Ladies and gentlemen, thank you very much for joining us here this morning. I'm really looking forward to updating you on Shell's performance, our progress against our strategic goals, and our plans for the future. Believe me, we're going to do so in some considerable detail. Before we get going, can I please remind you again of our disclaimer statement? As I said, we are going to update you on the company in some detail. After the presentations that we will be giving here this morning, we'll do a plenary Q&A, and that will be followed by a short break, and then we go into our business breakout sessions as we have done before.
Jessica will join me here for the plenary Q&A, and I hope we can keep that at a relatively high level, because there will be plenty of opportunities, believe me, to engage with all our colleagues here on business specific questions in the panel sessions that we will have afterwards. We have a lot to tell you this morning. We have made a lot of progress, and I want to start by outlining the three key messages that I want you to take away from today. The first one is that our cash flow momentum, the line of sight to our 20% gearing, and our confidence in our strategy all support the board's decision to cancel the scrip dividend program with effect from the fourth quarter 2017 dividend.
The company is also confirming its plans for a share buyback of at least $25 billion in the period 2017 to 2020, and that's, of course, subject to progress on further debt reduction and recovery in oil prices. This is all consistent with the intentions that we stated at the time of the BG acquisition. The second key message that I want you to take away is that we are increasing our organic free cash flow outlook for 2020. We now expect to deliver around $25 billion to $30 billion a year by 2020 at $60 a barrel, realterm 2016. We intend to continue to grow free cash flow per share between 2020 and 2025.
The third main message is to convey our confidence in the differentiation, the financial resilience, the long-term business relevance of our portfolio through the ups and downs of the oil price cycle, but of course also through the energy transition. We plan to step up our activities in new energies and set our ambition to reduce the net carbon footprint of our energy products in step with society's drive to align to the Paris Agreement goals. That's it. Increased organic free cash flow outlook, more distributions to shareholders, long-term confidence in our portfolio. These are the main points of today's presentations. Let me start with the financial and operational delivery and outlook, which I believe are key elements of a world-class investment case. We have been on a transformational journey since 2014, and the BG acquisition meant that we could accelerate that journey in 2016.
It strengthens the four levers that we could pull for our transformation, so operating cost reduction, capital discipline, portfolio restructuring, and accelerating growth. I believe that we have been delivering on a very ambitious agenda. We have delivered 11 major projects starting production since early 2016, adding an average of 500,000 barrels of oil equivalent a day of peak production. We have completed a $23 billion divestment at headline level, large divestments such as our Oil Sands, our share in Woodside, the Motiva split, the exit from Shell, just to name a few. Our four quarters rolling free cash flow at Q3 2017 was $27 billion, and that was at an average of $51 Brent. Over the last few years, we have established tremendous clarity of purpose that's inside the company, but I trust also for our shareholders.
We have developed a differentiated strategy that gives us competitive advantage, we are reshaping the portfolio profoundly to align to that strategy. I clearly see it working. Over the last two years, we have transformed the financial metrics of our business. Higher returns. Our current return on average capital employed at around $50 a barrel is around 5%, and that's expected to grow to around 10% at $60 a barrel by 2020. More cash. We are now delivering more free cash flow than when the oil price was close to $100 per barrel and more than any other IOC. Note that we are doing so while still implementing the largest capital investment program amongst our peers. As I said, by 2020, we expect to deliver around $25 billion-$30 billion of organic free cash flow at $60 a barrel real terms.
This is a material upgrade compared to our previous outlook of $20 billion-$25 billion, clearly speaks to the confidence in our delivery. Less debt. We are focused on strengthening our balance sheet, over the last 12 months, we have reduced net debt by more than $10 billion, gearing now stands at around 25%. That's down from 29% a year ago. I think we have pulled the four levers that I mentioned earlier with great effect. However, equally important is that underpinning all of this, there is a very deep transformation in our ways of working. Let me offer you some proof points on this as well. We have reset and streamlined our organization. Since 2016, we have reduced the number of FTEs by a further 13,000 net. We have reduced our office footprint, and we have reduced our expat base.
In addition, we have continued to expand our Shell Business Operations centers by another 1,000 to approximately 12,800 FTEs offshore. That's by the middle of 2017. The related people decisions have not been easy, we have executed these reductions respectfully and transparently, with strong and active involvement from all leaders. Consequently, despite these restructurings, our people engagement, which we manage very actively, has remained stable in 2017. That's according to the Shell people survey that we do every year. Moreover, our people believe in and are strongly supportive of our direction, also according to the Shell people survey. At the same time, we continue to recruit and develop graduates and experienced hires to grow and build our leadership cadre for the longer term.
We run a larger business with less staff, less cost, a simpler and nimbler delivery model, and a stronger focus and direction. The performance management culture that we established since 2014 has also firmly taken hold and now see more attention to detail, greater focus on competitiveness, clearer accountabilities throughout Shell. Performance is now clearly defined in terms of financial outcomes, not functional excellence, and that's an important change in the culture of our company. We have also fundamentally changed the way we conceptualize new projects, focusing on competitiveness and financial resilience rather than just engineering wonders. Andy and Maarten will further illustrate this point a bit later on. These are only a few examples of the deep changes that have occurred over the company in the last four years.
Let's go back to these four transformational levers that I mentioned earlier, and let's start with operating cost. We have now been reducing underlying operating cost continuously for 11 quarters, and we have achieved a spend rate of less than $38 billion, well below the $40 billion that we indicated in our previous outlook. Even with the growth of our business over the next few years, we are confident that we can hold costs below current levels as we have over the years established a sophisticated way of managing costs at the right levels. Jessica will say some more about that in a few moments as well. Discipline, focus, and capital efficiency have allowed us to maintain our investment levels at or below the bottom of the $25 billion-$30 billion range that we indicated in 2016.
I want to maintain that range with its hard ceiling and soft floor because I see it drives discipline, it drives competition within the portfolio, but it also allows, at the same time, sufficient flexibility to continue to invest for the future. At current oil price levels, you can expect capital investments to be at the lower end of this range. We have significantly high-graded the portfolio as well. We are now close to completing our 2016 to 2018 $30 billion divestment program, but you should expect us to continue to high grade and to reshape our portfolio in a dynamic manner that adds value. So expect divestments to continue beyond 2018 at a rate of at least $5 billion a year.
Finally, I can say we remain on track to deliver a wave of new projects which have a targeted delivery of 1 million barrels of oil equivalent a day or $10 billion of cash by 2018, and that's all at $60 a barrel. Most of these projects are already on stream, or they are ramping up, or they are close to completion. These projects, of course, will continue to ramp up over 2019 and 2020. In fact, by 2020, we expect an additional $5 billion of operating cash flow from these projects and some of the new ones, all at $60 a barrel as well. I believe the four levers have served us well to transform the company over the last few years, and therefore, we will continue to use them for the foreseeable future. We will continue to show discipline and determination.
Of course, financial performance is key, but we can only take credit for it if it is delivered without compromising on safety. On top of the solid financial performance, Shell has also maintained and improved its HSSE performance. You can see the company here is broadly stable in terms of injuries and process safety incidents and operational spills, Goal Zero is the goal, and I will therefore not be happy until we see these figures improve even further. You will also note that upstream flaring is down to the level that we last saw in 2013. That's despite the growth in the footprint of our business. I've talked a lot now by how much we have improved operational financial outcomes in absolute terms, delivering a world-class investment case takes more than just that.
It also takes an improvement in the competitive positioning of the company on these metrics here. We will have to remain relentless in our efforts to continuously improve our competitive position. I believe these charts already highlight significant progress, but I also believe I can't declare victory yet. In particular, I want to see further improvement in Return on Average Capital Employed and in free cash flow per share. I also believe that discipline and consistency in capital allocation, combined with strong operational performance and consistent delivery, will actually take us there. Let's have a look then at how we are shaping up for the future. As you know, Shell today has 3 cash engines, oil products, integrated gas, and conventional oil and gas. We have 2 growth priorities, chemicals and Deepwater, and 2 strategic themes, which are emerging opportunities, New Energies and Shales.
The purpose of the cash engines is to fund growth and distributions to shareholders. While the purpose of growth priorities is to become additional cash engines. By 2020, I expect Deepwater to have become a cash engine, delivering significant free cash flow, but also still some moderate growth. I see our chemicals business remaining a growth priority until the early 2020s, while we are completing, of course, the current growth project. By then, we will have to decide, do we want to continue to grow this business at an accelerated pace or do we want to turn it into yet another cash engine? I expect our Shales business to have become a growth priority by the end of the decade, as we have high-grade opportunities.
Andy, in a moment, will talk to you about growth and competitiveness in this area and how we expect to reach free cash flow neutrality over the next couple of years. Ultimately, we want to grow this business in the '20s to be a material cash engine by the mid to late 2020s so that we can maximize investment optionality between short and long cycle upstream investments. The main emerging opportunity by 2020 will be our New Energies business. The next few years, I want to strengthen this business so that it can become a growth priority in the '20s. This will really be a game of managing our exposure to this new business while establishing also scale. Essentially building a platform for potential material future value. Our capital allocation choices are consistent with this strategic story that I just laid out.
As I have already mentioned, our capital investment guidance until 2020 remains unchanged, $25 billion-$30 billion, hard ceiling, soft floor. Within this range, you will notice a few shifts. In Deepwater and conventional oil and gas, we are reducing capital investment guidance to reflect the significant capital efficiency improvements that we have achieved in these businesses. Capital allocation to integrated gas and chemicals remain unchanged. We have decided to allocate a little more capital to our oil products business to add materiality to this very differentiated and high returns part of our portfolio, particularly in marketing. We are increasing capital allocations in new energies. We believe the time will come for these businesses to emerge as the growth priorities of the future. Altogether, these capital allocation choices means that by 2020, cash engines will represent approximately 80% of our total capital employed.
That's versus 65% in 2016. A very significant change. Let me reemphasize again, cash engines are not cash cows. They generate cash, free cash, but we still see sufficient attractive investment opportunities in them to sustain moderate growth. Chemicals and Shales generate material operational cash from which we in aggregate allow it to be reinvested in these businesses. Now, many of you have had questions about the level of our capital investment. Is it adequate? Is it maybe too high? Is there sufficient flexibility in it? Let me offer a different lens on our capital investment. On this slide here, you will see a breakdown by the degree of discretion in our spend. Of course, a portion of our capital program is essentially non-discretionary. Think of spend on asset integrity, for example, or catalyst change or turnarounds.
There is spend which has actually very little discretion as well. That's really to maintain positions such as tiebacks, accelerating wells, well reservoir and facility management, but also retail network maintenance, assets under construction. Not spending here really means that we are eroding the earning capacity of these assets or destroying value. Now the total of these 2 spend categories is between $15 billion-$20 billion, depending a little bit on the amount of assets under construction. On top of this, there is growth, which can be further split into 2 types of investment. Small scale, value growth. Think of high double-digit IRRs. For instance, expansion of existing assets or commercial positions that we have. Here, of course, we would only scale back if we were really with our back against the wall.
The last segment covers the large, more discretionary value growth options. Choices here are driven by long-term value for shareholders. Spend is determined by near-term affordability within the overall financial framework. Most of the near-term capital flexibility really comes from flexing these large value growth options. Let's talk about these large value growth options in a bit more detail. First of all, I want to point out that they are delivering free cash flow growth now and not just barrels. Multiple projects in Brazil and others like Stones and Malikai and Schiehallion and Kashagan have already come on stream and are delivering. In Downstream, we recently entered the retail market in Mexico. Some projects are due to start up production in the coming years.
Think of Pennsylvania, the Nanhai expansion, Prelude, Appomattox, there are a number of potential FIDs coming, such as Vito, Libra, post the first FPSO in Brazil Deepwater, Bonga Southwest, LNG Canada, and Lake Charles. If I look at all of this, it adds up to a company that is on track to meet and exceed the commitments we made to you in June last year at our Capital Markets Day. What I see is a company that is moving forward across a range of measures that is becoming a world-class investment, with ultimately the number one position in the industry in terms of enterprise value. A company that is optimizing its ability to generate cash and returns for shareholders.
A company that is ready to cancel the scrip dividend program and at the right time to start a share buyback program, which will be another driving force for improving per share financial metrics. Now, may all be well and good that we are on our way to be a world-class investment, number one in our sector, we also have to plan to stay there. For that, we must not only have a portfolio that is resilient and relevant for today, but also for the long term. Let me explain to you why I believe Shell plans to be financially resilient and relevant as a business for the generations to come. We can only remain a leading company if we evolve Shell in line with societal expectations.
Today, we will set out our ambitions for the future, as well as the business levers that we will pull to thrive in the energy transition of the 21st century. Let me be absolutely clear and categorical. Shell supports the Paris Agreement and its goal of keeping the rising global temperatures below 2 degrees C. Scenarios analysis suggest that that goal actually means society must get to a state of net zero emissions by 2070, which means that over time, we as a society must stop adding to the stock of greenhouse gases in the atmosphere. As a society, we also must realize that rising living standards of a growing population means that energy demands could double over the course of a century, and this has to be accommodated as well. The world needs more energy, falling CO2 emissions, and all at the same time.
This means that on average, each unit of energy consumed has to come with a lower amount of CO2 emissions in its production, its distribution, and its use. Or in other words, a lower carbon footprint. Ultimately, the 2 degrees C path means that society must get to a net zero carbon footprint. This is a challenge for the whole planet, for all of society, for customers, for governments, and indeed for businesses. It can only be achieved by a multifaceted approach to which we all contribute, around which we all collaborate. Now, we have carefully listened to our critics, to our supporters, to our shareholders. What do they expect from a company that aspires to be leading in the industry and a company that wants to be a responsible member of society? As a result of that, we've set ourselves a clear ambition.
It's a long-term ambition, it's an aspirational ambition, we believe it demonstrates leadership. It's the first in our industry. Let me share it with you. Let's start with our existing assets first. Right now, of course, we are working to improve their greenhouse gas efficiency. For 2017, you will remember we changed the company's bonus scorecard so that 10% of the scorecard was dependent on greenhouse gas management. In 2017, this was based on the performance across 60% of our portfolio. Next year, we will increase that to 90% of our portfolio. We also have to focus on the medium term, say to 2030. Over that period, beyond of course, oil and gas will remain an important part of the energy system, there's no credible forecast that says otherwise, really.
In that same period, we expect also the energy transition will start to gather pace. We will have to choose our oil and gas investments with that reality in mind. This means only proceeding with those investments that are climate competitive. It means shaping our oil and gas asset portfolio further to ensure financial resilience and compatibility with the 2 degrees C roadmap. While no one can see the future, we believe our detailed modeling means that we can reasonably well predict the range of how energy demand patterns will evolve in the next decade, how fast the electrification of transport will go and the residential sector, how policy measures by governments will shape the mix of energy demand.
We can also reasonably well foresee what our portfolio of assets will look like in 10 years' time, given certain investment strategies, certain degree of portfolio high grading, et cetera. Altogether, we can assess reasonably well the probabilities that part of our portfolio may become stranded in the medium term. The Task Force on Climate-related Financial Disclosures is providing the framework for this assessment, that's the reason why Shell is a supporter of the task force. We are working hard to ensure this framework provides the information that you as investors need in developing our TCFD-based disclosure. We believe also that we can demonstrate that our portfolio will be resilient in this regard. Now, a lot is happening already in the energy transition, it will really start to accelerate in the 2030s. How do we prepare for the long term?
As I said earlier, tackling climate change is a cross-generational, global, and multifaceted effort. It needs plans that meet increasing energy demand with an ever lower carbon footprint. It is critical that any plan covers the full energy life cycle from production to consumption, where around 85% of the emissions associated with our energy products occur. I cannot stress this enough. Now, according to credible scenarios, to meet the Paris goals, society will have to reduce its carbon footprint, so the amount of CO2 produced per unit of energy consumed by around half by 2050. Now you will not be surprised if I tell you that Shell's product portfolio with full life cycle of emissions, including the emissions from the use of our products, has a higher starting point than society's average.
We may not have coal anymore in our portfolio in our product mix, we also don't have the large quantities of nuclear, of hydro, modern renewables, large scale primary biomass that is also part of the global energy system. Even though our starting point is higher, we will aim to bring down the net carbon footprint of our energy products by around half by 2050, expressed in grams of CO2 per megajoule of energy consumed. As an interim goal, by 2035, we aim to reduce that by around 20%. Just to be completely clear on this approach includes Scope 1, Scope 2, and Scope 3 emissions. It goes further. It also includes emissions from energy products that we buy from third parties and eventually sell on to our customers. When I said this was the first in industry, this is what I meant.
By including the full range of emissions, including those produced by using Shell's energy products, we aim to help consumers with their own emissions through the solutions that we offer. We believe this is the right way to evaluate our performance and to evaluate our contribution to society. Now, how will we do this? Well, we have a variety of tools that we can use to achieve this over time. Providing lower carbon fuels to customers like biofuels and hydrogen, but also providing renewable power from solar and wind, as well as pulling through demands by growing the number of charging points for battery electric cars. Developing gas markets for power and transport is another powerful tool. Of course, we will continue to pursue further operational efficiencies in our assets, and we will seek to develop carbon capture and storage.
Increasingly, we will work with nature, with forests and wetlands to help compensate for those emissions that are just hard to avoid. Now at this point, so early in the transition, it would be unwise to commit to an exact mix of measures to get to this ambition. There is still just too much uncertainty around the future policies and what technological change may bring. I can tell you, we will use all these tools and indeed we are already active in all these areas. We can and we will adapt our business. Shell is a company that invests between $25 billion-$30 billion a year, and over the course of 10 years, that means an entirely new Shell is being built.
We expect the speed of the transition to vary by country, by industry, and even by customer as society and governments balance the need for energy transition with the need to provide that vital energy to fuel their economies and their lives. Accordingly, it is possible that our ambition will evolve with society and government's progress, and therefore we will undertake every five years aligned to the Paris INDC process to review and report our progress to make sure that we remain in step with society. As a business, Shell cannot do this alone and we can't run too far ahead of society. Both consumers and Shell need to see the right conditions in which to take action, we will do what we can to bring those conditions about.
I'm talking here about well targeted regulation to mandate things such as efficiency improvements, support for technological improvements, backing for carbon capture and storage and usage solutions. Talking about a government-led carbon pricing mechanism that could help different choices and behaviors across the economy. I'm talking about well-designed energy markets with policies and mechanisms that promote decarbonization of all sectors of the economy without unwanted side effects. All of these could enable both society and Shell as part of that society to advance towards the Paris goals. We are committed to play our part, and we will play our part with humility. We don't have all the answers. We will also play our part with sound financial discipline. We cannot, and we will not meet this ambition by destroying value. We will also play our part with strong conviction.
We know our destination, and we will find or make the path to get there. In summary then, we are confident our strategy is working. We have sufficient confidence in the future to cancel the scrip dividend program with effect from Q4 2017 dividends. The company is confirming the plans for share buybacks of at least $25 billion in the period 2017 to 2020, and that's subject to progress with debt reduction and recovery in oil prices. We will see significant organic free cash flow growth by 2020, even more than we communicated before, and we intend to continue to grow free cash flow per share, but more modestly from 2020 to 2025. At the same time, we will prepare the company for the long-term future by investing in resilient projects, sectors, and business models. With that, let me hand over to Jessica.
Good morning, everyone. Thank you, Ben. As Ben has shown, we're making great progress transforming the company. We have a differentiated strategy, clarity of purpose, and are reshaping the company to align the portfolio to our strategy. Combined with increasingly strong performance, we are pulling all levers to become a world-class investment case. To be successful in our industry requires financial strength. A disciplined approach to financial management is an integral part of the world-class investment case. It is what enables us to grow free cash flow per share and returns, which I believe will grow total shareholder returns. We have demonstrated the strength of our strategy and financial framework, and it is not changing. Shell strategy and financial framework are designed to succeed through multi-year price cycles and multi-decade investment programs.
A key element of this is that through cycle, we look to maintain a strong credit rating by delivering AA equivalent cash flows or gearing of 20% as a proxy. We aim to generate sufficient free cash flow at the lower end of the price cycle to cover the entire dividend and generate excess free cash flow above the dividend at the mid to high point in the price cycle. The dividend policy remains to grow the U.S. dividend per share through time in line with the growth of our earnings and cash flow. In the short to medium term, share buybacks will be the preferred means by which we increase shareholder distributions, consistent with our commitment to address recent share dilution. This financial framework has served us well as it allowed us to use our financial strength to acquire BG when the opportunity arose.
We want to ensure we are well-placed for the future. To acquire BG in a challenging macro environment, we raised debt, and as a result, we're at the high range of our 0-30% target. In line with our financial framework, we have consistently reduced debt over the last four quarters and rebuilt our financial strength, driven by underlying improvement in our cash flows. We made our intentions clear to the market at the time of the acquisition, maintain the dividend at $1.88 per share for 2016. Subject to oil price recovery and progress on debt reduction, turn off the scrip and start the share buyback program. We reduced our debt through divestments and grew the cash flow from operations through performance improvements, cost reductions, and bringing new projects on stream.
We further strengthened our financial framework through our disciplined approach to capital investment, from what we choose to invest in to how we execute our projects. Our strategy is working, we are delivering. As Ben just announced, the board has decided that we're now in a position to cancel the scrip dividend program. We also reconfirmed our intent to undertake a share buyback program of at least $25 billion in the period of 2017-2020, subject to progress with debt reduction and recovery in oil prices, consistent with the communications made at the time of the BG acquisition. I would like to talk you through the strength of our financial framework in a bit more detail. Strong cash flow generation is key to the strength of our financial framework.
As a result of our strategy and delivery, our ability to generate organic cash flow has grown significantly, we have demonstrated resilience at lower prices. Our cash flow from operations at $51 per barrel is in line with the CFFO we generated when the price was at $99 per barrel. Our organic free cash flow on a four-quarter rolling basis supports our level of declared dividend. We are confident that we can continue to grow our organic free cash flow in the years to come. With revenues from new projects coming on stream and further operational and cost reductions yet to be realized. As Ben has outlined, we expect to generate free cash flow of some $25 billion-$30 billion around the end of the decade at $60 per barrel real terms 2016.
Towards the end of the decade, our free cash flow will increasingly come from CFFO and be less dependent on divestment proceeds. This free cash flow growth demonstrates the strength of our portfolio, underlying performance, and the ability of our business to manage potential bumps along the way and underpins the confidence in our decision to undo the scrip program. In addition to growing cash flow, the proceeds from divestments have resulted in lower net debt and gearing. However, it is important to keep in mind that the main objective of the divestment program is not just to raise debt, but to high-grade our portfolio and simplify our portfolio.
At Q3, our gearing stood at some 25%, and that did not yet reflect the proceeds from the completion of the Gabon, the North Sea, and Woodside divestment. The completion of these deals means that 2 years into our 3-year program, we now have some $23 billion of transactions completed on a headline basis. We have a further $2 billion announced and are well advanced on at least another $5 billion. We have high-graded our portfolio and generated significant proceeds to reduce our net debt. I expect us to continue to optimize the portfolio, which will lead to divestments of at least $5 billion in 2019 and 2020. This means we have clear visibility on bringing our gearing to 20% and generating cash flow to support a double A credit rating. Over time, I expect gearing to move below 20% to ensure robustness of our financial framework.
This builds resilience to a changing macro environment and provides balance sheet strength to prepare us for the future. I would like to highlight that the strengthening of our financial framework is not just a result of divestment. It is fundamentally about the strength of the underlying cash flows and a disciplined approach to capital investment. A large part of the cash flow growth can be attributed to bringing on stream and ramping up new projects. We expect to generate an additional $10 billion from new projects that come online between 2014 and 2018 at $60 a barrel. Approximately $5 billion will have been delivered in 2017, and the remaining $5 billion is expected in 2018. This includes contributions from Brazil, Kashagan, Gorgon, and others. Beyond 2018, in the 2019 to 2020 period, I would expect another $5 billion of additional cash flow from operations.
This would include further startups in Brazil, the Gulf of Mexico, and the ramp-up of Prelude and others. We would also start to see some contribution from our chemicals projects, such as Geismar in the U.S. and Nanhai in China in the near future. A lot of these cash flows are de-risked as most of the projects are onstream and ramping up. For the remaining projects, all are significantly advanced in their construction. Recent examples include the completion of the hookup of Prelude's mooring system off the coast of Australia and the arrival of the Appomattox hull in Texas. It is worth noting that cash flow growth in downstream from initiatives such as the recent launch of our latest generation of V-Power across a range of key markets is not included here.
We are generating significant growth today across our portfolio, reflecting the quality and breadth of projects across our businesses. Another important element of the financial framework is a disciplined approach to cost, both operating and capital cost. We continue to see a downward trend with our operating costs. On a rolling four-quarter basis, we are well below the $38 billion and see potential to reduce this further. An efficient cost structure remains our priority and will continue to have the undivided attention at all levels of the company. Simplification, standardization, and increasingly, digitalization are tools we are deploying from the asset to the corporate level. In addition, we are applying a consistent cost management framework throughout the company. This is further enabling delivery and sustained cultural change. Simplification of our ways of working allows us to reduce costs, cut out waste, and often improve safety.
We've reduced overheads by standardization of data, processes, and IT solutions. We've deployed standard back-office tools in contracts and procurement and expense management, for example, that have or will reduce operating costs while improving the employee experience. Further, we continue to offshore activities, which leads to lower cost, enables further standardization, and increasingly enables innovation as activities and know-how are concentrated in our business centers in the Philippines, India, Malaysia, and Poland. Digitalization is another key enabler for cost reductions, and we have many projects running across the company to accelerate capturing these opportunities. For example, in maritime and shipping through use of advanced analytics, we are achieving operational efficiency improvements and significant cost reductions. In upstream and integrated gas, better monitoring and analytical tools are allowing us to plan maintenance better, reducing cost and downtime.
While in the Gulf of Mexico, advanced analytics is helping us to reduce inventories. You can see a lot is going on here. We've also shifted our thinking when it comes to costs. Throughout the company, we are benchmarking our performance internally with peers, but also with companies outside of our industry. This improves our understanding of the full potential of our business, identifies the gaps, and allows us to set ambitious targets. This approach is embedded in our performance management system. With a lower forever mindset, we will continue to push this agenda to improve our competitiveness regardless of the price environment. As I mentioned earlier, a disciplined approach to capital investment is key to our financial framework and increasing returns over time. Today, we reconfirmed our commitment to the $25 billion-$30 billion range for capital investment to 2020.
This is the level needed to grow our cash flows and increase shareholder distributions over time. For 2018, we intend to spend at the bottom of this range. This range is consistent with the free cash flow expectations we've set out for the end of the decade and will allow for moderate free cash flow growth into the next decade. Even if oil prices continue to rise, we will not exceed the $30 billion hard ceiling, but use the additional cash flow to accelerate debt reduction and share buybacks. If oil prices would fall back again and stay depressed for a prolonged period, our track record in reducing capital investment and the flexibility in our capital program ensures that we can adjust our framework accordingly. With a capital investment level of some $17 billion-$20 billion, we'd be able to sustain today's cash flow into the next decade.
Our capital efficiency continues to increase. This means we can create more value for every dollar spent compared with just a few years ago. You will see a number of examples of that today. A disciplined approach means that we only sanction the most competitive projects. In our upstream business for new capital investment, breakeven prices in the 30s have become the norm, and our wells and projects delivery capability is increasingly meeting or exceeding expectations. In downstream, we are very selective on how and where we choose to grow our business, building on proven strengths and capabilities. This will provide resilience to the portfolio and drive shareholder returns higher over time. We've made great progress on all fronts. Given this progress, the board has decided to cancel the scrip dividend program for the payment of the fourth quarter 2017 dividend.
The scrip was intended as a short-term measure. With our strong performance and delivery, we are entering the next phase in delivering the world-class investment case. With the removal of the scrip, we will maintain our financial framework, continue to grow the company, and look to increase shareholder distributions over time. Our intention remains to undertake a share buyback program of at least $25 billion in the 2017 to 2020 period, subject to debt reduction and recovery in oil price, to buy back at least $25 billion to offset the shares issued under the scrip dividend program, and over time to significantly reduce the equity issued in connection with the BG transaction, and therefore grow distributions to shareholders. We will also balance buyback levels with meeting our ambition to achieve double A equivalent credit metrics and funding growth.
Let me reinforce again that as we move into this next phase, our financial framework remains unchanged. We are as committed today as we were before to ensure we build our financial strength as the industry evolves. Even with the removal of the scrip, we remain conscious that we're in a cyclical and evolving business. We will continue to strengthen our balance sheet, hydrate our portfolio, and deliver performance in line with our strategy and purpose. With that, let me hand you over to Maarten.
Thank you, Jessica. Shell continues to lead the industry in Integrated Gas. Shell is the largest independent producer, marketer, and trader of liquefied natural gas and gas to liquids products. The acquisition of BG accelerated our growth strategy by about a decade, as a result, Integrated Gas has become a cash engine for Shell with a differentiated and resilient portfolio that grows with the market and delivers free cash flow. Today, I will point out the performance and potential of Integrated Gas and share why I think the future is exciting for this business. Our financial performance over the last few years has demonstrated the financial resilience of Integrated Gas. Since 2015, even at oil prices well below $50 per barrel, earnings have remained strong at an average of around $1 billion per quarter, and are now growing further as the market normalizes and our growth delivers.
Over the last 12 months, Integrated Gas has delivered more than $9 billion of cash flow from operations, excluding working capital at an oil price of $51 per barrel. This substantial contribution to Shell's financial framework is delivered in parallel with continued significant investment in the future growth of the business. LNG liquefaction assets and sales volumes have increased by around 50% since 2015, accordingly, the Integrated Gas capital employed has grown also by about 50% to $90 billion over the same period. Given this performance, by 2020, we now expect to deliver between $8 billion and $10 billion of organic free cash flow at an oil price of $60 per barrel. Beyond the upgrade in price, the ramp-up of our existing portfolio in Australia, increased margins from our gas to liquids business are the main drivers of this cash flow growth.
Over the same period, we want to increase the return on average capital employed to 10%, and we will deliver this improved outlook while investing sufficiently to continue to grow with the market and remain a leading international company in LNG in the 2020s and beyond. Shell has achieved a leading competitive position in gas to liquids with uniquely differentiated premium products that enable us to capture a strong margin uplift across Shell's end-to-end integrated value chain. I think our edge lies in the fact that we are adding value at every turn. In the North Field, we have been setting new standards for the industry. We completed the well in 28 days, for example, whereas the industry would have previously considered 75 days good performance. Our offshore availability has increased as well.
Gas is then delivered and processed at the Pearl GTL plant, the largest gas and liquids plant in the world. For Shell, when Pearl started up, it was the culmination of more than three decades of research, the filing of 3,500 patents, and the development of some of the world's most advanced cobalt synthesis catalysts. As a result, Pearl GTL is a unique plant using unique technology to manufacture unique products. The plant produces cleaner-burning diesel, aviation fuel, oils for advanced lubricants, naphtha to make advanced plastics, and paraffin for detergents. It makes enough diesel to fill over 160,000 cars a day, and enough base oil to make lubricants for 225 million cars. Let us have a look at trends in global gas.
Last year, for the first time in the history of the energy industry, gas-fired power generation, the red line on this chart, in the OECD passed coal-fired power generation. Last week in Bonn, more than 25 countries, OECD and non-OECD, pledged to phase coal completely out of their power mix by 2030. This makes sense. As the world is looking for opportunities to cut CO2 emissions from the energy system, gas should play an increasing role in power generation. We equally see a growing and lasting role for gas in powering and decarbonizing the industrial sector. Gas is the cleanest burning hydrocarbon, producing around half of the greenhouse gas emissions of coal does when burned for power. Besides playing a critical role in the decarbonization, improving air quality is also an important growth driver for gas.
Gas emits less than 10% of the air pollutants that coal does when burned for power. Take Beijing, for example. Switching from coal boilers to gas has helped reduce the annual output of fine particulate matter in the wider Beijing area by 40%. As the world transitions to a more sustainable energy system, the gas market and the LNG market in particular, will continue to grow along with that evolution. Looking into the future, Shell expects global LNG markets and demand to double by 2030 compared to 2015. That assumes that there is enough investment in additional supply. In the near future, we see rapid growth in supply occurring between 2015 and 2020. Around 160 million ton per year of new capacity is being brought online at the moment, representing a 50% growth in supply capacity over that five-year period.
Half of that capacity is in operation today. So far this year, supply has grown to match the demand growth by 24 million tons, matched by the demand growth in China, Southern Europe, and Korea. This positive demand trend is also confirmed by another year of reduction of net imports into Northwest Europe, which is a flexible outlet for surplus LNG. Current Asian spot prices even indicate market tightness at just short of $10 per MMBtu. However, we also observe that while gas demand in general and LNG demand in particular continues to grow, the flow of final investment decisions for new projects has almost stopped. A more complex competitive environment has emerged in which only the strongest projects backed by the strongest players and sponsors are likely to be developed.
LNG projects generally take more than four years to start production, it will take well into the next decade for new supply to come to the market to match the growing demand. These two effects point to a plausible scenario of supply shortage emerging in the 2020s. Having covered the general market dynamics, I would like to highlight the competitiveness of our position along the LNG and integrated value chain and the unique resilience of that portfolio. The development of our portfolio is market-led driven. We are securing new demand, building a supply portfolio for maximum reliability and flexibility. We optimize how we link our supply position to the demand of our customers depending on the market conditions. Let me start with how we create and secure new demand.
We are the largest LNG marketer amongst all independent oil and gas companies with competitive demand positions in Japan, Korea, Taiwan, and China, but also in emerging LNG import countries like Malta, Jordan, Pakistan. At the other end of the chain, we are managing our supply portfolio for reliability and cost of supply. Through our joint ventures, we have the largest IOC position in LNG liquefaction capacity with 13 plants in all major supply basins. We supplement this capacity with both long-term and short-term third-party offtake contracts for additional flexibility and cost optimization. In the middle of this value chain, we continuously optimize how we deliver LNG to our customers depending on market conditions and logistics. To do so, we leverage the flexibility of that portfolio, our trading and optimization capabilities, and our established position in shipping and regasification.
Integration is not only just a competitive advantage, but it's also a key resilience factor in the portfolio as we can capture value as it moves up and down the value chain in LNG. Let me now tell you more about how we are building our LNG sales portfolio for flexibility as well as resilience, starting with some facts. We buy almost as much energy as we produce. This balance creates a naturally resilient position for our cost of supply across a wide range of market conditions and a unique diversity in supply points across the world. At the sales end, about 80% of our sales are based on term contracts with an average duration of about 10 years, our spot sales represent about 20% of our total sales matched by similar amounts of spot purchases.
This large portfolio of more than 50 million tonnes per year of term business, both purchase and sales, delivers an attractive and ratable cash flow to our business. We add to that by leveraging the inherent optionality of that portfolio and tactical market opportunities to add value through spot trading, which currently is about 20% of the total sales. It gives a balanced and resilient position with upside. The same principle of diversification and resilience applies to our portfolio of customers. We are selling LNG to 70 different customers across 25 different countries, with Asia representing about 60% of our total sales. In terms of concentration risk, our term sales are spread over more than 30 customers. In Japan, Korea, and Taiwan only, we have more than 20 customers that buy LNG from us. The portfolio is also strong because of the credit strength of those customers.
The majority of our customers have a credit rating of A or above. As we expand our footprint, we don't only grow our customer base in the existing LNG demand areas, but also unlock new countries for LNG. As we unlock new countries, we often unlock significant suppressed energy demand where we connect a new importing country to the global LNG supply system and find volume upside in every place. In most cases, connecting to that global LNG system improves prosperity and opportunity for the citizens of those countries. Our marketing reach extends beyond wholesale LNG. We have gas and power trading activities in the USA, in Europe, Singapore, Australia, Brazil.
In an increasing number of markets, we are also developing the use of LNG as a transport fuel for trucks and ships with potential economic and environmental benefits when compared to diesel or fuel oil. The total market potential in shipping alone is the equivalent of 300 million tonnes per year of LNG demand, which is more than the total current global supply of LNG. Since October 2015, Shell has access to import and storage services in the Dutch port of Rotterdam. From there, we can supply our own LNG to shipping customers in Northwest Europe and to trucking customers on the mainland. We've also ordered an LNG bunkering barge to do the same off the U.S. East Coast, and we have the bunkering license in Singapore and have started to make our first ship deliveries recently, creating a global footprint of LNG supply to ships.
This is a promising segment where our leadership in both LNG and downstream gives us a valuable edge over many competitors. Demand creation is not just about acquiring customers. Government policy is a major driver for gas demand, and we take an active role in advocating the case for gas with general and special publics. This includes advising governments and policymakers on the role that gas can play in the energy transition. Having looked at the customer and marketing end of our portfolio, I also want to emphasize the competitiveness and the opportunities of our supply portfolio, the industrial end of our business. We participate, as I said, in 13 plants around the world, all in key supply basins. This gives us a capacity of more than 40 million tonnes per year of LNG supply.
That's almost twice as much as the nearest competitor from international oil and gas companies, which gives us the benefit of scale, but also geographic diversification. On the cost side, including BG, we have reduced our underlying operating expenses by 12% over the last three years while increasing our sales volumes by 14% at the same time. Our plants are also reliable. The average reliability percentage of our plants has been above 95% over the last three years. We also have areas where we see opportunity to extend our advantage further. Plant utilization is one of the areas in which we can further improve value delivery from this portfolio. The key here is to remove some of the bottlenecks in feed gas supply, like we did with the recent acquisition of Chevron's interest in Trinidad and Tobago and also Centrica's interests there.
Upstream projects such as these, meant to increase the utilization over existing LNG footprint, are affordable, attractive, and actively chased by our teams. To sustain our competitive leadership in LNG, we continue to assess opportunities for selective growth all over the world. Each project has distinctive characteristics that encompass abundant and economically attractive feed gas, proximity to key markets, and competitive construction cost. Our aspiration is to lower the all-in supply unit cost for this new LNG of our new product towards $5 per MMBtu. Some of these opportunities, like LNG Canada and Lake Charles, are post-FID and near term investable if we choose to go ahead. Others, such as Abadi and Browse in Asia Pacific and Tanzania and East Africa, are pre-FID and therefore medium term investment opportunities.
We also have expansion options in Sakhalin Energy and Nigeria LNG, where existing infrastructure helps to drive down the unit cost to very competitive levels. We continuously assess competitive long-term purchase opportunities from third parties. Whether we build, expand, or buy, our objective remains the same, to have the most competitive cost of supply, and to capture new demand in the supply gap that is opening up in the early 2020s to retain our position of strong and competitive leadership in the industry. I know that this success must continue, and for it to continue, we must keep our plants full and further take our cost of supply down. This is increasingly important because of the advent of North American LNG with a deep gas resource base and LNG at a transparent Henry Hub-based price.
We are looking at our portfolio of new supply opportunities through a new competitiveness lens. Over the last few years, we have lowered all-in unit supply costs of all our pre-FID options, as you can see on the chart. We are now on a path to reaching a cost level that is competitive with marginal supply from the U.S.A. We achieve that through benchmarking, disciplined and innovative engineering and contracting, and collaboration with our partners across the value chain. I think with this attitude, we will stay competitive and resilient. Shell is a world leader in liquefied natural gas and gas to liquids, with a differentiated and stable portfolio that grows with the market and delivers material organic free cash flow, $8 billion-$10 billion by 2020.
We are strengthening this competitive leadership position through active and innovative marketing to continue to create and secure new demand, driving operational excellence across our supply portfolio, and continuing to develop new competitive supply growth options. These new marketing and supply options will position Integrated Gas for an exciting future as a profitable gas engine with resilience, longevity, and growth potential. I will now hand over to Andy.
Thank you, Maarten, and good morning, ladies and gentlemen. It's a pleasure to be here and to give you an update on the Upstream business. As you know, Upstream spans all three of Shell's strategic themes: Cash Engines, Growth Priorities, and Emerging Opportunities. Conventional oil and gas is one of Shell's Cash Engines. It's a portfolio that should deliver resilient and attractive returns and free cash. In this strategic theme, we see opportunities for selective growth, but we've also been high-grading the portfolio through divestments. We've been improving cash margins through operational excellence and unlocking value and resources through new deals with governments. Deepwater is one of the company's two Growth Priorities. Here we've been increasing production and lowering costs. Our strategy here is to develop a material, attractive, and resilient business over the coming years so that it becomes a Cash Engine by 2020, as Ben described earlier.
Finally, Shales in the Americas is an Emerging Opportunity today. We've restructured the business, reduced cost, and improved competitiveness. We're now accelerating some selective growth within our capital constraints and expect it to become a Growth Priority by 2020. Our work to reduce costs, improve operational efficiency, and upgrade our portfolio is starting to show in our financial results. Upstream cash flow from operations on a four-quarter rolling basis to Q3 2017 was more than $16 billion, double the $8 billion in 2016, at a time when the oil price only rose by 17%. Since 2015, the upgrade of our portfolio improvement in operational excellence have resulted in a material increase in our CFFO per BOE. At comparable oil prices, our CFFO per barrel of oil equivalent has increased by more than two and a half times between 2015 and 2017.
Our cash flow is also improving, which means Upstream is now contributing positive cash surplus to strengthen Shell's financial framework. Earnings from Upstream are following the same improvement trend, but not as dramatically as cash flow because of high depreciation charges in Deepwater and Shales. The lower price in combination with BG have been a significant catalyst for change in Upstream. Our improvement program called Fit for the Future has helped reduce underlying Upstream costs by over 25% since 2015. At the same time, mainly due to the BG combination with increased production by 20%. Fit for the Future is essentially continuous improvement on steroids. Each asset defines its ultimate potential and develops granular improvement plans to close that gap, driving these improvements on a weekly cadence. Over 6,000 improvement initiatives have been delivered or are under action today since this program started.
Shell and BG Upstream businesses combined now have 25% less people than Shell had prior to BG. Remember, we're producing 20% more. The increase in production comes partially from improved operational excellence, including reducing scheduled and unscheduled maintenance. Optimizing production through well reservoir and facility management. For example, we increased the intervals between planned shutdown maintenance activities, saving already $200 million cash on a gross basis and reducing deferment of around 20 million barrels of oil equivalent. We're focused intensely on optimizing production through well reservoir and facility management. For example, this year in the Gulf of Mexico, we've unlocked 70,000 barrels of oil equivalent a day of additional capacity, delivering $500 million additional dollars cash surplus for less than $50 million investment. Let's give some examples of the work we're doing on projects to make them more resilient in a lower price environment.
We've fundamentally changed the way we conceptualize and execute projects. Whereas safety remains a number one priority, we're now putting lower breakeven prices as an absolute priority over engineering achievements and maximizing net present value. We're focused on the competitive scoping of our designs, our effectiveness in execution, as well as leveraging the supply chain. An example, let's say in Central Luconia in Malaysia with the SK408 project, where we're looking at three platform tie-backs with a standard wellhead platform design. Overall development cost expected about 30% below best in class in the industry. Another example in deepwater is the simplified development concept of Vito in the Gulf of Mexico, which has helped reduce costs by 70% compared to our initial designs. We started our new processing plant earlier this month in our Duvernay tight oil field near Fox Creek in Canada.
This was a fully modular construction with no welding in the field, cutting man-hour costs by 50%, which not only reduces cost but also reduces safety exposure. Since the beginning of last year, we have started projects that will deliver at peak Shell share production greater than 400,000 barrels a day. Delivery of new projects has helped to more than offset the reduction in cash flow and production from declining assets and divestments. Recent highlights include the arrival of the Appomattox hull in Texas and the start of the production of Gbaran-Ubie Phase 2 in Nigeria, and just yesterday, the start-up of Libra Early Well Test Unit FPSO in Brazil. Including shales, we have more than 600,000 barrels a day Shell share of production from new projects under construction today, still to start up by the end of this decade.
In 2018, we expect to have three new FPSOs in Brazil pre-stalled on production, continued growth in Permian and Fox Creek, and the start of the Clair Phase 2, Tempa Rossa, Coulomb, and Kaikias. Let me be clear, we're not just driven by production targets. We're driven by our focus on cash flow and improving returns. Production is just one lever to achieve this. Let's focus on the individual strategic themes. As I mentioned at the start of my talk, conventional oil and gas is one of Shell's cash engines, and we aim to improve the quality of this portfolio to offer higher returns and stronger free cash flow. The core long-term positions in conventional oil and gas are in the U.K., Norway, Nigeria, Kazakhstan, and we're looking closely how to continue to high-grade this portfolio, as we've seen with a number of divestments post the BG deal.
We have reduced decommissioning restoration liabilities by more than 20% through these divestments and execution improvements. All of the divestments we've made so far in conventional oil and gas have been ROACE accretive. In combination, we continue to look at selective growth to offset the production and cash flow reduction from these divestments. U.K. is a good example where we are divesting the more mature assets and growing the more attractive ones. Actually, in the U.K., we have cut unit operating costs by 70%, actually helped by operational excellence, including 40% reduction in staff and an increase in production efficiency by 25%. We do have a robust pipeline of projects in conventional oil and gas. All projects with planned final investment decisions over the next two years have a break-even price below $40 a barrel.
In addition to reducing costs, we're working hard on commercial arrangements with governments. For example, in Denmark, where new fiscal deals are helping tie our future project towards its FID. In Nigeria, where funding arrangements with NNPC are not only addressing arrears, but also unlocking new projects through third-party funding. This opportunity to unlock resources and value through proactive government engagement is yielding results across many assets in the conventional oil and gas portfolio. Our projects under construction today in conventional oil and gas should add over 200,000 barrels a day of new production in the next few years. With pre-FID options and exploration, we expect to maintain production into the next decade.
The focus on operational excellence and competitive project delivery allows us to maintain conventional oil and gas as a powerful cash engine, delivering $5 billion-$6 billion organic free cash flow by the end of the decade. I'm especially pleased with Shell's strong portfolio and track record in deepwater. We have an advantaged portfolio of options for competitive growth and a focus on production excellence. What do I mean by advantaged portfolio? I believe we have some of the best positions in the best basins, and we have scale and expertise. Our new projects are resilient across the cycle with competitive costs. The pre-FID average forward-looking break even price is below $30 per barrel, providing us competitive growth opportunities.
On a unit development cost basis, the cost of deepwater projects has come down on average by around 45% since 2014, and there are more opportunities to reduce costs further, which we're actively working on. Since 2014, we've almost doubled our deepwater production to around 740,000 barrels oil equivalent a day, setting us well on track to deliver the expectations of 900,000 barrels oil equivalent per day that we communicated at last year's Capital Markets Day for 2020. We expect we can maintain this level of production to the mid-2020s by completing existing projects such as the FPSO program in Brazil, the Appomattox project in the Gulf of Mexico, and pre-FID projects such as Vito and Libra. With exploration, we have upside which can potentially continue to grow deepwater production through the middle of the next decade.
As we continue to improve capital efficiency, we have lowered the capital spending by around $1 billion versus the guidance last year with no impact on expected production. This year, we expect to be around free cash flow neutral in deepwater with a steady trend of improving organic free cash flow to the end of the decade, where we have an expectation of between $6 billion and $7 billion free cash flow. By the end of the decade, deepwater will be a strong cash engine, delivering material cash flow into the 2020s. We've also been working extremely hard to improve our competitiveness of our shales business, and we are seeing better results. In the Permian Basin, for example, we've reduced direct field expenses by 33% in the last year and 60% since 2015.
97% of our water is now piped rather than trucked, which has cut water handling costs by two-thirds, as well as dramatically reduced safety exposure by taking trucks off the road. We're not only transforming our operational cost performance. Our capital efficiency continues to improve thanks to better drilling and completion performance. We've maintained a consistent drilling program and matured an inventory of drill-ready locations over the past two years, this has allowed us to move to multi-pad drilling ahead of others while benefiting from attractive locked-in rates for rigs, frac spreads, and well services. We believe we can now compete with the best E&P companies in shales. Also, we have the expertise to do things that's hard to replicate. In Argentina, for example, we're using remote drilling centers in Canada, as well as our Duvernay well designs to significantly reduce drilling costs.
It took us 11 wells in Argentina to achieve the same cost per well as we achieved after drilling 40 wells in the Duvernay field in Canada, transferring learnings quickly to this new international play. We're also investigating the use of digitalization to improve results in shales through our iShale program, which is exploring changes in the way we design, configure, execute, and operate onshore shale fields. We aim to build shales into a material and sustainable growth business after 2020. As I mentioned earlier, we're already accelerating development in the Permian Basin and Fox Creek Duvernay. Earlier this year, we said we could achieve around 140,000 barrel a day growth by 2020. Now we expect that figure to be around 200,000 barrel a day growth by 2020.
This is without increasing our capital spending from the $2 billion to $3 billion per annum guidance that we gave last year, just increasing the efficiency of that spend. This kind of selective growth is expected to accelerate our free cash flow breakeven for shales by one year to 2019, and in 2020 now has the potential to generate between $1 billion and $2 billion in organic free cash flow at $60 a barrel real terms. Through exploration in the last years, we have unlocked significant value in deepwater, particularly in the Gulf of Mexico. Since the BG combination, we've reduced our spend in exploration and now aim to spend around $2 billion per year through the next few years. With a more constrained budget, we focus success in our heartland to sustain future growth, putting a smaller proportion of our budget on higher risk frontier plays.
In our heartlands program, we have an average of 40 wells per year. In addition to significant volume additions, we are creating value through turning exploration success into production quickly, with a focus also on the near-field discoveries. We've been commercially successful in about 60% of the wells there, delivering 70% of our near-field discoveries on production within less than a year. In 2017, we've also secured new acreage in a number of countries, and I'm particularly pleased with the results in the latest bid round in Brazil. The deep water blocks we've acquired will add to our significant portfolio in Brazil, increasing the number of fields we operate and improving our options over the next decade. We have a strong development potential in Upstream with significant discovered resources which have not yet been booked as proved reserves.
As you can see from this chart, we have good running room here and many possibilities. With 2P and 2C development pending resources that could last between 20 and 25 years. At the same time, we've dramatically reduced our development costs, making more projects economic. The bottom line is we can do much more now for less, and we have the right portfolio and resources to do so. Ben showed you earlier the key projects across Shell, but this map shows those key projects for Upstream, also the next level of projects we're working on towards a final investment decision over the next five years. Today, these projects all appear to be very attractive and are expected to help deliver growth well into the middle of the next decade.
As you can see from the map, we have significant opportunity across all themes, with the potential to add 750,000 barrel equivalent per day Shell share peak production. I'd like to close by highlighting the great strides we've made improving the financial performance of Upstream over the past two years. With the acquisition of BG, better project delivery, and our cost reduction and operational excellence improvements through the Fit for the Future program, we will continue to focus on capital efficiency and profitable growth in Upstream. With a robust funnel of projects, dramatically lower development costs, and significant discovered resources, I'm confident we're on track to deliver our 2020 expectations, as well as to continue to grow well into the next decade. Thank you. Now I'll hand over to John.
Thank you, Andy. It's now my pleasure to update you on Downstream. In Downstream, the priority remains the continued improvement of our financial performance and, of course, ensuring future resilience in what is an intensely competitive sector, as you will all know. You'll also know that we have been restructuring our portfolio and have made and announced some $13 billion of divestments. That's excluding oil sands over the last five years. There's been a lot of change, but of course, we continue to focus and scrutinize our portfolio to look for opportunities to further upgrade it. In marketing, which of course forms part of the oil products cash engine, the business is delivering resilient and improving results. This is due to three things. Firstly, it's our investment in the strong brand, our differentiated fuels offering, and thirdly, our premium lubricants.
To build on this, we plan on continuing selective growth of our networks in rapidly expanding economies. That's in Asia and also further afield. In refining and trading, the other part of the oil products cash engine, we've done a lot in the last couple of years to improve the performance of our refineries. Through further integration of refining and trading, we've delivered a lot more integrated value. That's both on the crude supply side, but also on oil products. In chemicals, advantaged feedstocks, technology, and first-class footprint have really become a competitive edge for us. Chemicals is a growth priority for Shell. It has strong market fundamentals, high growth rates, different end market exposures, and attractive returns when projects are able to access advantaged feedstocks.
Overall, our strategy to develop and maintain hubs where trading, refining, and chemicals can be fully integrated is proving to be a correct one. It's proved especially helpful in periods of high volatility within the market. The improvements that I've just described have helped Downstream deliver approximately $9 billion of clean earnings over the last 12 months and some $12 billion of cash flow from operations. That's excluding working capital movements, and that equates to 17% returns. Our marketing activities are providing a very resilient and increasing stream of income and high returns. Refining and trading are working very well together on an integrated basis also to enhance those cash flow deliveries and returns. Given that this performance, we now expect oil products to deliver $6 billion to $7 billion per annum of organic cash flow by 2020.
I'll say a little bit more about chemicals later on, and the performance aspirations and cash aspirations we have in that part of the business. As I mentioned earlier, we have been high-grading our refinery portfolio now over a number of years, and in the last decade, we've actually exited from 27% of our refining capacity. That's more than 1 million barrels a day over that period. I'd like to emphasize that today how our ongoing push to fully integrate all elements of Downstream is truly creating value for Shell. Let's take refining as an example. Across the globe, Shell has interest in 18 refineries that supply Shell's marketing businesses and local wholesalers. The fact that our manufacturing footprint extends across the planet means that we're able to use variations in margins between different regions to create that value.
It is really the close integration of our refineries with trading, chemicals, and marketing that makes the biggest difference and the biggest competitive difference in our performance. Because our global trading and supply business operates in every major energy market across the world. Let me give you two specific examples of how this integration push is really working. Firstly, let's look to Shell operations clustered in the Rhine Basin. This covers Europe's largest short market for oil products and many of the most important clusters of the petrochemicals industry in Europe. Its location also provides Shell with access to key European oil markets, as well as global trading options via the Port of Rotterdam.
In 2016, we further strengthened our position in both refining and petrochemicals with the start-up of a new aromatics unit in Pernis refinery in the Netherlands. This is now supplying our own optimized aromatics feedstocks into the Moerdijk plant, increasing value there. Our Rhineland fuels business also benefits from this same level of integration with the Pernis refinery and with our marketing businesses. We've also improved the crude oil flexibility of both Pernis refinery and Rhineland refinery, which means that in periods of high market volatility, those sites can optimize their output of specific products to meet the customer needs in the most efficient and effective way for Shell. Pernis refinery's heavy oil upgrading will further enhance with the commissioning of the solvent deasphalting unit, which will start up next year, 2018.
My second example is the split of the Motiva joint venture with Saudi Aramco. That's enabling a similar integration story, but this time in the U.S., where we have a fully integrated the assets with Shell's downstream business across North America. We have a strong product portfolio with proprietary technology and focused growth in differentiated leading positions. The move has allowed Norco refinery to optimize its operations and maximize value across its refinery and chemical plants on that single site, delivering significant value uplift. The Norco and Convent refineries are now also working together to optimize their hydrocarbon flows across both sites. They're connected together. This is also in collaboration with trading, who are adding further value. This enables both refineries to meet customer needs whilst, as I say, optimizing both the crude and product slates.
Shell Trading now is actually fine-tuning the ex Motiva assets in the northeast of the U.S. by blending and supplying products from other geographies where Shell has a presence. This is all about improving the assets that we have today and ensuring they work together to create more value for Shell. There's no doubt that the company and downstream must also take advantage of attractive growth opportunities. In relation to that, I'd now like to update you on our marketing business. With more than 43,000 sites, we are the largest branded fuels retailer in the world. We're also the global leader in lubricants, and that has been recognized for the 11th consecutive year. We're seeing very strong returns and strong growth in marketing, some 25% return on average capital employed in the last 12 months, and more than $5.5 billion of free cash flow.
It is a good business to grow. As part of our retail growth plans, we opened our first 20 service stations in Mexico this year, to which Ben referred earlier, with many more sites due to open. I should remind you that Mexico is the fifth largest consumer of gasoline in the world, a growing market. Over the next 10 years, if market conditions develop at their current rates, Shell Retail plans to invest a further $1 billion over those 10 years. To give a very different example, back here in the U.K., we've launched Recharge. A service on our retail sites that meets the refueling needs of our customers with battery electric vehicles.
I'm sure many of you will have seen the announcement yesterday where Shell will join forces with the IONITY partners, that is BMW, Daimler, Ford, Volkswagen, Audi, and Porsche, to develop a high-powered charging network across Europe. The partnership will start with 80 sites across 10 countries in Europe, and with an additional 2,030 sites in Germany, about one-quarter of Shell sites along highways in Europe will offer high-power electrical charging within two years. These investments in marketing are capital light activities when you compare them with refining or chemicals, and we plan to continue to grow our marketing activities around the world with a focus on emerging economies. Retail, of course, as the face of Shell, is also a good place to gain insight into progress on the energy transition that Ben also referred to earlier. We have developed five ambitions to 2025.
They are clear and they are bold. We plan to reach 50% margin share from our retail offerings beyond fuels, especially by expanding our food and drinks offerings. We plan to significantly increase the amount of low-emission fuels we offer and to reduce our carbon intensity. We plan to ensure that every customer feels like a guest, and to follow our global social cause of reducing waste. Having touched a little bit on the future of transport by mentioning Shell Recharge earlier and IONITY, I want to briefly mention some progress on digitalization. Starting in the U.K. this year, Shell launched a groundbreaking integrated app alongside Jaguar Land Rover. This app within those Jaguar vehicles now allows customers to find Shell Retail sites, to pay for their fuel, and manage their receipts from the comfort of their car.
After a successful launch here in the U.K., the app is being rolled out to other markets around the world. This follows the success of Shell's Fill Up and Go app, phone app, which shares similar functionality in which we have rolled that out across 29 countries. In the U.S., the FitCar app is available to drivers under currently a pilot project. This app syncs with your onboard device to provide vehicle maintenance alerts, trip information, the location of your parked vehicle, as well as service offers and details of the nearest Jiffy Lube service center, and of course, that is a Shell brand as well. Let me now turn to chemicals.
Looking around the room, I recognize that a number of you were at our chemicals investor briefing early in October and hopefully gained a much better appreciation of the strength, but also the potential of this business, and I'd like to share with you again some of the highlights from that session. Shell's chemical strategy focuses on activities with a clear competitive advantage. We've reduced our number of sites from 133 to 50, and we've focused on Shell's core competencies and the advantage feedstocks that I've already mentioned. The global portfolio now offers both a regional balance and a balanced feedstock exposure, which is critically important. As with refining, this ensures we can capture good margins in a range of volatile market environments and conditions. The business is entering a new period of growth.
In 2016, we took three final investment decisions to make our site in Geismar, Louisiana, the largest alpha olefins producer in the world, to double our capacity in Nanhai in China together with CNOOC, and recently we started the main construction works in our petrochemicals project in Pennsylvania in the U.S. This site will use ethane from one of the lowest cost Shell gas basins in North America to produce polyethylene. That's what I mean by advantage feedstock. It will generate 1.6 million tons per annum of polyethylene capacity per year, which is a world scale asset and will be the most cost-competitive polyethylene producer in the U.S. In chemicals, Shell has had a solid performance over the last five years with a record quarter in quarter one of this year.
Returns have averaged some 15% over the last five years, and the business is on track to provide strong returns in what we see as a growing market. Operational performance and current planned investments drive the aspiration for chemicals by the mid-2020s to $3.5 billion-$4 billion per annum of earnings and cash flow from operations of $5 billion-$6 billion per annum. We aspire to do this by delivering the already announced projects on time and on budget and of course, safely. Also maintaining our focus on operational performance to get the most out of our assets and our people, and capturing additional value from the extension of our value chain in polyethylene and our focus, of course, on customers. Let me wrap up. We've made good progress, and that progress must continue.
We will focus on select investments with competitive advantage, high-grading our portfolio, and harvesting the fruits of ever closer integration, which is very dependent upon our people. With this effort, I think Downstream will be a world beater in terms of financial performance and scale. Yes, a lot has been achieved, but I certainly recognize there is far more to do. I've described what we have to do, and I'm personally, together with my team, determined to deliver it. Thank you very much indeed. At this point, I will hand over again to Maarten, who will cover New Energies. Maarten.
Indeed. Thank you, John. To New Energies. Our New Energies business is an emerging opportunity in Shell with two focus areas, new fuels and power. We intend to make investments that are disciplined and importantly commercially driven and financially sound. We will focus on integrated value chains that are adjacent to our existing Downstream Trading and gas businesses. Simply speaking, this is about making commercial investments that leverage our strengths into new and fast-growing segments of the energy industry. Equally important to note, we are also clear about what we will not do, and in particular, we do not intend to become an equipment manufacturer of panels or batteries. From previous experience, we have learned to focus on businesses in which we have a distinctive and preexisting competitive advantage. Let me explain more. We expect that over this century, the energy system will become increasingly, but not fully, electrified.
Around 20% of energy today is consumed as electricity. With a gradual transition towards a lower carbon energy system, electricity's role in the energy mix could grow to more than 50% by the end of the century. The market shows that this is starting to happen with battery electric cars, perhaps the most visible example in Europe, the U.S., but also particularly in China. The pace of this development will differ greatly in different parts of the world. Some countries are changing slowly. There are also places where electricity use is growing at twice the speed of the worldwide energy system. Local markets in Europe and the U.S. are expected to shift significantly to more electrification in the coming 15-30 years.
Some of the larger developing economies, such as China, are adopting new energies as quickly as feasible for strategic energy development, but also to improve air quality. Besides the large growth potential, the second reason for our focus on power and new fuels is the adjacency to our traditional business and the existing expertise that we bring to the table. Shell already operates in more than 70 countries with a strong brand that customers know and trust. We are used to working with governments and regulators in different places, in different cultures. We have strong risk management, trading, and optimization capabilities embedded in our enterprise. We start from an extensive experience in the power business. We rank with the top three wholesale power sellers in the U.S., for example. Of course, we're also the world's leading seller of liquefied natural gas.
We power mobility across the world with our 43,000 existing retail stations. Altogether, a starting point that a startup in new energies would envy, and we have it. Let me first talk about our intention with respect to new fuels. Our new fuels business will benefit from its adjacency to the existing downstream business. 30 million customers visit our retail sites every day. This widespread experience and familiarity with Shell, as well as our supply chain expertise, provide a compelling competitive advantage in bringing new fuels to market. These new fuels are biofuels and hydrogen. Shell is already one of the largest producers, blenders, and traders of low carbon biofuels in the world. With this experience and leveraging third-party technologies, we seek to produce and market second generation advanced biofuels at scale, bringing low carbon options to our customers.
We also see hydrogen play a role in the low carbon, low emission future. Hydrogen powered cars can drive over 700 kilometers or 430 miles without refueling, and with their only exhaust being water. These cars can also refuel quickly, as quickly as cars that run on petrol or diesel. The cost of filling a car of hydrogen is comparable to the filling cost of a car that is conventional. Currently, we have hydrogen filling stations in Europe, mostly in Germany and in California. Close collaboration between governments, car manufacturers, industrial gas producers will be critical to further develop this business. Together with partners, we are looking to develop more than 400 hydrogen sites by 2023 in Germany.
In addition to these cleaner fuels that offer customers more choice to power their mobility, we are also active in the area of electric mobilities, which includes developing smart charging and installing charging posts at forecourts, homes, and work locations. NewMotion, our recent acquisition, is a leader in home and office-based charging and offers a platform for further growth and integration. John already mentioned this week's announcement on IONITY building more than 100 high-power Shell-branded charge points in Europe to add a further exciting element to our e-mobility value proposition. Onto the power value chain. Shell sees opportunities in different parts of the power value chain and additional value delivery through the integration of these parts. We will start to develop this value chain from the customer end as we develop our power customer base, commercial, industrial, and residential in selected focused markets.
In the U.K., for example, we have been active in power trading and wholesale markets for several years, we will start supplying power to industrial customers from next year. In the U.S.A., we are further down the track of establishing a large power demand position. We increasingly see opportunities for differentiated and branded customer offerings, a game that Shell has a proven track record in. Demand will drive our investment in generation capacity and storage capacity for low-carbon source of power like wind, solar, but also gas. Equity supply will be complemented with third-party supply. Capacity ownership will be selective, with the intent to create reliability and flexibility in our portfolio.
In the middle between those supply and demand positions, between increasingly intermittent supply of renewables and increasingly intermittent demand of customers powering cars and homes, we will drive extra value through optimization of a portfolio of positions with embedded optionality and flexibility. We will leverage our existing skill and expertise in this area to deliver value and enhance our returns. We also see Shell as being part of the response to energy poverty, one of the world's biggest energy challenges. We aim to define and scale up a commercial solution to the problem that so many of the world's citizens lack access to power. This is an emerging field with many technologies and business models starting to deliver affordable off-grid solutions to a market of more than 1 billion people. We believe we can make a real difference in this area and create shareholder value in the process.
Let's talk about capital and returns. We will only invest in new energies where it makes sense, and that is commercial sense. Capital investment in new energies will be between $1 billion and $2 billion a year for the rest of this decade, part of which is likely to be inorganic to build positions. We will be focused and selective with this investment and build a base from which to turn this business into a growth priority in the 2020s. We expect the largest part of our investments in new energy to go into power, where we will invest to gain customer access and selectively pursue generation capacity ownership in solar, wind, and gas to create integrated positions. Returns will be a key selection criterion already in this emerging phase. For new fuels, we expect downstream-like returns in the high teens.
For power, we are seeking 8%-12% equity returns with stable and ratable cash flows. We are stepping up our efforts in new energies in emerging opportunities that we target to turn into a growth opportunity in the 2020s. We will be selective, disciplined, and commercial in our investment decisions, leveraging the adjacencies with our existing businesses and existing competitive advantages and capabilities. We aim to build a new value chain for Shell, leveraging our current strengths, acquiring new capabilities in the process, and building a business that will help Shell thrive through the energy transition. Thank you. With that, let me hand over and back to Ben to close.
Okay, thanks, Maarten, and thanks, colleagues, for covering so much ground. We certainly did cover a lot of ground, I think. Let me sum up a few points and then go to Q&A. By the end of the decade, we will have transformed the company. Throughout the '20s, at $60 Brent, we expect to keep free cash flow at this or make it go up a little bit. As we continue to deliver moderate growth in the '20s, our increased distribution to shareholders will continue to support a stronger growth in our per-share metrics. With that, let's start with the Q&A. Jessica will join me for this. As I said earlier on, let's keep the questions a bit high level because there's plenty of opportunity to go into lots of detail earlier. I think, Thomas, you were the first one to put up your hand.
Let's start with you.
Thank you. Thank you for the presentation. Thomas Adolff from Credit Suisse. Three very quick questions, if I may. Just firstly on the buybacks, I think you said the intention is over time to offset the dilution from the scrip dividend. If that's the case, then $25 billion sounds like a small number over time. Maybe it looks closer to $50 billion-$60 billion. The second question may be a quite random question. Is there an ideal balance between the size of the company and the internal capabilities? Is it 85,000 people, 60 million in LNG somewhere? There's a balance. Finally, just on the IMO regulation, is this a net benefit financially to the organization? Now, the question may be not just on refining. In refining, you may be processing more sour crude, therefore it's a positive in upstream. I don't know what happens to the realization.
LNG, are you shifting away from JCC, because JCC is sour, and instead going full Brent indexation? Thank you.
Okay, good. Some good questions in there. Jessica, why don't you cover the buybacks first, then I will talk a little about size of the company, which is a difficult one, and IMO.
Good. Thank you for your question. First of all, I think it's great that we're talking about buybacks. Just to highlight we're moving on from the scrip and entering the next phase of delivering on the world-class investment case. In terms of the numbers and the 25, what does that relate to? That does actually cover the scrip dilution. When you look at the dilution associated with the transaction with BG, it does get up to the 50, 60 in total. I think I indicated in my speech that we're looking to first get through the $25 billion commitment, also look in the future to increase further buybacks, with the goal of ultimately getting through the dilution.
In terms of IMO, yeah, we expect that to be a net benefit for some time. We also believe, by the way, that the market will quite rapidly respond to the shifts that you will see in the different refining cracks. As a matter of fact, any sort of big differential between fuel and diesel will probably quickly close in the years to come. There will be some transient effects. It's factored into some of our forward-looking economics, but it's not a major effect. What I do believe, though, is that increasingly, also, you will see the shipping sector go to cleaner fuels like natural gas. The opportunities that Maarten mentioned in terms of penetrating LNG into shipping, but also doing land transport, I think is probably a bigger effect than the effect IMO will have on our refining footprint.
In terms of the size of the company, I must admit I'm not entirely sure I got the key gist of the question. Is it size in terms of financial metrics, people, complexity that we can somehow contain, or-
People, it's also the 18 executive priorities and strategies and the size of the company.
I think what we have been doing, and I think this is what I said earlier on in my part of the presentation as well, I hope it came through when my colleagues talked about the different businesses. We have worked incredibly hard on improving the clarity for each of the businesses that we have. The first step in that, of course, was to sort of clearly delineate what are the main strategic themes of the company and what purpose do they have in the overall framework of running the company. Of course, running an oil products business is different than running a deepwater business, is different again than chemicals and certainly New Energies.
We make sure that we are very clear what it is that we want to achieve, what ambitions do we have, how can we keep these businesses relevant, competitive, how do we keep them going attractively over the next decade or more. Then basically, we add it all up and we come up with a corporate constellation that needs to make sense as well. Therefore, we cannot have everything in growth mode. We need to have different investment horizons and different choices so that we respect also the basic rules of our financial framework.
With that, I actually do believe that we manage the company quite well in ways that keep ourselves very clearly in control of the destiny of these different strategic themes, the relevance that they will play, or the lack of relevance, like for instance, oil sands mining, which we decided didn't fit the longer-term strategic objective of the company. I think with that approach, I do not see any reason to doubt that we can manage a company with indeed a quite wide range of different businesses, sort of in any less effective way than a more focused, smaller company could. Let me go to Martijn first, then I'll come back to Lydia.
Yeah, I wanted to ask two here for me . In terms of the $5 billion increase in free cash flow guidance, is there a bridge to go from the old number to the new number? Because it seems that CapEx hasn't changed, so it must either be, I don't know, upstream volumes or downstream profitability or perhaps just less conservatism built into this number. The other question I wanted to ask is that in terms of the priorities for cash, it's really one, debt, three, buybacks. Now, I'm not a fixed income expert, but it seems to me that your debt is rather expensive and your stock is rather cheap. Would you consider the possibility to kind of sort of flip that around and at least for a while, say, "Geez, I mean, it's still a 6% yield.
Let's accelerate the buybacks and maybe move the debt reduction a little further into the future.
Okay, that seems to be questions for you, Jessica.
On the first question on the increase in the free cash flow ambition by $5 billion, it is relatively straightforward. It reflects, first of all, increasing confidence in our delivery. In terms of what's happened in the last 18 months from the last point in time when the ambition was set, we have more confidence in our cost reductions and our underlying level of OpEx, and that then continues through for the coming years. We've had very strong project delivery, which has come through and essentially de-risked the project delivery piece of the growth in our cash flows. We have more projects coming on stream in the 2018 to 2020 period. You bring all of that together, that essentially translates into the increase by $5 billion. On the second point, it's a valid question.
We have confidence, we believe the financial framework we have set up, and that priority is the right priority for us. One. It's consistent with the commitments we've made. We believe the financial robustness that's reflected in the double A credit rating is appropriate for the type of company we are, the type of risks we have, the capital levels we deploy. That combination makes us feel like this is the right sequence, getting the right balance in terms of serving the debt market as well as the equity market. We think overall, as we move through these next phases, this will translate into the right financial framework and ultimately delivering the world-class investment case.
Good. Lydia? I think Theepan had a question, John.
Thanks. It's Lydia Rainforth from Barclays. Two questions. One. Just on the capital allocation process. In terms of the increase in CapEx for downstream and new energy business, would you have made that decision had you not been able to achieve the savings that they have on the downstream? Just in terms of that, would you have actually increased the CapEx number had not those savings come through? Just to be clear, on the free cash flow per share growth in post 2020, basically the idea behind that is that you will continue the buyback throughout that period of the 2020 to 2025.
Yeah, good questions, Lydia. No, I think you're right. Indeed, every part of the business needs to earn its right to grow, I mean here specifically oil products, which you are referring to, but also chemicals for that matter, they both have earned their right to grow. Chemicals, of course, we have turned into a full-fledged growth priority simply because we felt it was way underweight in our portfolio in terms of size. In oil products, we've seen so much strength after more than a decade of restructuring, not just in refining but also in marketing, for that matter, that we now feel that we have to come up with some really good targeted growth opportunities within that part of the portfolio as well. As John said, these are relatively capital lean opportunities.
We expect much like Shell's a very quick return and a big momentum behind it. The per share metrics, well, again, let's be very clear. What we wanted to say today is there is no change to the commitments that we made at the time we did the BG acquisition. I want to be very clear, the commitments that we have made, all commitments that we have made around BG, we have every intention of fulfilling them, and you will see that we can tick them off along the different boxes that we have. In there was also a commitment to do $25 billion with the buybacks. At least we set $25 billion. Yeah. We will do that. We will do that as quickly as possible.
Also, to Martijn's point, yeah, it makes a lot of sense to buy back shares that have a 67% dividend yield on them. Then we will see where we go from there. At this point in time, the board is very clear, $25 billion of buybacks, and then we'll see after that. Now, I think your point as well is positive. We have the intention of growing the per share metrics through the next decade. Well, there's two ways of doing it, and partly, buybacks as well. There is no new announcements on that today. I think Theepan. Yeah.
Yeah. Hi, it's Theepan from Exane. Just to follow up on the trigger for the buyback. I think in the past, you've talked about line of sight for the script removal. I just want to understand how do we see that trigger precisely in terms of, is it 20% double A rating, then we can see a buyback in place and your free cash flow above a certain oil price gives you that buyback? The second question is also related to CapEx. You talked about 2018 CapEx being similar level to this year. Two questions. Firstly, it appears that a lot of your growth spend is rolling over from material capital projects. Should we expect more final investment decisions into 2018? Secondly, just a point of clarity on your capital investment guidance. Does that include resource additions, for example, like the cost of the acreage in Brazil?
Thank you.
Let me take the second one, Jessica will talk a little bit more about the buybacks. We said $25 billion-$30 billion, the range, we will keep that. Next year it's going to be the lower end of the range, much like you said for this year. Yes, it does include resource additions. Capital investment is capital investment. It is both the cash part as the non-cash part as well as the acquisition part of new resources. It's also inorganic for that matter. All the things that Martijn will be chasing in new energies, which will have some inorganic components in it, that's all part of that $25 billion-$30 billion. Why do we keep that range?
It's basically because, as I said earlier on, we believe it's the right thing to do for our shareholders, which is basically allowing us to grow free cash flow, not only just until the '20s, but through the '20s as well. You have to bear in mind, of course, that the numbers that you mentioned are capital investment numbers. The cash portion of that is slightly less. The other thing you have to bear in mind is we do a certain degree of divestments as well. It is part of the dynamic process to continue to high-grade, upgrade, and improve the portfolio going forward, and with it, indeed improve free cash flow delivery. Buybacks?
Buybacks. I think that one of the main messages we're trying to get across today is our commitment to increasing shareholder distributions. We've tried to lay out our financial framework, how we're trying to balance debt, equity, growth in our portfolio, and that provides some guardrails in terms of how we're going to make decisions in the coming years. The key ones are, if prices exceed, spike up, go up, we're not going to have our capital program exceed $30 billion. We'd be looking to either accelerate debt or return more cash to shareholders. We are indeed trying to get our gearing to 20%, we're trying to provide clarity in terms of what are the handrails for our financial framework, importantly, what is our intention? Our intention is to increase shareholder distributions.
You see by 2020, we've increased our free cash flow ambition to $25 billion-$30 billion. You know what our dividend cash obligation is. It gives you a sense of the amount of cash that we'll be generating in the future. Again, we need to balance debt reduction. We need to know what's happening with the macro. Indeed, the intention is clear in terms of at least getting through $25 billion of buybacks in the near term.
Okay, Jon?
Thanks. It's Jon Rigby from UBS. Quickly, just if we can nail down this shareholder distribution question. Is your ambition or your inference, or should I be inferring, sorry, that as you reduce your share count, you will then take a separate decision around what you do about the per share dividend, which may include keeping it flat and reducing your absolute dividend payout. The burden on the entire business of the cash out and the dividend actually reduces over time, or would you increase the dividend by virtue of keeping the absolute level flat divided into a smaller number of shares, just to think about how we square that circle. The second question is just on the downstream.
I'm not expecting you to tell me like an oil price that you do in the upstream, but can you at least triangulate where you think things like refining margins are going to be vis-à-vis maybe the last two or three years, so we can actually get some idea about the operating environment that you're assuming in terms of the cash flow generation? The last point is a sort of question of valuation. Would you agree that for the theoretical reduction in cost of capital that might come from running, let's say a 20% gearing level, a 5%-10% or a 0%-10%, and the degree of flexibility that might give you when the next cycle appears is much more advantage than, as I say, a few basis points off your cost of capital? Thanks.
Okay. If you don't mind taking the financial questions, I will talk a little bit about refining margins. Jon, I always say I don't want to predict the oil price because I will end up looking like a fool. I think predicting refining margins is even harder. I think there is going to be considerable volatility still in refining margins to come. We've seen indeed a bit of a good run. It may well be indeed that we will see another downward lag in the years to come. Much of course, again, it's a supply and demand picture or an availability of refining capacity picture versus demand. Demand, of course, has been growing strongly. Low oil prices has meant that oil products demand has gone up quite considerably, particularly also in emerging economies. Think of places like India.
We've seen a tremendous amount of growth in diesel and gasoline, but also in other emerging markets. We see that the big growth wave of refineries coming on stream east of Suez is sort of coming a little bit to an end as well, but not entirely. You could argue that maybe in the near term, there's a slight tightening or higher utilization levels of refineries. You have to overlay on top of that how the energy transition is changing things, too. Altogether, that makes for almost an equally unpredictable mixture of where things will go. The other thing to bear in mind, of course, is that a lot of it will also be driven by how quickly will refineries go out of fashion for people who own them. Quite often these are long, difficult, painful processes.
Quite often, of course, with government intentions sitting behind them as well. Altogether, hard to predict where it will go. What we have said, our refining footprint needs to be resilient in whatever the outcome is. It's a bit like the overall story for oil and gas prices. That's why Jon has been focusing so much on shrinking that business back to a core backbone business that is either incredibly resilient because it is an integral part of a marketing business somewhere, or because it is a world-class refinery, which is integrated with its trading capacity in a global market, and therefore will be the last person standing come what may. We just have to ride the ups and downs of the refining cycle, but make sure that at the bottom of the cycle, this is still a strong business.
That's the clear strategic intent that Jon has for the refining business.
Jon, you raised two very valid points. On the first one, in terms of intention with the dividend going forward, first of all, we haven't changed our dividend policy. Just to be clear, and that's really the purview of the board. Indeed, when we do share buybacks, there'll be an opportunity or decision point. Do you, going forward, increase your dividend or continue doing more buybacks? That is something we consider, that's something we look at and we will continue to look at. At this point in time, our dividend policy is unchanged, and our priority right now is to do the buyback program, as I said, as we get up to at least the $25 billion. I think those are very real choices that will need to be made.
In terms of the driver behind our leverage levels and is that a cost of capital question or a flexibility question? It's more a flexibility question. It's really about having the financial wherewithal to manage the downturn, handle volatility with macro, but also importantly, in the future, to potentially take advantage of future opportunities as we did with the BG opportunity. We were able to do that in a difficult macro environment because of the strength of our balance sheet. How do we prepare the company in the future for those future opportunities?
Good. You, and then I'll swap.
Yeah. Hi. Iain Reid from Macquarie. Ben, you've spoken over the last couple of years as part of the transformation of Shell, as making it the most attractive integrated company to invest in. I'm just wondering, given the fact that you've obviously come quite a long way here, where do you think you sit in terms of your future financial improvement or your portfolio to actually make you decisively, the kind of best integrated company as far as investors are concerned? Because although there's lots going on in the portfolio, what's going to kind of decisively push you up there to take that lead over Exxon? Kind of on that theme, don't you think that an overall ambition of a 10% return on capital is rather unambitious if you really want to be decisively the best integrated company?
It's not that long ago that we had significantly higher returns on capital from some of your competitors. Is 10% enough of a stretch for this sort of big ambition which you've got here?
Thanks, Iain. Where are we and what would be sort of a decisive move to get us ahead of the pack? I was kind of hoping that today would be a bit of a moment to give you an insight of where we are. I think if we are able to grow our free cash flow to $25 billion-$30 billion, and are able to turn off the scrip, show that we are a company that is resilient through the 20s, and has an intention to be there for perhaps another century. I think that's a pretty compelling story. I think we have financial metrics that are better than any IOC at the moment, and we have every intention to stay ahead of the rest and perhaps even open the lead a little bit more.
We have to get recognition for that, which is not always easy, by the way, because recognition comes with track records. Track records you cannot get ahead of yourself. Track record is something of the past, not something of the future. I do hope that we have a little bit of a track record already, and we can at least, with the things that we are talking about, the plans that we have, we can lay out a pathway that will inspire confidence. Not just confidence that we only have, but confidence that you will share with us. I think, we are going to get there, and we're going to get there, I mean, being number one in terms of TSR, which is the metric that we have chosen, and frankly speaking, also in terms of enterprise value.
When that's going to happen will partly depend on how you will see and how much confidence you have in what we have been telling you for the last four years, and what we will be telling you for years to come. Of course, it's also returns. Returns is a very important aspect. It is an indicator, of course, a hindsight indicator for the capital discipline that the company has. I've said very clearly, I'm not happy with the returns where they are. You may say, "Well, you shouldn't be happy with 10% return either." No, I'm not. It needs to be more than 10%, and that's what the slide also said. Is 11% then good enough, or 12, 13 or 14? Let's see. You have to bear in mind, it's hindsight.
That also means that we have to deal with a very high degree of depreciation, which comes from the investments that we have done in areas like deep water and shales, where depreciation is sort of turbocharged because we have a very short resource reserve life to book barrels on. It's not indicative of the quality or the health of the business. Over time, that will right itself. It's over time. By 2020, more than 10% is the most realistic expectation that we can offer at this point in time. Over time, yes, I agree, our return on average capital employed needs to go up. It's sort of the law of averages that will get us there.
Ben, I'd like to add just two points to that, if I could.
Sure.
Just in terms of being the best IOC indisputably, this is a bit of an MBA kind of answer. I think if you look at our company holistically, the clarity of our purpose, our differentiated strategy, our portfolio that matches that strategy, and the delivery of the most value from that portfolio, I think we're firing on all of those cylinders. I think hopefully the market will see that, and that will lead to us being the undisputed leader in the industry. The second point on the ROACE piece, for each of our businesses, we look at it at the business level because that's more appropriate. We look at chemicals, we look at Integrated Gas, we look at deep water, we're looking for those businesses to generate the most competitive returns for their sector. The 10% is the average.
That's important, but I think what's more important in terms of how we're trying to drive returns is ensuring that we get the most competitive returns from each of our businesses.
Good job. Oswald, and then Thijs, and then I'll come to you.
Yeah. Thank you very much. Oswald Clint at Bernstein. I want to maybe ask a question about LNG. Please, you're speaking about advising governments about gas policy. You talked about the coal in China, and so it's clear you believe in gas demand in China. You give us a chart on the lack of FIDs within the LNG space. Do you have the confidence to start moving forward with some of those LNG project sanctions earlier than the rest of the group, the rest of the industry, given your insights into Asian gas demand? Also linked to that, I see comments here about buy versus build, when it comes to LNG. Is this also a bit of a move here where you're willing to start buying more and more LNG rather than building it? It's kind of connected.
Then secondly, just on the power or the new energies perspective, the 8%-12% returns in power. I'm not a utility expert, but normally think of lower levels of returns in power. Can you maybe walk us through or explain how you could get to 12% return when it comes to these investments in power, please? Thank you.
Okay. Let me take the returns question. Would you like to comment on the LNG a bit?
Sure.
I think also it's very important to, and sorry for picking on some of your word choices. It's very important to recognize what it is that we try to do in new energies. We don't try to be a utility. We like to be an integrated power player. Part of that means that we have to indeed build generating capacity as well, probably not entirely covering the shorts that we will have in the overall power market. The value that we are going to reap from this business is not just a utility return that you will have, like your boring old utility that your parents used to know. This company or this industry is changing quite dramatically. The whole supply side is changing quite dramatically, becoming much more interesting, fascinating, difficult, and everything else, and so is the demand side.
In there's a lot of value to be had if you have a strong integrated supply chain model taking advantage of the adjacencies that we already have with our trading customer, asset management, and optimization capabilities. Therefore, the returns that we like to have from that integrated power chain are indeed going to be 8%-12% return on equity. I think that is absolutely doable. Can you get that by just holding a portfolio of PPAs? Probably not. That's also not what we endeavor to do.
In terms of the LNG market, I think you heard we're very bullish on the market. We believe in the fundamentals of what will drive the growth of LNG. We expect it to essentially double by 2030. We have a suite of great options for new supply. Maarten pointed those out around the globe. In terms of the decision-making process over the next couple of years, I think there's a couple of elements. The first one is making sure we have the most competitive project. We've taken advantage of this price environment and the circumstances within the industry, and also what we've learned from our deep water and other projects to rethink how we're developing these projects and, also reengage with the supply chain.
There's a piece around this, how do we drive the most competitive projects, which is also a function of the timing and working through that and ensuring indeed we get the most competitive projects possible. The other piece is indeed timing it with the market. There's a lot of supply that's come on stream in the last year, which the market has absorbed. There's more coming on stream. It's really about when does the world need more LNG going into the 2020s? I would expect in the next couple of years, we would be seriously looking at an FID in that space. Indeed, we do also engage in the market. That's strategically driven and commercially driven. Given the strength of our portfolio, we can engage commercially in ways that others can't. We can take risks that others can't.
You can have examples where a customer may not want to buy Henry Hub indexed LNG for one reason or another. We can bring that into the portfolio and then offer them something else. These are the kinds of tools that we have, at our disposal because of the strength of our portfolio that allows us to do things commercially that others can't. Those will be the kinds of decisions that we'll be making. As Maarten said, we're basically balanced. We're looking into the 2020s. It will be a mix of buying as well as building.
Okay. Lots of questions to get through in five minutes or so. I was going to go to Thijs first, then we'll go to you, and then to Irene.
Thanks. Thijs Berkhout, ABN AMRO. Thanks for the clear commitments on the Paris Agreement. A question related to that. Looking at your capital employed ambition for 2020, that's more or less unchanged from the current capital employed. That means either that you indeed return all excess cash to shareholders, which is more like $50 billion and 25
Does it mean that you really identify Shell as a company which is taking new energy serious and is stopping in growing in fossil fuels? That's, I think, not message. Message is CapEx is clearly including expansion CapEx. Why is capital employed not growing in the coming years?
It's essentially in line with depreciation. There's not a lot of excess capital beyond our depreciation, which is really what's causing that to essentially not move over the coming years. There's not something strategically reflected in that in terms of a massive shift from one part of the business or another, other than what's been described today.
Okay, clear. Then maybe on the downstream, number of refineries now 18. Where are we in 10 years from now?
I know, Thijs, I'm not sure whether this would be a forward-looking statement or not, the number of refineries that we would have. I think, we will have in 10 years' time, we will not have a refinery that doesn't make sense. Yeah. That's the only thing I can say about it. I think we have shown a very strong track record of cleaning up asset portfolio, where we see the running room is not there anymore, or it loses its ability to make sense to hold it for marketing purposes or whatever else. A lot will depend, of course, also on how the energy transition will play out. I would imagine we will be, in many of the geographies where we operate, we will be the last Not the last, but we will be one of the core refining positions left.
That makes a lot of strong sense. Yeah. We go to you and then to Irene. How much more time? Five minutes? Okay, good. We're not going away after this, so there's plenty of time for Q&A over lunch as well.
Yeah.
Yeah.
Christyan Malek from J.P. Morgan. Two questions, please, briefly. First, just want to understand when you frame your CapEx of $17 billion-$20 billion on sustained cash flow, when I think about thinking about 2020 beyond, can you guide us to what sort of replacement CapEx you're thinking to sustain cash flow from 2020? In other words, if you were just a steady state, what that CapEx range would be? That leads me to the second question around when you're thinking about cash flow growth, so absolute cash flow rather than per share, what is the path of that in terms of mixing it between high-grading your cash flow per barrel versus volumes? Can you sort of-
Sorry, say that again?
Frame the difference between volume-led cash flow growth and high-grading those barrels to improve cash flow, because you've given us volumes, in terms of FIDs, you've talked about cash flow per barrel. I just want to understand that path and the mix effect between those two things, because Andy did mention it's not just volume for volume's sake.
Okay. Thanks for those questions. Let me take the second one for starters, then maybe you can talk about the first one a little bit. I'm afraid I don't have a real clear answer for you because it's not the way we look at it, really. We don't say, "Let's just grow some volume, then we have to grow value on top of it," or whatever. We really look at the individual strategic themes in their own right, and we want to deliver a certain amount of free cash flow for the investment dollars that we put in. That's actually one of the more important ratios next to returns, Iain, that we look at in order to judge the health of the business, the longevity of the business as well, and where we need to take this business to in terms of investment choices.
Of course, increasingly, you can also see, we will also build next to a very strong and high-quality upstream business. We will also build a business that has volume component, but not your traditional volume component of barrels or scfs or whatever else. As we double our chemicals business and maybe triple it towards the end of next decade, it will come free of barrels. New energy is the same thing. Of course, our marketing businesses, yeah, they have barrels, but not the sort of barrels that you're interested in, but in terms of production. The mix will all change, and we've stopped talking about volume and barrels such a long time ago that I actually forgot how to talk about it. Yeah. Again, we run this company for financial effect, not for volume effect.
I'm not so sure whether I can give you a real clear cut answer along the lines. If there is a deeper meaning to your question, by all means, seek me out in the lunch break and we'll talk about it.
Perhaps just to build a bit on that. Of course, we've increased the CFFO we expect from new projects between 2018 and 2020 by $5 billion, that gives you a sense of at least the volume piece of that. That doesn't include growth from our downstream business, which either chemicals or the retail activities that we're doing. Then I was going to indicate the improvement piece. The WRFM activities, the higher availability, I would probably put in the range of some 10%-20% of that growth in that period. On the first question, the sustained capital to sustain our cash flows is $17 billion-$20 billion. I think that's a good number going into the 2020s as well. We don't expect that composition to change materially.
We're looking at some $5 billion-$8 billion to further grow cash flow, which is, of course, our ambition to increase cash flow from the company, and increase shareholder distributions.
Okay, Irene.
Thank you. Irene Himona, Societe Generale . I have two questions, please. Andy spoke of the materiality of your 2B and 2C resources today, you're the first major to introduce a material reduction to your carbon footprint. In your speech, you mentioned you accept the risk that some resources will become stranded in this energy transition. I wonder if we assume you deliver the first target, which I think is a 20% reduction to your carbon footprint by 2035, what do you assume happens in terms of resources being stranded? What proportion of your resource would be stranded in that scenario? My second question, apologies, I'm coming back to the detail, the increase of $5 billion in free cash flow by 2020. Can you please clarify two things? First, how much of that incremental change comes from outside the upstream?
Secondly, for the upstream, what do you assume happens to new barrels? The previous level was one million barrels of startups contributing $10 billion of cash flow from ops in 2018. Within your $5 billion increase in free cash flow, what happens to the production side? Thank you.
Thanks, Irene. Let me take the first one, and maybe you can talk about the second. The ambition that we set for reducing our carbon footprint is the carbon footprint of the products that we sell. Very important to bear that in mind, because quite often it is forgotten how it all works. We sell twice as many products as we refine, roughly, and we refine twice as many barrels as we produce. In the end, the only thing that really matters for society is that the energy products that we put into customers' hands to enrich their lives with need to have, overall, a lower carbon footprint over the entire life cycle of where that amount of energy came from. That, I believe, is in the end also what society needs to deliver on the back of the Paris commitments.
We have put our ambition in place to be in line with society. As a matter of fact, that means that we have to run a bit harder than society because our current product mix is very much dominated by oil and gas-type energy products. That's, again, a bit of a clarification of what I said. What does it mean in terms of stranded assets? There's not necessarily a correlation between one and the other. Still, going forward, certainly towards the end of the next decade or even after that, there will be a need for oil and gas in that mix.
As a matter of fact, there will be a higher need for oil and gas investments in that mix, because no matter how hard the world will continue to drive to a lower carbon energy system, lower carbon footprint, the rate with which existing resources will deplete is much faster. The world will need to invest continuously in new oil and gas projects. Therefore, there is still relevance for a business model that relies on investment in these resources. Of course, some resources will be better placed than others. What Andy has been doing, and Maarten for that matter as well, is continuously find our way to the best part of the creaming curve. The lowest cost assets that will continue to be competitive and also those projects that are, what I said, climate competitive, so very low carbon footprints.
Ultimately, even if we get to a 50% reduction by 2050 in the carbon footprint of the energy products, we will still need to have investments in oil and gas. Again, it's a bit like the last person standing story with refining. If you have the best positions to enjoy, you will be enjoying delivering that portion of oil and gas that society is inevitably still going to need.
To your question on the nature of the growth, there's two $5 billion. I wasn't sure which one you were referring to. There's the $5 billion of-
Free cash flow growth
CFFO growth that's going from new projects, there's the $5 billion from free cash flow growth that we've increased from 25 to 30. Both of those reflect growth happening across our portfolio. I think that's important. It's not just Upstream, it's not just Downstream, it's not just Integrated Gas, but we're seeing growth across the portfolio that will come from Appomattox starting in the Gulf of Mexico, that will come from Prelude starting in our LNG projects, starting in Australia. It will come from our chemicals projects that are starting up. It's really across the portfolio. I wouldn't say it's overly weighted to one portion of the portfolio or another. I think it's a relatively balanced portfolio in terms of what's driving that growth, both in CFFO and free cash flow.
Okay, thanks very much. I think we have come to the end of our slot. Thank you very much for bearing with us for a very long morning, but I hope you found it valuable, informative, and hopefully, there's also an opportunity for further dialogue over the lunch break. At the end of the lunch break, we will be breaking out in our different groups as we have done before. I think you are probably all familiar with that. I believe you're going to give the last-minute instructions just in case. Is it? George. Okay. Good afternoon.