-Pierre used a nice word, which was the historic result for petrochemicals and for polymers. I can tell you polymers, of course, today, like in many other, I would say, commodities, you see high pressure on prices because in fact, what we observe at the world level is two effects. One, of course, is the growth after having a low, so quite a high growth in many areas of the planet, but also the fact that last year, when the crisis came, people have almost emptied all their inventories. Why?
When the crisis came, to maintain the capacity to continue to manufacture, as the system was stopped, our customers have emptied their inventories. They did not rebuild them because of the economic crisis. Today you have a planet, and it's not true only for polymers, it's true in many other, I would say, semiconductors and others, where the inventories were down, and now you have a quite a good demand because the economy is coming back to the levels previous the crisis. It put some upward pressures on all these commodities, and so we benefit from it. I think today many comments were positive about the downstream result, which is good for them. I can tell you with the margin, refining margin was quite poor. European margin, I think, was around $10 per ton as an average, or not far.
$10 per ton, we lose money. We have a target of breakeven for European refining margin, which is around $20 per ton. At $10, the result's negative. If you have a plus $ 500 million, just to give him some clue on the downstream, the trading was a normal trading. No exceptional last year on the same quarter. I commented during the same call that there was an exceptional $500 million reserve on the trading. I give you plenty of clue today because I'm happy to be in TotalEnergies. It's a normal trading this quarter. You have quite a negative figure of refining, so you can deduct yourself the results for polymers, which is quite a historical. It's a historical high. This, I think, my view, is because of the structural impact. Why I described it, I think it will be maintained for next quarter.
I'm quite optimistic about our petrochemical reserve because this polymer stress, global stress, will not disappear easily. To build on one side, the inventory is backed by customers, and on the other side, to deliver the products required by the economic growth. I think it's a trend which compensates again somewhere, this full refining margin. Polymers, by the way, integration works as well because we benefit from raw naphtha prices in our petrochemical business. This is why I always consider this integrated model has some value, and this is another proof this time. Is another question?
Thank you. Thank you. We have a final question from the line of Alessandro Pozzi from Mediobanca. Please go ahead.
Hi. Good afternoon. I have two questions. The first one, I'd like to go back to the Fit for 55. The one thing that was probably missing was carbon capture. I think across Europe, we are seeing a bit of a divide between government supporting carbon capture, like Norway, UK, Holland, and some others. Norway is also providing substantial grants. How important do you think carbon capture will be for Europe to reach the carbon reduction targets by 2030 and 2040? What is the breakeven that we need to see in terms of carbon price to see a widespread use of the carbon capture technology?
Okay. I think there is a debate, but at the end of the day, the commission is quite clear, if you want to have carbon neutrality in Europe, without CCS, you cannot achieve it. We have to be pragmatic. They have also in their plan, Fit for 55, putting emphasis, by the way, on nature-based solution. For us, to have an interesting part of the action plan is also around the natural and carbon sinks, I would say. We need it. We need that. There are some debates, of course. There are some pressures from NGOs. It's interesting to see that some very different governments, like Norway on one side, which obviously is an oil and gas country, but also the Netherlands, which will not be an oil and gas country by 2050, are pushing for these type of technologies, like the UK as well.
To come back to your question, in fact, the best way to lower the cost is not only the question of the cost of capturing, it's more the question of infrastructure to store. You need to have a sort of mass effect. It's easier to make it, I would say, to lower the cost when you build a CCS scheme in Rotterdam or in the Netherlands with many industries putting together the CO2 in some infrastructure, you can lower the cost. In term of cost, by the way, in Europe, today, the ETS, the CO2 price is around almost $60 per ton, not far. It's not a big guess to think that we can reach more than that, $100 a ton by 2030, and at $100 a ton, the Northern Lights project is profitable.
It's a question just of, because all this, you cannot think CCS if you don't think carbon price, but if everything in Fit for 55 is organized to reach at least $100 a ton for CO2 by 2030, if not more. This makes these technologies profitable. This is my feedback to you.
Okay. Fine. Thank you. The second question is a bit more old school. Suriname, I've seen you announce a new discovery. Maybe can you give us an update on what the potential for the basin there could be?
Again, we announced a new successful well, Sapakara South after Sapakara. We have another one. The priority today for all of us is for Apache and us is to move to a first oil development. We have a well going on, which is called Keskesi. I think it's another important well. I think with this sequence of wells, by the end of the year, we should be able to answer more precisely to your questions. There is a lot of hydrocarbons. There is as well quite a lot of associated gas. As you know, neither Apache nor TotalEnergies have any policy to develop a field while flaring. That means that for today, what we are working on together is appraising in order to identify the first oil development, mainly with limited associated gas, in order to be able to develop according to our standards.
Okay. Thank you very much.
I understand it was the last question. Thank you to all of you for attending this call. I would like, of course, to wish to all of you happy holidays. I think we have not been too long, even if when the CEO is present, it's a little longer, but it's only the CFO. Again, I would like just to, as a conclusion, to say that I'm very proud as Chairman and CEO of all what our teams are doing within TotalEnergies despite the COVID crisis. We are really putting all our action plans. We are transforming the company. It's a lot of effort. We have managed to overcame the 2020 crisis environment, and at the same time, we took an important major step in our journey by committing to our net zero ambition and to building together this new, more sustainable broad energy company.
Thank you again for your attention.
Thank you. Thank you. With that, we conclude the presentation today. Thank you for participating. You may disconnect.