Ladies and gentlemen, thank you very much for joining us today and turning out in such great numbers. That's really very encouraging and also, of course, a very warm welcome for those of you on the phone and on the internet. Today, I'm really looking forward to talking to you about the progress in our delivery of our 2020 outlook, but also the plans that we have for positioning Shell for the future of energy well into the 2020s and even beyond. Before we start, let's first of all take a close look at the disclaimer statement, which I'm sure you are getting very familiar by now. Jessica and I are going to start to update you on your company in a bit more detail. Jessica will join me first in presenting to you the strategic and the financial framework outlook for Shell up to 2025.
We will have some presentations by the business directors who are all here. We will then do a short high-level Q&A, which will be quite challenging with a room this full, but we will keep it quite short because after that, we will have first of all a lunch break, and then we will have breakout panels and there will be plenty of opportunity to ask questions and have in-depth discussions with not only our other executive committee members, but also quite a few executive vice presidents you will see around. First of all, you will undoubtedly be glad to hear that we have made significant progress with our strategy. The progress that we have made means that we are now competitively positioned for the future. This is a future where we expect the net carbon footprint of the energy products to be lower.
We will continue our focus on fully sustaining our upstream business well into the coming decades because for as long as there is sustained demand for oil and gas, there will be sustained commitments from Shell. That means also sustained investment. Alongside a strong upstream, that future for Shell also includes growth in our businesses that have a strong market-facing aspect. Businesses like integrated gas, oil products, chemicals, but also emerging opportunities like power. Being very well positioned for the future allows me to be confident of our potential growth in shareholder distributions, supported by continued capital discipline, growing returns, and a balance sheet that is resilient through the cycle. All of this is leading to an increased organic free cash flow outlook for 2025. It's a strong delivery today that allows us to have such confidence in the future.
You will agree that we already have taken action that we will expect will pay back over many years to come, action to safeguard and to build trust, but also action to pursue our relentless drive for safety in our operations, action to ensure that ethical standards are being maintained and our people always do the right thing, and action to ensure that Shell can thrive through the transition of the global energy system. This is action that will keep Shell aligned with our customers. All this adds up to a forward-looking company that is well-placed to thrive through the energy transition in the coming decades. Let me start first with the financial and operational delivery and outlook, which I strongly believe are the key elements of our world-class investment case.
Over the past few years, many of you have told us you have come to appreciate our clarity of purpose. We are proud of that because our strategy is clearly working. In recent years, we have transformed the financial metrics of our business. We have substantially de-risked the delivery of our 2020 commitments, and that has meant for a start, more cash. We are on track to deliver a revised post-IFRS 16 outlook of around $28 billion-$33 billion of organic free cash flow by 2020. This strong cash flow generation has allowed us to progress well with our $25 billion share buyback program. The success of our strategy has also meant higher returns, with ROACE on track to now be around 10% by the end of 2020.
Implementing that strategy has also brought down debt, meaning that gearing is well within reach of 25% by the end of 2020. Finally, you may remember that we introduced the metric of cash CapEx earlier in the year. We believe cash CapEx is a better metric, a cash-based metric to evaluate our capital spend and prevents the distortions that may come from accounting impact. Until 2020, we expect to stay within a cash CapEx range of $24 billion-$29 billion per annum with a hard ceiling of $29 billion. That is the previous $30 billion. There is no change to our commitment to stay within that hard ceiling, $29 billion cash CapEx. Let me then give you some insight on what we expect our strategy to deliver as we look forward to 2025.
First of all, we plan to be generating some $35 billion of organic free cash flow by 2025. This strong cash outlook will create the potential to distribute to our shareholders a cumulative cash amount of $125 billion or more over the five-year period 2021 to 2025. Distributions are expected to come from a combination of dividends and share buybacks. Second, we expect that our continued capital efficiency programs and discipline around investments also to yield results. We expect a return on average capital employed of more than 12% by 2025. Third, very important, we continue to maintain a strong balance sheet and expect our gearing to be within the range of 15%-25% through the cycle. Finally, the cash CapEx to deliver these results. We expect cash CapEx to average around $30 billion per annum over the 2021 to 2025 period.
While the average cash CapEx spend over that period is expected to be $30 billion, of course, we will allow for some variation in the annual spend. Even with that flexibility, we are setting an annual ceiling of $32 billion for each year over that period. Of that $30 billion, and this is very important, some $20 billion per annum would be required to sustain our portfolio and to deliver cash flows from operations at the 2020 levels. The outlook is mostly based on organic growth. The $30 billion average cash CapEx only includes a modest inorganic spend of around $1 billion a year. To ensure continuity and to make it easier for you to compare, the 2025 outlook is also based on an oil price of $60 per barrel, 2016 real terms.
That's the same premise that we used in management day for 2017 or 2016, for that matter. I have outlined now how our strategic direction has translated into financial results and how we expect that progress to continue. Let's now highlight the effect of this performance on our competitive position. For us to be a world-class investment case requires industry-leading outcomes, and we have been delivering industry-leading cash flows over the last 11 quarters. We have also improved our return on capital employed over the last few years, and we are now on par with our peers. I hope you will recognize that our brand is second to none in our industry, and we are building on the strength of that brand and the trust in our products to further grow our customer-facing businesses.
Much of what I talked about so far, of course, concerns Shell progress towards being a world-class investment case. Let's now spend some time on some other strategic ambitions. To sustain a societal license to operate, for instance. Because without a strong societal license to operate, without trust, we cannot and also we will not be a world-class investment case, nor will we be able to thrive through the energy transition. Securing a strong societal license to operate requires us to do three things. The first one is to cause no harm. No harm to people, no harm to the environment. These are actually the basics of being in business. It requires a very strong operational HSSE performance, but it also requires ethical and respectful behaviors by all of our staff and all of our contractors.
The second requirement for a strong societal license to operate is to make and sell good products. Good products that our customers actually want and need. Customers, of course, want products that have the lowest possible environmental impact, and we intend to sell such products that are also, of course, at the same time commercially viable. The third element of a strong societal license to operate is to contribute to society. It is by contributing that we can be valued and trusted as part of that society. At its most basic level, this means for us providing energy, of course, providing employment, bringing local investment, prosperity with the projects that we do, collecting and paying $1 billion in tax.
We want to make a substantial contribution to improving people's lives as well by providing access to energy to those who do not have a reliable and safe connection today. To secure that strong societal license to operate, we must ensure the right performance and the right behaviors. All of this, I think, is the right thing to do, and I expect you to expect nothing less from Shell. Our strategy today is set against a number of global trends. We believe that a growing population, rising living standards, are likely to continue to significantly increase energy demand for many years to come. While the world needs to find a way to meet this growing demand, of course, CO2 emissions need to fall to counter climate change.
Last year, we released our Sky scenario, which is a technically possible but a challenging pathway for society to achieve the goals of the Paris Agreement. This scenario outlines how electricity is expected to become a much bigger part of the primary energy mix because of changes in consumer energy demand. These trends that we can see help us to shape our portfolio to be fit for the future. While liquid and gaseous fuels, including biofuels, of course, will continue to be an important element of the energy mix, over time, electricity will need to play a much bigger part if the world is to meet the Paris ambitions. Organizing our business in seven strategic themes has served us well. It has focused our investment priorities. It has helped us to execute our strategy of driving delivery.
In recent years, of course, we had a grouping in cash engines, growth priorities, and emerging opportunities, these businesses have evolved over time. Of course, so has the external environment. We believe that now these groupings have become somewhat obsolete. We are refreshing the way we group our strategic themes to better communicate the portfolio strategy that we have in Shell. We now group the themes into core upstream. These are themes that need to generate strong cash flow. Leading transition themes, which will be critical for us to capitalize on the energy transition to a lower carbon future. An emerging power theme, which will capture value from the growth in electricity consumption that I just referenced. The core upstream themes comprise Deepwater, Shales, and Conventional Oil and Gas, the three themes that we had before.
As the label implies, these themes are core to Shell. We will sustain their strong cash generation through the coming decades. The market-facing integrated gas, chemicals, and oil products businesses are where we already have a leading position in the industry, we intend to extend that leadership as we see these businesses as the cornerstone for Shell as we thrive through the energy transition. The power theme will focus on creating business models to support the evolving customer demands for more electricity as the energy transition unfolds. As I said, this is an emerging theme for Shell, we will have to plan our steps carefully, but also with conviction as we prove the investment case before we scale up this business with more investment.
The refreshed grouping continues to provide clarity about our strategy, I believe, and expectations in relation to the returns as well as the risks and the opportunities in there. Let me give you a little bit more flavor on the specific themes. Starting with Deepwater. We have a very strong position in Deepwater, where we generate high margins through very focused cost management. We are a top quartile operator in Shales with very strong basin positions, we aspire to be cash positive in this business in 2019. We were already cash positive in the Permian last year, we will make this entire theme free cash flow positive. We have a deep funnel of projects in our Conventional Oil and Gas business. Our integrated gas business, I hope you will agree, is a market leader.
It generates very competitive returns and more resilient cash flows compared with our peers through the deep optimization capabilities that we have in the company. The gas business is expected to play a critical role in meeting our net carbon footprint ambition by enabling natural gas to displace higher carbon fuels like coal, for instance. Petrochemical demand is expected to grow above GDP rates, and chemical products are expected to play a role in lower the carbon intensity of the global economy as well. They are less resource intensive compared to the alternatives, and they are lighter, for instance, which enables energy efficiencies. The integrated nature of our oil products business and our trading optimization capabilities really make this particular business very resilient to market downturns.
It is strongly positioned to offer new customers choices in response to energy system changes, thereby also playing a very important role in meeting the challenges of the energy transition. John will provide more details in a session on the Downstream themes. Our power theme, in turn, is well-positioned to respond to evolving customer preferences, identifying sources of value in an increasingly dynamic sector. As I said before, we must absolutely ensure we get our approach right for this theme, and we will not get ahead of ourselves. Our conviction to find value in this theme will therefore be backed up by a clear track record and proof points. Maarten will discuss both the integrated gas theme and the power theme in more detail in the presentations to follow.
To demonstrate the robustness of the project funnel, I would like to highlight some high-level expected business milestones in the period from 2019 to the end of 2025. We expect to take more than 40 final investment decisions on major projects across all our businesses, and we plan to start up more than 35 major projects. For a more detailed list, I refer you to the backup slides that you will have in your handouts. I also would like to reiterate the outlook provided at our Downstream Open House last year when we expressed our intent to open up more than 10,000 new retail sites and add more than 10 million new daily customers in the period to the end of 2025. Let's break down the figures for the outlook for 2025 a little bit further.
As I mentioned, we need to spend around $20 billion each year of cash CapEx to just sustain our operating cash flow at the 2020 level. Remember, the focus here is on delivery of cash and not remaining production levels. We have also detailed the total cash ranges on the slide, including the growth CapEx for each of the themes. All of this adds up to an average of around $30 billion per annum during the 2021 to 2025 period. As I said, we have a ceiling in any one given year of $32 billion. This investment in growth is expected to deliver an organic free cash flow of around $35 billion by 2025. As you will notice, most of the Upstream themes cash CapEx is spent on sustaining cash flow with a modest amount of growth in there.
The main investment in growth is expected to gravitate towards the market-facing transition themes and eventually also to power. Some of these themes options are expected, of course, to then start delivering cash beyond 2025. Delivering high-value projects is expected to raise our return on average capital employed to more than 12% by the end of 2025. We demonstrate here an attractive evolution of our shareholder distribution story. In the period 2011 to 2015, we paid out more than $51 billion cash to shareholders in dividends and share buybacks. That was at $97 Brent. In the period 2016 to end 2020, where we are at the moment, we expect to distribute more than $90 billion, and that includes a $25 billion share buyback that is currently underway. That's at $60 Brent.
If you look at the 2021 to end 2025 period, we expect to have a cash potential of $125 billion or more to be available to distribute to shareholders over that period. That's half the market cap of Shell. We are fully committed to our current dividend per share. We expect any dividend growth to be resilient, of course. We plan to increase our dividend cover and any dividend per share growth by complementing it by further share buybacks to reduce the share count. We expect to grow the dividend per share, we have a clear line of sight to completing the ongoing $25 billion share buyback program. The founding assumptions behind this chart is a gearing level of around 20%, that's in the middle of the 15%-25% range that I mentioned earlier. The cash potential is based on organic growth assumptions.
If you identify any opportunities to add substantial value through major inorganic moves, these would require decisions to be made on a case-by-case basis. It's hard to predict exactly what that would be at this stage. Finally, let me share with you some of the levers that we will pull to deliver that 2025 outlook. Delivering an increase in cash flow from operations versus actuals in 2018 is of course one of them. Delivering growth through major project investment decisions is another one. Competitive operating cost and capital efficiency are also very important levers for us to create value with. We plan to drive unit operating costs per barrel down to less than $9 per barrel of oil equivalent in our upstream businesses.
For our global commercial and retail businesses, the focus is on driving up the marketing OpEx yield to above 65% by the end of 2025. Capital efficiency leads to increases in organic free cash flow, while of course, driving up at the same time the returns in our business. It's a very important lever. We intend to achieve average forward-looking breakeven prices of around $30 per barrel in our upstream businesses, while driving down the average unit technical cost of integrated gas projects to around $5 per million BTU. Delivering the cash in a resilient manner requires ensuring that our businesses models are future proof. This means making progress towards achieving our net carbon footprint ambition and the short-term targets that we have set for the net carbon footprint.
In summary, we continue to implement the strategy that has served Shell and Shell shareholders so well over the recent years. The successful implementation of that strategy allows us to be confident in the delivery of our 2020 outlook, and our faith in that strategy also allows us to set out what I think is an ambitious but also very achievable 2025 outlook. With that, let me first of all hand you over to Jessica.
Good morning, ladies and gentlemen, and thank you for joining us this morning. It's great to see you all here. Today I'm looking forward to sharing with you how our strong financial delivery is set to continue beyond 2020. I would first like to start by reflecting on what we've achieved since 2016 and the BG acquisition. When we announced the BG acquisition, we made a number of promises, and we've been delivering on each of them. Equally important, we created momentum that we've used to transform Shell. In three years, we've integrated BG, a $65 billion company, and divested $30 billion in assets. We started up new projects that generated additional cash of $10 billion. We restructured our organization and ways of working, which has led to cost reductions of some $10 billion.
At the same time, we also transformed our approach to the financial framework, bringing greater clarity and discipline to drive robust and sustainable outcomes. In these same three years, we reduced net debt by $28 billion, canceled the scrip dividend program, and launched the share buyback program. We've kept our promises and have transformed Shell, and I'm confident that we can continue delivering on our promises for 2020 and beyond. By 2020, we seek to sustainably achieve gearing of 25% on a post IFRS 16 basis, which is our proxy for a strong double A credit rating. We remain disciplined with our capital decisions and plan to spend between $24 billion and $29 billion on cash CapEx per year for 2019 and 2020, also on a post IFRS 16 basis. This outlook is equivalent to our previous capital investment range.
We're on track to complete our share buyback program and deliver organic free cash flow of $28 billion-$33 billion by 2020, which is equivalent to our previous target on an IAS 17 basis. As I said at the beginning, we've been delivering more than promises. We've reshaped Shell through big and small steps. With company-wide programs, such as upgrading the portfolio, as well as with asset-level programs, such as increasing availability. We have shifted the culture of our company, as seen in our approach to cost management, and we have refreshed our people strategy to sustainably deliver industry-leading performance. Starting with reshaping the portfolio. In the past three years, we have simplified our portfolio tremendously, allowing us to focus on where we have a competitive advantage.
We've exited oil sands in Canada, downstream in Argentina and Japan, upstream in Ireland and Gabon, and integrated gas in Thailand and New Zealand. We simplified our operations in many other countries. Our reshaped and improved asset base generates more cash than before. We've invested in high margin projects and divested low margin assets. Value over volume. In upstream, we've shifted our capital employed from low margin barrels in mature markets in the Middle East, Europe, and North Africa, and have invested in high margin barrels in Brazil and the Gulf of Mexico. We can see the results of these portfolio decisions in our numbers. Our unit cash flow for upstream and integrated gas has increased significantly in three years. We now outperform most of our peers by some distance. Besides the higher value we get from our barrels, we've achieved more balance with our portfolio.
If you look at the cash generation from our business, you can see how our cash flow from operations has become more diversified. This makes us more resilient and competitive through the commodity cycle. As we've improved our portfolio with our divestment decisions, we've also applied the same focus and discipline to our investment decisions. Investors often ask me, how do we ensure robust capital stewardship in Shell? This is an area where we adopted best practices from BG. To improve capital allocation, we have taken several steps to increase the quality of our decision making. In our capital investment committee, we consider all organic and inorganic opportunities above a threshold. I'm a member of this committee together with Ben, the business directors, and subject matter experts. This committee is supported by an independent team of experts who provide unbiased assurance.
We bring diverse expertise to the table to provide robust review and challenge to each opportunity. Opportunities are assessed against a breadth of strategic, financial, and non-financial criteria, which drives consistency and discipline in our capital allocation. This has proved to be an excellent investment of our time and has raised the bar for capital investment proposals. The shift in Shell is also reflected in our people strategy. In the last three years, as we sought to reduce our cost base and achieve the BG synergies, we also sought to reduce internal complexity. This has had a number of effects. We reduced the number of people required to do the same work, and we gave people larger roles and greater accountability. At the same time, we built more capability with our business operation centers in Manila, Kuala Lumpur, Chennai, Bangalore, and Krakow.
In these centers, we concentrate our HR, finance, and IT activities, and also business processes, reducing cost and improving outcomes. Overall, we've reduced our employment costs by some 22% since 2015. Costs and processes alone are not the only changes in our people strategy. We now have a more diverse organization in gender, nationality, as well as thought and experience, which we believe will support our success into the future. Further, we saw improvements in our scores on staff engagement levels and staff support for the direction of our company during the same period. With all the changes in the last three years, we have a more engaged organization, which is essential for our long-term success. As we transformed Shell, we transformed our approach to cost management.
We've rolled out a number of global programs to simplify, standardize, eliminate, and automate activities, which represented more than simple cost cutting. Our approach is based on a critical assessment of how value is created and risks are managed, with cost as a resource to be deployed. With these initiatives, we've significantly reduced costs across Shell. Combined, our support functions such as HR, IT, and finance, together with our Projects & Technology organization, lowered their costs by almost $5.5 billion in three years. Harry will talk further about how we've transformed the Projects & Technology organization, and we have the ambition to do more. With this transformation in our culture and portfolio, we've created a strong foundation to deliver a world-class investment case to our shareholders well into the next decade and beyond. In fact, our priorities remain the same.
We will keep our focus on growing free cash flow and returns and maintaining a robust balance sheet to be resilient through the commodity cycle so we can generate the cash capacity to increase distributions to our shareholders. In order to sustain and grow value, we will continue rebalancing our portfolio into the next decade. In 2025, our core Upstream themes should continue generating substantial cash flow, with increased contributions from Shales providing a more balanced Upstream portfolio. At the same time, we see around half of our capital going to the leading transition themes, mostly to Integrated Gas, which is expected to increase cash flow beyond 2025. Gradually, we are reshaping the portfolio to ensure we are competitive for the energy transition. While on the portfolio side, we need to continually rebalance and high grade, there are other areas that remain unchanged.
This is the case with our commitment to capital discipline and our focus on free cash flow and returns. For 2025, we are upgrading our outlook to deliver some $35 billion of organic free cash flow. There are also no major changes to how we look at our priorities for cash post 2020. We will continue to reduce net debt, pay dividends, invest in the business to sustain cash flow, and keep our gearing between 15%-25%, while any cash surplus will be invested to grow our business and/or further distribute to shareholders. Inorganic opportunities, acquisitions, and divestments will be evaluated separately when they arise. In our sector, it is essential to have a resilient balance sheet to manage volatility. We target a range of 15%-25% gearing through the cycle, which means that when industry conditions are favorable, we plan to reduce gearing to build resilience.
We can use this flexibility during the trough of the business cycle to retain a resilient balance sheet or make counter-cyclical investments if the right opportunities arise. This way, we remain competitive through the cycle and ensure strong, sustainable shareholder distributions. A resilient balance sheet, combined with the strategy, portfolio, and operational capability we have established, will enable significant levels of cash generation through the next decade. This translates into the potential for more than $125 billion of cumulative shareholder distributions from 2021 until the end of 2025, which are expected to come in the form of further share buybacks, as well as growth in dividend per share. Our progressive dividend policy is very important to us, as is our disciplined financial framework. This means that we must ensure any growth in dividend per share is resilient through the business cycle.
We expect to increase dividends per share once the completion of the current $25 billion share buyback program is in sight. Dividend per share growth will be complemented with share buybacks to reduce the share count, and over time, the amount of the total dividends are expected to reduce. Let me recap before I give the floor to Harry. Our reshaped portfolio can generate more value than before. This solid base gives us confidence in delivering on our promises for 2020, which are now substantially de-risked. We see an even more promising outlook for 2025, with substantial potential to grow shareholder distributions into the next decade. This is how we're delivering a world-class investment case today and in the future. With that, let me hand over to Harry.
Thank you, Jessica, good morning, ladies and gentlemen. Today, I'd like to talk to you about two things. Firstly, our net carbon footprint ambition, then some detail around the exceptional progress that we've been making in Projects & Technology. Let me start by recognizing that climate change is a challenge that involves each and every one of us, from consumers to communities, from industries to governments. You would have heard, too, about the significant steps that Shell is taking. In December 2017, we announced an ambition to reduce the net carbon footprint of the energy products we sell by about half by 2050 and by about 20% by 2035. In practice, our net carbon footprint ambition starts with ensuring that our own operations use energy as efficiently as possible, of course.
As the previous slide showed, most of the emissions associated with our energy products come from our customers' use of these products. Achieving our net carbon footprint ambition means that we have to change the makeup of our product portfolio. On this chart, you see the tools we have to achieve our ambition, we're already using all of these. The first bar represents our 2016 baseline, the last full year before we announced our ambition. To the right of it, we see several opportunities to shape our energy mix. Some are likely to make larger contributions than others, of course. Probably the greatest contribution Shell can make right now is to continue to increase the role of natural gas to fuel transport, to heat and light homes, and to power industries. Natural gas, as we know, is less carbon intensive than coal and oil.
We are also investing in low carbon businesses and technologies. These include biofuels, hydrogen, wind and solar power, carbon capture and storage technology, and nature-based solutions such as reforestation. These investments will mean we can offer new solutions to our customers. For example, our nature-based solutions program in the Netherlands offers Shell customers nature-based carbon credits to compensate for the carbon associated with the use of the fuels they purchase from us. This is done at no extra cost for consumers who choose Shell V-Power, while those who fill up with regular fuels can participate for an additional $0.01 per liter of fuel. We plan to make similar opportunities available to customers in other countries, starting with the U.K. later this year. We can only change the mix of our energy products in line with the willingness of our customers to buy them.
We think we can meet our net carbon footprint ambition for 2050. We all have a part to play, because Shell can only get there if society as a whole gets there. Let me now move on to Shell's Projects & Technology organization and how it sets our businesses apart from the competition in helping Shell to achieve its strategic priorities. Our P&T organization partners with all businesses to deliver our major capital projects, to provide asset support, to manage our supply chains, and to develop and deploy technologies. We're responsible for the safe and efficient delivery of nearly two-thirds of Shell's total capital spend. P&T is a global organization. Importantly, we execute and deliver locally, hand-in-hand with our business partners. This is a key factor that sets us apart from other companies.
It ensures we deliver consistent, competitive results through our capital efficiency improvement program across the Upstream, the Downstream, and Integrated Gas. As a proof point, we've successfully reduced the unit development costs for all major Upstream and Integrated Gas projects by more than 50% since the end of 2014. Although this is a great achievement, we can and we will do more on cost. We'll do so by systematically applying our capital efficiency improvement program. By doing so, we've ensured that over three-quarters of our major projects that were sanctioned in 2018 were either best in class or top quarter. Such savings means that Shell is even more resilient to oil price. Our average forward-looking breakeven price at final investment decision has gone from around $40 a barrel in 2014 to around $30 per barrel in 2018.
We're not done yet, as will be reflected by Andy, by Wael, Maarten, and John as they discuss their various businesses. Now, let's look at the other key strengths that P&T will bring. Let me start by Shell supply chains. Our supply chain sets us apart. Again, it is organized and governed globally, but it is delivered locally. We can reach deals of a scale that are very competitive to us, but also commercially sustainable for our suppliers. Over the past few years, we have accelerated our journey through greater digitalization and high-graded workforce. This has resulted in an even more competitive supply chain. In 2018, 50% of our spend was benchmarked as most competitive. However, we still see significant upside. We aim, therefore, to have 80% as most competitive by the end of 2020.
Digital technology and better and simpler processes and improved contract management are all helping. For example, we integrated 14 contracts and procurement systems into one end-to-end purchasing tool. The tool went live in late 2017. We now have a standardized contract system driving deeper discipline and enabling more focus on strategy and on value-added activities. There's still a lot more to do in our supply chain performance. Our focus on this area means we expect more efficient capital spending and operating cost discipline. It allows us to do even more with significantly less. Now let me move to innovation and digitalization in Shell. We have a proud history of commercializing technology to create value for Shell.
For example, by innovating in both catalyst and process technology over the last several decades, Shell has established a 50% global market share in ethylene oxide catalysis, with which we make derivatives that are used for the manufacturing of many materials, including plastics. The catalyst business makes products both for our own use in our assets, but also for third parties, where it represents a $1 billion revenue business for Shell. One of the ways we create value is by having Shell's world-class scientists collaborate with academic partners to make the most of the latest technology. In 2018, our collaborative efforts meant that we embarked on some 260 research and development projects worldwide. I'd like to give you an example of successful partnering. We are working with a company called Akselos. It's a company that performs highly complex engineering calculations almost in real time.
Last year, Shell and Akselos invested in a project to deploy their predictive digital twin technology for Shell's upstream asset integrity management systems. Today, this technology is used on several of our fixed and floating offshore assets. It provides information that allows us to optimize our assets, for example, by performing real-time structural integrity checks. P&T's unique abilities produce unique solutions that enable us to create value. For example, we've developed an artificial intelligence drilling system called Shell Geodesic, which determines the best well placement autonomously, minimizing human intervention. The algorithm was fine-tuned using data from over 1,300 wells and allows us to drill more precisely, more efficiently, and more quickly. This means, in turn, that we have higher production at lower costs.
You'll see many more of these examples in our Shell's business, which Wael will speak to later. This sort of innovation can also mean further improvement where we are already best in class. We will look to extend our lead over the competition. For deeper insight into our business, I'm happy to invite you to our P&T Open House, which is planned for the 26th of November this year, where we will have the opportunity to go in depth into our capabilities, look more at technology, innovation and the programs that are helping Shell to deliver better products and better assets. Thank you very much. With that, I'd like to hand you over to Maarten, who will take you through integrated gas.
Thank you, Harry, and good morning ladies and gentlemen. Great to see you all here. Talk about integrated gas. Indeed, Shell is a worldwide leader in LNG and gas to liquids, our integrated gas business provides material and resilient free cash flows to Shell. Today, I will outline our strategy to expand and diversify this strong position in the market that we expect to grow well into the 2030s and probably beyond. For Shell, gas is not only a fuel for today, it is also a fuel for the future. We intend to grow this business and deliver substantial cash and returns. With natural gas helping Shell thrive through the energy transition on its way to a cleaner energy system. To make sure this business achieves its full potential, our strategy for integrated gas rests on three pillars. First of all, we are a market leader in LNG.
We are building here on the position of strength, which is based on an unmatched energy supply portfolio, a top-notch trading, marketing, and optimization organization, and a 22% share in the worldwide LNG sales. Since we expect that LNG market to grow by 4% a year, we plan to grow along with it, keeping that leading position. We plan to lead in creating new pockets of demand by accessing currently unserved geographies, creating new global markets such as fueling ships and trucks, and by mining the adjacencies to our growing power business. The second pillar of our strategy is to run the engine that put us in the lead in the first place even better and deliver superior cash flows enabled by operational excellence.
We have been on a good improvement path already and are determined to increase our LNG liquefaction capacity utilization further to above 90%, as well as reach top quartile unit costs in our operations. Sustaining that high level of cash flow that we have today requires us to invest about $4 billion-$5 billion per year in our existing assets and to build new assets to displace declining assets. This includes the capital that we spend on backfill opportunities that keep our plants full and tend to offer attractive marginal economics. Finally, we will grow this engine. Until 2025 from 2021, we will invest an additional $2 billion-$3 billion per year to create more free cash flow growth from advantage positions that will come on stream in the second half of the next decade.
You can expect us to pursue the most competitive projects emerging from our healthy funnel of LNG projects, we plan to complement these with inorganic opportunities and options to grow our gas to liquids footprint. This strategy allows us to target organic free cash flow of $9 billion-$10 billion and a ROACE around 11% by 2025, with further free cash flow growth coming in the second half of the decade. With that, let me take a step back and put our strategy for integrated gas in a larger context. The energy transition and Shell's net carbon footprint ambition call for a greater role of gas. When used instead of coal, it helps to meet increasing energy demand while lowering greenhouse gas emissions and air pollution.
To give you an example, coal to gas switching has led to a 78% improvement in Beijing's winter air quality over the past five years. To increase our resilience, we also need to improve the carbon footprint of our own operations further. Our LNG Canada project, which we sanctioned last year, is designed to achieve the lowest carbon intensity of any LNG project currently in operation around the world. Finally, for our own operated ventures, we have set a target to maintain methane emissions below 0.2% by 2025. We are proud to lead a global industry coalition focused on continually reducing emissions of methane throughout the gas supply chain from well to customer. As the world transitions to a more sustainable energy system, the gas market, and particularly the LNG market, will continue to grow.
Our projections to 2035 estimate that more than 70% of the energy demand growth will be met by gas and renewables combined, with gas supplying some 40% of that additional energy demand growth. China, India, and other major energy importers are putting policies in place that drive a preference for gas over coal. LNG therefore remains the fastest growing source of natural gas supply. It's worth noting that a large share of the growth of gas demand is coming from the non-power sectors, such as industry and industrial heating and residential heating, where demand is sticky.
Natural gas of course also supports the integration of variable renewable electricity generation, as it can quickly compensate for dips in solar or wind generation and rapidly respond to sudden increases in demand. In the short term, the increase in demand for LNG is expected to be well met by some 35 million tons of additional liquefaction capacity coming on stream this year. We still expect a supply shortage to develop in the early to mid-2020s as demand continues to grow. Let me illustrate how we are developing that new demand for LNG. Customer centricity is fundamental to our business, and the LNG customer landscape is growing and diversifying. The number of LNG importing countries has grown to 42, and we currently supply 76 customers in 27 of these countries. We are actively developing new markets and penetrating deeper in gas value chains.
Taking full ownership of the Hazira LNG Import Terminal India is a good example. At Hazira, we supply the LNG for India from our global portfolio. We perform the regasification, but we also sell the gas to local customers behind the terminal through our Shell Energy India marketing and trading business, opening up new markets for LNG. We also increasingly see opportunities to leverage the adjacencies to our power business, where the customer base and the product offerings are starting to overlap. One example is provided by the Bahamas, where we are the project developer for a 200 to 250 megawatt integrated LNG to power project that also offers upside through LNG to marine facilities. The third way we are helping to develop a growing market for LNG is as a fuel for transport.
In Europe, for example, the number of LNG fuel trucks is expected to grow from currently around 5,500 to about 280,000 by 2030, the same number that's on the road in China today. In the same time frame, we anticipate the global demand for LNG and marine to increase to almost 20 million tons per year. We are well-positioned to supply this demand, especially with our filling stations along European and Chinese roads and with our worldwide LNG bunkering network for ships. Let's now look how our diverse customer base and our diverse supply base are matched and how we generate value from optimizing the match between the two. I think the best way to illustrate this value is by showing you the routes that our LNG cargos traveled in 2018. That's what you see now on the screens behind me.
In 2018, we sold some 71 million tons of LNG from a supply portfolio that is diverse like no other. This makes us a worldwide leader in LNG, and we are ahead of other IOCs by a large margin. The diversity of our supply portfolio is unmatched. We sourced 58 million tons of term volumes from more than 20 sources, with the single biggest source accounting for only 8% of the total volume sold. In addition, we sourced and delivered some 13 million tons of spot volumes, equivalent to 200 cargos. Apart from this mixed supply portfolio, our sales portfolio is equally diverse, with varying contract duration, flexibility, and indexation. All this diversity on both sides of the equation means that we have many, many options to match supply and demand. With options come the opportunity to create additional value.
Our experience in trading and the commercial control that we have over a fleet of more than 60 LNG carriers on any given day allows us to generate value from that optionality, and our earnings and cash flow last year and in the first quarter of this year demonstrate that value. We are seeking to grow that value in the future by looking for more competitive sources of supply and by growing our own production and the volume we buy from others. Now let me talk about our assets and the improvements that we have made in our operations. Operational performance and cost control are key value levers in our business, and we have stepped up our game. In 2018, we achieved an LNG liquefaction capacity utilization of 87%, up from 81% in the year before.
Our relentless focus on operational excellence is paying off, and we are convinced that we can improve further. With continued attention to the reliability of our assets and by realizing major backfill opportunities, we are confident that we can increase the utilization to around 90% or more. In operating costs, we see a similar picture. Our drive for competitiveness is paying off, and we see average unit operating cost of our integrated and our midstream assets in or close to the top quartile benchmark in the industry. Digitalizing our assets and our operations is a major enabler for our ambitions. For example, our shipping arm uses advantaged algorithms to analyze ships' operational profiles and instructs the captain on the optimum draft, trim, and speed to use given the circumstances.
This reduces the ship's resistance, requiring less main engine power, and saves 3%-8% of the fuel compared to before we introduced this method. Not only is it good for the environment, it is also good for business, since fuel usage accounts for a large share of the operational cost of a trading outfit. As you can see, we are increasingly achieving the benefits of digitalization from other examples on this slide and are now aiming for fast replication of those examples at the global scale of our portfolio. Now with that, I will now set out how a leading position in a growing energy market translates into competitive financial performance. Over the past three years, we have consistently been growing both our LNG liquefaction volumes and our sales volumes.
This speaks to our ability to secure long-term offtake agreements from third parties and to improve the utilization of our own plants. Further supported by an average Brent price of $71 last year, we have delivered a very significant earnings improvement. An organic free cash flow of $10.8 billion in 2018, and a ROACE of almost 11%. With Prelude now producing LNG for more than a week, the first shipment from Prelude being imminent, we are further de-risking the delivery of our $8 billion-$10 billion organic free cash flow target in 2020. Looking further ahead, we see continued growth in our cash flow from operation towards 2025. Post 2020, we will also step up our cash CapEx to $6 billion-$7 billion a year to ensure that we can benefit from the opportunities the growing gas and LNG markets offer to us.
Against that $2 billion CapEx increase, we still expect to generate $9 billion-$10 billion of organic free cash flow by 2025, to increase that free cash flow further in the second half of the decade as we bring those new projects on stream. How will we grow our business and create these new advantage positions? I explained before that we look for the most competitive source of supply. This can mean buying LNG from third parties, but it can also mean expanding our own asset base. As you have observed last year when we announced our final investment decision on LNG Canada, we take investment decisions based on the cost competitiveness and the resilience of our projects. One way to measure this is the cost it takes to produce and deliver one MMBtu of LNG to the customers that we have in Asia.
As you can see on this slide, our LNG project funnel compares well with the rest of the industry. All of our potential projects have a delivered unit cost to Asia below $8 per MMBtu, many, as you can see, below $7. They beat the typical cost of U.S. Gulf Coast projects that are being developed at the moment. In addition to these new greenfield and brownfield projects, we have lined up attractive backfill opportunities to keep our existing assets full. Across those backfill projects in development, we average a unit technical cost of below $5 per MMBtu. Indeed, we see a lot of opportunity in LNG. When it comes to growing our business, gas to liquids, or GTL, also has an important role to play. Let me explain why I'm so excited about this technology.
We have 45 years of experience with GTL and own more than 3,000 patents on the technology. In Malaysia, we operate the first-ever GTL plant. With Pearl GTL in Qatar, we operate the largest GTL plant in the world. We produce high-value, differentiated premium projects such as GTL gas oil, kerosene, normal paraffin, and base oils. Shell Helix Ultra with PurePlus Technology, for example, is the first synthetic motor oil designed from natural gas. Through strong integration with our downstream marketing and trading business, we are able to develop new markets and successfully sell these products for new and unique applications. We have a clear competitive advantage and see significant free cash flow generation from our gas to liquids assets. A key value lever is the proportion of specialty products with higher margins that we are able to produce and place in the market.
We've been increasing the share steadily, reaching 16% of our production in 2018, allowing us to capture an average premium over Brent of $14 per barrel. Our team in Qatar continues to optimize the product slate, and we have an ambition to get the average premium over Brent to $21. As we look ahead in the market, we see a significant increase in global demand for GTL base oils that is not matched by our current supply capacities. This creates an exciting opportunity for us, and we are looking at ways to increase our GTL footprint. I hope you can see why I'm excited about the opportunities that we have in GTL and LNG, and I'm very confident that we can extend the leading position that we have today. With that, let me hand over to Andy to talk about Upstream.
Thank you, Maarten, and good morning, ladies and gentlemen. It's a real pleasure to be here today, and this will be the last time that I'll be speaking to you as the Upstream Director in this forum. As you probably know, I'll be handing over to Wael Sawan on the 1st of July. I've worked with Wael for over 20 years, and under his leadership, we've seen the transformation of our Deepwater business, and I look forward to watching him lead Upstream in the coming years. Let me start by touching on how we've improved Upstream over the last few years and ask Wael to share what more you can expect from this business in the future. Our Upstream business consists of three strategic themes, and we've made them stronger, more competitive, and more resilient.
We have a leading global Deepwater business where we've transformed the capital efficiency of our projects, have grown production from existing hubs, brought new hubs online, and have an exciting funnel of competitive, high-margin projects still to develop. In Shales, we've improved our competitiveness and focused our portfolio and now have a very high-quality asset base, such as in the sweet spot in the Permian Delaware. In conventional oil and gas, we've high-graded our portfolio, improved our operational performance, and reduced our development costs, unlocking further attractive opportunities to develop this deep resource base. You can see the results of our transformation in our financials. When we spoke in 2016, Upstream was cash flow negative. Today, we're generating some $1 billion of organic free cash flow every single month. Only a third of that improvement is a result of the high oil price.
We've worked hard to improve the performance of our assets. For example, since 2015, we've reduced unit operating costs by more than 20%, and aim to reach below $9 a barrel UOC by 2025. With that performance, we're well within reach of our 2020 target of delivering $12 billion-$15 billion of organic free cash flow annually. The strength of our development funnel and asset performance show that despite significant divestments, our Upstream business is delivering strong cash flows, and that delivery will continue. Today, we're updating our outlook for our organic free cash flow delivery to the range of $14 billion-$17 billion by 2025 at a $60 Brent real terms 2016 price. We expect strong double-digit returns in the range of 12%-14% from Upstream. We have visibility of how we will maintain momentum from our Upstream business well into the next decades.
When looking at upstream and integrated gas, we have a commercial resource base with significant developed options at a resource life exceeding 20 years. When you compare this to peers, we're well in range and benefit from having the largest share of high-margin liquefied natural gas and Deepwater resources. High-margin barrels is what we're focusing on, value over volume. The strength of these high-margin barrels is clearly seen with Shell delivering industry-leading cash flow from operations per barrel. We've shown yearly unit development cost improvements, which allows for more of our resource base to be developed at less capital spend, giving us confidence in the long-term strength of our business with the capital allocated. Most of the cost reduction is structural, with only 20% of the improvement by supply chain unit costs. We have an ambition to further reduce unit development costs by some 20%-30%.
With an intense operational focus on well, reservoir, facility management, infill drilling, LNG backfill, and production availability, we see a decline rate of just some 3% across our portfolio. This means we only need around 100,000 barrels a day of production from new fields annually to sustain the business. Our development opportunities easily covers this and more, helping us grow cash flow through the next decades. With our discovered resources, we can sustain production through most of the next decades. In addition, we have a very exciting exploration portfolio that will supplement this. We have been investing some $2 billion per year recently. We have a value-focused exploration strategy. We've been successful in discovering high-value, near-field, and heartland discoveries. We track our value creation as a multiple of our exploration spend.
We just need to look at the U.S. Gulf of Mexico, where we have a string of discoveries like Appomattox, Vito, Kaikias, which we're bringing online. We have more discoveries in the funnel to develop in the coming years. Beyond this, in the last years, we've seen a substantial build of our exciting prolific acreage in Brazil, Mexico, U.S. Gulf of Mexico, Mauritania. In our conventional portfolio, in places like Malaysia, Egypt, Brunei, and Oman, we replenish our heartlands year on year. Also in emerging basins like onshore Albania, we've seen some exciting recent well results in an asset with a really large resource base. Overall, we expect to reduce unit finding costs down to $2-$3 per barrel without compromising the value per barrel of discoveries we make.
Whilst maintaining our investment levels, we're seeing the yield on that spend improve and have ambition to add over 750 million barrels of resources each year. Now, let me hand over to Wael, who will take you through the outlook for Upstream in more detail. Thank you.
Thank you, Andy. Good morning, everyone. It's a real pleasure to be here today. Let me start by saying I really feel fortunate that Andy has built such a strong foundation for me to step into. He's shown a relentless commitment to safety, a sharp focus on portfolio optimization and capital efficiency, and a dedication to operational excellence. I plan to build on that success during the years to come. Let me start the presentation talking about deepwater. We are the leading IOC in each of the major deepwater theaters in which we operate, the U.S. Gulf of Mexico, Brazil, Nigeria, Malaysia, and most recently, Mexico. This gives us a strong position to drive growth by leveraging existing infrastructure, our locally established capabilities, and our relationships in these countries. I'm especially pleased with what we have done in the past few years to improve the performance of this business.
You can see the large swing in organic free cash flow from 2016 to 2018, which we expect to keep moving further in this direction, reaching some $7 billion to $8 billion in organic free cash flow by 2025, almost entirely on the back of our already discovered resource base. We expect to invest some $4 billion to $5 billion in cash CapEx each year, which will sustain production of at least 900,000 barrels of oil equivalent per day. We will continue to push this business, as we are not yet at the end of our improvement journey. By fully leveraging our leading global projects and our wells delivery, replicating our growing digital capabilities across our assets, and continuing to deepen our partnership with our core supply chain, I am absolutely convinced that we can deliver differentiated performance and the next exciting tranche of growth.
Our transformation began with our people and our focus. We moved from making the technically impossible possible to now making the possible profitable. We are using our deep technical capabilities to drive capital efficiency with a strong focus on value and delivery. We have challenged the organization to deliver industry-leading unit development costs and cycle times from discovery to first oil. They have responded. For example, with the Whale project. Through standardization and replication, we are driving towards top quartile development costs and cycle times. We're targeting less than six years from discovery to first oil, with plans to replicate nearly 80% of the Vito host design. By changing the way we work internally and externally with the supply chain to drive capital efficiency and value, we have reduced the break-even prices by almost 50% since 2014.
On average, our projects break even around $30 a barrel or less on a forward-looking basis. Our operating costs have also been decreasing. For example, we made structural changes to our headcount and the logistics fleet and have an ambition to achieve unit operating costs of $5 to $6 per barrel over the coming years. It's worth us looking at two of our major deepwater locations, starting with the U.S. Gulf of Mexico. Our strategy is to fill our hubs by focusing on operational excellence and investing in water flood and tiebacks around our hubs. That is working today. For example, we've seen nearly an 80% increase in production from the Mars Corridor. These are highly attractive investment options that mitigate declines and importantly and critically deliver profitable barrels. Our development funnel is strong. Two weeks ago, Appomattox started production.
It was delivered some 40% under budget and will ramp up to 175,000 barrels a day. With discoveries at Dover, Fort Sumter, and Rydberg, we believe we can keep Appomattox full for some time to come. Last year, we sanctioned Vito and our phase 2 of development at Perdido. Both are progressing as planned, we are also maturing PowerNap, a tieback to Olympus. We continue to expand this heartland through exploration. In April, we announced BlackTip, an exciting discovery in the Perdido Corridor, today we announce exploration success at King Embayment, a near field success near Mars. Lastly, we participate in bid rounds where we add new licenses. With the licenses from the last bid round, we will have nearly 300 licenses and will be the largest leaseholder in the Gulf of Mexico. Let me shift now to Brazil.
Brazil has become an exciting heartland for us in Shell, with production approaching 400,000 barrels of oil equivalent a day. We have 15 floating production storage and offloading vessels online. The 16th, known as P-68, is coming online later this year. Well performance from the pre-salt is exceeding expectations, we are seeing lower declines than expected. Beyond these, we have a conveyor belt of FPSOs that will come on stream, including our Mero development program. In total, we are progressing a further 7 FPSOs in which we have interest. In addition, appraisal activity is underway at Gato do Mato, we are planning exploration wells at Alto Cabo Frio West and Saturno. These are exciting blocks that can really help extend our funnel further. Let's now move to Shales. We've been on a significant performance journey, optimizing our portfolio and directing our capital to developing high-margin assets.
We now have a proven track record of delivery, by 2020, we expect over half of our production to come from liquid-rich assets in the Permian, Fox Creek, and Argentina. Within these areas, we have some of the best positions in the core of these basins. As a result, our Shales business is on track to become organic free cash flow positive this year already. We are positioned to deliver strong returns and long-term cash flow. We expect to reach production of 600,000 barrels of oil equivalent a day and to generate $2 billion-$3 billion of organic free cash flow per year by 2025. Our business is supported by a competitive cost structure, resilient break evens in every basin, and strong operational performance across all of our positions. Our strong Permian performance underpins the delivery of our strategic intent for Shales.
We are a leading operator in the basin, in the second half of last year became organic free cash flow positive. We've achieved top quartile drilling performance in the Delaware Basin and have reduced total well costs by some 40% since 2015. At the same time, through completion optimization, we've increased our oil recovery by more than 60%. We see technology, particularly our iShale program, as an integral part of our business that drives delivery today and into the future. A quick example, which Harry had introduced earlier, is Shell Geodesic. By the end of 2019, nearly all the wells in Shales will be geosteered using this AI technology, allowing us to stay in zone nearly 100% of the time, which of course, allows for greater overall recovery, adding some 5% per well to our EURs.
Further, late last year, we became the first and only company to receive approval from the U.S. Federal Aviation Administration to fly drones beyond the visual line of sight, allowing us to reduce costs and enable safer production. Our improvement in drilling costs, use of modular replicated facilities designs, optimized EURs, and deployment of technology means shorter paybacks, better financial returns, and margins per barrel of production. With our high-graded portfolio, we have the running room and the capabilities to deliver our aspirations. We will continue to deliver organic growth, and potentially as well through inorganic options. We are not in a rush to grow through acquisition given the quality and the depth of the portfolio. If we choose to grow inorganically, we will be selective and would only consider value-accretive opportunities that fit within our financial framework. Let's now take a closer look at conventional oil and gas.
We have more than 100 years of experience in this business. This deep familiarity with our Heartlands comes with unique assets, insightful data, established capabilities, and deep relationships, all of which are key differentiators for us. Since 2015, we have been high-grading and simplifying this portfolio through a series of divestments, really focusing efforts on key assets with running room. As a result, we now have a simple, more resilient portfolio on track to deliver between 12%-15% ROACEs by 2025. While we will continue to divest non-core positions to further improve our portfolio and returns, we are very confident about the longevity and the growth opportunities of this business. In recent years, we have secured agreements with governments to unlock more value from existing discovered positions, for example, in Brunei, Malaysia, Nigeria, and Egypt.
These agreements have been key to the turnaround of this theme and allow us to grow in the majority of the conventional oil and gas countries. By 2025, growth countries will represent more than 80% of the cash flow from operations. We have a deep resource base of around 11 billion barrels of oil equivalent of commercial resources, providing attractive infill drilling and debottlenecking opportunities. With a sharp focus, we can unlock more production from existing wells, allowing us to limit decline to around 4% per year. With a strong pipeline of competitive new developments, we expect to sustain production at around 1.5 million barrels per day, with cash CapEx of $4 billion-$5 billion a year, delivering organic free cash flow of $5 billion-$6 billion by 2025.
Now, maybe let me explain some of the underlying improvements and why I am excited about the future of this business. A sharp focus on competitive scoping and efficient execution has halved our average unit development cost from $14 per barrel oil equivalent in 2015 to $7 in 2018. We will aim to further decrease this to $5-$6 a barrel. Our planned new developments are very competitive, with an average forward-looking break-even price of under $30 a barrel. This is complemented by a rich portfolio of infill drilling and debottlenecking opportunities with very attractive economics and average IRRs above 50%. In summary, this Heartland portfolio offers strong cash flow generation and resilient returns for years to come. Let me end now by sharing my reflections and priorities as I get ready to take responsibility for Upstream.
First, let there be no doubt, we will continue the journey that Upstream has been on to safely deliver top quartile performance. Second, I see an enviable development funnel that we are maturing, with key projects ramping up on stream soon or under construction, adding over 650,000 barrels of oil equivalent a day at peak production levels. With key projects coming in feed and pre-feed that will add another 750,000 barrels a day. Further delivery of smaller projects that can add an additional 400,000 barrels a day. My objective will be to ensure we apply a ruthless focus on value and returns for our project portfolio and to develop this funnel in a safe and competitive manner. Third, on exploration. We will continue high-grading our funnel of options and in parallel, drilling some of the most exciting exploration wells in the industry.
In Brazil, we have some critical wells that we are preparing to drill over the next two years. In the U.S. Gulf of Mexico, we have both opportunities near infrastructure and corridors and major hub scale opportunities. In Mexico, where our acreage is nearly four times the size of our entire U.S. Gulf of Mexico position, we are moving quickly from license award to drilling our first well later this year, have identified prospects that could support one to two drilling rigs for an extended period of time. To conclude, I'm excited to inherit this business from Andy and would like to really thank him for his leadership and his vision over the past years.
I strongly believe we have the right skills and the capabilities to unlock the full potential of this Upstream business, and I'm very confident about the longevity and the sustainability of strong cash and returns that we can extract from this portfolio for decades to come. Now, let me hand over to John.
Thank you, Wael, and good morning to everyone. As I look around the room this morning, I do realize that I spoke to many of you at the Downstream Open House event last year, where I shared a handful of important points. Firstly, that Downstream plays a key role in Shell's progress towards a world-class investment case. Secondly, it is integral to help Shell transition to a low-carbon future. And finally, that as the world changes, so the Downstream must change as well. Today, I want to reinforce these messages, give you further details, and further insights. So how are we going to adapt our oil products business and deliver growth? In short, we plan to continue expanding the marketing business to further increase its predictable and high returns. This is expected to involve expanding in the key growth markets of China, India, Indonesia, Mexico, and Russia.
It will mean a more balanced geographical spread. With this growth, we aim to increase our marketing earnings by $2.5 billion per year by the end of 2025, and that's relative to 2017. I will talk more about this later on. First, I want to sketch out for you how Downstream plans to adapt our products and our services to respond to the changes that are taking place in society today. As we highlighted previously, with a growing population, with rising living standards, we will, as a society, consume more energy. At the same time, the world must find ways to reduce greenhouse gas emissions and improve air quality as well. As the energy system changes in response to these fundamental challenges, advances in technology and mobility will give customers far more choice.
For example, in transport and convenience retail, we are working on many different solutions because we believe the customers will not only need these, but also demand them. This is demonstrated by our offerings of fast charging for electric vehicles, liquefied natural gas, LNG, for shipping and heavy freight, and of course, hydrogen as fuel for vehicles as well. Also by leveraging mobility to increase our non-fuels retailing offerings. As we bring more solutions to our customers, we are also using the opportunity that comes with the rise of digital innovation to change the way the customers interact with us. This is a great opportunity, not only for Downstream, but for the whole of Shell. We are planning to offer multiple solutions and maximize the opportunity of digitalization. You may say, well, others will do the same as well.
Shell's Downstream has three strengths that set us apart that will ensure that we win. The first is our brand. This has a higher value than our competitors' brands, as you can see. The second strength is our scale. Our retail business is the largest of its kind in the world, with more than 44,000 retail sites in close to 80 countries. Our global commercial business includes lubricants, which has been recognized as the global market leader for 12 consecutive years. Finally, our capabilities, from retail to lubricants to our trading and supply business, we aim to ensure the best value for Shell. As the world changes and the needs of our customers change, so will our retail and lubricants businesses. We will shape the future of both businesses to meet the needs of our customers.
Indeed, the importance of this focus on the customer is clear to see, with more than half of the margin coming from Shell's distinct products and services. For example, Shell V-Power. It is through our customer focus that we aim to achieve our growth ambition. In 2025, we aim to serve more than 40 million customers every single day. As we offer yet more premium services and products, we expect them to contribute significantly to our margin. As you will see, these changes are already well underway. Last year, we made a commitment to achieve more than 20% return on average capital employed by the end of 2025 across our marketing businesses. I can tell you that this still stands.
Whilst our current business has competitive returns compared with retailers even like Sainsbury's or Walmart, we plan to become even more competitive in 2025 as a result of our focus on customer and our strong returns. As you can see, we're making clear progress. There are many examples on this chart, but let me just draw a few to your attention. For example, since 2017, we have already added more than 450 new retail sites across the key growth markets that I mentioned earlier. We've increased our lubricants volumes by more than 8% also in those growth markets. It is in this way that we are building the foundations of our future growth strategy. We're using our significant customer insight and our versatility to make sure that we offer customers not just what they want, but also what they need.
To put it simply, we are moving with the customer. We will continue to seize opportunities as they arise, like the digitalization of our loyalty schemes, or rapid rollout of electric vehicle chargers across 23 markets. As you can see, we're providing multiple solutions to create the best possible products for all of our valued customers. Now, earlier on, I talked about Shell Downstream's brand, scale, and capabilities, the factors setting Shell apart from its competitors. It is these three elements that truly come together in trading and supply. We believe making Shell's Downstream business the most highly integrated in the world. Trading and supply integrates and optimizes everything that Shell does. This is the key to making Downstream an efficient and profitable business. It sources the crude, oil products, biofuels, gas, LNG, electricity, and carbon credits that the businesses need and matches them against customer demand.
Those customers could be car owners in Chennai, an airline in Bangkok, the builders of a bridge in China, or even a Shell Energy customer here in London. We expect to see further value opportunity as we implement the new marine fuel specification changes as well, which are aligned with the IMO 2020 targets. Optimizing what we do, whether it's through trading or across our portfolio, means that we stay competitive. Our focus on high-grading our portfolio has improved our competitiveness further, but there is still more for us to do. Indeed, as this slide shows, we plan to continue to reshape our refining portfolio over the next decade with both divestments and investments. First, we intend to ensure our global presence matches that of our customers, our trading operations, and chemical plants.
We ensure that we use our commercial advantage at every stage of the Downstream business. Secondly, we intend to ensure the remaining refining portfolio delivers resilient returns through the energy transition. As you can see here, when benchmarked, our refining portfolio was in the third quartile for its non-energy cash costs. This is not good enough to generate the returns we aspire to. We have worked to identify material and significant savings via our cost improvement program that will put us on a strong path to that second quartile. The second quartile, we feel, offers the most efficient and sustainable running of our operations whilst also creating significant integrated value. Let me show you what this means in financial terms for oil products.
The competitive strengths I've highlighted earlier are allowing our oil products business to deliver on the commitments I outlined at last year's Downstream Open House event, which many of you will recall. Oil products has delivered sustainable and resilient cash flow from operations, excluding working capital movements, over the last three years, representing a return on capital employed at the end of 2018 of 11%, with our competitive returns contributing to our world-class investment case. Our current growth in marketing is on track to deliver our aims in 2025, which actually shifts our capital employed more towards this part of the business. Together with our integrated trading and refining portfolio, we're on course to meet our return on capital employed target of more than 15%, our organic free cash flow target of $8 billion-$9 billion by the end of 2025.
Let me now briefly recap on oil products. Oil products is a key component of Shell's world-class investment case. We intend to seize the opportunities presented by the global trends in energy, mobility, and digitalization to continue to meet the needs of our customers. We plan to do this thanks to our unique strengths of brand, scale, and capabilities. It's also important to remember that sitting alongside our marketing and refining and trading businesses is our chemicals business, which we expect to help Downstream deliver transformational growth in a lower carbon future. Having talked to you about the unique strengths of our oil products business, how it is integral to Shell's strategic ambitions, and how we are adapting and growing in a time of change, let me now turn and focus on our chemicals business. Petrochemicals are vital to our evolving modern society.
In our offices, cars, home, whilst we're at work, or whilst we relax, we continue to increase the use of products that began life as petrochemicals, and we may not realize that. Economic growth drives demand in petrochemicals, as you can see specifically on this slide. The desire of consumers and societies for lower carbon solutions will also increase this demand as well. Many finished products made from petrochemicals use fewer resources and have a lower environmental impact than the glass, paper, or metal products that we've been used to using and that chemicals replace. Efficient insulation, synthetic textiles, low-temperature detergents, for instance, all save energy and reduce CO2 emissions for society. We expect the chemicals business to help Shell to thrive through the energy transition, and the fundamentals and the benefits of this business continue to be strong.
As societies increase their recycling rates and use fewer single-use plastics, I'm often asked if this will have an impact on the petrochemicals industry, and my answer is this. While these trends are expected to reduce petrochemicals demand in specific areas, so for example, packaging is just one outlet for plastics, and actually, single-use packaging is one subset of that. In fact, demand for the core product, the plastic resin, is set for a strong growth even in a future of extremely high recycling rates for those single-use packages. Shell, of course, very much shares the concern about the impact of discarded plastics on the environment. Plastic waste is the issue. Plastic belongs in our home, in our hospitals, and in our schools, not in the oceans, in the rivers, and in our landscape.
This is a problem that requires collaboration across the whole of society. That is why Shell is proud to be a founding member of the Alliance to End Plastic Waste. This is a new cross-sector organization with a clear mission to help to end plastic waste in our environment. What is it that sets our chemicals business apart and makes it competitive? First, we have an advantage when it comes to feedstock. Ours comes from local sources under long-term contracts. For example, in our Pennsylvania cracker, we'll use ethane feedstock sourced from the Shell gas producers in the Marcellus and the Utica basins. Second is our proximity to key markets. Again, in our Nanhai joint venture with CNOOC in China's Guangdong province, we doubled the site's cracking and doubling the site's styrene capacity as we speak to access the large and growing Chinese demand.
Finally, use of our technology sets us apart. Recently, I was privileged to be at the startup of our fourth alpha olefins unit, or AO unit, at our Geismar facility in Louisiana. This project makes it the largest AO-producing site in the world. This new unit was built using Shell's proprietary technology. All of these projects I've talked about are highly competitive and actually are the pillars to our cash growth commitments to the end of 2025. In fact, representing about 75% of our projected cash flow increase. I'm pleased to confirm that we plan to continue to grow with a healthy series of options we can choose from for our future growth projects. The growth in our chemicals business is based on solid foundations.
Our strong underlying business has an organic free cash flow that is funding our capital growth program, enabling us to build the chemicals business of the future. As we see our projects move into operations, we expect to see cash flow growth enabling us to deliver on our commitments of $5 billion-$6 billion of cash flow from operations and $2 billion-$3 billion of organic free cash flow by 2025, representing a return on capital employed of around 15%. That is not the end of the investment in this business. We plan to continue to invest $3 billion-$4 billion per year through the next decade. This is expected to ensure continued growth focused on the areas where we see further opportunity to use our strengths and also proximity to the markets where we operate.
I have highlighted where we believe economic growth will continue well into the 2030s. That petrochemicals growth exceeds economic growth. There is an opportunity to be part of a larger growth market in chemicals. Building on our existing differentiators and evolving these by an increased focus on our natural strength of technology, also the Shell brand, we believe we can expand our business into selected performance chemicals, which are customized products that influence the performance of the end product and require that deeper customer intimacy for which we are known. This is an exceptional opportunity to make the chemicals business even stronger. As I've said, this is an opportunity, one that we will appraise as we go and continue to grow our business into the 2020s.
I hope that you agree that there are very exciting times ahead in the whole of our Downstream business, both chemicals and oil products. With that, I would like to hand you back over to Maarten. Thank you.
Thank you, John. New Energies. It's been about three years ago since we launched our New Energies business, and we've been growing this business, making quite modest investments and testing out new business models to deliver competitive returns to support the world-class investment case that Shell is. We focus on two areas, new fuels and power. New fuels includes biofuels, which can help reduce CO2 emissions and air pollution from transport. Today, Shell is already one of the world's largest blenders and distributors of low-carbon biofuels through our Raízen joint venture. In addition, we're also developing advanced biofuels, which produce fuels from feedstocks such as waste or inedible crops, and we do this in collaboration with third parties. We look for high returns from biofuels in the order of about 15% or higher.
Hydrogen also has a role in our portfolio as a clean fuel for light and heavy transport in fuel cell electric cars, trucks, and ships, as a feedstock for industry, and over time, as a way to store electricity or move it across the globe. In hydrogen, we partner with OEMs, original equipment manufacturers, governments, and others, and we're building hydrogen filling stations in places like Germany, California, but also here in the U.K. The pace at which we proceed in this new fuels business depends on developments in technology, the regulatory framework, and of course, customer demand. We are positioning to scale up this business significantly when the time is right. New Energies will continue to lead the development and the deployment of advanced biofuels projects, but the related investment will be reported under oil products from 2020, which is the main channel to monetize biofuels.
Power will be an emerging theme. Power could be a significant business for us. It has the scale and longevity that aligns well with Shell and could one day sit alongside our oil, gas, and chemicals businesses. We're not interested in this business because of the returns that the utility industry has traditionally delivered. Instead, we believe that a modern integrated power business can deliver 8%-12% return when on stream. We see potential for profitable involvement across almost the entire integrated power system, from supplying power directly to customers and related services directly to customers, to buying, selling, and trading and optimizing power, to low-carbon power generation. Our core markets are in Northwest Europe, USA, and Australia, where customers want low-carbon initiatives, alternatives, where governments take action to promote decarbonization of power, and where people are willing to pay a fair price for clean power.
Beyond these markets, we may be involved in select markets where the opportunity makes sense or where we have distinct adjacent in-country positions. Let's talk a bit more about that in detail, starting with an overview of the macro environment. The world's demand for energy is rising, and society expects this to be met in a clean way. As part of a move to realize the ambitions of Paris, we will see deep electrification of the global energy system. That will require strong growth in renewables like solar and wind to complement traditional fuels for sectors where the molecules will still be needed. In fact, natural gas will complement those renewables, and together, both have a critical role to help meet increased demand while lowering greenhouse gas emissions. The combination of the two offers a reliable, flexible, and cost-effective pathway to a lower emission energy system.
This is what we see many of our customers demanding. Developments in technology spark new products, services, and business models that offer rent to companies with a strong brand and an ability to deliver integrated energy solutions. While the pace of change and exact solution may vary for the different markets, we expect to see growing value pools in this important segment of the energy system, presenting a commercial opportunity for a company such as ours. We see opportunity as the traditional power system is changing with a fundamental shift from power markets, competition, and regulations.
From what used to be the relatively straightforward delivery of an electron from a centralized, stable supply source to a customer with predictable demand at a modest financial reward for the investors to a more intricate system with more risk, more volatility and complexity, and more opportunity for customer intimacy, and hence the potential for higher returns than before. This is because the system is growing fast, it's becoming more interconnected and more complex. Customers of the future will have more choice driven by technology, we can expect to see increasing intermittent demand from charging, heating, and cooling. Of course, increasingly intermittent supply from sources such as solar and wind power. Also, the rise of distributed energy sources and storage in the market will continue to change this system. This transformation is disrupting incumbents and challenging their business models, creating opportunities for new entrants.
We see new value pools being created in this integrated system. We see the potential for higher returns at the customer end, helped by new capital-light business models such as EV charging and smart energy services. Trading will sit at the heart of our integrated approach and will be an important source of value. We will be involved in generating electricity with assets, where this adds portfolio value and where the returns meet our criteria, but always with a preference to be asset light and buy the balance of the power from other producers. Over the past three years, we have started to assemble the building blocks of this business, let me highlight a few of these. On the customer side, we have existing businesses and customer relationships with all four customer segments.
We recently acquired retailers like MP2 in the U.S.A., focusing business to business, and First Utility in the U.K., which we rebranded to Shell Energy. I hope we find many customers in the room today. Otherwise, you can sign up in the lunch. You may have noticed that we have teamed up with PGGM to explore the joint acquisition of Eneco, a Dutch sustainable energy provider that would give us access to a bigger customer portfolio and a modern power generation portfolio. We've also invested in Sonnen, a leader in smart battery storage systems. We joined IONITY, which provides charging along major European highways and acquired NewMotion and Greenlots, giving us scalable positions in EV charging in Europe and in the U.S.A.
We are looking to stitch these together, for example, by offering our Shell Energy customers energy solutions to charge their electrical vehicle along major highways and at various charging points, in addition to providing them with 100% renewable electricity, and offer them a Sonnen battery in the process. On generation, we have a position with onshore wind and are expanding offshore through Borssele in the Netherlands and with acreage that we secured in the U.S.A. In solar, we acquired an interest in Silicon Ranch in the U.S.A. and Cleantech Solar in Asia, which has increased our solar development capabilities. We bring several competitive advantages that we can draw on to drive returns in this business. First of all, power markets are very local, and we have a legacy of over 100 years of being successful locally, currently operating in 70 plus countries where we understand the markets.
We are a trusted partner to governments. We know the regulators, we know the local communities, and we have millions of customers. Indeed, we have the strongest brand amongst all energy companies. We have an edge when it comes to marketing and customer intimacy. Shell serves several hundreds of millions of customers, unique customers every year, many of whom will be turning to Power to decarbonize their energy usage in decades to come. With this, we can provide integrated offerings to our customers. For example, in the U.S., where we supply General Motors with fuels and lubricants, we are now also one of their main power suppliers. We have a well-established trading business and marketing expertise, particularly in North America, where we are the third largest power trader. But from that position, we are expanding into Europe, Brazil, Japan, and Australia.
Of course, we also have deep technical and project expertise able to deliver big projects and manage risks. Across Shell, we have a large asset base that consumes substantial amounts of power. For example, at our Moerdijk plant, we installed 77,000 solar panels to support some of the power needs of that plant. Our assets give us an opportunity to scale this business. These are just some of the advantages we see that will help start drive stronger competitive returns from this business. As you can see, we have been growing this business for the past 3 years, but from different starting points. In retail, we added some 750,000 customers and are looking to add more. Our trading business, as I mentioned earlier, is already quite sizable, but we have further expanded it and see more room for growth.
Lastly, we've been scaling up our generation capacity. While we have big aspirations, we are investing with care, and we will remain disciplined in how we commit resources and funding to this business. Since setting up New Energies 3 years ago, we have invested around $1.6 billion to date in power and new fuels. As we continue to ramp up this business, we could see an increase of our power cash CapEx averaging $2 billion-$3 billion per year from the 2021-2025 period. This ramp up in CapEx is subject to a few criteria. First, that business must demonstrate that it is on a path to be self-funding before 2030. Secondly, our investments must meet certain financial milestones that we establish for every investment.
As we've said many times before, we must deliver returns in the 8%-12% range for our own stream integrated power business. All these three conditions will need to be met for us to scale up. Starting in 2021, we will provide additional financial disclosures for power. As we develop these low carbon products, we are seeing pull from our customers and increasingly a commitment from our regulators. This combination is the perfect combination to develop a growing profitable low carbon business, and we are determined to be a leader in that process. With that, I hand back to Ben.
Okay, thanks very much, Maarten. I trust you will agree with me that we did cover a lot of ground today. Let me summarize it in a few very simple headlines for you. First, long-term confidence in our portfolio. Increased organic free cash flow outlook, and more potential for distributions for our shareholders. All this together with an ambition to stay at the right side of history. With that, let's do some Q&A. We have, I think, almost 45 minutes to do that. Jessica will join me for that. I suggest we keep it to a relatively high level, because this afternoon, of course, we have the opportunity to go into much more detail in the breakout groups where you can interrogate other EC members and EVPs that have joined us in the back of the room. I'm going to go from left to right.
I think I'm not entirely sure we can cover everybody, but why don't we start with that table. Oswald.
Thank you very much. Ben, you mentioned the 2020 targets being substantially de-risked at this point. Obviously, you're rolling out to 2025. I assume there's still quite a bit of risk in those 2025 numbers. You've learned how to incorporate that into numbers, given the last five years. Could you just talk about what are the key risks that you're looking at today? What have you learned about the last five years in setting 2025 numbers? The reason I'm asking is the distribution of $125 billion is half the market cap. It's large, but has that funny little word potential in front of it, which raises eyebrows and just causes some areas of concern. It's just about conviction and your confidence in that $125 billion distribution plan is the first question.
Secondly, please, one of the first things you did do stepping into the role was cancel a gas to liquids project. Here we have a slide today on expanding or an ambition to expand in gas to liquids. I'm a little bit surprised by that. I know you talked about the margin, or Maarten talked about the margin uplift, but really the CapEx side of that. We've seen issues with Sasol recently. It is your conviction on building the CapEx side, expanding gas to liquids here, please. Thank you.
Let me take the second question first. I'll also take part of your first question, since that is such an important question, I'm sure that Jessica will want to add to it. Absolutely, at the time I took over, we had a study, not a project. We had a study going on to do a gas to liquids project in the U.S., which was essentially, if you think of it, of course, taking a punt on the arbitrage between natural gas and international oil products. In a market that was increasingly, I think, also showing signs of overheating because of the significant capital being drawn into it. I think at that point in time, it didn't feel like the right thing to do. I didn't think that we had this as the top of the list.
We had many more other good things to do, I hope people have seen in the interim that we have done things that all made sense and that really have contributed to the outlook that I will talk about in a moment here. We are looking again, we have been continuously looking at GTL opportunities simply because we believe in the market potential of the products that it makes. We believe it has a role in our portfolio and in the energy system of the future. We would like to start with natural gas that is fundamentally low cost and de-risked. Where we are not exposed to the vagaries of the market, both on the supply side of the project and the offtake side of the project, with a very large amount of capital in the middle, potentially.
The opportunities we are looking at is basically molecules that we own in the ground, where we have the entire upside from in situ molecules to molecules in the market. We think of a few opportunities. You're aware that we're studying an opportunity in Oman that would be a great prospect for us. It needs to make sense, so we have to understand, indeed, whether we can build this competitively. We believe we can. We have demonstrated that we can do that. Therefore, I think it is a credible opportunity to evaluate. I don't think we will do many GTL projects. I think having one that fits into the demand patterns of the future makes a lot of economic sense. Of course, it will be subject to the same intense scrutiny that we have for all our investment projects.
On the outlook, well, yeah, it is substantially de-risked. I've learned over time that it's never a good idea to stand here and to guarantee things in a world that is as uncertain as it is at this point in time. When I mean substantially de-risked, the emphasis is very much indeed on substantial. Things can happen. We still have to start up and deliver a few projects. We said we need another $5 billion of cash flow from operations to come from projects that are starting up. Well, that is basically Appomattox and Prelude and a few others. That is happening. You can judge how substantial substantial is. I think it is by and large there. I think other risks are, of course, continuously operational risks, which I believe we have a pretty good track record to delivering operational excellence. You can never guarantee everything.
Even though we have said, listen, for instance, the buybacks are subject to the macro and oil price. That is very important small print. If the oil price would collapse to below $40 for the next 18 months, it's going to be tougher to deliver the $25 billion than when it bounces back or stays in the range where it currently is. It is just sensible prudence to make these important qualifiers. The period 2021 to 2025. Well, let me answer your question a different way. It says potential.
Potential can mean more than $125 billion. I'm very confident that we can put numbers out like this. We have built, or we are building, I should say, a reputation of credibility with this company, which was very much needed. That's what all of you have been telling us for quite a few years. The last thing I would want to do is to put numbers out there that we know are going to be almost impossible to meet. Believe me, when we put out $125 billion, we know what we are doing. Any adds?
Yes. Perhaps a few points in terms of starting a bit where we are and what we've learned over the last couple of years. If you go back to 2016 and 2017, and you think about what was ahead of the company versus where we are today, I think we've created a much stronger sense of capability and confidence in our ability to execute against very ambitious targets. Whether it be bringing more capital discipline into the organization, being more cost effective, cost efficient, across the organization, reshaping the portfolio, where I started the conversation, the company just delivered across the board. I think our capability and our confidence in our ability to deliver ambitious targets has certainly increased over the last couple of years.
As Ben said, in terms of looking out to 2020, what needs to happen to achieve those numbers, I think a lot of that has been largely de-risked. Those are a couple of large projects that are currently happening. If you go out to 2025, I think we've provided a lot of transparency, in the pack today, in the speeches today, in terms of what's going to move us from where we are today to 2025. You can see your way through it quite easily. First of all, this is organic. This doesn't require any kind of material inorganic activity for us to achieve this $35 billion of organic free cash flow. By theme, you can see where the additional incremental cash flow is going to come from. There's nothing heroic in those numbers. It's all within the sense and the realm of very possible.
We've also provided the transparency on the Upstream business in terms of how things are playing out, NFA, pre-FID, post-FID. What you see is most of those, the production and the cash flows associated with that, are things that are already in hand. In that sense, I have a good basis of standing up here and saying $125 billion or more. I think the other piece that I would want to mention is just also providing a bit more flexibility. It is seven years out. The world can change either positively or negatively. There may be different opportunities and different reasons for us to make different moves that we can't anticipate today. I think having that potential in there is a sense of the capability, but also just reflecting, as Ben said, a very dynamic environment.
Okay. Yeah, table behind.
Yeah. Graham Hull from ING. I have two questions, one about exploration. In the period 2026, 2031, in fact, you are keeping your exploration at $2 billion, in that range. Do you think it's enough given the fact that you, for example, don't have a large resource base or a new frontier like Exxon has in Guyana, et cetera? My second question is about renewables. You have now focused on power or electricity. Does that imply that you have stalled other sorts of renewables or hydrogen or CO2 storage and that sort of things? Maybe you can elaborate on that.
Yeah. Good. I suggest the details of the exploration question is probably best asked to Andy and Wael going forward. The very short answer to it is that, yes, we do believe we have what it takes to deliver the sustainability in upstream and integrated gas well through the thirties. You've seen we have included even some production outlooks in terms of how we see production develop, how much will depend on exploration. We believe we have what it takes to fill these wedges going forward. On renewables, I think maybe a bit of clarification. Nothing really has changed in terms of how we run this business or how we approach it. Our focus when we talked about new energies before, still is very much on the whole range. On biofuels, on hydrogen, but also on power.
We thought, based on a lot of comments and feedback we got, it is probably better to just say, let's take the fuel components and start reporting them under our products. Where we talked about power, we elevate that to a strategic theme in its own right. It's cleaner, it's clearer, it's easier for us to also disclose information. As Maarten said, next year, we plan to progressively disclose a little bit more how that business looks like. It will be easier for you to see what not only our ambitions are, but also how we are delivering against those ambitions. We're still very much on track to pursue opportunities in these other spaces, including CCS, for that matter. Can we move to Irene?
Thank you. Irene Himona, Societe Generale. Two questions, please. Firstly, you upgrade very materially today your free cash flow target by $8 billion to 2025, of which $5 billion is from downstream oil products and chemicals. I wonder if you can share with us, Ben, your view on what needs to happen to refining and chemicals margins for the plan to deliver those targets. Secondly, Jessica, the role of disposals going forward. Obviously, you completed the $30 billion, but looking at slide 33, sorry, 73, you seem to be signaling a halving in your number of refineries to sort of nine in 2025. Thank you.
Well, let me take the first question, Jessica, the second. I think nothing heroic on refining and chemicals margins. We have a fairly conservative outlook on chemicals margins. I think the uptick that you see in the chemicals cash flow delivery is very much these very large projects coming on stream. Yeah, you've just early this year started up AO4 in Geismar. We have started part of the Nanhai expansion, the doubling already, but we still have a major second phase of that to come a little bit later. Then, of course, we have the Pennsylvania cracker, which is a world-scale cracker coming on stream. When all of that is on stream, this business will generate significant free cash flow, right? Of course, in the past, didn't do very much because we reinvested all the CFFO into these large projects.
Then on top of it, we will continue to invest at the sort of levels that you have seen before. This is basically the current investment wave coming through, and therefore significantly bumping up the free cash flow of the business. Margin assumptions, very conservative. In refining, we are even more conservative. We have basically said, "Listen, going forward, of course, there will be disruptions in the refining system, and there may be transient pockets of value and everything else. Over time, we have learned the most prudent approach to refining margins assumptions is to take mean reversion to historical averages as the way going forward. It may well be that from time to time, like with IMO, we have a blowout, and we will take advantage of that and make sure that we are well positioned for it.
We're not going to rely on these types of things to make long-term investment decisions. Also, not long-term portfolio decisions." That's our approach, which is actually probably more conservative than some of our competitors.
On the portfolio piece, portfolio optimization will continue to be part of our strategy and way of running all of our businesses. Refining has a particular focus at the moment in terms of ensuring we've got the right positions, the right integrated positions, integrated from a market perspective, or integrated with our chemicals business. For the purposes of how we're looking at the 125 and the modeling, I'm not sure if you caught that or not, but we're assuming some $20 billion in divestments between 2021 and 2025. That's the quantum that's considered in terms of the cash generation over that period. It's not a firm target, yeah. It's also part of what comes into this potential word. We will do what makes sense for the company and for the business, but we think 20 is probably a good number to work with.
Okay. I think you were next. Yeah.
Thank you very much. Natasha Landon, Wilson Sonsini Goodrich & Rosati. I just wanted to ask about the net carbon footprint ambition, which you've shown incredible leadership on, but also how that is consistent with what you're presenting today. What we see is continued heavy investment, I would say, in terms of relatively speaking, into fossil fuels. We've heard a lot about growth, we've heard a lot about exciting opportunities for growth, and not really seeing how that circle is squared, if you like, with what you're saying about bringing down emissions. Ultimately, I think you referred to at the very beginning, which I think again is something to be applauded, doing no harm. It'd be very good to understand how your CapEx plans, which you are articulating here and plans for growth square with that. Thank you.
Yeah. Okay. I think probably I will give a very short answer to it, but I suggest that we don't have a breakout group on net carbon footprint, but we are happy to take that also offline in a lot more detail, as we have recently done with a group of investors that really wanted to understand to what extent and how exactly our net carbon footprint ambitions are consistent with less than two degrees and everything else moving forward. It's very important to recognize that our net carbon footprint is the footprint of the products that we sell, not the assets that we built. You have to bear in mind that for every barrel that we produce, we refine two barrels, but we sell three barrels.
In the end, of course, it doesn't really matter whether the three barrels that we sell, one comes from Shell and two from somewhere else, or 1.1 comes from Shell and a little bit less from somebody else. What is important is that the energy products that we place in society, in the energy system, are increasingly low carbon. The first thing to do is to put more gas into the mix, more biofuels into the mix, and then ultimately, as we can scale this up, also more renewable power into the mix. That actually is less capital efficient, less capital intensive. Ultimately, when you drive down the net carbon footprint of the products, it doesn't necessarily mean that we have to stop investing in the production of some of these products in our own facilities.
It may mean that we will cause investment, that we participate, for instance, in generating facilities in new energies, in offshore wind, or in solar. We may want to recycle that capital, but hold on to the electrons, cause new investment, et cetera, et cetera. Which is fundamentally a different investment model, a different business model than the traditional capital-heavy investment model that is associated with producing molecules. Therefore, tracking investment as a means to see to what extent we are on track with our net carbon footprint is simply not the right approach. The right approach is to look at our net carbon footprint per se. I can tell you what we are doing is entirely consistent with meeting the 2%-3% that we have set out there as a reduction for 2021, and ultimately, of course, meeting our ambitions. We go to these three tables.
We start with the first table.
Yeah.
Thank you, thank you for the presentation. Two questions, if I could. The first one, can I come back to the inorganic opportunities that you referenced and the idea that they're to be evaluated on a case-by-case basis? What limits do you put on those, and how do they compare when I think about that potential $125 billion? Do they always have to compare with the world-class investment case of buying back your own shares? Then the second question is on capital discipline. Why is a 50% premium in CapEx to your sustaining CapEx budget the right number? Within that, what, if anything, in the last 12 months, has the investment committee said no to? Just as an example of discipline.
I think let me start with the last question. I think we said no to quite a few things. I think it would be probably commercially unwise to say what we have turned down and which opportunities we walked away from. Believe me, we say no to quite a few things because we simply do not have the capital space to do everything that our businesses can dream up. Believe me, they know very well that there is a constraint. Actually, that's a very good dynamic as well. What we have seen is not so much that people come back and say, "Well, I meet the hurdle," or, "My breakeven price is low enough for you to find it an attractive opportunity." Everybody knows they have to beat the next best project. That actually brings a sort of discipline that we really enjoy.
That's why we will have a capital ceiling going forward as well. Why do we work with a higher capital number than what we would strictly need to sustain the business? I said we would only need to invest about $20 billion of cash CapEx to keep the CFFO at 2020 levels, we want to do more. As a matter of fact, we have been doing more. We have been doing about $24 billion in the last few years, which, of course, were very much constrained years as well. We have been investing over and above the strict sustain levels. That's the reason why we are looking at growth in our free cash flow, of course, in these years and in the next few years to come. At the same time, I think this is what you want from us.
You want us to grow value in the business. Therefore, if we have the room to maneuver, if we can invest more to create even more value, I think that should be a welcome opportunity, particularly if every dollar cash that we invest in our business, we match that and more with extra shareholder distributions. Yeah. Don't think that the extra growth that we have talked about in our CapEx, cash CapEx numbers are basically coming out of shareholder distributions. If you do sums, you will find that one and a half times that growth goes to extra shareholder distributions at the same time, which I think is roughly the right thing to do. Nobody would want to tell a story where we say we're going to profitably shrink the business. Don't worry, it will be good at the end of the day.
This is the balance that we had to find. I think it is the right balance, and it is the flexibility that we currently have, as well as a track record, I hope, that will allow us to do so. Diane. Oh, sorry. No.
Inorganic, yeah.
Yeah.
Sorry. Sorry, Lydia. I just want to quickly make one comment on the last question as well. The better we are at clarifying our strategy and our portfolio objectives and the better we are with capital discipline and capital allocation, through time, the organization also self-selects. I'd say that there's a bit of high grading that's happening within the company, and that's not to say things don't make it there, and then we still have to say no, but I'd say that a healthy organization, actually, that becomes smaller over time. It was just one other point I wanted to make is that, as I mentioned, there's a number of criteria. Returns are the most obvious, the value proposition, et cetera. But I do want to say some of these other license to operate elements are important to us.
Things like the CO2 profile, et cetera, the HSSE profile are meaningful. There are reasons we don't do projects because of those as much as some of the value characteristics. Inorganic, it is a bit case by case, if you will. Again, it needs to fit within the strategic context. It needs to fit with the portfolio objectives. From a value proposition perspective, we're looking to at least achieve above our weighted average cost of capital. That should be the minimum. Then for each of our businesses, we have different return expectations. Some of our businesses have higher return expectations than others for various reasons. We need to make sure what we're doing is compelling from a value perspective. It's going to be a bit bespoke by strategic theme in terms of how we define what that value proposition needs to look like.
Yeah.
Hi. Hello. It's Martijn Rats, Morgan Stanley. I wanted to thank you for exhibit 13, which is very interesting. It allows quite a bit of visibility on what CapEx is versus sustaining CapEx and therefore which business you want to grow and which businesses you perhaps more sort of want to run to be flat. There are two that I thought were sort of standing out, and one is Shell and the other is Oil Products.
I'd expected that Shell arguably would have quite significant ambitions in shale. I don't ask you to comment on things in the press, but you were frequently mentioned around the BHP assets, around Endeavor. In the Energy Transition report from last year, there were a whole lot of positive comments around how shale enables the energy transition through its short cycle nature. The actual level of CapEx versus the sustaining level of CapEx in shale seems only a relatively small difference. I guess you're running it for growth, but maybe not so much. My first question is there perhaps a little bit of a cooling down in the internal Shell debate on shale relative to where you maybe were six, 12 months ago, when you arguably looked a bit more optimistic about this particular sort of theme?
The second one, which is on the flip side of this, is oil products, where sustaining CapEx is $3.5 billion, you're planning to invest $5 billion-$6 billion. It sort of builds a little bit on Irene's question. When I think about oil products, I think about refineries, and I think about petrol stations, and maybe that's arguably a little bit too simplistic. It doesn't seem like you're going to invest large amounts of money into refineries. At the same time.
No
Petrol stations are not particularly capital-intensive either. That incremental, what is it, $2 billion of investment above the sustaining level in oil products. Can you talk a little bit more about what that is then?
Happy to do so. Shall I start and then I'm sure you will have a few points there. I don't think there is any cooling off in Shales, or a change of heart or whatever else. Far from it. The investment levels that we show is to indeed sustain our cash flow generation at 2020 levels. Indeed, we do believe that for Shales we need to invest around $2.5 billion to sustain it at 2020 levels. It's not at today's levels, that's next year's levels. Of course, we are in a significant ramp-up phase at this point in time in our Shales business. If you can't remember the slide now, but go back to the slide that Wael showed, and you will see that we are still significantly ramping up. To keep it there, $2.5 billion.
To continue to grow, which we intend to do as well from our existing positions, maybe with a few sort of fill-in M&A bits and pieces here and there is going to be the sort of level that you see here, $3 billion-$4 billion. We think we can build a very strong business through essentially organic, maybe with a little bit of add on, which you tend to have in this business to create more contiguous blocks and to infill some acreage, et cetera. Could we do more? Maybe we could. Again, we don't rely on it. We can generate this $14 billion-$17 billion of organic free cash flow in the upstream with the sort of investment levels that we're looking at here.
If good opportunities would come along, you would want us to look at that, whether that's in Shales, whether in Deepwater, whether it is in chemicals, and eventually maybe even in power. That is, of course, something for the somewhat longer term. No change. Again, I would like to emphasize the point that the little caveat that this is without inorganic doesn't mean that we are looking at inorganic and finding a way to bump our CapEx up. It basically means to say we can deliver the $125 billion or more without inorganic. That's a very important point. On oil products, I think you're right. We're not going to grow an awful lot in refining, but we may do a bit. Of course, we have been historically strong in Europe, in North America, and a few sort of near Asia and Africa positions.
We have one good position in Singapore, we may want to have a little bit more access to refining capacity in places like China, et cetera. We have some designs to continue to invest and to continue to look at opportunities in the East, where we do think it makes strategic sense to feed our supply chains that we have in that part of the world. A lot of it is indeed going to be a marketing growth. You may say, well, a retail station doesn't cost very much. Well, if you do 10,000 of them, it's a little bit more. At the same time, we also want to strengthen our lubricants business, and we want to continue to invest in our supply system and network.
Maybe even when we reduce our refining business in areas where we want to have less exposure, we have to backfill that with distribution assets so that we can continue to serve the market. Because the marketing business is such a profitable part of Shell, strong double digit, 20+% returns, we have to have some infrastructure also to continue to grow that business as well. Finally, on oil products, bear in mind this now includes some investment on biofuels where we intend to also make a major push. Next table.
Hi. Thank you. Christyan Malek from JPMorgan. Two questions please, and thank you for a very comprehensive presentation. The first question is regards to resilience of the portfolio to lower oil prices. Obviously, oil is volatile, but you're planning the entire financial framework around 60, 70 real to nominal. Within the capital framework, you've set out plenty of targets on CapEx, cash return and gearing. The priorities as far as what gives in a weaker environment seem a bit more vague. You used to have a quite nice clear sort of list of priorities going from left to right. What's your commitment to return cash in the context of a weaker oil price outlook? Can you quantify a minimum target? Also put another way, what comes first, harvesting or growth?
It feels like it's all not clear at the moment where you're running those two tracks, how they converge into lower price. The second question linked to that is slide 29, where you talk about building resilience using flexibility through your balance sheet. To what extent, say you are in a position where you have de-geared substantially, does the focus become on energy transition? Obviously there's a lot of chatter around M&A and Shell and all the opportunities you can look at. Ultimately, if you're trying to solve for that as the end game, does it mean that any extra ammo that you have should be really prioritizing power or something else, even if it's a long-term strategy, as opposed to anything within the oil and gas sector? Thank you.
Sounds like questions for you, Jessica.
Okay, good. Thank you, Christyan. How does this play out in a lower oil price environment, I think is your first question. A couple of things. I think what we've demonstrated over the last couple of years is a pretty impressive capability or capacity to deal with a very low price environment and still be able to meet all of the commitments I highlighted at the beginning. Our ability to turn off the scrip program, to start the share buyback program, to de-leverage, was during periods of time where obviously oil prices were not always favorable. I think the company is structurally stronger today in terms of its ability to manage downturn. Our balance sheet is in a very different place today than it was three years ago. Those are all things for us to leverage should there be a challenging macro environment.
The relationship of cash flow to oil price remains the same. $10 change is about a $6 billion impact on our CFFO. I think what we've laid out is a commitment to our sustaining CapEx, we need to sustain your CapEx. What you see is a company that actually has a tremendous amount of flexibility in its capital spend in terms of maintaining the level of cash flow needed to achieve what we're achieving today, some $50 billion plus of cash flow from operations. I think we have embedded flexibility in our company because of the company we are today and how, relatively speaking, the sustaining CapEx, I think, is low relative to the total cash flow from operations. I think going forward, we're going to try and keep doing what we've done, which is balancing all of these things.
Our balance sheet doesn't need as much attention as it did over the last couple of years. At this level of cash flow generation, we don't need to allocate that cash back to the balance sheet as much. There's still some of that needs to be done over the next couple of years, that's going to free up more capacity for us to deal with challenge. We're a more capital efficient organization, a lower level of sustaining CapEx to maintain this level of cash flow. That creates some capacity as well. Our goal is to continue to de-leverage, to increase shareholder distributions. There may be moments in time where that's a bit more challenging. I'm confident in terms of our ability to continue to manage balancing all three of those things going into the next decade.
Let's take these tables here. Yeah. One and two. Thijs first.
Thank you. Thijs Berkel, ABN AMRO. Two questions. First one, what are the key reasons behind demoting Deepwater from growth to stable boring core? Secondly, maybe coming back on Martijn's sheet. Deforestation. By 2025, what kind of CapEx will be spent on, let's say, reforestation? And what part is it in oil products or in other segments?
Yeah. Okay. Deepwater. A lot of people would look at growth priorities, which is where Deepwater used to sit as the most exciting part of the story, of course. We don't have to cover dividend. We just can spend everything that we earn, we build a lot of new things for the future. That was seen to be the highest aim within the industry, perhaps. What we've been very clear on inside the company, the highest priority you can aspire to is to be a cash engine. Yeah. The point is that if you look at the seven strategic themes that we have at the moment, nearly every one of them is a cash engine. They all contribute at this point in time, with the exception of power, for some time to come, because it's such an immature business to covering the dividend.
They all have been promoted to cash engines. To have six cash engines and one emerging opportunity didn't feel like the right message. We thought, let's look at it in a different way to communicate some other aspects of our strategy. Our strategy and the way we prioritize and categorize these strategic themes was very much driven by clarity on the sources and the use of cash. That was the story post-BG. We had to be clear that up to now, we were not just having everything in growth mode because we would get into trouble with shareholder distributions. Yeah. We said very clearly, this needs to be for dividend cover. Here, we can continue to spend a little bit more on growth. Going forward, I think it is better to articulate the strategic posture of the company differently.
Which is very much we believe in upstream to be at the core of Shell, and we will sustain that business well through the '20s into the '30s, which was a concern that we have heard a lot of times before. You guys talk about energy transition so much, maybe you are leaving upstream behind. Absolutely not. We believe in strong and resilient cash flow from those three businesses indeed for decades. That's one message. Indeed, we will be investing a lot in those businesses that we need to rely on as cornerstones for the energy transition. Gas is going to be one, oil products is going to be one, chemicals is one.
I think that articulates the portfolio strategy better than to just one, maybe just say, "Here's the cash coming from, and there's the cash going to." That, by the way, is, of course, still provided as clarity as well. Reforestation by 2025, I don't know. To actually be perfectly honest, we said, "Let's get on the journey of nature-based solutions." We believe it has tremendous potential. We said we would invest $300 million over the next three years in these types of nature solutions that will help us a long way in introducing carbon offsets for our motorists in a number of countries. Depending on the speed, this will get uptake, and we roll it out. It will be more by 2025. At this point in time, we don't have a clear line of sight how much it will be.
John first, then we go to the table thereafter. I realize I'm going to run out of time. Apologies in advance, but we'll be available, of course, also during lunch in the afternoon. John.
The first question is sort of an observation and a question at the same time. It strikes me that over the last five years or so, that you had to be fairly strict on the way that you determine the financial structure, because from the place you were coming to to the place you arrived at. It seems to me, and this is the observation, that it created a degree of structure that also meant that you had less freedom to operate outside. I sort of reference two transactions in the last year, BP's $10.5 billion, BHP, Total waking up on a Sunday morning and writing a check for $9 billion. Neither of which I think you probably could have done without having to go through enormous amounts of financial gymnastics on every quarterly call for two before and three after.
What I'm trying to understand is, one, as you've got to the point that you've got to, are you signaling now that with the way that you're describing potential future M&A, there's a little bit more freedom as you see it in that context? Also, I want to understand what are the touch points we need to understand that are the perimeter around what you're likely to do? I'm thinking perhaps maybe is it ROACE and gearing is the ways we should think about it. The second question is, I was struck way back when you did the post-BG thing, that the guiding principle in everything you were doing was this world-class investment case, which it seemed to me was a sort of broader view of how Shell should fit into the market as a whole and not just within the sector.
Of course, again, is you had a sort of structured approach for the first four or five years, but you've got more freedom now. The key freedom, I think, is this $125 billion because it's dividend buyback. There's potentially more cash, which could go to debt reduction, et cetera. As a board, as a senior management group, have you done work looking at how you should position Shell in the context of the equity markets? Maybe you could share some of those thoughts with us about how you think about this sort of how you use the largesse moving forward, if indeed that is what happens. Thanks.
Okay. Jessica, if you take the second question. The financial parameters, I think they were pretty clear, John. At the time of the BG transaction, we of course had to stretch the financial framework. We didn't know how much that would be because we did this deal relatively early still in the downturn. We had to make some very clear and concrete commitments to our shareholders that we knew what we were doing, that we were going to constrain ourselves. The story is actually quite simple. Where we are today, we do roughly $50 billion of CFFO. Another five may come from projects that are starting up. We may get another five from divestments. We have 60 to play with. Yep. Then we have some debt reduction that's still required, say five.
We have a buyback program of 25, so 10 a year, roughly $15 billion of dividends, so that's another 30. We have 30 left. That's it. There is no more. That's very clearly the story. You may say, "That sounds very constraining and everything else." Yes. That's 30 left to invest in the business while we're also distributing 30. Yep. That's the reality that we found ourselves in post-BG where we had made very strong commitments that I am still very proud of that we made them and that we are going to deliver on. That reality comes to an end by the end of next year, and now we have to find a new space to understand where we will be. Fortunately, we will be in a much stronger position. We will have more CFFO.
The fact that we have invested at sort of investment levels well above our sustaining CapEx basically means that we now see the effects coming through in the early '20s of increased free cash flow. We can have an even faster focus or a stronger focus on value growth creation. I think, at this point in time, 2019, all the way up to 2025, yeah, we also want to give ourselves the opportunity to do inorganic things if that makes sense. Yeah. Very clearly, we continue to have a cap on what we spend this time around. It will be 32. I'm sure we will find plenty of ways to exceed that cap if we wanted to. I look forward to having the exact same dynamic in the capital investment committee to find out what are the best opportunities.
On top of it, if we wake up on a Monday morning and we find there's a great opportunity to take advantage of, I don't think it would be wise for us to say, "We made commitments all the way to 2025. We're not going to do that." We have to make sure that if we consider something like that, we can come back to you and say, "This really makes sense. This is value accretive. It's not going to go at the expense of the 125. This really makes sense." We have to convince you, and we have to do it with everything. Not with maybe something like $1 billion or $2 billion that will just have to fit in into the fray anyway.
If we do something large, which we may well do, and we're not working on anything at this point in time, I want to have the freedom to be able to contemplate that. I don't want to tell the organization, "Stop thinking about large value accretive transactions because we somehow ruled ourselves out of that game." That would not be the right approach for a company our size. Yeah.
As you would expect, we spend a considerable amount of time thinking about how we position ourselves in the equity market. At a business level, we consider how each of our businesses are competing within their sector. At the RDS level, how do we differentiate ourselves as a company strategically, then ultimately, what is the investment case we're offering to our shareholders and hopefully new shareholders in the future? There's not one shareholder voice. Depending on who I speak to in the room, some may want me to increase dividends, some may want me to cut dividends. We have to see through that and basically focus on what we think is the most compelling investment case. What do you get when you buy Shell?
What you get when you buy Shell, we believe, is a company with a differentiated strategy that has a view on the future, that's going to be resilient in the future. Is going to have the largest cash flow in the sector and have a compelling return case for our shareholders, all the while maintaining a resilient balance sheet. We think overall, that's a pretty compelling case that hopefully will bring a number of investors around if we can deliver against that.
Yeah.
Colin Smith from Panmure Gordon. Just on the distribution, I think you mentioned, Jessica, earlier in your discussion that you expected to reduce the overall cost of the dividend, which implies that quite a lot of that incremental distribution is going to come by way of share buyback. I just wondered if you could talk a little bit about the balance between share buybacks and dividends as you see them going forward. Then just sticking with the financial framework idea, again, you mentioned cutting total debt, and I think I heard Ben just mention cutting it by five. Are you thinking that 50 billion on an IAS 17 basis is the kind of target number that you're looking for to get to, then after that, it's whatever flows out from the cash flows you're generating? Thank you.
Good. The absolute level of our dividends matter. Just in the way that we want to be resilient from a balance sheet perspective with respect to debt, we have the same concept. What is the right total dividend level that is appropriate for the company going forward? I think we've demonstrated there's no concern about our dividend level or no concern really about our ability to grow it, but how do we grow it appropriately and do it in a sustainable and resilient way? So what we're trying to signal is a relationship going forward as we consider increasing dividends per share through time to offset that with share buybacks, so that we don't have an ever-increasing dividend burden through time. There's not an exact math formula. It may be different one quarter to the next.
I'm just signaling this as people will probably trying to understand perhaps what the algorithm is that's going to solve for all that. I think it's the principle that we're trying to convey that we're paying attention to this, but we want to grow shareholder distributions, we want to increase dividends per share, but we want to do it in a way that's sustainable, and we're going to find that balance through time. On the debt level, it's actually five a year, so it's below the $50 billion. We're getting down on an IAS 17 basis, it's closer to 15% than 20%.
Yeah.
Yeah.
Okay. Chris, Jason, you after that?
Thank you. Chris Kuplent from Bank of America Merrill Lynch. 2 questions, if I may. Firstly, Ben, you've been very clear about allocating 50% of that step up in CapEx to also a step up in shareholder returns that go back to shareholders in cash. I wonder whether you would make the same commitment if you stepped up inorganic CapEx, because you clearly, as we've discussed, now have room to do a little more. Assuming that hypothetical next BG deal comes your way, and you spend another $60 billion on it, would you apply the same commitment that you've given us to organic CapEx stepping up and 50% of that going back to shareholders? That'd be question number 1, just to be very stupid and clear about it.
Secondly, in your 2025 cash flow outlook, I wonder, with an increasing share of both investment and cash flow generation from Downstream, are you telling us today that your oil price sensitivity will be lower than it is today? Is that something you are actively looking forward to or not?
Yeah.
Thank you.
Let me take the first one and then Jessica, the second. Your question is indeed hypothetical. Any answer I would give is hypothetical as well. I'm not trying to dodge it. I'm just trying to say that we will have to communicate with you much in the same way as we did the BG deal. What it is that we are trying to achieve with it and how we're going to accommodate it. Again, without wanting to box myself in with anything, of course, it has to make sense. It has to make sense to you as shareholders that we would pursue something like this, which needs to be accretive on value and everything else. It also needs to fit within the financial framework. How we would accommodate that? Probably through a set of measures.
We probably find ways and means to, of course, get synergies, cost offsets, maybe suppressing our normal organic investment for some time, and indeed finding ways to return more to shareholders. What exactly that story is, I cannot tell you. It would be foolish to somehow give you a formula of something that I don't even have a concept of what it is. Believe me, the main point of making this statement was that we do not need inorganic to get to $125-plus billion of shareholder distributions. If we find something really compelling, which we have to convince you of, we will not rule it out a priori.
I think those are the right connections that you're making in terms of the direction of the company. If you connect the net carbon footprint frame that we provide to then our strategy and our focus on the transition themes, what that translates to is a company that's more market-oriented, is changing the product mix of the company in terms of what it's providing consumers. Over time, you would expect less exposure to oil because of that. It's a big company. These things don't happen overnight, but directionally, that's correct.
Yeah. I am getting some frantic signals that we are out of time, but we will do 3 more questions. Is that okay? Okay, Jason. Then I will have 2 more in that part of the room. Again, apologies. Next time around I will start at that side.
Thanks. I will just ask 1. It is Jason Gammel, Jefferies. It seems to me that the amount of growth CapEx that is being directed to the upstream is a change in thought process. Even if I include integrated gas, your CapEx allocation into the upstream is going to be amongst the lowest of your competitors. I normally think of the upstream as providing some of the best rates of return that are available to an oil company. How do you think about the evolution of return on capital employed over time with a lower allocation, perhaps into growth in the upstream business? Would you even challenge me then that you do not think that the upstream is going to provide superior rates of return on a move forward basis relative to some of the other businesses you are investing in?
Yeah. Can we bring up slide 19 again, the one we had earlier with the table on it?
13.
Sorry, 13. Yeah, 13. Apologies. Yeah. Indeed, you are right. If you look at just the upstream themes per se, we say to sustain this business, we need about 11, but we are going to spend 11-13 in it. We will grow it modestly. That basically means we are going to sustain the cash flows we have. It is not production volumes or anything else. It is the cash flows well into not just the next decade, but the decade thereafter. The integrated gas is on top of that. That, of course, has an upstream component in it as well. Yeah. You see that we proportionately invest more in it because we also see that the business has more running room over the decades and actually is a business with very compelling returns also from a market perspective. I think you are absolutely right.
If you look at many of our upstream investments, particularly at the sanction moment, they have superior returns. If you look at over the cycle and on average, they are pretty much in line with the rest of our portfolio. If you look at this particular slide, our transition themes, if you look at the free cash flow we get for the investment levels that we are going to put into it, I think our transition themes are actually very compelling as well. We believe that leaning deeper into the transition is positioning the company better for the future of energy. Yes, we will do both. We will sustain our upstream, which will be quite a CapEx-hungry business, which is by nature of the business, and we will continue to grow, maybe disproportionately, the business more towards gas, more towards GDP-type growth, et cetera.
I think that's really all there is to say about it. Jessica, anything you want to add?
Just to highlight that the return profile of our marketing business and our chemical business is some of the most compelling returns in the company. If you were to ask the downstream people in the room, they'd be saying, "More capital should come towards us from a return perspective." I think it's just a recognition of the strength that we have there, and I would hope through time that's supportive to our returns.
There's one important point to make, which is you could look at this slide and say, "Oh, hold on. Why don't you just invest more then in these transition businesses if they seemingly have a higher return or more bang for the buck in terms of free cash flow per investment dollar?" What they don't have is upside potential. If the oil price, this is at $60, if the oil price goes to $70, $80, all of a sudden this picture completely changes. Now we are looking at an upstream business that gives us a wall of cash that you could never get out of a marketing business simply because it gets competed away instantaneously. Therefore, to have that type of balance, we know that our business is going to be competitively positioned for the future with a very strong upstream core.
This is still one of the largest upstream businesses that we can sustain with all the upside potential that the positioning of our business has because we have not invested in low-margin upstream barrels. We only have invested in high-value barrels. I think it is the right positioning for the company, both from an upstream as well as an overall perspective. Okay, we're going to this table here.
Michele Della Vigna from Goldman Sachs. Two questions, if I may. The first one is on your ambition to reduce the net carbon footprint by 50% by 2050. As you say, that depends also on society and the change in consumer behavior.
Yeah.
Within that context, how important is a broader application of carbon pricing across the economy to get the consumer behavior there compared with what today is largely a set of incentives on specific low-carbon technologies? Secondly, looking at your Deepwater business. It's a business with high barriers to entry where Shell has been a leader for a very long period of time. I'm surprised that given the strong free cash generation of that business, given the break-even on new projects at or below $30 per barrel, the actual ROACE target for 2025 is 10%-12%, which actually is below the average that you target for the upstream. I was wondering if there are also some accounting reasons behind that lower ROACE. Thank you.
I think, let me talk about the first one. The second one, Jessica will talk to. Carbon pricing is essential. Yeah. We will not get to a very significant change in customer behavior or societal behavior without a price on carbon. It will not do everything. Prices on carbon work very well for people who are highly sensitive to these economic parameters. Industry, particularly power generation, of course, has been the reason why this country goes more than two weeks without coal-fired power is, amongst others, because it has a floor carbon price which incentivizes that shift away from coal. It works less well for you and I when we fill up our car. Another little bit of carbon tax in your fuel is probably going to be insignificant. It's definitely not going to make you change your car.
You change your car because of other preferences, not because of carbon pricing. You will find, and these are two extremes, of course, there's all sorts of things in the middle, but you will find that carbon pricing, yes, absolutely, but not enough. We will have to have other things that will change consumption patterns, that will drive energy efficiency in appliances, homes, and everything else much faster, and some of which will have to come through regulation as well. All of these things need to happen. Now, we can, of course, do our piece by decarbonizing energy supply. We can do things like putting nature-based solutions in place, which, by the way, are very competitive. $0.01 per liter to offset the carbon emissions from a liter of petrol or diesel is, of course, at a carbon price of less than $10 per ton.
It's the most efficient way of doing it. If you do it at scale, it's a loss of forest, by the way. It goes to show that we have a number of tools and techniques that as society we need to deploy. We need to do our part, but carbon pricing is going to be absolutely part of the solution. Thomas, you have the honor of being the last.
On the tape. Sorry.
Sorry. I'm sorry. This is the second time I do this.
the ROACE question on Deepwater. A couple of things. As Wael pointed out, we've transformed the capital efficiency of this business. We've transformed the amount of cash generated per barrel in this business. We're a very different Deepwater business than we were a few years ago, and that legacy position on our balance sheet does take time to work through. That does have an effect. The other piece, of course, is this is being modeled at the $60 RT, that doesn't give you any sense of, as Ben said, certainly the upside or what that might look like depending on what the oil prices are. The actual returns we're striving for and achieving in the business today are, I would say, on average, above those numbers.
Yeah. Okay. last question.
Thomas Adolff from Credit Suisse. Two questions, please. Firstly, Deepwater versus Shales. Previously, you always argued that you wanted Shales to be similar in size to Deepwater. You've reshaped your strategy now. Is that still the case, your longer-term ambition? Secondly, your gearing today post IFRS 16 is at 25%. Presumably today, we're in the build resilience phase. You want to bring down leverage further down. Let's say in 2021, we have a downturn and oil price goes down to $40 Brent and it stays there for a while. What happens to buyback? What happens to CapEx? Will CapEx go down to $20 billion, the sustaining level, or you cut both? Thank you.
Thanks very much. Let me take the first question again.
Deepwater Shale balance.
Yeah, I think nothing really has changed there, Thomas. Again, I would like to emphasize that if you look again at this page 13, you see that we can build a very significant Shales business in the early 2020s with the sort of investment levels and the resource base that we have. This assumes no major acquisitions. It is, of course, it's a faster treadmill that we're on. Therefore, we would continue to have to add acreage to it. We can do it in an inorganic way, small steps, or we can do it in a larger organic way and balance out a little bit more the Shales versus Deepwater sort of sizes in terms of capital and free cash flows that we have there.
I think that still makes a lot of sense to do, but I've been very clear also, every time I said I don't mind having a rebalancing between Shales and Deepwater in favor of Shales, we will only do this if it makes sense. Yeah. First of all, if there is a compelling proposition that is really competitive for us to take on, and that will then fit in the financial framework, and on top of it, will displace other capital, which is most probably also going to be Deepwater capital. It needs to be really compelling as well. We are not growing the business for growth sake or for size sake. We are going to do it to have a more resilient portfolio going forward. We don't need to do it. We don't need to do it for delivering the $125 billion of potential shareholder distributions.
Yeah, we will look at opportunities to rebalance where we believe it makes sense.
I think that the main message I'd want to get across in terms of our ability to manage in a difficult macro environment is that. There are many levers for us to pull, but we are a much stronger company today, and we have more options and more flexibility than we did a couple of years ago. We have, as we indicated, substantial amount of CapEx that we have choice around in terms of growth. We have flexibility with our balance sheet, more so today, and I think we'll continue to increase the amount of flexibility we have with our balance sheet. We have a significant amount of excess cash that we're going to generate, where we can make choices around dividend growth or share buybacks. Which one of those levers should be pulled at any moment in time is very circumstance dependent.
CapEx can be more or less flexible depending on the nature of the project, the moment in time that that's happening. Your debt, depending on where you are, you may have different views of what's appropriate to do. We're pretty firm about the overall range, 15%-25%. Shareholder distributions. You may choose to kind of dial back a bit the share buybacks or postpone dividend per share growth at a moment in time. It's really circumstance dependent. I think what's important, though, is that we're going to try and manage all of those. What we're clear is what we're trying to achieve as a company, increase shareholder distributions, grow the value of the company, and maintain a resilient balance sheet. We're in a stronger position to do that today than we were a couple of years ago.
Okay. I realize that there's a lot more questions in the room, but don't worry. We have, first of all, lunch. If you wanted to tackle me or Jessica on a particular question, feel free to do so. Of course, in the afternoon, we have very detailed breakout groups on three main themes. I'm sure that we will have some instructions for that. Mano, are you going to give them or anybody else on how we circle through the different breakout groups in the afternoon?
Yeah. People will be kept into the right room. Your lanyards have different colors, which will mean that you start in a particular room.
Yeah.
people will take you through those after the lunch.
Okay, very good. Thank you very much for your attention this morning and for the rest of the day. I look forward to talking to you a little bit more as we progress through the afternoon and into the early evening. Thank you.