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All right. Let's get started then. Welcome, everyone, to Shell's 2025 Capital Markets Day. I'm Mohammed Hamid, Executive Vice President for Investor Relations and Strategic Planning. It's wonderful to see so many familiar faces in the audience and some new ones as well. A warm welcome to those of you who are joining the live stream online. I'll start by outlining the run of the day. First, our CEO, Wael Sawan, and our CFO, Sinead Gorman, will kick off with an overview of the Shell investment case, followed by a Q&A. After that, we'll have a short break. When we come back, Wael and Sinead will take a deeper look at our businesses, followed by another Q&A session.
For those of you who are here with us in New York, we will be joined by some key business leaders who we have in the audience with us today. Before we get started on some of the content, please note the cautionary statement behind me on screen. I know many of you are familiar with this. It is also available in full online. Before Wael and Sinead begin, we would like to take a moment to play a short video that nicely summarizes our journey to date. For those of you who are more familiar with the Shell story, you will notice a phrase, and some would call it a promise from the past, that will be key to our journey going forward. With that, let's play the video. Thank you.
There's a global company that's connected energy to people for over a century, delivering on a lasting promise. You can be sure of Shell. Innovation, it's been in our DNA from day one. Through pioneering technology, we've made energizing the world our business. Commissioning the first oil tanker passing through the Suez Canal. Fueling the first ever transatlantic flight. Delivering the first shipment of liquefied natural gas by sea. And helping to guide the first astronauts to the moon. Providing new forms of reliable energy to a growing customer base. With pride, passion, and commitment. Through challenging times, Shell has always been there for its customers, keeping them moving, keeping them warm, keeping them bright. That's only part of our story. Today, we are a world-leading integrated energy company, serving 33 million retail customers, over 1 million businesses in more than 70 countries.
We're constantly evolving and innovating, delivering on our strategy and commitments, guided by our principles of performance, discipline, and simplification, strengthening our portfolio and capabilities to realize our potential for our people, customers, partners, and shareholders. As the world changes and your needs evolve, we'll deliver more value with less emissions and keep our promise just as we have done for over a century. You can be sure of Shell.
Thank you very much, Mohammed, and welcome everyone to our 2025 Capital Markets Day. It's great to see so many of you here in the room in New York Stock Exchange, and also a warm welcome to all of you joining us today online. As Mohammed alluded to, the video uses a phrase that many will have heard before. You can be sure of Shell. That phrase has been used in different ways over the years, but it nicely encompasses what we've been trying to do, to restore and to bring life to life across this organization. What do we mean by that? It comes down to confidence. Confidence that we will create even more value for our shareholders while reducing emissions. Confidence that through performance, discipline, and simplification, we will deliver what we say.
Confidence that we are strongly positioning Shell for the future, resilient irrespective of how the energy system evolves. Now, let's go back to Capital Markets Day 2023, or CMD 2023. We knew we had an organization of great people and some world-class businesses, but we also knew there were questions on our consistency, our focus, and our ability to unlock Shell's potential. We agreed with that. We moved with urgency and conviction. We decided to course-correct, challenge internal dogmas while undertaking a cultural reset. That correction spanned multiple areas. We sought to drive improved performance, embed cost and capital discipline, and make fundamental decisions across our portfolio. We sought to transform the company. Whilst there is much more to do, we are proud of where we are today, having taken the difficult steps when we needed to. The from and the to are clear.
We reduced the number of targets significantly, ensuring that the ones that we did set were purposeful and would instill focus across the organization. We also introduced the principles of performance, discipline, and simplification. As we proceed to the next phase of our journey, they will remain our guiding principles. These are major changes which require significant efforts, especially by our staff. I could not be more proud of how they are rising to these challenges and how they are enabling our transformation, helping us deliver the successes that we have enjoyed so far. I'm also pleased to see our collective efforts reflected in our shares outperforming peers and at the same time helping to drive our lowest net debt in nearly a decade, which positions us well for all scenarios.
This gives us the momentum to keep improving and to deliver even more for our staff and our shareholders as we continue on our journey to deliver more value with less emissions. At CMD 2023, another area we touched on was our desire to build a track record and earn back the trust of our shareholders. Our mantra of delivering on what we say we will do has permeated throughout the organization. By simplifying our processes and standards to help debureaucratize the organization, together with setting up more frequent performance cadence and much tighter management of capital, we are seeing real improvement, which is visible across all of our key targets. In fact, if you look to the left on the slide, you will see that we are over-delivering. This is particularly impressive in the areas of structural cost reductions.
We had a target of $2 billion-$3 billion by end of 2025, and as we stand here in March, we have already exceeded this. On shareholder distributions, we said we would distribute 30%-40% of our CFFO through the cycle, and we've delivered above that. It is not just the more value side that we've made progress on. On the emissions side, earlier this year, we reached our target of eliminating routine flaring. We also achieved a reduction in the net carbon intensity of the products that we sell, moving us closer to our target of a 15%-20% reduction by 2030. In 2024, we introduced an ambition to reduce customer emissions from the use of our oil products by 15%-20% by 2030. I can confirm that we are progressing well on that too.
Hopefully, what you can all see is that when we say we will do something, we deliver. I hope that as a result, when you walk away today, you have the same high conviction that we do, that we will deliver on what we have said. We have learned a lot over the last two years, and these lessons will serve us extremely well over the next period of our transformation. We are clearer on where we want to go as a company, where we should play, and where we need to step back, and how to help our people and businesses unlock their full potential. As we think through how to measure that potential, our North Star remains free cash flow per share growth.
Alongside this, as we outline in the second part of the presentation, we aim to enhance our capital, aiming for a ROACE greater than 10% across our segments in a normalized $70 per barrel oil price environment. We are extending our free cash flow per share growth target of greater than 10% per annum out to 2030 and believe that this continues to be a good proxy for intrinsic value creation. Alongside these long-term and more fundamental principles, today, we are also outlining the next phase of our transformation, with 2028 representing a key milestone year for Shell. We are raising our structural cost savings target to a cumulative $5 billion-$7 billion by the end of 2028 compared with 2022. We are further right-sizing our cash CapEx to $20 billion-$22 billion per year, from $22 billion-$25 billion.
We will continue to reward investors with higher distributions, moving our payout percentage from 30%-40% to 40%-50% of CFFO through the cycle. In summary, we are going further on all of our financial targets, building on the strong foundations that we have built during Sprint 1. Let me step back now for a moment. Shell has connected energy and people for 100 years now. It is what we do and what we will continue to do. While we cannot always predict the future of energy, our scenarios help set the bookends of possible outcomes and inform our portfolio choices.
Whether it's our Archipelago scenario, which reflects a worldview which is very much focused on owning resources or tighter border and trade security, not too dissimilar to what we are seeing today, or our recently published Surge scenario, which incorporates increased demand from AI into the energy system, one message is consistent. Demand for energy will continue to grow. Across all of these scenarios, we see gas, and in particular, LNG, being a winner. That is aligned with our portfolio today and our longer-term vision, which I will come to in the next slide. We expect that supplying LNG will be the biggest contribution we will make to the energy transition over the next decade, and we are positioning our portfolio to match this. At the same time, continued investment in oil will be needed to offset the natural decline rates of oil fields.
Aligned with our vision to sustain a material liquids production base, we are ready to take advantage of the growth opportunities ahead. As the demand for secure and affordable energy rises, it will need to be consumed with lower emissions. Lower carbon molecules and renewable power will play an important role supporting the decarbonization of the different sectors. EVs' share will grow in light transport. Biofuel demand will grow in heavy transport and in aviation, together with the increased use of natural gas as marine fuel. All these are foundations for maturing a set of high-quality, low-carbon business options, which we will talk about later. Ultimately, different outcomes and different rates of change across energy vectors are possible, but we believe that Shell's strength comes from a portfolio and balance sheet that aligns with the uncertainty of a transitioning multi-energy system.
Now, before delving deeper into our plans through to 2030 and the beliefs that underpin them, I want to lay out our longer-term vision to ensure that our investors are clear what they are getting into when they buy the Shell investment case. The vision we have is underpinned by the positions that we have created today. From the strength of our balance sheet that you'll hear more about from Sinead in a moment, to our strong free cash flow delivery that we will grow further, to the momentum that we have in sustaining the successful Sprint performance improvement journey that you have seen, I am confident in our future path. That path is about three great franchise businesses that drive our conviction in growing free cash flow, and all three are core to our portfolio.
Through our intent to fully fund growth across all of these, our investors can be sure of reaping the rewards of resilient and highly attractive shareholder distributions through not just cycles, but decades. First, in integrated gas, or IG. We are already the number one global listed LNG supplier, and we intend to remain a leading integrated gas and LNG player through to the 2040s. We believe LNG will be one of the most durable energy vectors through the energy transition, with very attractive growth prospects. We will aim to decarbonize our gas value chains and, over time, strive to develop and commercialize lower carbon intensity gases. Second, we are today the number one global lubricant supplier and a world-leading mobility platform, but we aim to be the most customer-focused energy marketer and trader through to the 2040s.
Our trading capabilities are one of our most important competitive advantages, and they add immense value to our portfolio, especially through the mobility short. We expect this value uplift, which is already material in products and integrated gas, to expand over time and help unlock new growth opportunities through deeper integration with our power, mobility, and low- carbon options. Third, we will sustain material liquids production as we expect demand to fall less than natural field declines. We will focus on basins where we have a competitive advantage and will prioritize cost and carbon-competitive molecules, which add and high-grade our leading deep-water and conventional oil portfolio. I hope you'll agree that we are shaping a winning portfolio for the future, one that offers our investors a differentiated investment case with underlying resilience and attractive distributions.
Our portfolio today is more streamlined than it has been for years, but we still have work to do to truly enable us to realize our full potential. Let me introduce a frame which we will use throughout the rest of the presentation to outline our plans across our portfolio. On the one hand, we have world-leading businesses offering focused growth across integrated gas, mobility, and lubricants, and we also benefit from adjusted earnings and cash flow stability and resilience within our upstream and products businesses. Combined, these represent around 80% of group capital employed and generated an attractive 15% return on capital employed last year. We will continue to allocate capital towards these businesses, and are confident that they will provide cash flow duration well into the next decade, which is far beyond current market expectations.
On the other hand, we have businesses where we are focusing our attention to unlock value and realize upside. Those are chemicals, power, and our low- carbon options, including low- carbon fuels, hydrogen, and CCS. Combined, these constitute the other 20% of the group's capital employed, but in aggregate, they are not delivering adequate returns. Our plan is to further high-grade returns in this portfolio and implement the business models and structures that will unlock the most value. Our overall investment case consists of three distinct characteristics. We offer upside price exposure through our IG and upstream businesses. We offer downside price protection from our resilient downstream businesses. Thirdly, best-in-class volatility capture through our world-leading trading capabilities. Let me now expand on these three to explain why we believe we have a portfolio that offers both focused growth and duration.
Firstly, in LNG, we aim to grow volumes within our overall LNG portfolio at a 4%-5% compound annual growth rate to 2030, which, as you will see later, is largely Brent- exposed. Across our combined IG and upstream businesses, we also aim to grow top-line production by 1% CAGR to 2030, supported by 1.4 MMbpd of liquids with a clear value over volume lens. We do not believe these growth elements and the resulting cash flow longevity, which extend well into the next decade, are fully appreciated today, but we are confident in their delivery. The second key characteristic of our portfolio is the downside protection as well as the longevity offered by our downstream businesses, including chemicals and products and marketing, and eventually, our low- carbon options.
While cash flows from our core IG and upstream businesses bring a certain degree of commodity-linked volatility, these downstream businesses offer very stable adjusted earnings and CFFO even with external volatility. Lastly, given the commodity and margin volatility that we expect will continue to be a feature of energy markets, we are better positioned than most to capture further value through our unparalleled trading and supply capabilities. The uplift that this provides will continue to bolster and enhance our cash flow delivery, from which our shareholders will also benefit. We do not often speak about our trading and supply capabilities, but our scale and our global footprint are unparalleled across the industry. We have been developing these capabilities and positions for decades, which makes them hard to replicate as the map of our global assets highlights.
As a result, trading has shown consistency in performance, resulting in tangible value creation, delivering an average uplift of around 2% to our return on average capital employed over the past decade. Indeed, across this time, we have not lost money across our commodity classes in any quarter. This is an underappreciated and undervalued aspect of Shell that is fundamental to the integrated nature of the company. Looking ahead, we expect our trading and supply capabilities to continue to contribute to the 2%-4% return on capital employed uplift. This uplift is possible because our scale in energy markets is just unmatched. We have the largest LNG capacity amongst our peers and one of the world's largest LNG shipping fleets, representing 10% of the global market. Beyond LNG, we trade more than 8 million barrels of crude daily.
In 2024, we physically traded more than 10 billion liters of low-carbon fuels. With hundreds of supply points worldwide, this portfolio represents one of the largest energy trading capabilities globally. Now, let me hand over to Sinead to detail how we plan to unlock even more value for our shareholders. Sinead.
Thank you. Let me first start with where we have come from. The first slide that Wael spoke to is one that makes me smile and makes me proud of everything the organization has delivered. We have sought to ensure that every capital allocation decision we take is in service of creating long-term value for our shareholders. At Capital Markets Day 2023, we stood here and outlined a revamped approach to how we allocate capital, with a conscious focus on increasing per-share value.
We went from the myriad of targets that Wael mentioned to an emphasis on free cash flow per share. Our conviction then and our conviction now is that our shares remain undervalued, which the middle chart demonstrates very nicely. This presents the management team with an opportunity to undertake buybacks at an attractive price relative to our underlying cash flows and with the full knowledge that there is much more we have to deliver. We have been building momentum. We went from a 20%-30% payout to 30%-40%, and that has translated into tangible results. Over the last three years, we have bought back more than 20% of our shares and also increased our DPS by 25%. Combined, this has helped us deliver peer-leading total shareholder returns.
Today, with confidence in our path forward, we are further increasing our payout to 40%-50% of CFFO through the cycle. We continue to see significant free cash flow opportunities across our portfolio and material upside in our shares, which is why we continue to preferentially allocate capital to share buybacks. By 2030, with our share price at these levels, we see the potential to repurchase up to a further 40% of our shares. For a company that has had a flat share count over the last 20 years of the century, our delivery since 2022 and our plans through to 2030 represent one of the most significant shifts in capital allocation in our history. Staying with the theme of capital allocation, let me outline our plans for cash CapEx.
We remain committed to making every dollar count, being unemotional with our spend, and delivering performance, not just promises. Despite inflationary pressures, we are today lowering our cash CapEx range from $22 billion-$25 billion per year to $20 billion-$22 billion for 2025 to 2028. This is about raising the bar for investment. It is about being strict and allocating more to the highest returning projects we have. It is about a disciplined approach to creating low- carbon options for the future. We expect to spend around $12 billion-$14 billion a year in integrated gas and upstream, both of which will continue to contribute significantly to cash flows and allow us to sustain our material liquids production and grow our LNG sales. In downstream and renewables and energy solutions, we aim to spend around $8 billion a year.
In renewables and energy solutions, we will take a measured approach, building positions to deliver cash flows in areas where we can leverage our strength, such as our trading capabilities. As we have previously indicated, our cash CapEx guidance includes a small amount of capital for bolt-on inorganic activities, and that will continue to be the case. We exclude other inorganic activity from our range, but would expect those, if they arise, to be directed towards integrated gas and upstream in line with our strategy. Given the discipline that we have shown and will continue to exercise, we are driving improvement in return on average capital employed across all our businesses. By 2030, this will mean a shift in capital employed towards the higher returning businesses that Wael described earlier. With that, let me move on to structural cost reductions.
In 2023 and 2024, the delivery across the organization has been excellent, helping us to reach our reduction target of $2 billion-$3 billion for structural costs one year ahead of plan. The majority of these savings in 2024 came from non-portfolio activities. For example, we now have a leaner corporate center, which helped us save some $700 million, including a reduction in the number of contractors by around 30% since 2023. Outside of the corporate center, at the front line, our staff are starting to spend every dollar as if it were their own. As an example, travel costs have come down some 40% compared with where we were five years ago. For a while now, it's an important barometer of cultural change. We are transforming Shell. Our people have stepped up and are at the forefront of this transformation.
As our ways of working change and our ability to challenge paradigms increases, we continue to identify ways to go even further. We're moving at pace to realize these opportunities, which is why today we are upgrading our structural cost reduction target to a cumulative $5 billion-$7 billion by the end of 2028 from 2022. This is about putting our principles of performance, discipline, and simplification to work, streamlining processes, and being purposeful in everything we do. The majority of the savings will come from non-portfolio activities. We see opportunities to further optimize our procurement and supply chains. We're excited by the latest technology and AI opportunities, which will help us become even more efficient. We will continue to identify opportunities to simplify further in the corporate center.
All of these will ensure we remain agile and competitive, and we will not stop looking for further cost savings beyond this target. One of our key priorities when embarking upon our first sprint was repositioning the portfolio, and we've certainly been busy. There's a lot on this slide, but we wanted to highlight the key strategic decisions that we have taken since we were last here. On Singapore, we moved from strategic review to divestment at pace, with the transaction expected to complete next week. We announced, signed, and recently completed the divestment of SPDC, which has been an overhang on our stock for some time. We showed cultural change in action by pausing HEFA, responding to a changing context, making a difficult decision with a project in flight, which is something we have not done enough of in our history.
Finally, we showed a willingness to challenge long-held positions, such as our presence in the North Sea, whilst exercising both agility and creativity in announcing a new JV, which will leave the combined entity better off than the status quo. We use the phrase pragmatic in our approach, dynamic in our response at CMD 2023. We hope, as we stand here today at CMD 2025, that you can certainly see this in action, and you should expect much more to come. Moving from the positioning of the portfolio to the positioning of our balance sheet, we stand here from a position of strength, which we have worked really hard to create over a number of years. In fact, we have one of the strongest balance sheets amongst our peers and the strongest we have had in nearly a decade.
Excluding leases, our net debt at the end of 2024 was around $10 billion, with gearing at 5%. Despite the progress we have made, we remain committed to maintaining a strong investment grade rating through the cycle, reinforcing the financial strength that underpins our long-term strategy. As Wael mentioned earlier, we have delivered on our free cash flow growth targets, and we remain confident that with our portfolio and performance focus, free cash flow will continue to grow through 2030. We will further outline how we will achieve this when we delve into the respective businesses in the next section. Our dividend remains a financial priority, and our confidence in sustaining a progressive approach is well supported, with our dividend break-even at around $40 per barrel.
Additionally, given that we view share buybacks as an attractive use of our cash, we will continue to allocate capital towards buybacks even at a $50 per barrel world, utilizing our balance sheet strength if necessary. We have been clear that free cash flow per share is the key financial target for the company. At CMD 2023, we introduced a target of free cash flow per share growth of greater than 10% per annum to 2025. Today, we're extending this target to 2030 as we drive intrinsic value creation. This is relative to 2024 based on organic free cash flow before working capital and derivatives and at a $70 per barrel Brent price in real terms. We have exercised discipline and focus to enable us to reach this position. Although we are pleased with where we are, we're not done yet.
Let me tie this all together and outline the rest of our financial framework. A progressive dividend growing 4% annually, cash CapEx spend of $20 billion-$22 billion allocated towards higher returning businesses, payout percentage increased to 40%-50% of CFFO, preferentially allocating towards buybacks, all whilst maintaining a strong investment grade rating. As I said in 2023, we take our responsibility as custodians of our shareholders' capital extremely seriously. We believe in pragmatism and balance, allocating capital based on value. We remain confident in our path forward and free cash flow generation. In summary, a strong balance sheet and a strong portfolio means a stronger Shell, and that is good for investors. With that, I'll hand back to Wael.
Thank you, Sinead. At CMD 2023, we set out four financial targets, and we clarified our four carbon targets during the energy transition strategy in 2024. We've met the financial targets, and we are on solid footing to achieve our carbon targets and ambition. Today, we leave our carbon targets unchanged while stretching the financial ones further. We're extending our target for free cash flow per share growth of more than 10% per year through to 2030. We're increasing our structural cost reductions to $5 billion-$7 billion by the end of 2028, lowering our capital spend to $20 billion-$22 billion a year from 2025 to 2028, and increasing our shareholder distributions to 40%-50% of CFFO through the cycle. We've come to the end of the first part of our presentation. Now, before we go to Q&A, let me summarize our position.
We're creating a portfolio that is built to win, that delivers more value with less emissions, that allocates capital and carbon with discipline and a value focus, that accelerates delivery through performance, discipline, and simplification, and that rewards shareholders with consistent, competitive, and resilient returns. We'll do this profitably for our shareholders, delivering both high returns on capital and high returns of capital. Thank you for your confidence and for your support. Mohammed, back to you.
All right. Thanks, Wael. Before we start, we'd really appreciate it if you could stick to sort of one to two questions each to allow for as much time as possible. Please do state your name and firm. Hands are already going up, which is great. With that, let's start. I'll try and cover the room, and there are some online as well. Why don't we start here at the front? We've got a few. Let's go with Biraj first.
Hi. Thanks for the presentation. It's Biraj Borkhataria, RBC. The slide that kind of stuck out to me was at slide 10, where you're addressing head-on 20% of your capital employed is basically not generating adequate returns or negative returns in this case. I'm assuming there's different answers to rectify that issue across the segments that you've outlined. Could you just walk us through in a bit more detail how you expect the path to go from minus 2% ROACE in those segments to a more adequate return? The second question is just on kind of market perception. You've been on this journey since CMD 2023. Sprint one, you could argue, is quite successful. Shares have outperformed the peers, but largely due to the earnings performance rather than the multiple.
As you're thinking about the journey going forwards, is it now the time to start thinking about doing something more radical in terms of value unlock, or is that more of a discussion for a few years down the line as you develop this track record? Thank you.
Thank you for that, Biraj. I think your first question, and correct me if I'm wrong, Sinead, we will cover in a lot of detail when we go into the second phase. We will go, Biraj, plan by plan on chemicals, power, and then some of the low-carbon options like LCF, hydrogen, and CCS. If you do not mind, let me park that, and we will come back to it. If you feel that we have not fully addressed it, we can come back in the second set of questions. On your second question around where we feel we are at the moment, I think, firstly, we came here almost 18 months ago, 19 months ago, to be able to tell the story and to be able to re-earn confidence.
I do think we stand here today in a much better place, having indeed built up a consistent track record of delivery, having delivered on the promises we made, and having the momentum to be able to accelerate our strategy as the next version of the story. As you touched on, whether it is measured on TSR improvement, which is some 30%, or whether it's on share performance, we have outperformed our peers, but we haven't fundamentally re-rated. At the end of the day, what we are focused on is very much what are the sequence of actions we need to take to be able to achieve the outcomes. We've taken the first set of actions. Today, you'll hear a bit more about what we're doing for that 20%, including chemicals, et cetera.
You've seen us continue to revise upwards from 20%-30% all the way up to 40%-50% our distributions. We are confident, as a result of that, we will continue to move in the right direction. What you will see is that we will continue to focus on unlocking value for our shareholders through that sequencing of decisions that we are taking. While all that's happening, the one big arbitrage opportunity that we are able to play for the benefit of lifecycle returns for our shareholders is buybacks. Hopefully, what you've heard today, with a 40%-50% CFFO, the preferential allocation will continue to be to go after those buybacks, as Sinead said, with an ambition to be able to continue to grow that towards the potentially 40% of shares being purchased over the next five, six years.
Okay. Shall we take a question there, Kelly, at the front? Lydia, please.
Thank you. It's Lydia Rainforth from Barclays. Two questions, if I could. Sure of Shell, it's probably 20 years since I've heard that phrase actually used. Can you just talk about the confidence level that you have to actually go back and use that, and how much support there is internally, actually, for that? Secondly, just coming back to the cash flow side of it, I think it was slide 11 where you have that really interesting chart of the longevity from integrated gas and marketing actually growing into next decade and sustaining. Ultimately, that looks like it covers where your CapEx level is today. Is that part of what gives you confidence around that 40%-50% number, being able to sustain that longer term and potentially more?
I can come back to the first one. Did you want to start with the second one?
Sure. No, indeed. Thank you, Lydia. The only thing I will say, it's really nice to be able to say with confidence, you can be sure in Shell. It has a resonation across the organization. In terms of the cash flows, you're right. On that chart, what we're trying to show you is the different parts of our business. Of course, we have upside potential with our diet in terms of price, and you see that through our upstream and integrated gas businesses. What you see and why we put marketing and IG together was exactly that growth potential. The IG, our integrated gas business, through our belief in terms of LNG sales, you see that 4%-5% coming through.
But also marketing, and what you'll hear a little bit more about later is really about how we intend to generate even more cash flows from those businesses. You hear us talk about premium, et cetera, and where we expect to go there. Those combined actually add to sort of that growth story for the company. There is much more to the growth story, and we can take that through and unlock it a little bit more as we proceed. There is that confidence. Beyond that, of course, is the growth that we see in terms of upstream as well. When you put upstream and integrated gas together, you end up with a 1% production growth CAGR through to 2030. That is really well backstopped by projects, which we'll delve into, the specific projects and where we see the break-evens of those coming up.
Thanks, Sinead. On the you can be sure Shell, I think if I step back for a moment, Lydia, what are the winning characteristics of a company in our sector? Firstly, consistency of delivery and distributions. Secondly, resilience through the cycle to the energy transition. Thirdly, disciplined capital allocation and holding, making the right calls even when the macro is challenged. The you can be sure of Shell for us, from an investor lens, is making sure that we're playing across these. You're exactly right. To broaden, you can be sure of Shell. It starts with the confidence that our customers have to buy our products. It starts with our staff, our people, who hopefully many are watching today. There's a spring in their step. I have to acknowledge it's been hard because we are changing a very big company.
I still remember walking off the stage after CMD 2023 and no one asking me about the content, but saying to me, "The monster is going to consume you guys. You won't be able to deliver what you're saying." This is a testament to them and what they've been able to do over the years. Once we have that spring in the step, that's why we can start to move forward. The you can be sure of Shell for me is, yes, confidence, but importantly, with humility.
Because the world is uncertain, and what we need to be able to do is to focus on what's in front of us, what we can control, and to build that confidence through the good and the bad times, and to be able to have a team that's hungry to win and to be able to hold on to that mantra for well into the future.
All right. Shall we take the table at the back? Paul. I'll come to you.
Thank you. Paul Cheng, Scotiab ank. We're just curious that, I mean, compared to your peers, they are targeting to grow their liquid production. You guys are looking to stay flat for the next several years. Is it a function of your view on the global oil market, or that is more opportunity or organizational capability limit that to make you make that decision? What kind of reserve replacement target that you have? The second question, if we look at, for I think one big thing for you and Sinead is that simplification and make it more efficient organization. Can you give us an example? Are we talking about cutting off some of the layer? I mean, with your recent announcement in the management change, you actually have two heads for integrated gas and upstream. You installed one head before.
We're just trying to understand that, I mean, how that reconciles in terms of simplification and make it more efficient. Thank you.
Thank you very much. Let me take the second question if you want to address then the liquids one. The blessing and the curse of being a 115-year-old company with an incredible portfolio is that over time, you allow bureaucracy and complexity to creep into the organization. A big part of the sprint was to just call it out and start to be able to declutter that. There are a couple of points you touched on there. I mean, one around how we are structured, I think, organizationally. Zoe and Huibert have made a huge contribution to getting us to where we are today. What we have announced recently is that colleagues who were reporting into them have essentially moved up. We have delayered the organization. Because in this step of the journey, what we want is much shorter lines of communication.
We're doing the same, by the way, with our capital allocation, where one of the biggest things you should take away from today's presentation is, A, performance going further, and two, an appetite by this management team to go after capital reallocation in favor of unlocking healthier returns out of every dollar we are employing. We are moving the role of capital allocation squarely to Sinead and myself with the support of the incoming executive committee to really get much tighter on a much more frequent cadence around this. Those are some of the bigger examples of simplification. Sinead touched on things like travel and the like, how we've been able to just do work in different ways. There are multiple examples. I do these recognition calls on a regular basis, and one that sort of came through recently from legal, for example.
We do thousands of non-disclosure agreements, all requiring a lawyer to prepare. Through one of our business operations in Krakow and Poland, we have now developed essentially a risk-based NDA, where some 85%-90% of our NDAs, you can press a button and have them without talking to a lawyer, and 10%-15% require or get escalated to a lawyer because of the context. There are 20 of those examples, and we can talk about them in the break. The point being, every single one of these is now starting to come bottom up, and that, to me, is the sign of culture change.
Thank you. Apologies, you're going to have to wait until I do the oil one. Paul, your first one was really around our views on the global oil markets, et cetera, and why our liquids production, you commented on, is flat. What I'd remind you of is we very much believe in the need for oil and gas for decades and decades to come, but specifically on oil, which is what you're referring to here. Our liquids production, what we're looking to do is, of course, ensure we maintain or sustain that very material levels going out. What you'll see as we talk through in the next section is we'll talk into a little bit more detail on it.
We'll talk about the fact that whilst we have very attractive businesses, there is a decline rate to that, and we will continue to invest to be able to have that materiality going through. There is no cap. That's not what we're suggesting on that. We're basically just simply giving you a view out to 2030, which is not priced in at the moment. I think that's very important because I don't see you pricing that in. That's showing you that we will be able to maintain all the way through to 2030. It's not about organizational capability or anything else. It's purely about our focus on ensuring that we backstop out to 2030 and show you line of sight to 2035, which will be the next discussion. You also alluded to sort of the reserves replacement targets. You've heard me say this before.
I don't have a target. What I care about more is how I make money out of this stuff. Therefore, it's very much focused in terms of the high margin barrels that will come through. We'll spend a little bit of time on it in the second section, where you'll see some of the numbers on our thinking around that, which is why I'm not going to go into more detail now.
All right. Can we have, we'll show some love to this side of the room. Michele has got his hand up at the front here.
Michele Del la Vigna from Goldman Sachs. Congratulations on the very strong delivery since the last capital markets day. I wanted to ask you really one question in two parts. We see two big discrepancies in valuation. On one side, the issue of sum of the parts. For instance, your marketing business could easily trade on 10 times EBITDA, as Shell, you trade between three and four. The other big discrepancy is U.S. versus European valuation. I was wondering, clearly you're doing everything you can to improve the quality of the business, the resilience, and the profitability. At some point, do these discrepancies come to the point where something needs to be done? On one side, for instance, for marketing, I'm thinking, do the synergies with the rest of the business justify keeping a business that could be so valuable on a standalone basis?
On the other side, I think also the issue of relocation, clearly very complex, very difficult to execute. At some point, if that valuation gap really does not close year after year with improvement in returns, is there something that needs to be considered?
Given this is one question, two parts, do you want to kick off, and then I can supplement?
Does that mean I get to go in either direction?
Anywhere you want to go.
This is good. In terms of I'll give you the relocation one, because I think that's more suited for the CEO at the moment. The marketing business, per your point, let's just take it back to what's the principle. Our overriding principle is about creating intrinsic value. You know that. That's exactly what's on our mind. There are no sacred cows in this company. We look at exactly where we can realize value across all parts of it. You see it, whether that's going after things in the North Sea, which has been core to our heart. We are in the North Sea, and yet we're creating a joint venture. We saw an opportunity. We saw an opportunity to partner with somebody else to create value.
When you talk about our marketing business, and we'll spend some time on it later, which I realize I keep dancing back to later on these, what we're doing there is focusing in on improving the underlying. Improving the actual performance of that, and I hope you see that. I think there's some team here who'll be able to answer some of the detail for you at the table as well. What they are doing is actually driving improved ROACE across that business, and it's coming through. They're really delivering each and every day on that. We see a huge amount of integration for our marketing business. It creates a shorter, and I think Wael talked about that a little bit in the speech as well. Our trading business is able to maximize value.
Frankly, what we see is an awful lot of the trading houses trying to buy into some of these, whereas we have that integrated chain. I'll leave you to do the U.S.
Yeah, thank you, Sinead. Michele, thank you for that for the question. Let's step back, right? Where were we in 2023? At the end of the day, I have to trust that the market is going to value a share in the right way. We have a very comfortable proportion of U.S. investors in the Shell share. We went back to fundamentals. That's what we believe in. The fundamentals said at 20%-30%, we weren't distributing sufficiently, and we were inconsistent in our delivery. The sprint was a compressed 10-quarter window to really just re-earn that confidence around the consistency and the competitiveness. We addressed one part of it, but we're not done.
The other part that we still need to do is to continue to improve that competitiveness, but it is important to recognize that the longevity question has been a big question, and that's what we want to also try to dispel today. You've seen the first part of dispelling it, which is the IG, the marketing growth. You'll see a bit more, as Sinead's already alluded to, around the underlying liquids growth. I would very much like when you walk out of the room today to have line of sight not to 2028 only, but to 2040. This is what this company is building. It's building for the decades ahead, not for the next couple of years ahead. In addition to that, we are looking to build resilience because we are quick to forget the difficult times. Today, we are still in a very healthy macro overall.
We want to build the resilience that gives us the ability to navigate, whether it's through buybacks at $50 or potentially countercyclical moves. That's what we're trying to do. We're playing this game for the long run, not trying to sort of get a sugar rush for our share price in the short term. That's not what we're doing. What you can be assured of is the following. We are always going to look at opportunities to unlock more value for our shareholders, and we will be very deliberate and methodical in the way we're going to sequence our moves to make sure that we are pushing the right buttons at the right points in time so that over the coming few years, we truly are able to realize the value that sits within our portfolio.
Okay. Over here, Roger.
Thank you. Roger Read, Wells Fargo. The 2%-4% uplift in trading returns, we've come off a pretty volatile last few years, so 2% and volatility, generally speaking, helps that business. What should we be looking for over the next, say, to 2028 or 2030 to get to the 4%? Has there been a restraint on this business that's being released? Is it a function of increased LNG or more electricity trading? I'm just curious how you get there and then how you think about the risks that you need to manage in putting a larger trading target out.
Yeah. Our trading capability is core, Roger. You're right. It's something that differentiates us and has been able to allow us to extract value compared to many others. What we did was actually give you a 10-year lookback, which is why we gave you the sort of greater than 2%. If we'd gone, obviously, to closer years with the volatility, it would have been much higher. That is why we went longer. We're trying to give you that long-term view, as Wael said, to be able to build through decades here. Our trading business is core to what we do as a capability rather than a business. It manages to use the assets from our different business leaders here. Of course, one of the things that Wael has done is to bring trading up to his executive committee so that he has line of sight.
He has that ability to be able to optimize across it, which means they'll be much more integrated in everything that we do. What do we really need to do? We need to get out of their way and allow them to be able to actually focus in on where they can create different value. We have strong constraints around them in terms of the sandbox that they operate on. This is not freedom to do whatever they wish to do. Be very clear on that. It is very much about ensuring that they understand the liquidity, the impact on the group, and the volatility that comes with them. It is a dialogue. That is where having Andrew sitting at the table with us, being able to have that discussion, allows us just to unlock. We are very much focused. You see it in our leases, actually.
We have a higher amount of leases than, frankly, any others of our peers. That is because of our trading business. It is in service of our trading capability. Why do we allow for that? Because of the returns that they manage to generate. You see it in our LNG business with the shipping that we have. You now see it as we move towards power, and we will discuss it a little bit later as well, the move towards flex. You will see it in flexible generation and the move there. That will allow Machteld to make some core decisions and make sure that she is integrating to ensure that she actually maximizes or gets the benefit from the trading capability.
It is more of the same rather than change, but it is about making it more visible and hoping that you see the visibility of it, and we can extract even more value.
Thank you.
Question over the back there. Kelly.
Yeah, hey, Jason Gabelman from TD Cowen. You mentioned that if you do M&A, it's likely in the integrated gas and upstream. This is kind of continuing on a theme that we've heard. As you think about what U.S. peers have done, where they've kind of done large M&A in upstream to shore up their resource base out beyond the 2020s into the 2030s, and that's clearly a point you're trying to drive home, to what extent is that something you want to accomplish over the next 10-15 years? Then tied to that, as you think about your capital framework, the 40%-50% CFFO to buybacks, if an opportunity arises that makes you test that level, would you consider changing it? Thanks.
Let's break it into two. Let me start with the M&A and maybe if you want to talk to the financial framework. We were clear, I think, in the Sprint that we saw significant value in our own shares, and therefore every dollar was going to be allocated, every marginal dollar was going to more likely be allocated to buybacks. Our share price was depressed, particularly compared to peers, and we did not feel that using our paper for that purpose was the best approach. Hopefully, you have seen us stick to that despite, on a weekly basis, a rumor that we were going to go buy someone or buy the, we have been very focused on it. Now, where we are today is I think we have, I hope we have earned the confidence of our shareholders to be able to make value-based decisions.
The great news is with the $20-$22 billion of capital over the next three years, we can deliver 10% plus free cash flow per share growth. That's just doing our thing. That already makes it one of the most compelling stories, I suspect, in our peer group, and that's without doing anything beyond that. It is also true that our integrated gas and our marketing businesses have a very good runway, as we've described, up to 2040. Upstream has a runway through to 2030 and beyond, of course, we will opportunistically look at a bolt-on, an opportunity to be able to go inorganic if we see something that's accretive, but the bar is very, very high. The bar has to be high because the alternative is to deploy that capital into our buybacks.
The final thing I'd say is one of the slides we used up there around the vision is a very important slide. I shared that with the organization two, three weeks ago now. We've now really tried to articulate what is the company that Shell will look like in the future in 2035. Anything we can do to be able to continue to accelerate the realization of that vision, we will look into. It has to be matched with a positive contribution to free cash flow per share. Otherwise, what's the point? It is not strategy without value delivery, nor value delivery that's aimlessly going around the place. It is going to have to be the combination. Where does that leave us from a financial framework, Sinead?
In a wonderful place. Because as you know, we've spent the last couple of years shoring up our balance sheet. We did it purposefully. We did it with intent, and we made sure that we end up with a peer-leading balance sheet at the end of the day. I talked about where we are from a debt perspective. We're incredibly low. At the end of 2024, less than 5% gearing without leases in place. Where does that leave us at the moment? It leaves us with a balance sheet that's robust throughout any scenario, whether that's a scenario of M&A, whether it's a scenario with oil prices, et cetera. It gives us space, and it gives us room compared to others. At the same time, of course, we're driving that share price up, which makes our paper more valuable.
At the heart of all of this is back to creating value for our shareholders. While you talked about it, the free cash flow per share, but also those distributions, that 40%-50%, I would not be standing here telling you 40%-50% if I did not believe we could do it through the cycle. That is really what we have been aiming to do. That balance sheet is there for us to lean on if we need to lean on it. Fundamentally, it is about making sure we as a management team drive the free cash flow of this business to give us those options into the future.
Okay. Martin?
Yeah, hi. Hello. It's Martin Russell, Morgan Stanley. I've got two questions, if I may. I appreciated a couple of lines in the statement about sort of intending to stay a leading player in global gas and LNG. It gives good sort of strategic direction of travel, and I think it's a helpful description. I wanted to pick you up on the intent to stay a leading LNG player. Specifically, I wanted to ask you, would you think the investments you would need to do to stay there? Because clearly, the global LNG business is growing. Are you looking for new FIDs? What kind of investments are required to stay at the front? The other one I wanted to ask you related to the, well, to the current situation. Clearly, trading is very important for Shell. It's a major earnings contributor.
Also, at the moment, we're in a world with tariffs, counter- tariffs. You mentioned the Archipelago scenario. I had to think back to mountains and oceans. To me, it looked more like mountains and oceans. Maybe it's Archipelago. Anyway, it feels like sort of trade barriers are growing. Look, it's hard to look inside your trading business, but I can imagine that it has some sort of implication, either a tailwind. It could be that perhaps we have more dislocations in the market that your traders could benefit from. Maybe it's a headwind that trading just becomes more difficult as these barriers go up. I was wondering if you could give us a perspective on how that situation could impact this part of the company.
Martin, when you start to know the names of all of our scenarios in the past, it shows how long you've been covering us. Thank you for that. Let me cover the first one, and then Sinead can talk a bit to where our trading situation is at the moment. You're right, Martin, and this was what I talked about two to three weeks ago with the organization, was crystallizing that vision, the purpose of the company, what we're trying to do, and what is it all in service of, as well as the how we're going to do it. It's a big statement to make to be the world's leading integrated energy company. What does it entail? At the heart of it, and we'll get into some of the details around this, I think it requires courage of conviction. LNG is a great example.
We are absolutely convinced in every scenario, LNG is going to grow, whether it's driven by the Asian demand growth, whether it is driven by coal-to-gas switching in general, whether it's the adjacency with renewables to be able to make sure that the grid has the sufficient backup, whether it's the AI boom in the U.S. and beyond. Gas is going to be key, and LNG is going to grow from 13% of the overall gas mix to around 20%. A real focus. In that space, that courage of conviction means delivering what we have and potentially taking more opportunities as they come. We do not need a lot of inorganic there. It is very clear where we are going. You look at the list of projects we have, and you can see that we can build runway through to the 2040s. In upstream, it does require investment.
You will see later on close to 1 MMbpd of projects coming on stream to be able to deliver that on a compelling break-even price. In our ambition vision to become the most customer-focused energy marketer and trader, that does not require massive new capital. It is already factored into the $8 billion that we are going to be putting into downstream and renewables. That allows us to methodically grow that business to be able to have the resilience and the cash flow support in the future. What you are hearing today is a vision that organically can deliver a lot of that with selective opportunities to be able to accelerate, fast-paced it as and when they come. Sinead?
In terms of the trading capability, I think the important thing here is we're not a pure trading house. We have that linkage into the assets, which means it's a little bit of a different scenario for us than some of the pure trading houses. Because fundamentally, this group of people will produce the flows that our traders can actually use. Whilst, yes, we're seeing a lot of different headlines and different changes and regulations occurring day in, day out at the moment, what it means is they have certainty of supply coming through, and they have the ability to optimize. They can take those volumes and move them to where they need to be. Volatility is something we like. We've talked about it before. Our trading capability helps us be able to deliver against it.
The nature of that volatility is a little bit different at the moment. We're conscious of that. As an organization, we're taking a little bit of a pause to say, where do we want to play with the volatility and where we don't? That's just at this moment in time. I wouldn't characterize it as headwinds specifically. What I would say is it allows us to be able to extract the value that we have from the underlying businesses more and focus on that. The traders are watching that and just taking their positions with focus. As I said, back to those sandboxes we give them, it makes sure that they don't go too far outside of that.
Thank you. Just as a quick process check, while Sinead was clearly eager to get through the presentation, and we finished a bit earlier than anticipated, we will end the Q&A at 10:15, but still stick to the 15-minute break to respect those of our colleagues and investors and others who have joined online. We will do that. A question at the front here, Doug?
Thanks, Mohammed. Thank you for the presentation, guys. It's great to see the update. I guess I'm trying to decipher the numbers. It's Doug Leggate from Wolfe Research, incidentally. I'm looking at slide 18, and I'm listening to the commentary that Sinead, you said you could buy back 40%. You think you can buy back 40% of the stock through 2030. You're also using a flat real oil price, which gets us to about $80 by 2030. My question is, what is the free cash flow growth in absolute terms over that period? My follow-up, I guess, is that while you talked about taking tough decisions during the macro cycles, your balance sheet is in fantastic shape. I guess my question there would be, are you prepared to lean in the balance sheet to execute your buyback plan?
Second question, absolutely. First question.
That was short. We're going a bit fast on some of these now, and Mohammed's going to point out. No, indeed, Doug, there's two things. Yeah, so leaning on the balance sheet, I'll just confirm that we created a balance sheet to be able to lean on it. That's exactly what it is. We need to look through quarters. There will be volatility quarter- on- quarter. You've seen us do it before, where we've ended up continuing to focus in on the buybacks, even though free cash flow had come down in a certain quarter. That's what we do. We look through. In terms of the free cash flow growth, let's just take a step back and look at it. The scenario we gave of up to 40%, or some 40% through 2030, you're absolutely right. It was done on flat. It's a scenario.
It's just to give a bit of a feel. And it's at these share prices, to be clear. You keep mispricing us. We'll keep buying back shares. That's really what the message I wanted to give around that. When you look at our free cash flow per share target, we've talked about 10% CAGR through 2030. Of course, it's not always linear. You'll know that there will be different periods during it. You know what we're doing at the moment. Even if you just take what we've been doing in the last couple of years, it's really at that 6%-7% in terms of buybacks. You can see that coming through. Therefore, where do I need to see growth? Where do I need to see growth? I see it in a number of places.
I see it in terms of marketing, and we discussed that earlier in terms of both our mobility and our lubricants business. You see real growth coming through on that. We will detail it out a little bit more in the coming period. We see it in terms of our chemicals business. Some of the changes that we are making, whether that is in terms of divesting Singapore when that comes through or Monaca and getting it up and running, that shows growth in our cash flows as well. That is ignoring most of the macro, so I am ignoring those aspects. Power. You look at our power business of where it is now as we move towards flex. There is some growth in there as well. We can detail further numbers later on if you would like to go through it.
Those aspects, and beyond that, if I were to take structural OpEx coming out, if I were to look at trading, which we have not priced in in a significant amount, we have got a baseline through our organization, sorry, through our numbers here. It is a flat sort of area to be somewhat conservative on it. That gives me the confidence in terms of being able to say, can I easily backstop that 3%-4% of absolute growth coming through? We have totally ignored, by the way, the LNG side of things as well. Absolutely, I can. That is without macro or anything else added into it. I am pretty confident in terms of that absolute growth coming.
Okay. Paul?
Thanks, Mohammed. Paul Sankey, Independent Research. The part B of my question actually was just asked, which was about the relocation potential re-quoting of Shell in this building. I have to say my view has completely changed. I now think that being the number one stock in the U.K., dominant global LNG player delivering will potentially be a very powerful thing for you. That was the second question, which was about relocating, which was going to follow on from your meeting last week in the White House. Our understanding was that it was a two-and-a-half-hour meeting, that Donald Trump was present for the entire meeting and was engaged. There was no discussion of oil price nor OPEC for antitrust reasons. Anything that you could say about your perspective on the meeting as Shell would be very helpful to us here. Thank you.
Thanks, Paul. Firstly, it was, of course, a privilege to be in the White House. The U.S. is a major, major source of our investment dollars. Actually, the highest capital employed sits in the U.S. for us. I think a couple of points. Firstly, really good to be able to see the energy sector back at the top of the agenda. We welcome that support because for far too long, I think, the narrative has ignored some of the basic provision of energy, of which oil and gas continue to be a critical, critical part. What was very clear was the administration's support, which we very strongly welcome. In addition to that, what became clearer and clearer is the role that Shell is playing here in the U.S. is particularly powerful. I'll just give you three examples.
We are the largest operator and producer in the Gulf of America . It is very clear that the administration is going to go back to much more predictable leasing of lease sales, which is critical. We are building infrastructure that is amongst the lowest cost, lowest carbon intensity molecules anywhere in the world. The ability to be able to be the largest player following through on that opportunity, I think, is key. That was a key element. Secondly, we are the largest LNG off-taker from the U.S. with the removal of the pause on LNG, and I think a re-acknowledgement that LNG plays a critical role in the energy transition. That, again, is positioning a company like Shell to do our bit to be able to bring value.
The third bit is what we're doing in particular in our chemical space in a place like Pennsylvania, bringing jobs, investing in an environment that is advantaged in so many ways, feedstock-wise, the proximity of our customers, and so on and so forth. It was pleasing walking out of that meeting and reflecting, is the administration's agenda misaligned with ours in any way? Actually, in so many different areas, there's very strong alignment. We're very proud to do our bit as well to be able to bring affordable energy to the folks here in the U.S. and beyond.
I didn't make a quick question.
Indeed. That's a separate topic. Thanks, Paul.
All right. We have about four minutes or so left. Why don't we make this the final question? After this, we will take a 15-minute break. For those joining online, please stay connected as we will make sure we are here sharply at that point. Maybe Matt at the front here.
Thanks. Matt Lofting at JP Morgan. You've referenced several times the point while on longevity and clearly extending the free cash flow per share growth objective to 2030 speaks. I wonder if you can just put a perhaps more of an industrial or resource-based slant onto how Shell has looked at the 2020 to 2022 CapEx frame and some of the analytics that you've assessed in terms of being confident and having conviction that that's a sufficient level of spend to sustain the business through 2030. Then, when you talk about being the most customer-focused marketer in the industry, can you just talk about how Shell operationalizes that viewpoint and perhaps where the competitive edge around that is, given that I'm sure several of Shell's peers would aspire to the same thing? Thank you.
Thank you very much, Matt. Let me take the second one and invite Sinead to reflect on the first one. I think, and I touched on it in the speech, the moats, if I could use that word, the moats that we have built are very difficult to replicate. We're talking about not just selling to the customer, but the arteries that deliver energy, whether it's molecules or electrons to the customers. The strength of that part of our business is the bread-and-butter pipelines. It's the storage terminals. It's the access into the airports to be able to supply 20% of SAF to North America and to Europe. It's our leading, globally leading LNG bunkering facility, of which we have 12 ships delivering LNG to our customers all around the world.
Those elements put together allow us to play across that entire value chain from point source of production through to those infrastructure control points into relationships that we have built with our customers, with a brand that is recognized, with the best example. People say to me, well, you talk about a $50 billion worth brand. What does that mean? Put aside the number. What it means is when we have typically acquired a retail site and rebranded it to Shell, the volume increase, and David Bunch is here who runs our mobility business. Just ask him about some of the numbers that we get to by rebranding. It is how do we leverage that in every part of that energy value chain. Those are the elements we are looking to continue to hone.
It is an asset right, I'm very deliberate in those words, asset right rather than an asset light or an asset heavy. It's an asset right investment to be able to continue to build those control points for the energy system of today and to pre-build for the energy system of the future and making sure that we continue to play through the power of our marketing businesses and the power of our trading capability to really own that space is something which we are very deliberate in pursuit of.
Matt, on the capital frame, let's take a little bit of a step back on this. First and foremost, my focus is on just the given, delivering the dividend and delivering that progressive dividend. That's a given. Next, it's about, as you say, making sure not only do I maintain the current business, but actually give it enough to grow where it needs to grow. After that, of course, I have the capital allocation decision of either buybacks or maintaining the balance sheet. We've just discussed the balance sheet. It's in a great position, hence the preferential buybacks. Ultimately, what I've got is a decision around, are we putting more towards capital investment? Are we putting more towards buyback? That healthy tension is there across the organization because they know there's always an alternative.
It does mean that we are not short of capital. We're not having to constrain ourselves. That's definitely not the situation. What we see with the 20-22 is, in effect, what have we done? We have looked at basically, if you look at the reductions, remember from 25-28, if you go back a few years, the money has come out of inorganic in downstream and renewables. That's where the money has come out. Why are we comfortable with that? Number one, it's about we spent a lot there, and we now need to get the value out of those businesses. We're very much focused on that. You'll see it as we discuss the ROACE improvements, et cetera, on that. Secondly, it's about the fact that we've got higher returning businesses elsewhere for now.
It is about, therefore, making sure that we protect and actually sustain and grow our upstream and integrated gas businesses. When you look at the $12 billion-$14 billion of CapEx that we are putting in there, Matt, I am really comfortable that we have enough to not only sustain, but actually to allow for growth. Actually, in those numbers, in all of our numbers, we have got about $1 billion-$2 billion of inorganic coming through. You actually see that we have just done Ursa, of course, a deal on Ursa where we increased our percentages. There are a number of others, Kaikias and stuff as well. Back to where Wael put our strategy, he talked about us sustaining material liquids. We have got the capital to do that. We talked about maintaining our position and growing our position in LNG. We have got the room to do that.
We have a backstop of projects that lets us get there, which we will discuss shortly. Back to that core business in downstream and renewables, marketing has invested heavily. It has enough now to do the runway and actually improve the returns on that. You have a chemicals business, which Machteld is thinking through just how to position that, really doing self-help, et cetera, but less about growth. There is a small element in there. Of course, power is about reallocation of capital. That is the focus here. This is about reallocation of capital across Shell, not reducing it fundamentally.
All right. So we've just eaten into our own breaks a little bit because we like round numbers. So we'll be back at 10:30, so 12 minutes or so from now. Thank you.
Thank you.
I think it's going to be a long, long time till touchdown brings me round again to find I'm not the man they think I am at all. Oh, no, no, no. This is what I should have said. I thought it, but I kept it. I think it's going to be a long, long time till touchdown brings me round again to find I'm not the man they think I am at all. Oh, no, no, no. This is what I should have said. I thought it, but I kept it. Girl, close your eyes. Let nothing get in between. Don't try to find anything that you can do. Relax your mind. Lay back and move with your mind. You've got a pill that I need, and a weekend ride to boogie. Share that feeling.
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Rock you into the sunlight. I want to rock with you all night. Rock the night away. Feel the heat, feel the heat all night. Rock you into the sunlight. Baby, you can hang me under the lights, diamonds under my eyes. Turn the rhythm up. Don't you want to just come along for the ride? Pull my outfit so tight. You can see my heartbeat tonight. I can take the heat, baby, best believe that's the moment I shine. 'Cause every romance shakes and it burns. Don't give a damn. When the night's here, I don't do tears, baby, no chance. I could dance, I could dance, I could dance. Watch me dance, dance the night away. My heart could be burning, but you won't see it on my face. Watch me dance, dance the night away. I'll still keep the party running. I wouldn't get out of place.
Lately, I've been moving close to the edge. Stupid looking my best. I stay on the beat. You can count on me. I ain't missing no steps. 'Cause every romance shakes and it burns. Don't give a damn. When the night's here, I don't do tears, baby, no chance. I could dance, I could dance, I could dance. Watch me dance, dance the night away. My heart could be burning, but you won't see it on my face. Watch me dance, dance the night away. I'll still keep the party running. I wouldn't get out of place. When my heart breaks, when my world shakes, I feel alive, I feel alive. I don't play safe. Don't you know about me? I could dance, I could dance, I could dance. Even when the tears are flowing, they're diamonds on my face.
I'll still keep the party going, not one hit out of place. Even when the tears are flowing, they're diamonds on my face. I'll still keep the party going, not one hit out of place. Watch me dance, dance the night away. My heart could be burning, but you won't see it on my face. Watch me dance, dance the night away. I'll still keep the party running. I wouldn't get out of place. When my heart breaks, when my world shakes, I don't play safe. Don't you know about me? I could dance, I could dance, I could dance. All right, I'm ready now, ready now. I ain't going to, I ain't going to fall back now. All right, I'm taking off, taking off, taking off, taking off. All right, I never asked, never asked. You want to, you want to be my lover.
Tonight, I'm taking it, taking it, taking it. If I look anything else, I'll just turn it off and send it home y'all. Baby, come to my room, come to my room, come to my room. If I look anything else, I'll just turn it off and send it home y'all. Baby, come to my room, come to my room, come to my room. If I look anything else, I'll just turn it off and send it home y'all. Baby, come to my room, come to my room, come to my room. If I look anything else, I'll just turn it off and send it home y'all. Baby, come to my room, come to my room, come to my room. All right, I'm ready now, ready now. I ain't going to, I ain't going to stop right now, no.
All right, I'm taking off, taking off, taking off, taking off. All right, I never asked, never asked. You want to, you want to see my life. Tonight, I'm taking it, taking it, taking it. If I look anything else, I'll just turn it off and send it home y'all. Baby, come to my room, come to my room, come to my room, come to my room, come to my room. If I look anything else, I'll just turn it off and send it home y'all. Baby, come to my room, come to my room, come to my room, come to my room, come to my room. If I look anything else, I'll just turn it off and send it home y'all. Baby, come to my room, come to my room, come to my room, come to my room.
If I look anything else, I'll just turn it off and send it home y'all. Baby, come to my room, come to my room, come to my room, come to my room. If I look anything else, I'll just turn it off and send it home y'all. Baby, come to my room, come to my room, come to my room, come to my room. If I look anything else, I'll just turn it off and send it home y'all. Baby, come to my room, come to my room, come to my room. I'm tired of love till we were upside down. I'll be the bad guy now, but no, I ain't your proud. I couldn't be there, even when I tried. You don't believe it. We do this every time. Seasons changed and our love went cold. Feed the flames 'cause we can't let go.
Run away, but we're running in circles. Run away, run away. I dare you to do something. I'm waiting on you again, so I don't take the blame. Run away, but we're running in circles. Run away, run away, run away. Let go. I got a feeling that it's time to let go. I said so. I knew that this was doing something big. You thought that it was special, special, but it was just a sex talk, sex talk. And I still hear the echoes.
Hey . All right, folks, we are about to kick off again. All right. Let me thank you all for being punctual and for colleagues on the line as well who have stuck with us. Welcome back, everyone. During this session, we will take a deeper look into our businesses, starting now with IG and upstream, followed later by downstream renewables and energy solutions.
Now, earlier, we discussed our beliefs around the critical role of LNG in the energy transition, as well as the continued need for investment in oil and gas production to provide secure energy. We believe that our portfolio in both IG and upstream is highly advantaged, positioning us for sustained value creation and for cash flow longevity. IG and upstream together generated roughly 70% of our organic free cash flow last year, and we expect that they will continue to generate competitive cash flows for our shareholders. Our LNG portfolio is the largest amongst our IOC peers, where we benefit from significant cash flows that we can sustain well into the next decade and beyond as we pursue a focused growth strategy leveraging our portfolio scale and its breadth.
In addition to the strong growth that we expect in IG, we will continue to invest in our upstream business, both organically and where the right opportunities arise inorganically, ensuring that it remains stable and resilient for years to come. Together, these businesses will provide a strong foundation for value creation. With that, let me start by giving some more detail on that portfolio strength. You've heard us talk about value over volume for many, many years, and this principle will remain at the heart of our strategy. We continue to have the highest CFFO, excluding working capital per barrel of oil equivalent, amongst our peers, consistently generating more value per barrel than any other integrated oil and gas company, together with very attractive returns on capital. We're well positioned to sustain this cash flow delivery with a clear line of sight through the 2030s.
This is underpinned by our resilience to a wide range of market conditions and our drive towards competitive best-in-basin performance across our portfolio. We are also driving lower emissions. Our portfolio has become more carbon competitive, demonstrated by the fact that we have reduced our carbon intensity by more than 30% since 2016. Onto volumes now. We will continue to grow our gas business, where LNG in particular plays a key role in the energy transition, producing fewer greenhouse gas emissions than coal when used to generate electricity and fewer emissions than petrol or diesel when used for transport fuel. We expect to maintain or grow our oil and natural gas liquids production, aiming to sustain material liquids production of 1.4 million barrels of oil equivalent per day to 2030, supporting the demand for secure energy.
Across IG and upstream combined, we expect a total production growth rate of 1% per year through the decade, which is achievable at our targeted cash CapEx of $12 billion-$14 billion a year. In summary, our focus on value over volume and strong operational performance is delivering attractive returns, and we expect our leading IG and high-margin upstream businesses to continue to do so for the foreseeable future. To show you how we aim to sustain this, let's dive just a bit deeper into our resource base. Our advantaged portfolio is weighted towards leadership positions in IG and prolific deep-water basins, which work alongside our resilient conventional oil and gas business to form an overall advantaged upstream position. We believe we have the right portfolio, consistent with our beliefs on LNG and continued liquids demand.
What really differentiates Shell is the significant proportion of high-margin commercial resources, the largest resources in LNG and deep-water compared with our peers, both areas in which we excel and in where we can drive this proportionate value. We continue to deliver on our commitments. We are on track to deliver our CMD 2023 commitment to bring online projects with a total peak production of more than 500,000 barrels of oil equivalent per day by the end of this year, given over 80% was already delivered in the first two years. This includes two new platforms in the Gulf of America, two new floating production storage and offloading vessels in Brazil, as well as gas platforms in the U.K. and Malaysia. Importantly, these improvements have come alongside structural cost reductions of $1.4 billion.
have also simplified our structure and operating models, ensuring a more efficient organization and challenged existing business models with the creation of our announced new integrated joint venture with Equinor for the U.K. North Sea. We start from a position of strength, and today we are showcasing projects that will add over 1 million barrels of oil equivalent per day of peak production, underpinning our growth and longevity ambitions and providing resilience with an estimated break-even price of $35 per barrel. This growth will be driven by new gas supplies to existing LNG facilities and by maximizing output from our deep-water fields. We will bring on Sparta in the Gulf of America and expand operations in Brazil with an additional Mero FPSO, Atapu-2, and the recently announced Gato do Mato FPSO.
Looking beyond this decade, we're confident that we can sustain these levels of production to 2035 within the $12 billion-$14 billion of capital allocated to integrated gas and upstream. Our organic investment hurdle of 11%-15% IRR across integrated gas and upstream will enable us to continue to prioritize value over volume, and any potential inorganic activity will continue to be examined through the same lens. Let's focus now on our leading IG business. At CMD 2023, we outlined a path to grow our LNG business, and that's exactly what we are doing. We have a large portfolio of projects under construction, and our acquisition of Pavilion Energy's LNG business last year helps boost our LNG trading capabilities and is expected to close soon.
In addition to this, our investment in ADNOC's Ruwais LNG project in Abu Dhabi will be another major step to grow sales into the next decade. We have also made good progress in areas such as availability, which we highlighted at CMD 2023. Year- over- year, LNG availability has steadily improved. For example, in Prelude, we have improved asset availability by more than 25% over the past couple of years. QGC in Australia delivered its best availability performance last year. These achievements reflect our evolving performance culture, with teams focused on where the value sits. We have delivered a step change in performance, and we are also excited by the prospects that lie ahead of us. Our ongoing investment in equity liquefaction capacity will support further cash flow growth well into the future.
First to come is LNG Canada, and we're on track for first cargoes to be shipped around the middle of this year. All LNG produced at the facility from day one will be provided to Shell and the other joint venture participants. LNG Canada was designed with resiliency in mind, with energy-efficient natural gas turbines and renewable electricity from the British Columbia Hydro Grid, lower CO2 composition natural feed stock from the Montney Basin. Additional projects in Nigeria and Qatar are also set to come online in the next three years, including our investment in Ruwais. These projects add 12 million tons per year Shell share capacity to the portfolio, increasing our equity volumes by almost a third from today's levels.
All of these investments are top quartile when measured on a well-to-loading arm basis, i.e., across production, pipeline, and liquefaction, such that collectively they will reduce the average GHG intensity of LNG that Shell sells to our customers. As we get into the latter part of the decade and beyond, our healthy funnel of options, including projects such as Oman Train 4 and a phase two expansion at LNG Canada, as well as backfill opportunities, all of that will extract further value from existing LNG trains and sustain the cash flow longevity of the IG portfolio. There is no doubt the macro environment has been remarkable in recent years, but we believe our operational performance, ongoing investments, and attractive options for the future show a clear path to continued healthy returns and sustained cash flow well into the next decade, further solidifying our position as the leader in LNG.
All of this gives us the confidence to reconfirm today that our LNG term sales trajectory will grow 4%-5% at a compound annual growth rate across liquefaction volumes and third-party purchases until the end of the decade, with additional optionality to grow liquefaction capacity even further after 2030. As many of you will have seen in our most recent LNG outlook, when we look at global LNG supply and demand, we see demand for LNG increasing by roughly 60% by 2040. This is mainly driven by economic growth in Asia, electricity demand from artificial intelligence, and emissions reduction plans driving gas demand within heavy industry and transport. The long-term fundamentals of LNG, therefore, remain extremely attractive, and we are very well positioned to benefit from these fundamentals.
We've built the portfolio to be able to capture this upside whilst also retaining optionality so that we can be dynamic in response to demand signals. New supply coming online in the coming years could lead to increased volatility. However, we see latent demand picking up at the $9-$10 per million BTU level, with price-sensitive buyers switching to LNG in a number of markets like India and China. Together, our portfolio depth, trading capabilities, low cost of supply, along with high conversion to term Brent-linked sales and limited exposure to JKM prices, bolster our resilience to global supply increases towards the end of this decade. As you can see, we have architected a leading portfolio in a growing and attractive market, which is also resilient through the cycle and supported by our unparalleled trading and optimization capabilities.
Let me describe those capabilities in a bit more depth than we have in the past. Our trading and optimization capabilities offer an unrivaled advantage across our LNG portfolio, given our scale, our footprint, and the optionality which comes with that. We're the largest publicly listed LNG market participant, and quite frankly, we believe we have developed the strongest LNG business model in the industry with an unmatched capability to deliver gas to our diverse customer base where and when they need it. With supply coming from all the major gas basins and long-term sales focused on Asian growth markets, our portfolio is fully integrated with our trading capabilities, providing flexibility and optionality to match supply with demand.
The strength of our LNG trading business was on display in 2022 and 2023 when we redirected almost 200 cargoes into Europe at short notice, whilst maintaining secure supplies to our term customers. With multiple supply sources and demand destinations, we can also manage exposure to shipping route constraints profitably and at short notice. With LNG Canada, we have an asset that, when operational, will add advantage supply, connecting a very cost-competitive North American upstream gas basin to growing Asian demand. Our global trading capability across basins diversifies our exposure to pricing, regulation, and even geopolitical events, ultimately improving reliability for our customers and adding value for our shareholders. We are also seeing new areas of demand growth, which could scale into the future.
For example, our world-leading position in LNG bunkering is enabling the development of the marine LNG market, which is set for significant growth in the coming years and provides a further opportunity to diversify the portfolio. In summary, our size, our diversification, our balance, and trading capabilities all provide an enviable platform from which to create value now and well into the future. Let me now hand over to Sinead to talk a bit about upstream.
Thank you Wael. Switching to our upstream portfolio, which is focused around our deep-water and conventional oil and gas, or COG, businesses. These businesses are highly complementary. Conventional oil offers price resilience, whilst deep-water provides price upside with its high-margin barrels. To differentiate ourselves, we focus on basin mastery, understanding the subsurface and geology in key regions like the Gulf of America , Brazil, Oman, and Malaysia.
Our long legacy in these positions provides the ability to produce at lower costs and higher efficiency to ensure we remain competitive through the cycle. Additionally, we are committed to reducing the carbon footprint of our production, aiming for lower carbon intensity over time by optimizing power use, for example, at our Timi asset in Malaysia and Sparta in the Gulf of America. Compared with our IOC peers, Shell's deep-water business stands out for its scale, efficiency, and infrastructure advantage. We are the only ones with a leading portfolio or position in both the Gulf of America and Brazil, two of the highest margin and lower carbon basins in the world. This is balanced by our high-graded COG portfolio, which provides stable and consistent returns from cost-competitive and long-life assets. Over the years, we have focused and rationalized the upstream portfolio.
Today, we are generating 50% higher CFFO, excluding working capital per barrel, compared with 10 years ago, despite nearly 20% lower Brent prices. We intend to continue maximizing the value from our existing portfolio, whilst also positioning ourselves for continued strategic growth. Our leading U.S. deep-water position in the Gulf of America is a great example of that: value maximization and growth potential. Over more than four decades, we have built our position as the largest operated leaseholder and producer, and we continue to deliver more value from these operations by focusing on levers within our control to safely maximize production and cash from our portfolio. The barrels from Shell's U.S. deep-water position have one of the highest CFFO, excluding working capital per barrel, in our portfolio, and we expect to maintain an average production around 300,000 boe/d into the 2030s.
We will deliver this by deepening our interest in existing assets, like our recent deal to acquire an additional working interest in Ursa and continuing to develop around the most prolific basins in the Gulf of America, creating opportunities for tiebacks like the Silvert ip tieback into the Perdido host, and through these tiebacks, connecting new wells to existing infrastructure and strategically delivering additional infill wells. We have added an additional 25% of incremental volumes to our Gulf of America hubs. We have also seen a step change in controllable availability, increasing our facilities uptime by 13% since 2018. We are building a track record on reliability too. We have seen 96% controllable reliability for the second consecutive year in a row, demonstrating sustainability of performance improvement and bottom line impact.
Our Well Reservoir and Facilities Management, or WRFM capability, integrates a variety of engineering, drilling, and operations discipline to manage everything from data gathering and interpretation through to modeling and drilling. Not only are we top quartile according to industry benchmarks, but we continue to improve, which enables us to protect and grow our existing production, delivering some of the lowest cost barrels available. By flattening our organization and increasing operational performance, we've reduced unit operating costs by some 15% since 2018. Our focus on performance improvement over the past six years has resulted in a significant $1 billion uplift. Meanwhile, we keep learning. Our new projects are also more efficient, replicating and optimizing our designs to reduce costs, cycle times, and emissions.
For example, our Whale platform in the Gulf of America replicated 80% of the topside from the prior Vito platform, whilst also operating with 30% lower greenhouse gas intensity. Next in line is Sparta, which will replicate about 85% of Whale's topsides with additional design improvements to reduce greenhouse gas emissions and intensity even further. If we move from a story of pioneering to one of partnerships, let's look south to Brazil. Through a strategic relationship with the national oil company, we're unlocking value in world-class reservoirs through state-of-the-art technology, combining both global experience and local knowledge. We've built a major pre-salt position in the Santos basin, partnering with Petrobras to develop high-margin, lower-carbon barrels across 19 FPSOs in operation today, and with three more set to come online by 2030.
Further growth opportunities on the horizon should maintain significant liquids in Brazil, with production of around 380,000 bpd into the 2030s. This exceeds any of our IOC peers. Our Brazil portfolio features long-life assets with high flow rates, and as a result, these are some of the most competitive barrels in our portfolio on both operating cost and carbon footprint, bringing resilience through a low free cash flow break-even price. Shell has been able to bring our international experience and technical capability, especially in areas like WRFM and near-field exploration, whilst Petrobras leads with deep local expertise, subsurface understanding, and operational excellence. As the Brazilian fields mature, we will bring our mid-life asset experience from the Gulf of America to unlock the full potential of our joint resources.
This partnership has allowed us to grow estimated ultimate recovery by 14% since establishing our position as a leading foreign producer in 2016 and to add 400 million barrels in additional resources. We'll seek to leverage these learnings from the partnership on our own Shell projects, including our recently announced FID on Gato do Mato. As our first operated asset in Brazil offshore since 2009, this is a great example of capital discipline and our philosophy of value over volume in action. After engaging with contractors and redesigning the project, we've now sanctioned an FPSO that offers an improvement of approximately 75% in NPV compared with where the proposal was two years ago. Conventional oil and gas business, or COG, completes this advantaged upstream story. This is a portfolio characterized by deep experience in countries with long-standing relationships.
COG provides the foundation to sustain our material liquids production portfolio beyond 2030. We see strong and consistent margin delivery of approximately $18 per barrel, which is driven by low-risk oil and high-value gas assets. We've high-graded this portfolio over the past several years, exiting positions with limited running room or higher costs and carbon, whilst continuing to invest in positions like Oman and Kazakhstan that provide longevity in liquids and cash flow. We're also implementing new business models for later-life assets, such as the announced joint venture with Equinor in the U.K. North Sea, which I touched on earlier. From this new business model, we'll extract more value from our combined U.K. assets through an independently operated JV. We've also successfully divested our onshore operations in Nigeria, completing the sale of SPDC to Renaissance.
This strategic move allows us to focus on our deep-water and integrated gas projects, reinforcing our commitment to delivering value. This is a journey defined by knowing our competitive context in each country and positioning the organization behind the levers that have the most impact on improving efficiency and increasing value, whether that be partnerships or business models, reliability, turnarounds, or WRFM. As we've seen in the past five years, the landscape of our business is constantly changing. However, COG provides commodity price resilience through much lower cash flow sensitivity, which complements our higher-margin deep-water business. With that, back to you, Wael.
Thank you very much, Sinead.
In summary, our focus on value over volume, improved operational and project delivery performance, and disciplined capital allocation have created a leading IG business, which we will grow, and an upstream portfolio that supports our ambition to sustain material liquids production well into the 2030s. We're committed to oil and gas and to delivering value over the long term from our advantaged portfolio of assets and differentiated set of capabilities, which we believe will drive longevity, growth, and attractive returns. Let's now move to downstream and renewables and energy solutions, or DSR, where we have made significant progress since our CMD 2023 and see a lot of opportunity to continue on that journey. We have a portfolio of businesses that reside within DSR, which span both sides of the framework that we used earlier in the group session and across IG and upstream.
DSR brings together our customer-facing businesses, where we have leadership positions such as in mobility and lubricants, as well as our high-graded products portfolio underpinned by trading. They represent about half of the capital employed in DSR. These are attractive businesses today, with 15% return on average capital employed and offering cash flow longevity and resilience. We're proud of the strong progress that we have made during our first sprint and will continue to drive performance so that they can realize their full potential. On the other side, there are businesses representing a further $45 billion of capital employed, where more work is needed and where the returns are not where we want them to be. Starting with chemicals, here we are repositioning our portfolio to unlock value and improve returns.
In power, we are driving a strategic shift in our business, reallocating capital to areas of the value chain where we see higher returns and that leverage our strengths. That brings me to our low-carbon options, which together represent today around $5 billion of capital employed across low-carbon fuels, CCS, and hydrogen. We will continue to develop these businesses to provide a platform of options we are building for the future, but we'll do so with capital discipline, harnessing our trading capabilities and driving deeper integration across our portfolio. Across these low-carbon options and together with our power business, we will manage capital employed to ensure that we are deploying capital where we truly see the potential to create value in line with demand. Going forward, we will limit capital employed across these businesses to below 10% of our total capital employed, with dynamic capital allocation based on returns.
Our integrated business model provides a competitive advantage to deliver both today and through the energy transition. Our DSR businesses form an interconnected value chain of energy products and solutions, one that is virtually impossible to replicate. We have some portfolio reallocation ahead to fully maximize the benefits of this integration. We have deep customer relationships. We have the strongest brand in our sector. We operate thousands of assets, manage complex product flows, hold long-term supply contracts, and run extensive logistics infrastructure across terminals, depots, and tanks. We have unparalleled trading and optimization capabilities. These unique strengths allow us to maximize integrated value and create competitive differentiation. They enable us to navigate market volatility, allocate resources to the most attractive opportunities, and ensure that every barrel, molecule, and kilowatt is generating value.
Our integration also allows us to optimize value by extracting margin at multiple points from upstream production to downstream sales and renewables. When refining margins are weak, the trading uplift and marketing margins can still generate strong returns. Last but not least, it gives us the strategic flexibility in the energy transition to shift capital to where the best opportunities arise. During our last Capital Markets Day in 2023, we acknowledged that performance had been below expectations in DSR businesses. A turnaround was required, and it had to be a significant reset, not only in terms of our strategic focus, but also across capital allocation and cost management. I'm pleased to say that we have made good progress over the past two years. In 2024, these businesses generated over $12 billion in free cash flow, the highest in several years, reflecting strong performance and disciplined execution.
In marketing, we achieved the highest annual adjusted earnings since 2020 at almost $4 billion. All this despite the price environment being much less advantageous than the price assumptions that we used at CMD 2023 when we set the $4-$5 billion range in earnings. We've been disciplined on cost, delivering $1.5 billion in structural cost savings through both portfolio simplification as well as accelerated decision-making. Cash CapEx has been lowered by one-third to $8 billion, significantly contributing to the improved free cash flow performance between 2022 and 2024. We have high-graded the portfolio. We have exited assets and countries where Shell has had a long history. We have paused projects and raised the bar for investments.
The past couple of years represent good progress, but there is so much more to do, and I'll hand it back to Sinead now to explain how we will deliver this in a lot more detail.
Thanks, Wael. Bless you. Although we are on the right pathway, we will continue to be guided by our principles of performance, discipline, and simplification, building on the progress we've made over the last two years. We are actively reallocating capital from lower-return areas to businesses and markets where we have proven we can deliver and have clear competitive advantages. We will maintain our capital discipline and continue to drive cost down, and our simplification journey will continue with relentless focus on value over volume, high-grading the portfolio where we see the opportunity to do so.
We expect our businesses to deliver over $15 billion in CFFO, excluding working capital per year, on average through 2025 through to 2030. In a lower oil price environment, they will benefit from both our existing resilience and our ongoing efforts. At the same time, we will work hard to ensure they deliver returns above 10% by the end of the decade, including the low-carbon options that we are developing for the future. This improvement journey will be an important lever in driving up return on capital employed at the group level and also enable Shell to create more value with less emissions. To substantiate these numbers, let's look at some of our core downstream businesses, starting with mobility and lubricants.
As mobility and lubricants' total addressable markets evolve, we believe our businesses are positioned to thrive and will remain resilient even as traditional fuel demand declines in some areas. The expansion of premium fuels, EV charging, convenience retail, and advanced lubricants continues to create high-value opportunities, driving long-term profitability even as fueling, vehicle, and industry trends are changing. In response, we continue to sharpen our strategy and focus on value over volume across our global footprint. In mobility, we are transforming our retail and convenience stores into convenience destinations, catering to evolving customer preferences with food and beverage services, convenient EV charging, and personalized loyalty offers. In lubricants, we continue to invest in premium, high-efficiency products, whether for internal combustion engines, electric vehicles, or industrial applications. These offerings create long-term value in areas where we have market leadership and competitive advantages.
Our goal remains to maximize returns, enhance efficiency, and unlock the full potential of these world-class businesses. We will achieve this through targeting strict capital discipline, prioritizing the most profitable areas of our portfolio, continuous high-grading, and expansion of premium offerings. We will also continue to optimize our cost structure and selectively invest in opportunities where we see clear and compelling returns. With this in mind, we will spend 30% less in cash CapEx over the next five years versus the last, and we will be highly selective on where we spend this. In mobility, where we have a global footprint, 80% of our cash CapEx will be spent in 10 key markets where we generate the majority of our cash flows, markets like here in the U.S., Canada, and the U.K., to name a few.
Additionally, we're expanding premium fuels and lubricants by enhancing high-performance products like Shell V-Power and Helix Ultra. This focus has already enabled us to increase our gross margin per barrel by around 50%, all this despite a conscious reduction in sales volume in pursuit of value when compared with 2019. As the fuel value pool evolves, we see the potential for significant growth in premium fuels. Our premium Shell V-Power fuels are now one of the best-selling performance fuels on the market and are expected to contribute around 30% of our gross margin by 2030, with roughly 75% of our company-owned sites being either freehold or held under long-term leases, and with over 80% of these sites based in strategic, high-traffic areas with significant potential for convenience and EV growth. Our retail network is resilient and well-positioned for the long term.
At the same time, while the EV value pools grow, Shell's EV-related gross margin is projected to significantly increase by 2030 as we expand our retail offer. We will flex investment to meet evolving demand. At our last CMD, we outlined an ambition to grow the number of EV charge points to 70,000 by 2025 and 200,000 by 2030. Having already achieved our 2025 ambition one year early, we will retire the 200,000 by 2030 ambition as we shift our focus from charger numbers to profitable growth. Beyond fuel, we're expanding our convenience retail business, offering a broader range of services that align with a potential shift in consumer preferences and increasing EV adoption. In food and beverage alone, we expect an 8-10% compound annual growth rate by 2030. Now, let's talk about lubricants. Our Shell lubricants business is often underappreciated.
Lubricants is a deregulated industry with highly specialized requirements and bespoke formulations. Our strategy is focused on growing our premium product offering, which delivers high margins, and we expect Shell's premium lubricants' gross margin contribution to grow to 50% by 2030. This growth is driven by three key factors: rising demand for high-value premium products that improve energy efficiency, continued demand for premium lubricants in internal combustion engine vehicles, especially in Asia-Pacific and the Middle East, and lastly, the opportunities of e-fluids for EVs, thanks to our strong OEM partnerships. This also extends to high-value fluids for EV battery and data center thermal management. As a company, we will continue to leverage and strengthen customer relations. We're investing in differentiated customer offerings, loyalty programs, and digital solutions to grow our customer base and total customer value.
To 2030 and even through 2035, we expect margin expansion in convenience and e-mobility, as well as greater premium sales in fuels and lubricants. This will enable us to grow cash flow into the 2030s whilst keeping overall cash CapEx flat compared to 2025 levels, thereby delivering greater free cash flow. To summarize, we are encouraged by the growth potential in our mobility and lubricants businesses, which we believe nicely complements the growth we see across our LNG sales and oil and gas production, with a duration that's much like LNG, which will last well into the next decade and beyond. Now, let me tell you about our products business, where our strategy will enable us to continue to deliver value.
We have a highly focused, high-graded portfolio, which we aim to enhance financial performance whilst at the same time supporting the energy transition by repurposing assets where we can create greater value. This month, we shut down a crude distiller at a Rheinland refinery, repurposing the asset into a high-quality base oils plant for e-fluids and engine and transmission oils. We have reduced our refining footprint while more than doubling the average refining refinery capacity. Over the years, we've high-graded our refining portfolio, reducing our footprint from 51 refineries in 2004 to just seven today, with the completion of the Singapore divestment expected next week. We will have four core refineries in the portfolio: Pernis and Rheinland in Northwest Europe, Norco and Scotford in North America.
By harvesting non-core refineries for cash, repurposing them, or disposing of them, we can focus on a smaller number of high-performing facilities that generate stronger financial returns. What defines the assets we've chosen to retain? They share three key characteristics. First, their strategic footprint. We maintain complex, flexible assets with strong logistics located in key markets. Second, our assets are deeply integrated with Shell's trading capabilities, enabling us to maximize value where others can't. Trading provides a competitive edge, optimizes crude sourcing, product placement, and risk management, which enables greater flexibility and higher earnings. Lastly, profitable decarbonization. We are investing in decarbonizing our refining assets to ensure they remain competitive through the energy transition. In 2024 alone, we committed to projects that aim to reduce approximately 2 million tons of Scope 1 and 2 emissions.
This includes major projects such as Polaris, the carbon capture and storage project at Scotford Energy and Chemicals Park in Canada, which will capture an additional 650,000 tons of CO2 annually once completed. The transformation of our refining business is deliberate, disciplined, and value-driven, resulting in lower per barrel costs and an increase in refining net cash margin where we expect to be top quartile in 2025. Now to chemicals.
Thank you, Sinead. Let me start by stating that we believe we have good individual assets that are well run by a great team, and that there are parts of our portfolio that also possess competitive advantages. However, given our starting point, and in particular our lack of scale in some areas, combined with competing opportunities across the group for capital, we do not believe we are the natural owners of this chemicals portfolio.
We remain open to retaining exposure through other constructs that will allow us or allow the business to flourish, such as partnerships. However, our intent is to reduce capital employed by 2030. This compares to what we outlined at CMD 2023, where we said we would keep capital employed stable. We intend to take a regional approach in chemicals, maintaining capital where we can drive differentiated value between the U.S., Europe, and China, steering our business through the cycle. In Europe, our assets operate efficiently and competitively despite current margin pressures. In North America, Shell Polymers Monaca benefits from advantaged feedstock, while our U.S. Gulf Coast Linear Alpha Olefins business holds strong competitive advantages. Meanwhile, in China, we have a successful standalone joint venture with CNOOC, which enabled us to take a final investment decision this year on Nanhai III and the polycarbonates project.
However, given the challenges in the industry, and in some cases, to get the most value from our investments, as I said earlier, we may not be the natural owner of these assets. During Capital Markets Day 2023, we talked about a unit-by-unit review of our chemicals and refining assets in Europe, which led to the closure of several uncompetitive units. In view of persistent challenging market conditions, we will continue to high-grade and pursue closures where necessary. Furthermore, in the U.S., while we will continue to focus on optimizing returns from our assets, at the same time, we will be pursuing strategic and partnership opportunities. This has the potential to help us realize value and support our intent to reduce capital employed.
In China, we will continue with our existing strategy, delivering the next phase of expansion of our joint venture and working with CNOOC to produce high-margin products sold locally. When looking at the entirety of the portfolio, we hope that our intent is clear: to reduce our capital employed in chemicals by 2030 and to reallocate that capital to more competitive options that we have across Shell. I have just talked about our plans for chemicals, and that portfolio represents around $25 billion of the capital employed within the $45 billion that we mentioned earlier. Here, we break down the remaining $20 billion that we intend to go after with the intent to substantially improve those returns. Power and our low-carbon options represent $15 billion and $5 billion of capital employed, respectively.
However, ROACE across these businesses was negative last year, and today we are outlining plans to turn this around. This starts with constraining the proportion of group capital employed that these businesses will represent by 2030 to less than 10%. We believe that by doing so, we will create a much stronger, more resilient, and more profitable set of businesses and options. Constraining capital will mean that only the highest return projects will move forward, and we will flexibly allocate between these two areas. Whilst many of our low-carbon businesses remain nascent today, they're important options that will contribute to the future shape of our organization and our investment case through the energy transition. Let's start with power. Power remains the most rapidly decarbonizing part of the energy system, and as such, it plays an important role in our efforts to deliver more value with less emissions.
Since Capital Markets Day 2023, we've been driving a strategic shift in this business to better position ourselves for success. We've learned a lot, and we therefore have set ourselves a target to increase ROACE from 3% in 2024 today to around 10% by the end of the decade. How are we going to deliver this? We have three levers. First, we are pivoting our portfolio away from assets with infrastructure returns and more towards assets that support our trading strategies. This means we will prioritize investments in flexible generation, such as gas-fired power, large-scale batteries, and digital technologies. These are critical for our trading teams to manage risk and capture value in a system which is expected to be more unpredictable as the share of supply from renewables grows.
We're already taking steps in that direction, as mentioned with the recently completed acquisition of the Rhode Island CCGT, but also evidenced through our Rangeb ank project. This is a 200 MW battery energy storage system in Australia which became operational towards the end of last year. With these investments, our total flexible generation and storage capacity under management is about 7 GW today, including positions in key markets such as the U.K., the U.S., and Australia. Second, we will continue to high-grade our portfolio, divesting non-strategic assets like our home energy business in the U.S. and our offshore wind positions in South Korea and the Philippines. We will employ a capital-light business model as we develop our renewable generation portfolio, making use of project financing where it makes sense and working with partners. This will enable us to maximize the value of our existing platforms.
Lastly, given our rigorous focus on capital discipline, we will maintain a measured approach to growth to increase the share of productive capital. For 2030, we are setting a ceiling for capital employed in power of around $15 billion. Whether we achieve that ceiling depends on returns and capital allocation choices which we will make between both power and low-carbon options. Irrespective of the quantum, our portfolio will look different as we reallocate capital to where we can generate higher returns, increasing the share of trading and flexible assets to about 80% by 2030, compared with around 50% today. A business model best described as trading-led, asset-backed. In addition to our power business, our targeted areas of focus in low-carbon options are within low-carbon fuels, CCS, and hydrogen. These are essential solutions for sectors that cannot easily electrify, such as aviation and industry.
We're allocating up to 5% of group capital employed to develop these growth options, providing resilience in the context of the energy transition. They represent our option set for the future, for the future energy system, and align with areas where we have competitive strength. Let's look at low-carbon fuels first. Despite encouraging developments and green shoots in certain parts of the biofuels market, the fundamentals look challenged through a large part of this decade. This, in part, contributed to our decision to temporarily stop on-site construction at our HEFA facility in Rotterdam. However, our longer-term outlook remains positive. We want to build a profitable low-carbon fuels business for the future, and we will do this by leveraging our trading and optimization capabilities to grow sales and secure sustainable feedstocks. We're starting from a strong position today.
In 2024, we traded over 10 billion liters of low-carbon fuels and sold 10 times more than what we produced. In the same year, Shell also became one of the world's largest traders and suppliers of sustainable aviation fuel, with close to 20% of the total sales in North America and Europe. This was delivered due to our regulatory expertise, our long-term agreements with producers, and the strength of our customer relationships, together with strategic investments in logistics around key terminals and airports. CCS and hydrogen are different to low-carbon fuels in that these are even more nascent businesses. We are making good progress thanks to our integrated positions and our technical capabilities. In addition to helping our customers decarbonize, these low-carbon opportunities will help us meet our own emissions reduction targets.
They're important levers to support the decarbonization of our chemicals and products and integrated gas footprint, where most of our Scope 1 and 2 emissions are generated. In the future, we see potential for CCS and hydrogen to support the future of our gas business, with abated LNG and new fuels such as liquefied synthetic gas all playing an important part in that transition. Without strong regulatory incentives or carbon pricing mechanisms in place, these solutions are unlikely to become economical. We will, of course, watch demand and be ready to scale up if the right market signals present themselves. Irrespective of how the energy transition unfolds, we see further upside beyond 2030 across these low-carbon areas, but we're not baking any of this into our plan, given the current uncertainty in terms of the pace of demand growth, as well as the regulatory frameworks.
To ensure that we can scale up quickly, once we do see conducive market signals for low-carbon opportunities, we continue to invest in new technologies and drive continued innovation. We have proven leadership in producing clean fuels. A great example is our proprietary GTL technology, which at Pearl GTL fully integrates the gas value chain across upstream and downstream. The products are a pioneering innovation which increases the supply of highly demanded liquid hydrocarbons, but also provides an alternative route for natural gas monetization. Today, we are expanding the value opportunity from this technology to a new suite of products, including immersion cooling, direct-to-chip cooling, and precision cooling. These new markets include expansion into cooling fluids for data centers, which address the growing power and computing performance demand from AI and high-performance computing applications.
Liquid cooling fluids can almost eliminate the need for power-hungry air conditioning systems and dramatically reduce required floor space, making it easier to scale facilities, reducing total cost of ownership and improving sustainability. We are not stopping there. Our commercially proven GTL technology provides a flexible pathway to produce biofuels, e-fuels, or a combination of both from a range of synthetic feedstocks, allowing us to develop low-carbon options for the future. We are not new to this space. In 2021, the world's first commercial flight flew from Amsterdam to Madrid, fueled with certified synthetic kerosene produced by Shell from captured carbon and green hydrogen. Our researchers and scientists are working with our assets to extend this demonstrated capability into affordable production at scale.
As we are bringing discipline and focus on our competitive strengths in our allocation of capital, we will do exactly the same as we allocate our technology dollars, driving value both in the short term and in the long term. Let me summarize. We will deliver more value from our core downstream businesses through focus on value by executing a differentiated strategy, by enhancing our operational performance in terms of OpEx and CapEx spend, and by reallocating capital to where we have conviction in above cost of capital returns. This is a continuation of our journey, and these businesses should deliver over $15 billion in CFFO per year on average from 2025 through to 2030. This is a 25% increase compared to where we were over the past two years. Key to the improvement journey is CapEx discipline, where we will spend $8 billion per year to 2028.
We'll invest in line with or better than our IRR hurdle rates of 12%-15% in downstream and 10% in the renewables and energy solutions. We will grow in areas where we have unique advantages and where we see existing high returns among our core businesses. We will optimize for value in both power and low-carbon solutions, harnessing the optionality that they provide. We are confident that we can achieve this, given both the strong progress that we've already made as well as the credible pathways that we have outlined today. With that, let's open it up for more questions. Mohammed, come to the stage, please.
I'm just going to grab some water.
All right. Thank you all, folks. You know the drill. We'll do it exactly as we did last time. One question each, please, or maybe two if we have time.
Please state your name and firm here to this table at the front, please. Thank you.
Thanks, Mohammed. It's Josh Stone here from UBS. I wanted to ask about your approach to recycling capital inside the organization and how you intend to balance M&A and investments. Because if I look at the last five years, you've been a net seller of assets. Is that still the intention if you look to the next five years? If I look at your capital employed, it's down over the period. It's down even more if I consider the impairments. Have we hit the bottom of the capital employed for Shell? Do you think you should actually now start to grow it from here? My second question, I wanted to challenge you a little bit on your low-carbon fuel strategy.
You said you wanted to wait for the right market signals, maybe to add more capital to that business. We had the right market signals five years ago. The rug was pulled from the industry. We're still seeing the fallout from that now. What would give you the—say the regulation did come back—what would give you the confidence that you wouldn't have the rug pulled from you again? Thanks.
Thank you for those, Josh. Let me take the second one first and then invite Sinead to reflect on the first. I think we mentioned it in the speech. We've learned a lot. The fundamentals are going to be key.
When we announced our energy transition 2024 plan, we talked about a critical element being the affordability of these alternative lower-carbon fuels and that the majority of our technology spend is going to be to bridge that green premium that we currently see. There are two elements here. There is what we can continue to do to be able to reduce that premium. By the way, that is why we like, for example, low-carbon fuels, because as drop-in options, they are the lowest-cost alternative for the carbon takeout that they bring. They are still more expensive, which is why they need the regulatory help. We need to do our part to reduce costs, and we need the regulator to do their part. A lot of this is starting about how much confidence we have in the policies.
There have been policies that have been consistent, and we have been working through in multiple regions. This is about making bets, more selective bets, in the countries where we see strong fiscal situation, strong appetite by both sides of the aisle, as well as the population to be able to decarbonize. Those will be the opportunities which we will invest in. We will be very, very clear and selective around where those are within the capital constraints that we have set for ourselves.
In terms of your question really around capital employed and this almost the bottom of it in that sense, the capital employed, it's a little bit of a difficult question to answer.
The reason I say that is if I look at what we're going to see happening, for instance, in upstream or even LNG as we get projects online, you'll start to see, of course, depreciation accelerating quite rapidly because they become productive. It really isn't stable as it goes through. At the moment, of course, we've got capital employed quite high because, as you say, we're building, and we have not yet actually delivered. LNG Canada being a case in point, and you'll start to see that coming. You could say the same for Sparta coming through. Gato do Mato will start, of course, building in terms of the capital employed before it comes down. It is not a linear situation. Your point in terms of, but you're actually saying you're looking to reduce your capital employed in chemicals.
We are, but we're still investing as you look at it across the rest of the businesses. Why we've said through by 2030 is we don't want to be rushed on any of this. We want to do it for value. That's why there's not a linear answer to that. Of course, I model it out, but I'm very, very confident that it will vary year to year to whatever I expect it to be.
All right. We have a couple of questions coming in by listen-only line, so maybe I'll touch on one first. We have Irene from Bernstein, Societe Generale , two questions. First question. The chemicals industry has been at the bottom of the cycle for a while. Should that cycle improve and normalize as is generally anticipated? Is there a risk that you are reducing capital employed, perhaps at a low point?
The second question from Irene is the capital discipline is impressive, and with the enhanced share buyback at today's share price, your market cap may be 40% smaller by 2030 than today. Is there a risk that Shell is self-liquidating?
Two great questions. Thank you for those, Irene. Let me maybe take the first one, and then if you want to touch on the second one. I think on chemicals, important we again contextualize the sequencing of our journey. Over the past couple of years, the focus has been very much on ensuring that we are doing all the self-help we can. There were three elements to that. There was cost, capital discipline, and making sure that we ramp up Shell Polymers Monaca to where it is today.
We have more to do there, in particular on continuing to create differentiated grades, and we're well on that journey. That was an important part of the sequencing of the journey. What we're saying today is we are, in essence, going to look at opportunities to be able to create or unlock more value. We haven't said we are going to sell it, nor have we said we're going to take one route or the other. As Sinead just mentioned, we start from a position of wanting to be able to really look at all the opportunities to create the scale and figure out how we will monetize that, whether that is through partnerships with other strategic partners or other options which we will be considering in the coming months. I think that's one part of it.
I think the second part is to recognize that we are looking to reallocate that capital into high-return opportunities. Back to this point around the key messages from this Capital Markets Day, we have to be able to be a lot more unemotional about where our capital allocation goes in pursuit of where we have competitive advantage and where we see a long-term trajectory for the business for us to be able to create value. That is exactly what we are doing in this context.
Indeed. Thank you, Irene. Yes, capital discipline is certainly alive and well. That is across the organization, and we have that healthy tension that exists.
Back to almost a comment I made earlier, when I think about the financial framework, when we have that debate, we talk about protecting our dividend first, then looking at the capital we need to invest across the company. We're not in a position where we have to be capital constrained. We're in a position where we're choosing to be capital constrained. If the businesses keep coming up with more and more ideas, we will keep reviewing those and look at allocating between them. The second part of that, I don't feel constrained from that point of view in terms of capital investing in the existing businesses or in actually growing those businesses. In terms of what you're alluding to is the buyback of shares in terms of self-liquidating, hey, if the price continues as it is, I'll keep doing the capital allocation.
We'll keep having that debate, and we'll keep buying back our shares. Yes, we will continue to reduce those and increase the stick of the pie for those shareholders who remain with us. Of course, at that point in time, at some point in the future, there will be that DPS increase. That is very clear. Remember, we've already done it. We've already done 25% over the last couple of years as well.
Maybe the only thing I'd add to that, Sinead, as well. Irene, I keep coming back to that vision slide that we had. The vision's clear. We know the destination we want to get to, and we will keep driving towards that destination. A smaller number of shareholders will enjoy some of the glory of the 2035 period, and that's absolutely fine. They'll be much richer than they are today.
All right.
Setting the bar high. Okay. Other question over here, please, Kelly. Thank you.
Thank you. Paul Cheng, Scotiab ank. Where are you all, Sinead? In the power, you're going to shift to 80% on the trading and flexible asset. Some of the utility companies, at least in the U.S. and one of your peers, are saying that CCGT right now is not economic to build and is cheaper to buy. I don't know whether you agree and if that's the case. We assume that to shove it up, you're just going to, using the acquisition itself, organically going to build. Also, a lot of the utility companies actually believe solar and onshore wind is probably the only asset you could, in the near term, bring to the market due to regulatory constraints and permitting and all that.
Wondering that whether you believe in that, and if that's the case, is it too much saying that shifting 80% to just on the flexible asset? The second question, want to see if you can talk about the role of exploration in the longer haul for you. I think over the past several years that you guys have cut back quite a lot, and you also have not done as much of the [rainwater] cap on the frontier exploration than in the past. Whether that will remain to be the strategy and what is that role in replacing your production or reserve? Thank you.
Let me maybe address both, starting with your second question, Paul. I'm not sure of the validity of the point around where we sit compared to others. We're still very strong in our exploration spend, but you're absolutely right.
The majority of it is going into heartlands. Around 80% plus of where our exploration money goes today is into heartlands. Not because of philosophical or ideological reasons, much more because that's where we have seen the best return on our exploration spend over the last 20 years. The wildcats have been much more challenged, and when you look at the infrastructure that you require to build it with our break-even price requirements, it's more challenged. We are absolutely committed for a very long runway for our exploration programs in the basins where we have a particular competitive advantage. That includes, for example, the Atlantic and, in particular, our strength across Brazil, the Gulf of America, the West Coast of Africa, as well as key basins like Oman, Malaysia, Kazakhstan, where we have good knowledge.
On your first question, I think it's fair to say that we will play to where the longer-term value pools are going to be. You don't see us building new combined cycle gas turbines. The move we made recently was exactly as you described. We bought the 600 MW facility in Rhode Island. Remember, we have a strong solar platform here called Savion. What's interesting for us with our trading-led asset-backed strategy is that Savion gives us a very healthy pipeline of solar opportunities, which we hybridize with our top three leading gas trading positions here in the U.S. that are underpinned with access to either capacity in CCGTs or, in the case of Rhode Island, where we own one. It is the hybridization there that we are looking for with the minimum amount of CapEx we can get. I'd leave that as one point.
I think the second point I'd make is it's important to recognize that the power sector plays differently. In Australia, there's a very different dynamic to what we see here, and similarly in Europe. It is much more of a local power strategy that we are implementing with Flex playing up in certain markets more than others. On balance, the 80% is what we feel is the appropriate direction and proportion.
All right. This table over here. See you, Martin.
Yeah. Hi, hello. It's Martin Russell, Morgan Stanley. I just want to ask you two things. In this discussion, trading clearly plays a very big role.
If trading is a sort of 2%-4% uplift to ROACE, then it's probably somewhere as a share of earnings, more than a quarter, less than a third on a sort of ongoing basis, which actually, when you think about it, makes it one of the very largest businesses in all of Shell. Clearly important. In your vision of Shell by the end of the decade, into the 2030s, would you like to see trading become a larger percentage of the overall earnings mix, or will it still by 2030 be broadly that sort of more than a quarter, less than a third, that what it is today? How large can it become, in your view, before it sort of starts to change the nature of the company?
Because it is, it's a bit different, of course, than all of the rest of Shell, which is very much centered around physical assets. That's one thing. The other thing I wanted to ask you is, in a number of locations, chemicals and refining seem very integrated. In your effort to sort of restructure chemicals, swing the capital employed, are there certain constraints where you might want to keep the refining but not the chemicals? What constraint does that put on you in terms of the ability to restructure chemicals?
Did you want to touch on that second question, Sinead?
Sure.
You go for the first.
Yeah. In terms of you're absolutely spot on. In many places, we have integrated sites, and you can see that whether that's in the Netherlands or we can keep going through the different locations.
You're correct that we look at them as two different businesses and then look at the value that we create because of that integration. That is why we talked about the energy and chemicals parks in the past as well. Is it adding a constraint in terms of what Machteld will look at as she moves her business? She is looking at that across the different areas to say, "Where would I be disadvantaged if I were to separate these?" Fundamentally, no. We can put in place long-term contracts. We can put in place different agreements. That is exactly what we are doing, looking at where are there interdependencies, where is there value created because of that, and how long can you do that? We have it in different divestments that we do, whether it is in Singapore, of course.
We continue to have a long-term relationship with Singapore in terms of either supply or offtake. That is part of how we typically do these. Of course, what we are talking about is, in particular in the U.S., looking at strategic partnerships. We see the ability to actually blend them together.
Yeah. Thanks, Sinead. Martin, a couple of points. I mean, I think maybe firstly the philosophy of how we see trading and optimization. We definitely do not see it as a business. We see it as a capability, a differentiated capability. I just want to emphasize that because it is a capability that indeed is unified under one umbrella in the way we have structured the company. That is to be able to really perfect risk management and put the right controls around it in service of different business outcomes.
Trading and optimization fundamentally differs in a place like crude or products, where we are working on commodities and where we are essentially creating flow versus LNG, where it is central to an integrated value chain with our customers, to a place like low- carbon fuels, where the 10 to 1, where we market, where we sell 10 times more biofuels liters than we actually produce, means it is much more of a trading-led asset-backed strategy. One of the refinements that we have brought today is a lot of those low- carbon options will be moving more towards that trading-led asset-backed. We do not start from a position of constraints because we also recognize that each of these different businesses will have different market fundamentals at any one point in time. We do not want to get into trading for the sake of trading.
This is as much of an optimization game around the assets and the value chain that we have with selective trading around that because of the insights we get with the broad portfolio we have.
Thank you. Let's just stay here on this table. Can we get Giacomo a mic , please?
Thank you, Giacomo Romeo, Jefferies. First question, you highlighted how you are one of, well, the largest off-taker of U.S. LNG, and this creates a natural position when it comes to U.S. gas. How comfortable you are with keeping that position, especially as we go into a material ramp-up of LNG in the U.S. and increasing demand? Second question, you highlighted a lot of changes in the DSR organization and portfolios in terms of where you capital employed and cost reductions.
What are the key pushbacks you're getting from the organization as you change your investments and your cost structure in these areas?
Thank you, Giacomo. Let me take the second one first and then invite Sinead to reflect on U.S. natural gas. I said earlier, the last couple of years, it's tough when you have essentially moved the direction of the company towards this real sort of focus on the destination that we're going to with a very strong value lens. I would say in the early days, there were questions around, "Is this the right direction to go?" I'd say over the last year, I've seen a significant shift in momentum. Of course, success in the direction as exemplified by out-delivering on plans, by being able to meet promises, by seeing the share price strengthen, by seeing the net debt continue to go down, that's created belief.
We were talking earlier on the side, and somebody said, "You can be sure of Shell." It does bring out pride in people. It does bring out a commitment to the pathway we've set forward. It brings out confidence in our people. People at Shell want to remember what it is like to be number one again, what it's like to win. I think if I would just reflect on two to three weeks ago when we announced the vision and the direction, the overwhelming positive response we have had for that, maybe the strongest that we have experienced in any of our webcasts, at least in recent memory, tells me that we have the organization fully behind us.
That does not mean, by the way, it gets easier, but it does mean that we have the commitment and the passion of the organization, and that is all I can ask for.
Yeah. In terms of being the largest U.S. off-taker of LNG, indeed, it plays into our overall portfolio balance. This is something where we get a lovely piece of work between Peter on the upstream side and, of course, Cederic on the integrated gas side. What we hopefully showed you earlier today is the balance in our portfolio and showed the Brent focus in terms of sales and exposure that we have in terms of that. We have Henry Hub exposure, of course, through the associated gas that Peter has through his deep-water positions, etc. We have, of course, Cederic trying to balance across the overall portfolio.
What's really important for us is that we're not just balancing it in terms of one of their portfolios. It's not just the integrated gas position. It's across the whole of Shell. That's where our trading capability comes into play because they can see what Peter and the upstream team are producing. They can see, of course, what Cederic has as well and be able to take that with the third-party sales. That's what gives us the confidence to continue to actually have that position.
All right. I'm going to really make you earn your money by asking some tough questions. Actually, it alludes a bit to Michele's question earlier on what we would be willing to do.
Anish Kapadia at Palissy Advisors asked the question, "Some segments like chemicals, LNG infrastructure, and marketing trade at an 8-12 times EBITDA versus Shell's trading multiple of close to 4 times. Will you look at spinoffs or other inorganic structures to unlock value?"
You want to address?
Sure. Look, where we start from, I think it's fair to say, is a position of just looking at realizing value on everything that we do. What we're very much focused on is in terms of ensuring that we really get the value out of each of our underlying businesses. Hopefully, that's what we've talked you through. You can see what we're doing on power.
We can see what we're doing on low- carbon, driving the businesses that are doing very well at the moment, the upstream and integrated gas, to go harder, to go further, to deliver more than what they've promised at the end of the day. What is also clear is that at the end of this, if we cannot extract the value, we will look at any opportunity to extract value. Hopefully, you can see that in discussions, whether we're the natural owner or not of chemicals. We look at partnerships. We've talked about specific assets, whether that's the U.K. and moving out of the North Sea after decades and moving to a JV structure, whether it's Singapore, etc. We do look at each and every one of these, and we don't rule out any option as we go through.
What is really important for us is that the sequencing is right. For our shareholders to actually get value, we have to sequence this properly. What we are making sure we do is we are delivering very clearly on these underlying businesses. We are turning them around. We are making sure that we get the maximum out of the performance, and we will keep doing that. That is where it stands.
Okay. Back to the room. Lucas at the back, please.
Thanks very much, Lucas Herrmann at BNP Paribas Exane. A couple of mine , and I think they both pertain to LNG, and one other, which actually is just a clarification. You talked about the sensitivity, by the way, to Brent in the integrated gas business. I think it being one point, it looks like about $1.5 billion. Historically, that has been near $2 billion, $2.2 billion. Is there a reason for the shift?
You've just excluded GTL, or is that just a function of portfolio? That aside, what I wanted to ask, to forgive me, the first is I'm just wondering whether when you talk about trading, in particular in the integrated gas business, you end up doing yourself a disservice because an element of this is we buy from a miner, I'm going to just say 10% oil. We sell to whoever, JERA at 13% oil. That spread, which is very reasonable, when you talk trading, is that spread included? I mean, you optimize on top of that, but how? It is just terminology and how you're using and how we should think about it, and as said, whether we end up putting a name to it that perhaps is not that appropriate.
The second thing I want to ask, you've been essentially, I would have said, short supply in many respects over the last two, three years in LNG as a consequence, not necessarily of contractually being or not having the contract signed for flow, but because Trinidad has not performed as expected, Nigeria has not performed as expected, Peru has not performed as expected. I could go on, but I will not. The volumes available to you have been less than anticipated. As we move forward and the new supply comes in, my question simply is, to what extent does the portfolio go long? Therefore, should I be more concerned about the exposure that the portfolio has to, I am going to use the term spot markets? I hope those were clear, and I am sorry for.
Very clear. No, not at all. Thank you, Lucas.
Actually, maybe a great opportunity to bring a different voice into the room. Cederic formally takes over as of 1st of April, but why not create a bit of a burning platform?
Less burning.
Thanks, Wael, and thanks, Lucas, for the questions. As always, very knowledgeable about our LNG business. In terms of the overall exposure, what you see there is actually the total exposure of both our LNG trading, marketing, and our asset businesses, including the JVs. It will be a little bit different than what we've shown in the past, perhaps in terms of the balance on both the buy and the sell side. That is why you see that balance in terms of exposures.
The key message, I think, also compared to the past is that you can see that the majority of our exposure in the years ahead, as we see a lot of supply coming into the market, is mainly on the Brent side, on the sales side, and also that the kind of, again, as Sinead also said, if you look at it on an integrated basis, the amount of the short exposure that we have to Henry Hub is perhaps also less than what it has been in the past. To your second question, what we also show there is our exposure to JKM and other global gas prices, which is by proportion a lot lower. That has to do with the fact that actually, if you look through, let's say, 2028, 2029, we're quite well sold in terms of our sales position.
We are not going to be very exposed into that timeframe in terms of spot prices. Beyond this, we look past 2030. We have the optionality to see is, okay, what do we do with our sales portfolio and how much do we contract as we continue to see what the dynamics is and to what degree do we actually want to offer more exposure to gas prices versus Brent beyond 2030. That is the resilience part of the message as well into the next few years up to 2030 that we feel quite confident about the portfolio. Thanks.
Thank you, Cederic. Maybe just to close off on that, yeah, we have fought hard, Lucas, around how to characterize it. I mean, the trading optimization, you are right. Within LNG, it is very much optimization-based. We have a whole bunch of sales contracts.
We have a whole bunch of offtake agreements. What we do is we lock in the spreads, and then we're always optimizing against those spreads. Sometimes, of course, we look at where the market is and take small positions here and there. The strength of the LNG game is the optimization of what is an unparalleled set of longs and shorts. I would hope that as we continue to show, and you saw the slides where we try to bring the full visibility of all those supply points, all the demand points, just to show the richness of what has been built over time and how difficult it is going to be for those who are trying to get into the space to replicate that now.
On the front here, Paul.
Thank you, Paul. Thank you again.
If I read slide 43 correctly, are you saying that you're going to take capital employed in chemicals to zero? Because that's one way of reading the slide, whereby you would either sell it or write it off. That's question one. Secondly, I know it's very difficult for you to talk about a legal situation, but is there any guidance on the dispute with Venture Global in terms of when arbitration may yield a result or any timing ideas you could give us? Thank you.
Yeah, very difficult to give too much on the second one. I'll give you the first one, Sinead. We continue to hold on to our position of the calculus you're having already delivered, I don't know, now 400 plus cargoes, the facility running at or above nameplate capacity, and the foundation buyers who created the bankability for that venture not yet getting any cargoes.
The legal process is ongoing. We hope to be able to have some readout from the arbitration in the coming months, hopefully this year, and then we'll see where that goes.
Yeah, and apologies if the slide wasn't clear, but no, the intention is unlikely to be able to go to capital employed to zero to wish to do so. What's our thought? The reason we didn't put a number out there, Paul, because we'd love to just put some data there if we could, is because it will be different, and we're actually exploring those options. We look at it from a sort of regional perspective. If you look to the east and what we have with China, it's basically locally financed, local products being sold with a partner who knows how to build this stuff and manufacture it well. That's well suited.
You then go to Europe, and what you see, of course, in the Europe sense is actually just a really challenged market. You can see, I mean, I think there was something like five shutdowns of different crackers shut down or units shut down, not by us, but others recently in the last couple of years. What we're looking for, Paul, is very much, number one, is just make sure we're the most competitive, and we're doing pretty well at that, and then looking at whether we want to stay or whether that will be with partners or a full exit. You then look to the U.S., and it could be different whether you go towards the specialty versus the polyethylene. That is why we haven't given an overall number, but is our intention to sort of write it all off to zero? Absolutely not.
That's not the way to do this sort of the value lens or to protect it. Why we've given ourselves to 2030 rather than doing shorter, we tend to like shorter targets to make sure we deliver. It's just about where the market is. The market at the moment is fundamentally longer term. Long-term fundamentals, great, but short-term, pretty challenged. That's why we want to take a different approach to each of the regions, and that might mean different timing. That's why I've not given this sort of the line of sight as to where it will go to. Thanks for the question.
All right. Perhaps do one that's coming through online. Alejandro from Santander. Two questions. First one, in M&A, what would be your preference for the upstream business? Greenfield areas or more mature basins? Second question, thinking about dividends versus share buybacks.
Dividends give a strong message about break-even. If the valuation gap narrows, would you reallocate distributions towards more dividends?
Let me take the first one, and then if you want to take the second one. Thanks for the question, Alejandro. I would not start with a predisposition one way or the other because at the end of the day, this is going to be based on value. The question is, if we are going to buy somebody's assets, what is the particular advantage we can bring? Are we able to create value by paying the premium dollar for something that is about to start up? Is it because we have a capability? For example, in the Gulf of America, what we see is our well costs are significantly advantaged compared to peers. Take Sparta as a great example.
One of our peers left that asset because it was going to be difficult to make it commercial. We stepped in in partnership with Equinor and fundamentally transformed the opportunity by leveraging an existing host design, a set of infrastructure design on the back of what we've done for Vito and Whale. That is where, and by the way, we got that for nothing, for very, very little. Those are opportunities where we can bring competitive strengths to, for example, a greenfield opportunity. We have also looked at Ursa, which was given before, and there we are the operator of the asset. There was an opportunity to deepen. We needed to find a price point that was sufficiently attractive for us, and that's what we focused on. We start from a very open-minded, pragmatic place with one delivery in mind.
Can we actually enhance shareholder value specifically through free cash flow per share accretion?
On the second one, indeed, the topic of how you spread your distributions or the form of them is always hotly debated. Of course, we get varying views across it. What I think is common is everyone is clear, keep giving more. That is certainly something that unifies all of our investor base. Where our investor base largely sits and where they are very supportive is that allocation of capital towards share buybacks at this price. They are very supportive of that, particularly here. Therefore, what I am looking forward to is us having this debate at some point in time where it is not the right value lens that we will shift towards dividends. What we have said is, from our perspective, we will continue to take advantage of that mispricing.
We'll continue to buy back those shares. Those shareholders, as you said very nicely earlier, who are still with us will be able to take advantage of that. Absolutely, there's nothing dogmatic about this that dividend badge, share repurchase is good, far from it. It's just about very much deep logic around value. Therefore, for the moment, the share repurchases make sense. Yeah, looking forward to having that problem and looking forward to having to reallocate.
Thanks. Ryan Todd at Piper Sandler. Maybe a couple of questions. First on the structural cost savings, the guidance that you've given over the next few years, it's a little more weighted to the downstream and renewable segments. Is that primarily driven by portfolio impacts, or can you maybe talk about what the primary drivers of the structural cost savings are there?
As you talked about Brazil and Gulf of Mexico or America, you've got leading positions in both basins. The volume guidance, I think the 2030 is maybe modestly lower in both basins versus current production levels. Should we think of those primarily as basins that you're looking to sustain, or what could be possible drivers of incremental upside that's not in the plan? Is it more likely to be things that you just talked about, like with Ursa and Equinor, or are there organic opportunities to do more there?
Let me touch on the second one and invite Sinead to talk about our structural cost reductions. What we are saying is we want to target at least sustainability of that production and where the opportunity arises to grow it. No question. We like both of those basins.
We think we are particularly advantaged in both, one indeed as a partner, the other one as an operator. That is going to depend on both exploration successes as well as, in the context of Brazil, license rounds, getting access, and so on and so forth. Just to add a bit more to each of them, what is most attractive in the Gulf of America is we have today 14 outstanding ZIP codes, hosts that allow us to really go around those areas and in particular with an administration that is going to open up further lease sales, allows us to pick up the leases that will hopefully keep those assets full for a long, long time and potentially make some big greenfield discoveries as well. Take Sparta, which is the one that is going to come up soon in the 20,000 PSI, more advanced horizon.
The Paleogene is relatively underexplored with great upside. Now that we have a host that is going to be sitting in that advantaged area, we will take advantage of it and continue to broaden our opportunities for exploration with the hope that we can grow our production. What you have here is what is in our resource pool right now rather than trying to bank on something we do not yet have. There are, by the way, a number of tiebacks to our Appomattox platform, to our Perdido platform that are being executed as part of this. I think in Brazil, what is underappreciated is just how massive those fields are. The Tupi field, we will run out of license on the current basis before we ever run out of resource.
There it is less about getting access to new resource and more how we support Petrobras in making sure we manage reservoir in the most appropriate way. We have a lot of experience in that in a place like the Gulf of America, of course, because we have late-life assets. We hope to be able to bring that to supplement Petrobras's very deep technical capabilities.
Yeah, in terms of the structural cost savings, we start from a great place where we've sort of delivered $3.1 billion a year early from a $2 billion-$3 billion target with more to come. The way it is outlined in the slide is certainly not meant to indicate more in one area or not.
What it is meant to indicate is a huge amount of ambition to continue to deliver and to hit five to seven and to keep going wherever we can beyond that. Specifically, where is it going to come from next? There is an element of portfolio, of course. We have just announced, of course, the SPDC completion, so that is on the upstream side in Peter's portfolio. We have also, of course, commented earlier that we hope to close in terms of the Singapore divestment in Machteld's portfolio. Both of those will have OpEx savings that will play out, of course, as the year runs through and will be sustainable beyond that. Beyond that, what are we seeing? Downstream is hitting this hard.
They are very much focused on changing their way of working in everything they do, whether it's the mobility business, looking at just costs in general in terms of inventory, where they're sourcing it from, how much they hold, looking at in terms of where they spend on advertising. Are they getting bang for the buck from it or not? If they don't, they don't do it. That's what David's focused on. I can keep going through each of the businesses. When you look to the refineries, to the chemicals businesses, what those actual GMs or general managers are looking at is how do they make their business more resilient and cost competitive? We have a lovely example, for instance, in terms of every time we take any of these plants down, the cost to get them back up again, of course, is painful.
When you have storms, etc., it costs us a lot of money. Norco did a brilliant job of ensuring that it was up and running, that it stayed there, that it did not have to take things down, and it had it through resilience on power. That meant that not only were they the only ones actually producing when everyone else was down, they reduced the cost that everyone else was seeing to bring it back up. This is not about cutting costs unilaterally. This is about actually, in some cases, spending more money because you are going to generate more value. You are going to start seeing a bit more of a mix of that, and we look forward to sharing more examples. I am very confident it is much more of a move away from divestments and more towards actually the underlying running of this company.
All right. We have five minutes or so left, so let's make this the last question. Perhaps when we're done answering that, if you could come up and say a few words to close us out. By the way, for those of you who are joining us for lunch here, back of your lanyards, there's a table number. If you could help us by sitting at that table, that would be much appreciated. Right. The unenviable task of who is the final question? Biraj, you're right in front of me, so I'll give it to you.
Hi. Thanks for taking the question. It's Biraj, RBC. It's a specific one on mobility. The kind of slides you put forward, you show a 50% increase in the gross margin the last five years. Going forward, it's an underlying increase in the gross margin in absolute terms.
If I look at the last five years in terms of kind of bottom line, that gross margin improvement does not look like it has come through in the net income number at least. I know volumes are down a bit, but it does not look like the volumes explain the story. Could you just help me understand the gap between gross margin and net margin and why that would be different going forward?
Super. It is great to again put one of our colleagues on the spot, David, because he will be delivering that uptick. David.
Thanks very much for the question. Thanks, Wael. I mean, the story over the last two years at least has been that the gross margin you have seen has grown over 10%, and that has translated into a 20% earnings increase last year.
It's starting to come through as we're putting into effect the strategy that we started about a year ago, excuse me, which is focusing on a much more disciplined way in high grading the portfolio, focusing on our route to market and our cost base as Wael and Sinead have outlined, and also on our premium products. Within that two-year timeframe, we've actually grown our premium volume by over 10% and have grown our premium margin by over 35%. I think what we're seeing now is that translation of that gross margin growth coming through to earnings with the 20% that we saw last year. With the actions that we have in place, I'm pretty confident that we're going to continue to see that drop to the bottom line. Thank you.
Thank you very much, David. We've been wearing David out and losing his voice.
Sorry, David. Look, before I close off, just to maybe take the opportunity to make a couple of introductions so that in the break you can meet up with some of the new members that maybe you haven't met. Maybe ask Peter first if you could just stand up for a second. Peter Costello will be running our Upstream business as of the 1st of April, has been running our conventional oil and gas business, and is one of the strong BG, ex-BG folks who joined the company and continues to be with us. Please look up Peter if you want to dive into the Upstream business. Machteld, who is taking over as the DSR President, has been running our Chemicals and Products business and before that was leading our Lubricants business. All this portfolio is very familiar to her.
A big part of her role will be to be able to deliver the turnaround we're talking, which we are well progressed on. Please look to Machteld if you have any questions in that space. Cederic, I think we have already asked to say a few words. You know Cederic from his integrated gas role, and he will move in as President of Integrated Gas again on the 1st of April. Let me also, David, you have just been introduced to, so you know. Maybe Colette, if I can invite you. Colette moves in as she was running the Gulf of America as Vice President as part of the delayering. Gulf of America will move to report straight into Peter.
Colette will be able to share with you all our plans for the Gulf of America, but also bring to life some of the aspects of the culture journey that we have been going on and some of the improvements that you saw on the chart. Please make sure that you ask her any questions you have. Let me close off by saying a few words, firstly to all colleagues who have dialed in online. Thank you for your patience. I can imagine it's a tough three hours to be watching on a screen, but particularly for colleagues around the tables here. Thank you very much for making it. What a difference two or just under two years makes. There was a big question, I think, around whether this management team, whether this company could live up to the promises we have made.
If there's one thing I really wanted you to go away with, it was the message in the video. You can be sure of Shell. We are committed to delivering what we said we're going to do. We don't take these commitments lightly. We recognize the credibility of our colleagues. Our credibility as a management team sits on our ability to be able to meet the promises we have made. You will see us working our backsides to be able to make sure that we deliver on what we have said we're going to do. We also have momentum. There is something around an internal catalyst that we see at the moment that we want to try to unlock. Our job is not just to deliver the plan. Our job is to be able to inspire our troops to be able to do even more.
It is within our reach to do that. We have unbelievably capable people, terrific businesses, and with momentum and confidence, we can do a lot more. That is where our focus is going to be. You have seen us continue to drive the performance agenda. That is a key priority, and performance discipline simplification continues to be at the core of what we want to do and who we want to be as a company. You have heard us today talk about a second key element, portfolio, and how we want to reallocate capital to be able to unlock the full potential of that capital employed in our businesses. Thirdly, we recognize our shareholders have choices both in our sector and outside our sector.
We want to continue to be able to make this an exciting story for you, an investment thesis that has an element of self-help in it, an investment thesis that shows you competitiveness, shows you resilience, and a company that is moving into its stride irrespective of where the energy transition is going to take us. This is a company that you can truly be sure of. Thank you all for making the time. Thank you for coming in today. I look forward to seeing some of you over the next hour, hour and a half who are here in the NYSE. Thank you again to those who called in, and I look forward to engaging with many of you, if not all of you, over the coming weeks and months. Thank you, everyone.