Ladies and gentlemen, if I can ask people to take their seats so that we can get proceedings underway. Thank you very much. Okay. Ladies and gentlemen, welcome to the Equinor Capital Markets Day. It is a real pleasure to see you all here today, and also to connect to those of you who are dialing in on the phone. For those of you here, I would like to start with a brief but important safety announcement. If the building needs to be evacuated, the fire alarm will sound. On hearing the alarm, security and support staff will be on hand to direct you to the nearest emergency exit and assembly point.
The assembly point is in Copthall Close, which is next to the Apex London Wall Hotel, just across the side of this venue. I think it is right to say there are no planned fire alarms today. If you hear anything, please follow those instructions. After the presentations, we will have the normal question and answer session in the hall, but also on the phone. Not only with those presenting, but also other members of the executive committee who are joining us here today. There will be an opportunity for everybody to meet at the venue afterwards over lunch and a drink. With that, let me ask Eldar Sætre, our CEO, to take the word. Thank you very much.
Thank you, Peter, and good morning, almost good afternoon, to all of you. It is really great to see you here. This is the fifth time I have the pleasure of welcoming you to our regular capital markets update here in London. It is definitely the first time I do so as the CEO of Equinor. For us, 2018 was definitely a year of change, you could say, some things will remain the same. We still take a lot of pride in delivering on our promises. Due to some really significant and sustainable improvements, as well as a high-quality portfolio, high-value projects, our outlook is even stronger.
Today, we will show you that we are on track to increase returns and to grow production and cash flow to record levels, which also allows us to step up capital distribution while at the same time strengthening our balance sheet. In short, we are delivering on our strategy: high value, low carbon, and always safe. The safety of our people and the integrity of our operations remain our top priority. We have reinforced our efforts, last year we delivered our best safety results ever. We know what it takes: consistent leadership and a systematic approach across the company. We also know that relentless efforts to ensure operational quality is necessary both to further improve safety as well as efficiency. Past performance is no guarantee for future success.
We will use our improved results as inspiration because we know that we can and that we also must continue to improve. Our mindset is zero harm. Last year, we set clear targets for 2018, and our people have responded very well. We have done what we said. In fact, we have delivered above and beyond even quite ambitious targets. We said that we, at an average oil price of $70 per barrel, would grow our return on average capital employed to around 10% in 2018 and 12% in 2020. As it turned out, we delivered 12% already last year. We materially increased our organic free cash flow to well above $6 billion. During the downturn, we also improved our project portfolio significantly.
As a result, we sanctioned seven new projects last year, delivering more than 1 billion barrels to Equinor at an average break-even price of $14 per barrel. In 2018, we also took new steps to become even more carbon efficient. Equinor is already a leading company when it comes to CO2 effective oil and gas production with average emissions around 9 kg per barrel, which is around half the global average, and aim to reduce it even further to 8 kg . In fact, the Equinor-operated projects that we sanctioned last year have average emissions below 1 kg per barrel. Our methane emissions intensity is also industry-leading at 0.03%, and we are pursuing further improvements. In addition, we are growing within renewables, and our projects today have a capacity of around 1.3 GW.
In a recent external benchmark by CDP, Equinor was ranked first among our peers when it comes to readiness for the low-carbon transition, confirming that we are on the right track to face the future. I'm also convinced that our low-carbon strategy will increasingly become a competitive advantage. Climate change is happening, t he world needs a comprehensive transition of our energy systems, and our industry has to be an integrated part of that transition.
As a company, we are well prepared for the future and to meet high expectations from investors, from talents, political leaders, as well as the communities where we operate. Nobody can predict the future with certainty, but we must try to understand the drivers for change, and we must be prepared to be surprised. One thing we do know is that the demand for energy is growing. We need to grow renewables at scale. Due to natural decline, we must also find new resources of oil and gas and produce these resources with the lowest possible carbon footprint. Equinor is developing as a broad energy company. We are growing in renewables, and we are well-positioned to deliver competitive barrels at low cost and with low emissions.
Equinor was built on the Norwegian continental shelf. We started out as what I would call an apprentice to the impressive leading global IOCs. From there, we have developed into the strong global and industrial company that we are today. On the NCS, our home turf, we can develop new technologies and digital solutions. We can scale them efficiently, industrially, and further develop our competitive edge to the benefit of all parts of our business. Arne Sigve will show you that even though the NCS is maturing, opportunities are still plentiful and highly valuable.
In fact, in 2025, our NCS equity production is expected to be at the highest level ever. We continue to develop our international portfolio, and we are increasingly also taking on the role as operator, allowing us to leverage our industrial value drivers even more. Torgrim will revert to this shortly, and Margareth will tell you how Brazil fits our strength perfectly and has become a core area for Equinor. You will see across our presentations today that we consciously seek opportunities that play to our strength.
Today we are showing you mainly numbers and metrics, but our most valuable asset is our people. Their competence, deep competence, and their values and their collaborative way of working. This is an essential part of our competitive edge. We used the downturn well to fundamentally strengthen our competitiveness by taking down costs, becoming much more efficient, and radically improving our projects. We will never rest. I've been in this industry now for almost 40 years, impressive, and I've seen oil prices record high and record low. That's a big difference. I have seen how industry costs have followed right behind the commodity cycles every time. We are determined not to repeat the mistakes of the past this time because we know that we must be competitive at all times.
The market volatility that we have seen in recent months is clear evidence, a demonstration of the need for a consistent cost and capital discipline and for continuous improvements through the cycles. Lars Christian will revert to how we work diligently with continuous improvement in our organization, and you will also hear examples from the business areas. Let me then give you the main points of reference on our financial performance over the next three years. In the period up including 2021, we can be organic free cash flow positive at an oil price below $50 per barrel. At $70 plus, we can deliver around $14 billion in free cash flow after investments and after dividend. This is $2 billion more than the three-year outlook that we provided last year. Our return on average capital employed has already increased to 12% of net.
Two years ahead of plan, and towards 2021, we expect to increase our returns even further to more than 14%. By the way, this is substantially higher returns than we delivered at oil prices above $100 before the downturn. Telling us that we are today a much more resilient and a stronger company. Let me then turn to our project portfolio that will come on stream over the next few years. You have heard about Johan Sverdrup many times.
There's more to come. Because all these barrels, the income and the cash generation, love it, is all ahead of us. In November this year, we will start producing from this 660,000 barrels today, the full field development. Since sanctioning of phase I back in 2015, we have increased resources as well as reduced capital expenditures by 30% for phase I and 40% for the full field. These are, I would say, unprecedented improvements. The full field can now deliver around 1.2 billion barrels to Equinor with an average breakeven price below $20. Johan Sverdrup is truly a flagship project. We have many more highly profitable projects coming. By the end of 2025, we will have started up a portfolio of projects providing around 6 billion barrels to Equinor at an average breakeven price of around $30.
An internal rate of return of around 30% at $70 per barrel. Our annual production growth is estimated to around 3% in the period from 2019 including 2025. We have increased production and improved our projects, we have also strengthened our resource base. We are delivering a record high reserve replacement ration of 213%, and an organic RRR of 189%. Our reserves- to- production ratio is now almost nine years. In addition, we have added around 1.6 billion new barrels to our resource base, in 2018. We are also well prepared for future resource scope. Last year, we acquired one attractive exploration licenses in Norway, in Brazil, Canada, and the U.K., and the Gulf of Mexico. We expect to spend around $1.7 billion on exploration this year.
Plan to do wells in several attractive basins, including some high impact opportunities in Brazil, in Canada, and in the Gulf of Mexico. An important part of our strategy is to capture additional value from cyclicality. We divested elected assets carefully when the prices were high and have been able to access highly attractive inorganic opportunities during the downturn. As a result, we have since 2012, capital gains of around $9 billion. Today, we have a strong balance sheet, an attractive project portfolio ahead of us, and a competitive resource base. Which means that we have the strength, the time, and the patience to take a continued disciplined approach to consider acquisitions or divestments when the best opportunities are there, when the prices are right, and also the industrial and the strategic fit is in place.
Another part of our counter cyclical strategy is to launch projects and award contracts when conditions are most attractive. Our strong financial position allowed us to mature and launch several projects during the downturn. From 2015 - 2018, we awarded contracts totaling more than $100 billion, which we will continue to benefit from also in the years to come in close collaboration with our suppliers. Equinor is developing as a broad energy company, we are gradually building a portfolio also within renewable energy. Provided that we are able to access attractive projects, we expect that 15%-20% of our capital expenditures can go to new energy solutions by 2030.
Today, we are delivering a competitive returns of around 10% from projects in the U.K., in Germany, and Brazil. Looking forward, we are now maturing further opportunities in the North Sea, the Baltic Sea, and on the East Coast of the U.S. A key value driver for us is to leverage some of the same strengths that make us competitive within oil and gas. In addition, we will pursue an opportunistic approach to realize value from divestments. Renewables open up a new set of opportunities to create value for our company, while also diversifying our portfolio and making it more resilient. Let me also remind you that our global trading system supports value creation through the cycles. We have a clear strategy to secure flow assurance and access premium markets from a highly cost-effective and also a highly flexible infrastructure.
Growing our asset-backed trading, as well as capturing margins from an increase in trade towards Asia, are an important part of this strategy. Last year, we sold more than 800 million barrels of oil and 100 million cubic meters of natural gas. We are now also taking a material position in the electricity market. Danske Commodities, which we bought for around EUR 400 million , is expected to deliver earnings before interest and tax of around $80 million in 2018. I'm confident that this will be a strategically important and value-adding transaction for us, not least in supporting our renewables business. As a result of strong and sustainable results from our improvements efforts in the recent years, the board proposed a step-up in our capital distribution, increasing our quarterly cash dividend by 13% to $ 0.26 per share.
This underlines our strong commitment to capital distribution, clearly demonstrated by the fact that we have always maintained or increased our dividend also in periods with low commodity prices. As stated in our dividend policy, it's our ambition to grow the annual cash dividend in line with the long-term underlying earnings. All in all, we are proud today to present what we believe is a strong value proposition. First of all, we are growing the cash flows and returns. Secondly, we are investing in world-class projects at an average break-even price of around $30 per barrel, and we expect 3% annual growth for 2025. Finally, we are stepping up capital distribution by increasing our quarterly dividend by 13% to $ 0.26 per share.
By that, I thank you for your attention, and I leave the floor to my friend, Arne Sigve, please.
Thank you, Eldar, and good to see you all. It's exciting times on the NCS. After 50 years, still going strong, and the best is yet to come. NCS will grow and deliver significant value for many years, and we have some of the largest and most profitable oil and gas projects in the world. The last year's improvements, our unique infrastructure, technological development, and improved efficiency create a very attractive and valuable opportunity set on the NCS. We are seeing strong volume growth taking us to a historical high production in 2025.
Who would have believed that just a few years ago? We already operate with a very competitive unit production cost, and we will continue to improve, maintaining a strong cost discipline going forward. Over the next three years, we will generate a substantial net cash flow of around $15 billion after tax. To put it simply, our future on the NCS is valuable growth. You heard Eldar talk about Johan Sverdrup with its significant production and low break even. In addition to Sverdrup, several attractive projects will come on stream over the next years. Martin Linge, Troll Phase 3, Snorre expansion, Johan Castberg, just to name a few.
We have a strong non-sanctioned project portfolio, a large set of exploration opportunities, and a great potential from legacy assets. Our portfolio of non-sanctioned projects currently has a break even of around $30 per barrel, and this portfolio is expected to deliver 1.8 billion barrels of oil equivalence for Equinor. Still early pace. We constantly look for further improvements as these projects are matured in collaboration with our partners and suppliers. We are continuously adding high-value barrels from existing low-cost infrastructure through increased oil and gas recovery from our producing fields.
As we presented last year, we have a recovery ambition from our oil fields of 60%, we have now also established a gas recovery ambition of 85%. These ambitions represent a total potential of 7.5 billion barrels, with 3 billion barrels of these Equinor's share. To capture this potential, we plan to drill around 100 new production wells per year. The current well portfolio has a low breakeven, with an average payback time less than 10 months. The value creation potential on the NCS is significant. This is also the case for exploration. We plan to drill 20-30 exploration wells per year going forward, we will actively explore for both oil and gas near infrastructure in low legacy plays, while also testing new ideas and concepts with 2-4 game-changing wells per year.
2018 was our best exploration year since 2014, with more volumes per discovery well. Our low carbon advantage is evident on the NCS. Last year, we talked about the 1.4 million tons CO2 reduction since 2008. This has now increased to 1.6 million tons by implementing profitable portfolio of energy-efficient projects. It is good for environment and reduces operating costs with around NOK 1 billion, lowering environmental tax and quotas. In addition to what we already have in operation and under development, we are evaluating new opportunities to further improve our low-carbon advantage and capture more value in the years to come.
I would like to highlight Hywind Tampen. If sanctioned, i t will be the world's first floating wind farm producing electricity to offshore installations, bringing power to Snorre and Gullfaks. The project underpins the core acceleration of the NCS. The digital transformation is well underway.
Last year's CMU, we presented the field of the future concept with a 50% reduction in OpEx and a 30% reduction in facility CapEx. We have matured the technology further. Let me just point to Krafla, where we have selected an unmanned production platform at 30% lower facility CapEx compared to a traditional concept. Automated drilling control reduces drilling cost and will be available on several rigs in 2019. In October last year, we established our new integrated operations center, utilizing data and digital tools. Now supporting five fields, we already see increased production and efficiency in our operations. By 2021, all Equinor-operated fields on the NCS and onshore facilities will get support from this center. We are still in an early phase but see an exciting potential transforming the way we work.
Last year, we presented our ambition of $2 billion of value creation by 2025 from the center, and I would say that we are definitely well on our way. We have also launched our new geo-operations center. Now geologists can work onshore, monitoring and controlling geo-operations without traveling offshore, improving quality, efficiency, and reducing cost. We see a bright future on the NCS. We are capitalizing on our position, our competence, and technology to deliver on our corporate strategy. Always safe, high value, low carbon. Thank you so much for your attention. Torgrim, the floor is yours.
Thank you, Arne Sigve, and good afternoon. It is very good to see you again. Today, I find myself between two great leaders Arne Sigve and Margareth that has truly shaped our company. That fits very well with what I'm going to talk about today, and that is about how we are going to apply the best of Equinor internationally. I will cover three topics. First, international business has become a true cash generator. Secondly, our share of operated production is going to double. That will enable us to apply the best of Equinor more broadly. Finally, international will grow with quality as cash margins increase further. Let's start with cash. I am very proud of our people and how they have changed our business. Last year, we had a cash margin of $30 per barrel. That is a significant improvement.
We can achieve even more, and we expect to increase the cash margin by another 20% by 2025 in a $70 environment. Higher-margin barrels will come on stream and a higher share of production with a low cash tax rate. For many years, our international business needed funding. Last year, we delivered $2.9 billion in net cash flow. We will generate even more cash, approximately $10 billion over the next two years in a $70 environment. We can't rely on $70. Our business has to work at $50. In fact, from now on, we aim to be net cash flow positive below $45 per barrel in DPI. Let me turn to our U.S. business. Two years ago, we promised a lot for 2018, and we promised from $90 to $50. You will remember, we needed more than $90 to make money.
We were deeply in the red. Our people responded, and we have made progress every year since, and now it's time to report. I'm happy to say that our business now makes money at $50. We promised to improve the cash margin from $5- $12 per barrel in a $50 environment. Well, we got to $14. We also aimed to grow our business by 50% and ended at 58%. The U.S. will continue to grow, and from now on, also generate surplus cash. We will double our operated share of production to 40% in 2025 and reach 50% by 2030. We will continue to have an impact as a partner, but this shift will allow us to have an even stronger impact and apply the best of Equinor more broadly. Being always safe, creating high value, and delivering low carbon.
Bay du Nord is our first opportunity to operate offshore Canada, and we will use learnings from the high recovery rate on NCS and the innovative FPSO design on Johan Castberg. Last year, we produced more than 750,000 barrels per day in DPI, and that is a record. We tripled our operated production in the Appalachian Basin in Ohio to 50,000 barrels per day. We learn from what we did in Norway and other places in the U.S. to drive operational excellence.
Our unit production cost is now less than $2 per barrel there, and our CO2 intensity is reduced from 7 kg-2 kg per barrel. This is actually 1/8 of the industry average. This contributes positively to our targets as we aim to be an industry leader in carbon efficiency. Last year, we reported a 40% reduction in breakeven in our non-sanctioned projects. Today, we report 14%.
We aim to reduce our breakeven further, which brings me to my third example, which is Rosebank in the U.K. We divested Rosebank when prices were high, but we saw that we could create more value. Again, using learnings from Johan Castberg, we have reduced breakevens from $80 to less than $35 a barrel. We bought Rosebank back, and this time as the operator. Production will grow, but cash margin will increase much more. This is growing with quality. Growth in the U.S. will offset declining production in West Africa, and by 2025, there are three more projects in the U.S. planned to be on stream.
In addition, Bay du Nord in Canada, Mari ner the U.K., North-Komsomolskoye in Russia, and Block 17 Satellites in Angola. Over the last two years, DPI has contributed with 40% of the NPV improvements in our non-sanctioned projects, and this is nearly $3 billion in NPV. We have a significant resource base developed over the next decade, 1.1 billion barrels. This does not include our unconventional assets. We are encouraged by recent developments in Tanzania .
Once we agree on a commercial and legal framework with the government, we can add another 1.4 billion barrels to this number. Exploration is key, and we plan to drill 10- 20 wells per year going forward. We will increase our international activity in 2019, including three high-impact wells in prolific basins, two in the U.S. Gulf of Mexico and one in Canada. Let me conclude. DPI generated significant surplus cash in 2018, around $2.9 billion. We will continue to grow and contribute with $10 billion over the next three years. We will double the share of operating production to 40% by 2025. An important contributor to this is Mariner on the left on this chart that will come on stream this year.
But applying the best of Equinor is all about our people. I've spent the last six months traveling to meet our organizations around the world, and there is one thing that stands out, and that is the quality of our people. I see it in the way that we work with our partners. I see it in how we engage with societies, and I see it in the trust that is built with governments. This is how we are going to apply the best of Equinor. Thank you very much. I will leave the word to a good friend. She has earlier been called techno babe. Before that, also called break even babe. Now she comes directly from Rio de Janeiro with a glowing suntan. I'm not sure what I'm going to call you this time, Margareth, but please, the floor is yours.
Thank you, Torgrim. I just have to say, you really look good with your new George Clooney style. It was 1-1. [Foreign language]. Today, you will discover why I decided to leave the cold winters of Norway to become the Girl from Ipanema in the sunny Rio de Janeiro, or at least a bit older version of her. My main message today is about the unique opportunities in Brazil and how Equinor has strengthened its position during the last years. Brazil has a huge offshore resource base. There are some seats there as well. Oh, donuts. I'll take it once more. Brazil has a huge offshore resource base, regular access to acreage, and a large recovery potential from mature fields.
During two decades, including eight years of Peregrino operations, we have built a strong local organization with proven operating competence, ability to manage risks, and a solid standing in the local industry, built on long-term relationships with very important and key partners. We know what it takes to develop and operate in Brazil. Our oil and gas portfolio has high-quality assets in all development phases, with the potential to produce 300,000 - 500,000 barrels a day in 2030. In Roncador, a field with 10 billion barrels of oil in place, together with Petrobras, we now aim to increase the recovery factor by 10 percentage points. Our non-sanctioned portfolio has a break-even below $40 per barrel. We want to improve it further. Tim believes the exploration portfolio in Brazil is the best he has seen since NCS in the 1980s.
In the next three years, we will drill five high-impact prospects in the pre-salt area. There is also upside potential from associated gas. Some of Equinor's best gas professionals are in Rio working on monetization options. Like Torgrim said, it is really about applying the best of Equinor. Personally, for me, it is an opportunity to utilize what I have learned in many different roles across the value chain on the Norwegian continental shelf. I feel really lucky to start the journey again. Now, with a bit more maturity than 30 years ago, but with the same enthusiasm. Our story started with Peregrino. More than 180 million barrels have been safely produced in a field nobody thought was possible. Peregrino II come on stream in next year, adding more than 250 million barrels.
We will bring gas into Peregrino to reduce CO2 emissions by more than 100,000 kg per year, which is a good business case for the environment, but also for our financials. Our non-sanction projects add up to 1.4 billion BOE of s hare. By 2025, we almost double our production, and only five years later, we could be producing up to 5x what we are doing today. The Brazil portfolio is very competitive and resilient. In 2025, four of Equinor's highest NPV assets are in Brazil. Five years later, we expect to generate a net cash flow about $2.5 billion with Brent at $70 or above $1.5 billion with Brent at $40. Roncador is among the top three producing fields in Petrobras. Our strategic alliance creates business opportunities for both companies, having safety as number one priority.
Last year, our ambition was to increase the recovery factor by an additional 5 percentage points, and that is 500 million barrels. After seven months of collaboration, we have agreed to double that ambition. Now close to 40% recovery factor. On the NCS, we have increased recovery rates from 30 %- 52%, DPN is now pursuing 60%. Arne Sigve, you will be my benchmark, and I will incorporate all the learnings we have from Norwegian continental shelf. We really enjoy the collaboration with Petrobras. This is one of a kind combination.
Petrobras deep, older experience and Equinor IOR toolbox. Increased recovery on the Roncador is about optimized drainage strategies. It is about implementing a robust infill drilling program with faster and cheaper wells. It is an optimized subsea solution and is also applying best practices from topside and subsea integrity to prolong the lifespan of the installation.
With our experience, we are confident it is possible to increase recovery and deliver very profitable wells. Carcará is the first greenfield project in the Brazilian pre-salt to be developed by an international operator. We are about to complete the first well in the north area that shows world-class productivity. The value driver in a pre-salt field is early production and high capacity. Since last CMU, we have taken decisions which improves our business case. A phase development to accelerate production while continuing to fulfill appraisal and industry-standard FPSO solution to enable faster execution and lower cost. With the highest production capacity in Brazilian waters so far, 220,000 barrels a day. We have simplified the subsea solutions based on our experience of Trestakk and Castberg and using standard Brazilian equipment.
To remove the dependency of the gas value chain, we have decided to reinject gas for phase I. This will not only de-risk the project schedule but also increase oil recovery. The project team has worked hard to reduce the break-even to below $35 a barrel, and there is potential for more. Our ambition is to start up as fast as possible, and I am sure Anders will do his best to deliver. Now, Anders, I am the demanding customer. We estimate around 1 billion barrels of recoverable resources from our current exploration portfolio in Brazil Equinor share. These are world-class reservoirs with high-quality oil, low CO2 content to enable cost-efficient development solutions. Our exploration efforts are not only about finding oil, but also understanding how a well will flow.
We have established a pre-salt center of excellence in Rio to transform the way we work, speeding up the development of the assets. This includes integrated work between petroleum technology, exploration, drilling and wells, and research, which I think is quite unique. Targeting first wells that have the potential to be producers and utilizing one digital sub-surface data lake to capture synergies from the different pre-salt hubs and to reduce the number of wells. You think we are done? There could be more, the calendar of bid rounds for the pre and the post-salt have been confirmed for the coming years.
The transfer of rights surface volume could be an opportunity this year if commercially attractive. Guided by our values and strategy, we will work very hard to improve our portfolio further and deliver safe, high value, and low-carbon production to Equinor. With all of this, I have no time for caipirinhas or beach life. That's for sure. Now, Lars Christian, where are you? Lars Christian? Will take you through the financials. [Foreign language]
Thank you, Margareth. Ladies and gentlemen, good afternoon. It's really great to see you all. This is my first Capital Markets Update as CFO. In my first six months, priority number one has been to sustain the cost and efficiency improvements and further improve across the whole organization. In a more uncertain world with high volatility, improving our competitiveness is even more important to stay attractive. 2018 was another strong year for Equinor. We delivered strong results, further reduced the break evens of our projects, announced value-enhancing transactions, stepped up our cash dividend, and strengthened our balance sheet. As you have heard from my colleagues, we have a lot of exciting opportunities ahead of us, all building on our industrial strength and all with the aim of creating value. Let me start with the fourth quarter 2018 results.
As you have seen, we delivered adjusted earnings of $4.4 billion in the fourth quarter, an increase of 11% from 2017. Gas prices in Europe, and especially in the U.S., were higher than 2017. On average, we also realized somewhat higher liquid prices. During the quarter, we expected the steepest fall in the oil prices since 2014. In early October, Brent Blend was traded around $85 a barrel and ended the year below $55. Due to sales pricing mechanisms in the market, where prices are set five days after the actual transaction, the significant drop in the prices led to a one-off effect with a higher than normal differential between realized liquid prices and Brent. This impacted our adjusted earnings from exploration and production Norway to deliver $3.2 billion from $3 billion last year.
Underlying OpEx and SG&A was, as expected, slightly higher than last year, mainly due to asset removal costs on Gassled and pre-operation costs from several fields, including Martin Linge and Aasta Hansteen. In addition, we had a lower share of profits from associated companies impacting the tax rate for the quarter. Exploration and production International delivered adjusted earnings of $774 million. After-tax adjusted earnings were $491 million, an increase of 146% from last year. Increased production from new fields and new wells coming on stream contributed to the strong results.
Both in Norway and internationally, we had high exploration activity in the quarter, impacting adjusted earnings. Our mid- and downstream business delivered a result of $319 million with a strong contribution from LNG and through trading. Low gasoline prices led to low margins on our refineries and market developments led to a weak result from product trading in the quarter. Now let's move to full year. For the full year, we are reporting solid-adjusted earnings of $18 billion, an increase of 42% from $12.6 billion in the previous year. Equinor's net income increased from $4.6 billion to $7.5 billion. Increased oil and gas prices and solid operational performance have contributed to this good result. We delivered record high full-year production, $9.9 billion organic CapEx, and exploration spend of $1.4 billion.
All better than guidance. In addition, we delivered 12% ROACE already meaning beating our 2020 ambition. It's also worth noting that our organic cash flow would have been positive below $50. Our financial robustness was rewarded with upgrades from both Moody's and Standard & Poor's during 2018, a testament to our focus on resilience. Moving to our production. At more than 2.1 million barrels per day, that is a record high production. New wells coming on stream, acquisition of Roncador, and start of eight new fields contributed to this record level. Among the new fields are Oseberg Vestflanken and Stampede. These are high-margin barrels that contribute to our strong cash flow. In 2018, we delivered 2.1% underlying production growth.
Let's take a look at the cash flow. In 2018, we generated $27.6 billion in operating cash flow and paid $9 billion in taxes. We delivered organic CapEx $9.9 billion below our original guidance due to good project execution, achieved efficiencies, and continued strict prioritization. We also continued to execute portfolio-enhancing transactions. Divesting non-core assets like Alba, King Lear, and Tommeliten Alpha and aligning ownership in Carcará contributed $1.8 billion to our cash flow. We spent $5 billion on acquisitions and signature bonuses for new licenses, so we can leverage our industrial strength. Roncador, Martin Linge, and Carcará are examples of such acquisitions.
Our free cash flow was $3.1 billion after CapEx and dividend. Before transactions, our free cash flow was $6.3 billion. We also reduced our gearing then from 29% to 22.6%, a reduction of 6.8 percentage points over the year. Since 2013, Equinor has fundamentally reset its cost base, and we are today a stronger and a more robust company. I started my speech by underlining the importance of keeping costs down and fighting cost inflation. Our objectives are to collaborate with suppliers to safeguard the achieved efficiencies, develop and utilize digital solutions, and drive further simplifications and standardization. We believe that there's still significant industry improvement potential, and as a company, we have to be competitive at all times.
The last couple of months of volatility in oil price is a clear confirmation of the need for continued cost and capital discipline for operators like Equinor, as well as for suppliers. In Equinor, we are on a journey from an improvement program to an improvement culture. We strive for efficiency in everything we do and are using lean principles as our way of working to improve safety, to increase value creation, and to reduce CO2 emissions. Our unit production cost is industry-leading at around $5 per barrel.
As we said in last year's CMU, the unit production cost would increase somewhat in 2018 and 2019 before reverting back to around 2017 level in 2020. On Johan Sverdrup, we have reduced unit production cost by 35% since the plant development finalization to around $2 per barrel. This is truly a world-class unit production cost.
Arne Sigve, he talked about the digital transformation on NCS being a digital leader. Compared to conventional solutions, what we call the field of the future, can deliver 30% reduction in facility CapEx and 50% lower operating cost. Integrated operation centers are a core enabler to deliver more than $ 2 billion in increased value creation by 2025. In Equinor, we actively use benchmarks to drive performance, to ensure that we deliver on our strategy: always safe, high value, low carbon. We see that we deliver competitive results. As of the third quarter 2018, we delivered first quarter corporate ROACE, second in our peer group. Whether you rank total shareholder returns over the last five years, last three years, or the last 12 months, Equinor is ranked in the top two, either number one or number two.
Remember, this has been in a period where the oil price has fluctuated between $113 and $27. We hope to demonstrate today that there is more value to come. Next, I want to address the reserves and resources. We started 2018 with 19 billion barrels oil equivalence in total resources. During the year, we have delivered record high production and strong divestments. Even so, we increased our resource base by adding volumes in existing assets, discovering through exploration, as well as executing value-adding transactions. In total, adding 1.6 billion barrels, ending the year with a resource base of 20 billion barrels. As Eldar mentioned, we recorded a record high reserve replacement ratio at 213% in 2018, and our three-year average is at 153%. If you look at the organic reserve replacement ratio for 2018, it was a strong 189%.
Our reserve life is 8.7 years, up from 7.6 last year. We are very comfortable with this level. As you have seen from Margareth, Torgrim, and Arne Sigve's presentations, we have a strong focus on cost and capital discipline, a strong production outlook, and we have a competitive project opportunity set. In combination with the resource base, this gives me comfort in our future deliveries. Our portfolio not only offers optionality and flexibility, but also gives us time to look for the best opportunities, and the best opportunities only.
Equinor expects the 2019 production to be around the same level, the same record high level as in 2018, followed by an annual average growth of around 3% from 2019 - 2025. At the same time, we expect CapEx to stay around $ 11 billion on average in the period 2019 to 2021. Free cash flow in the same period is expected to be around $14 billion at an oil price of $70. Remember, this is after tax, after CapEx, after dividend, and after announced transactions. Let me go into more details on the projects coming on stream. To the right, you see a strong and broad pipeline of projects, both in upstream as well as in renewables. Equinor will be the operator for most of these projects.
Ladies and gentlemen, operatorships are where we can leverage our industrial strength in order to drive down costs and ensure profitability, to shape development concepts, deploy technology, and deliver low-carbon solutions. This portfolio has increased in value since 2017 by more than 30%, has an average breakeven of $30, an internal rate of return of around 30%, and a CO2 intensity more than 30% lower than our current producing portfolio. This is what we would call a portfolio fit for the future. To the very far right on this slide, in the table, we have listed some non-sanctioned projects. Let me go into more details and explain the slide to the left. On this slide, it's important to be on the low side and to the far right.
The lower and further to the right, the better it is. You see we have improved over the years. Since last year, the portfolio of non-sanctioned projects has increased further in value by another $7 billion, achieved an average breakeven below $40 with an internal rate of return of more than 25% at an oil price of $70. When sanctioned and on stream, these projects will add around 4.3 billion barrels of oil equivalents to Equinor, with us being the operator for 80% of the volumes.
Our projects will be sanctioned only when the value is as good as it can get. Our project organization tells me this is a key learning to ensure good project execution and economics. Let's move to returns, balance sheet, and capital distribution. Equinor is delivering growing returns on cash flow from operations, while at the same time strengthening our balance sheet. We delivered a ROACE of 12%, two years earlier than previously communicated, and we expect ROACE to grow to more than 14% in 2021.
Our balance sheet remains strong and continues to reduce our net debt ratio. Cash flow resilience is illustrated by our ability to maintain our net debt ratio in a $50 scenario. We are committed to attractive capital distribution to shareholders, demonstrated by Equinor always maintaining or increasing our dividend level, also in periods with low commodity prices. As you have heard Eldar earlier today, we propose to increase our quarterly cash dividend by 13% from $0.23 to $0.26 per share. 30% increase in the dividend represents a significant step up in the level of distribution to shareholders. This increase also reflects the sustainability of our improvements and improvement in the long-term earnings outlook.
Cash dividend is our highest priority in terms of capital distribution to shareholders. In 2019, we plan for around $11 billion in organic CapEx and exploration spend of around $1.7 billion, and a production around the same level for 2018, and a 3% compound annual growth from 2019 - 2025. Before I sum up, let me remind you that new accounting principles came into effect January 1. For us, the main impact from IFRS 16 will be on capital employed, net debt, net debt ratio, and ROACE.
We will continue to report key metrics with and without this impact from IFRS 16 . Let me sum up why we believe Equinor offers value to investors. One, growing cash flow and returns. We have provided clear and quantifiable indicators on growing ROACE to above 14%, free cash flow of $14 billion in the period 2019-2021, and we have also created a more robust company able to be free cash flow positive at $50. Two, investing in high-value projects. We have extended the visibility well into the next decade. Production of projects until 2025 is a breakeven around $30. Non-sanctioned projects, next 10 years is an IRR above 25%. CapEx, as well as a 3% annual production growth. Three, we are committed to growing returns.
From internal rates of returns on projects and returns to capital employed to returns to shareholders, a growing long-term sustainable earnings supporting a dividend, which we propose to increase by 13%. Finally, we have the people and organizational capability to execute. Thank you for the attention, I pass it over back to you, Peter, and I look forward to the Q&A session.
As a reminder, if you would like to ask a question via the telephone, please press star one on your telephone headset. If you wish to ask a question, please press star one.
Formal session, not just from in here, but also on the phones as well. We try to do is to circulate some mics here first, we'll do a batch from the phones. I always ask if we can keep the questions relatively short and one each. I never entirely succeed. There'll be one and a follow-up, which preferably is on the same kind of question as you've just answered. With that one, can I ask the questions here? We've got everybody who's made presentations, but as I say, we've also got other members of the corporate executive committee here as well. Feel free. The first question I saw was from Lydia. Thank you.
Thanks, Peter. Hi, it's Lydia Rainforth from Barclays here. Two questions linked to cash flow. The first one is, if I look at the free cash flow into the $14 billion is post-dividend, what dividend growth rate do you have in there for the 2019, 2020, 2021, if I think about that three-year plan? The second one links partly to the free cash flow side around the standardization and cost-saving digitization plan. How much cash benefit have you put in cash flow numbers for that?
Okay. When it comes to the dividend part and the assumptions, I think all I can do is to refer to the dividend policy. It's a boring answer, I won't give you a percentage. In fact, I don't know. That could be an assumption. The basic thing is that our ambition is to grow, as currently stated in the dividend policy. That's also explaining very much why we ended at $0.26 as a starting point where we can actually grow from. Exactly how this is going to look like going forward is yet to be seen. There is growth in that dividend, but I can't give you a more precise number than that. Other questions for you.
On digitalization and the impact of it. We have a big program internally of aggregating all the improvement initiatives, impressed by obviously all the ideas that are coming up in the organization. Whether it's digitalization or lean or whatever it is, this adds up, and it's just included in the numbers that are being provided. On digitalization specifically, we said last year more than $2 billion in contribution in increased value. We see that we are starting to close that kind of gap towards that ambition.
Yes, Jon?
It's Jon Rigby from UBS. You indicated, and it's a fairly compelling chart where you showed that you sell assets in high oil prices and buy in low. You could also probably put a line of your organic CapEx on there as well. You tend to be more inorganically active when your organic CapEx is low. It looks to me that you do, and not to say that this is not the appropriate thing to do, is you do use the market to supplement your longer-term positioning with inorganic purchases. As we look out through to 2025, you've given guidance on organic spend 2021.
Could we also assume that to be building and preparing for the longer term, that a chunk of cash may be the sort of net $1 billion-$2 billion that you've been spending over the last cycle is likely to be spent again on inorganic opportunities? I think you've already referenced, for instance, transfer of rights, surplus volumes, et cetera. Maybe if I ask my second at the same time, if it does link, so tick that box. I think there was some reports in the newspapers that you had expressed an interest in entering Qatar, for instance. I think one of the gaps in your portfolio globally seems to have been a material LNG footprint, which has been curious given your position in European gas.
I just wondered whether, A, that was true, and B, whether that does represent one of the strategic bases that you might want to expand into over time. Thanks.
Oil and gas is, you produce a certain amount of barrels every year. Just to stay in that game and sustain that capacity, at some point, you need to replace that with new barrels. Exploration is the main priority. We really like to succeed on exploration, and we are stepping up that. We do see that you're not likely to compensate for the production over years only through exploration. That's the nature of what you see also globally, that exploration resources is coming down. We depend on actually some high-quality additions to that from inorganic acquisitions, purchasing assets. That's where we say that how we do that, when we do that, the shape and form of these acquisitions is extremely important because they need to create value for us.
They have to be a good strategic fit, tap into the industrial strength that we pointed out that comes from the Norwegian continental shelf. It's not just taking a bet on the oil prices, really that we can put into action some of our competitiveness skills and start improving from that point. It's a responsibility I have, we have to continue to look for these kinds of opportunities. It also includes divestment, so optimizing the portfolio continuously through that. It's something that you wouldn't be surprised that we will continue to look for that. That's why we are also very precise that the guiding we give is an organic guiding. It includes paying for the transaction that we have done, but nothing beyond that.
It's very precise that we will continue to look for this optimization and these opportunities to replace resources within our resource base. We do have a strong resource base, so we are very patient on this. We illustrated the cycles as a kind of a guiding thing. They are there. They're very fundamental. They define sort of broadly speaking, where things might be more attractive in terms of divestment and acquisitions. That there's always opportunities, wherever we are in the cycle. That's what we have seen. Strategic fit, price right, hopefully getting the cycle right as well. That is something we would work on. On Qatar, LNG, we have one asset in Norway. It's a growing theme and is growing within the gas space. It's connecting the regions of the world when it comes to natural gas.
They have the Tanzania asset that Torgrim mentioned briefly. It's down the road quite a few years, and we are working now on the transit solutions. We are looking for that. It's not something we have to do again, but we are looking. Are there any LNG opportunities out there that make sense for us? If there isn't, I'm fine with that. If there is, it would be still in a nice space between Snøhvit back in 2007 and Tanzania now maybe 20 years later. It's kind of things that would be useful because to be in the LNG game, you also need to have an arbitrage trading system to make sure that you're not cannibalized in the gas market from LNG. You need sort of
Sources of LNG or equity sources to have that system. It's something we are looking at, by no means desperately, but that also means that we are screening LNG opportunities. It doesn't work. We don't do it. To screen it, we need sometimes to be qualified to do that and sign into certain things to just have a look at stuff. That's basically what is the case with Qatar. It's no sort of conscious thing that we have to do. It's something that we would like to take a look at when it comes to LNG.
Okay. I've got Oswald.
Thank you very much, Peter. Two specific topics for me, please. First is Roncador. The kind of update from Margareth is pretty staggering, I think an extra 5% recovery factor from that field within the last 12 months. I guess in the due diligence, you spent $2.5 billion to get that asset. You must have thought about better drainage and the much better infill programs and that 5% prize. 12 months later, to have another 5%, I think is pretty impressive. Maybe just flesh that out a little bit more. Was that something you thought was possible? Is it a surprise in the last 12 months? Could we stand here this time next year and see that 40% realization being discussed more concretely and kind of even higher? I think it's a big number.
Secondly, to Rosebank, obviously Roncador shows the importance of Statoil's capability. Eldar, going back to your initial comments about not repeating the kind of sins of the past and having strength and time and discipline to make good acquisitions. I want to go back to Rosebank, because yes, you did some good M&A getting out of it, getting back into it. Now, you talked about Johan Castberg, $80 to $35 breakeven, but it feels like Rosebank potentially too complex, too difficult. This is a challenging discovery west of Shetland. Chevron looked at it quite a lot. There's a lot of volcanics around it. Is this maybe a little bit too difficult or you're starting to chew off a little bit too much? Thank you.
Okay. Maybe Margareth can talk, but whay I can say when we did that transaction, basically the price we paid was based on as is. We obviously saw that we could increase recovery, and we talked about that. That was really where the value creation was. Now we see more. Maybe Margareth, you would like to comment a little bit on that.
Yes. I don't think it was a surprise, to be honest. First of all, in such a collaboration, which I think is very good, you need to build trust and confidence. We have been working with Petrobras on technology agreement for many years. I think we work in an efficient way together. We have used the whole Equinor, Jannicke 's organization, and we've used people from DPN coming to Brazil to dig into all the details on Roncador to see and compare with what we have been doing on the Norwegian continental shelf. We have suggested a lot of different measures we can take. I think we have also agreed on an ambition, which of course is ambitious. At the same time, that's how we are developing, when we put very ambitious targets, we really drive towards these targets.
I think it's very interesting. What I also said on what is really promising in Brazil is not only the pre-salt, but it's a lot of fields also on the post-salt where they have a pretty low recovery rate. I think in that sense could be interesting for us to contribute. It's a powerful collaboration.
Rosebank, I remember we were part owner in that asset when we made the discovery. I was so happy. It's a tough discovery, deep down and salt and so on. We know this asset quite well, actually. That means a better starting point than we have when you start from scratch. We also know the subsurface pretty well. I know I have some colleagues here, Al did the acquisition, Torgrim is going to run it, Anders is going to develop it. If you want to comment on this, give it a try. I could say basically, we knew that we can come up with leaner concepts. There was a plan for this project which we reviewed. Based on where we come from, our experience from the downturn, we knew we can do this.
This fits nicely, and we have some great ideas about how to develop this. We know the subsurface. This is really not taking the concept as it is, which would be changing, taking a view on the oil market. It's really about improving the project. We believe we can do that significantly, and we will also ask for more time to do that, so that we get time to get it right, as you pointed to, Lars Christian. I don't know if any of my colleagues would like, Anders, it looks like you want to comment on this. You're going to deliver that project, you better.
Yes, of course, we look at this project that is similar to both the Bay du Nord and the Castberg, harsh environment. When we looked at the reservoir, looked at the capacity on the Rosebank, we saw there is potential for improvements. Basically, we look through all the value chain and see that if we work similar to what we have done on the Castberg field, we're able to bring down the breakeven as Eldar alluded to.
Next question is from Biraj in the center.
Hi. Thanks. It's Biraj Borkhataria, RBC. I have a question on CapEx. You've got into quite a good habit of setting a number there at the start of the year and then coming in lower and lower as you move through the year. I'm not expecting you to do that in February, but thinking about it alongside the production growth. Your production is growing by 3% per annum, and you want to manage within a flat CapEx framework. That seems to be quite challenging over time. I guess the question is, do you think you have sufficient momentum on the efficiency side and the reducing the capital intensity further from here, that flat CapEx can stay flat over time, over the medium term, or should we assume there being upside pressure to that number over time? Thank you.
I think we can go back to last year. We guided at $ 11 billion for this year, this range. Now this year, including 2020 as the levels. We still are. We are on the same level as it went. It happened that last year came out $ 1 billion lower. Efficiency, we see that we still manage to take down costs within our overall project portfolio. It's getting tougher and tougher. We have done so, and that is savings. It's not something that we have deferred into this year. You don't see that $ 1 billion on top of sort of the $ 11 billion that we had talked about last year for this year. I think that is important. It's basically the same level. A high level of transparency on this.
Longer term, we can't be precise beyond 2021 because we don't exactly the portfolio, don't exactly how cost is going to go. We know that we can continue to do a lot on improving the efficiency of our projects. We talked about the digital, the solutions, how we can develop Krafla and so on with the lower cost. I think that's what this is. Drilling more efficiently, so we can drill more wells to capture more resources and so on. That's what we are talking about. How exactly is that going to play out beyond 2021 is exactly to see. There are different forces, and we strongly believe in what we can do, what we can influence, and also contractual strategies.
We see opportunities to further enhance our collaboration with our suppliers, innovate how we set up this, how we engage with our suppliers, incentives and integrated contracts and so on, and length of contracts or penalties. Also then, obviously, the digital relationship with our suppliers and how that works out. I think where this is going, we can't say. I think we're proud to stick to $1 1 billion. I'm also happy that what the savings we did, almost nothing of that is delaying project into this year's CapEx. Would you like to-
One comment. We have contracts over a value of $ 100 billion already agreed to. In many ways, we are covered over the next couple of years, broadly speaking. Whatever beyond is too early to judge.
Okay. We've got quite a few questions to get through, I'm going to do a batch of a couple of people in this side. I'm going to take some questions from the phone. We're going to do a batch over this side. Alwyn first and then Thomas. Alwyn's in the middle here. Okay? Thank you.
Good afternoon. Alwyn Thomas here from Exane BNP Paribas. Just quick one from me on the U.S. business. Given some of the volatility in WTI spreads, I just wanted to know, looking what you talked about, the $45 central breakeven, do you think you still have to go further than that in the sort of near-midterm as well as trying to drive volume with that? How do you think about that in the next sort of, I guess 3 - 5-year period?
Okay, this is the perfect question for Torgrim.
All right. Thank you very much. Yes, you're right. The WTI and the spread and the discount in North Dakota has fluctuated a lot. Up to $20 at one point in time, and now it's sort of coming back down again. Despite that, we have been able to make money out of that business with those discounts. On top of that, Irene and her business is taking the oil and bringing it to the Atlantic to get better prices for it. There's a significant benefit in the value chain attached to it. Clearly, we are monitoring the situation very closely and taking capacity where needed to be able to achieve a higher price than the local price.
If I can pass over to Thomas over here. Yeah. Right in the middle there.
Thank you. Thomas Adolff from Credit Suisse. The first question is on benchmarking. I think Torgrim mentioned the word benchmarking. Presumably, you benchmark against peers inside the industry, but also outside of the industry. When we think about offshore versus onshore, offshore, you're presumably tier one already inside of the industry. What are the key takeaways from outside of the industry that you can incorporate into operations offshore? Then onshore, you've done an amazing job bringing down the breakeven. Understand, correct me if I'm mistaken, that you operate the business differently to the independents in the U.S., a little less independent. It's more kind of corporate organization. Is that the right way forward, or can you really adopt the more efficient approach that the independents in the U.S. adopt? The second question, I guess, is just on new energies.
There's always a debate around returns in new energies. For example, if we were to electrify all your offshore operations on the NCS with wind, what does that mean in terms of value created from additional gas sales for you? Thank you.
You're talking about all the offshore. Okay. I think when it comes to the U.S. onshore, Torgrim will prepare his answer on that. What did we learn from outside industry? We do that. Typically, the industry is very familiar, it's easier to get sharp with each other, we do a lot of that. Basically, the concept that we have developed through the downturn is very much based on what we actually learned from U.S. onshore, very extensive benchmark from an industrial-like type activity. You can pick what is the best, what is the perfect, what is the perfect well, translate that into the perfect facility as a concept. We break it up, take individual pieces, define through benchmark, also internal benchmark. What is the best available performer that we can compare with?
If you combine that, get the best well in total, the best facility in total, that's how we drive, sort of continue to drive towards the very best. We benchmark. I think we do, now and then we do more extensive research outside our industry. We've done that on safety. For instance, now last year, had a group of really deep dive into sort of other companies. We see that starting to slow down a little bit on improvements. We need to step up. We need to get more ideas from the outside. Really looking into what are the really best doing on safety. Aviation, for instance. The digital, same. We realized that our industry hasn't been seen as a leader when it comes to digitalization. It's so important for the future. How can we learn from others?
Again, we really deep dive into other companies and what they're doing, what kind of approach, what is important really at the core of it. To get the priorities right. We do that as much as we can and also on industrial practices in general. In terms of number, it's hard to get sort of really comparable data. You are more practices that you find from the outside. On electrification of the whole NCS, that is a no-go in a way. It doesn't fit for that. Basic electrification you need, if it's offshore wind, you need floating wind parks. If it needs to float, you can't do this from the seabed.
It's still a technology that we believe a lot in, and cost is going to come down, but you still need, it doesn't run on its own. It needs support and financial support. The Hywind Tampen project is I think, a technical part of that will have the support come from the government as part of their low-carbon strategy as well. I think it's really enough. It has to come down. That could increase the opportunities there for the Norwegian continental shelf and also beyond that. Now I'll leave the work to Arne Sigve to elaborate a little bit on that. Torgrim will soon get ready on the U.S. onshore.
Yeah. Thank you very much, Eldar. When it comes to electrification, there are a few prerequisites that we have to put in place. First, we look at the abatement cost. What is the cost of the project compared to CO2 tax and quotas. That is one. The next one is really, and obviously, if you can do it, you can sell the gas to the market. We do not have a figure for all the assets on the NCS what it will mean when it comes to electrification, because as Eldar says, it's not practically possible due to the grid system. We are looking at what can we electrify based on the available grid system and also looking at the abatement cost. If that adds up and we will have profitable projects, we will do it.
As Eldar says, when it comes to the Hywind pump, that is a new opportunity that we're looking at and quite exciting that we will explore further, as I said in my speech.
Thank you. Our business model for the U.S. onshore. It's a strong business model. Well thought through. Torgrim, explain why.
Okay. Thank you very much. Yeah, I mean, the business is currently working well. I mean, deliver earnings and a good surplus cash flow in the current environment. Improvement has happened, but we still have a lot to do. I mean, we still have to learn from others, we see that we can actually do the things better than we do today. We have taken a more long-term approach to our business, not optimizing initial production rate, but much more focused on recovery rates and technology application. Anders, he has an R&T team sitting in Austin working closely together with him. Then the marketing and trading organization is also deeply involved in that business. The business model is partly separate from the rest of the company, but trying to capitalize on the biggest system to find that balance.
That has worked okay so far. What we see now is that the next level will take more technology, if we are going to apply the best of Equinor, we need to bring that U.S. onshore activities even closer to the rest of the company. It is around digitalization of operations, it's around subsurface technology applications, even closer link to marketing of assets. If we are trending anyway, it's actually to bring it closer to the rest of the company than it has been.
Now I know we've got at least four people waiting patiently here, we've got at least seven people waiting even more patiently on the phone. We're going to take a break from the room and take some questions from the phone. We've got a lot to get through, I think if I can ask everybody, if we can keep questions and answers relatively smooth and efficient.
We'll now take our next question from Anne Gjøen from Handelsbanken. Please go ahead. Your line is open.
Thank you. If you look at your guided production down now, it's until 2025, 3%. It's a long way out. Previously it was until 2020, 3%-4%. I assume it's still the strongest growth in 2020. If you look a bit longer out and after 2025, I understand that you believe in peak oil demand within some years. Will you gradually position Equinor for growth and renewables and probably before that in natural gas? Are you still positioning also for oil production growth all until 2025 or even longer? Thank you.
So, short answer. I'll take that challenge. When it comes to the 3%, we said that's an average over these six years, so we can't be precise. Obviously 2020 would be a good year with Johan Sverdrup coming into play and phase II and Johan Castberg in 2022 as well. Obviously there is an energy transition going on and at some point the global oil demand will come down. Start coming down. We say that's a good thing. You do need alternatives for oil to make that happen, otherwise the demand will be there and just go on. This transition is really about developing alternatives that can compete and outcompete oil in the energy mix and before that, hopefully coal. That is really what this is about.
It's not about stopping to produce, because that doesn't help, because there's a lot of hydrocarbons out there, which is a higher carbon footprint than what we can produce in our portfolio. I can't say exactly how long we will continue to grow our oil production. The world is still increasing its demand, and as long as we can do that with the lowest carbon footprint there is, actually highly competitive, and I think carbon footprint, there will be cost and regulations associated to that. Increasingly, it's going to be competitive advantage. I think it is really important that the world is served by carbon efficient powers than less efficient powers as long as we need that. That is the transition that is going on and the shape and form is yet to be seen.
We will be part of that. We will follow this closely. In the meantime, we will continue to grow our renewables business, our low carbon business. We need to have two thoughts at least in our heads at the same time. We're very conscious about this with integrated into our strategy. I can't give a precise answer to your question because it's a strategic and important question down the road.
Thank you.
We'll now take our next question from Anders Holte from Kepler Cheuvreux. Please go ahead. Your line is open.
Thank you guys for taking my question. Actually, question, it's a rather short one. It's regarding Carcará. You previously talked about it as a new Johan Sverdrup. Now have lifted the veil on phase I with 220,000 barrels per day of gross oil production. My question then is more towards how many phases do you actually see at Carcará? Given that you have previously talked about this as a new Johan Sverdrup, should we expect to see a phase II and potentially a phase III down the line? Also on the Carcará field, I understand you drilled an appraisal well towards the end of 2018. I'm just wondering the results of that, what that contributed in terms of recoverable resources. Thank you.
So the Girl from Ipanema, please.
Ipanema. Yeah. Carcará, we believe at least we will have two phases for Carcará. The resource potential, we have the same we had the last year, 2 billion barrels oil equivalent. What we have been doing the last year is really to take a lot of very prudent decisions on them because the drivers for the pre-salt, the drivers for the profitability is really high capacity and early production. Now we have decided this standard FPSO. We are going to inject gas. We do not need to wait for the gas value chain to happen. We have a very high capacity, 220,000 barrels per day.
On that appraisal, I don't think we are revealing anything on the wells at the moment. If you listen to what I said we have a very high or world-class productivity on the well we have been doing in the north area. We are looking now on two different phases. It's the first phase, of course, we have chosen or we will have a standard FPSO. Was it anything more?
No.
All that?
It's good.
Was it good? Okay.
Oh, yes, Margareth.
Yes. Thank you.
I have to say that every time to keep her happy.
Thank you, Margareth. Next question from the phone.
We'll now take our next question from Teodor Nilsen from SP1 Markets. Please go ahead. Your line is open.
Yes, t hanks for taking my question. There's been a lot of discussion around both Brazil and U.S. today. Two very specific questions on both areas. First one is, how much do you plan to spend in Brazil over the next few years? You previously indicated that you will spend $15 billion until 2030. Second question for you, I guess that's for Torgrim, how much of the fourth quarter adjusted EBIT comes from the U.S. activity? Thank you.
We had some trouble actually hearing the question, but maybe you did, Margareth, on the first one.
I think we haven't done any changes to that one. We have said both $15 billion up to 2030. That's our overall plan.
I must admit the second question I didn't hear.
I think the second question was how much of the 4Q EBIT comes from the U.S. I think that was the question.
Oh.
If that was the question, we can't give that answer, I'm afraid.
It's a significant part. Basically, we still report on these segments and the international and the NCS on that. I think that is how we report. I need to look at it.
Thank you for those questions. Next from the phone.
I'll take the next question from Christyan Malek from J.P. Morgan. Please go ahead. Your line is open.
Guys, thank you for an excellent presentation and for allowing me to ask questions. Two, if I may. The first on portfolio evolution. You've got plenty of opportunities both in Brazil and Norway and some fantastic grounds developed. Just going back on a question Biraj asked, is $11 billion the right normalized level of spend over the medium term? If so, is it fair to say that you will allocate the excess free cash flow towards M&A? It certainly feels like that, as opposed to returning it back to shareholders through a buyback, for example. Second question is, I want to come back to the frame with which you model the evolution of project breakevens. Clearly, a great target you're aspiring to and lowering and continuing to do a great job on that.
Given the volatile oil back drop and what appears to be a continuous improvement in lowering the marginal cost of oil, which clearly is somewhat bearish for oil itself, but I'm slightly confused as to how you frame a $70 oil price deck against your benchmarking to achieve a 25% return. Can you just walk me through the logic around or the basis to your assumptions around your oil price and the framework that you use to model breakevens?
On the cash from the $11 billion, and we indicated $14 billion in the organic cash flow, which includes the inorganics that we've done prior to this, going into this year. That is obviously cash available. It includes before that the organic investment program of $11 billion, which is a high-quality program. That is really important. That is our highest priority. We are committed, I didn't give a number on dividend, but we are committed to actually grow the dividend in line with underlying earnings. That is included. We are left with cash, and we indicated how our debt ratio could develop given that we don't do any inorganic measures, which I discussed a little bit in one of the previous questions. It's not unlikely that we will.
Given $70, we will strengthen our balance sheet and that there are a lot of question marks on that roadmap, and it has to do with commodity environment and the uncertainties related to that and the opportunities that are ahead of us, and obviously in the end, how our gearing is going to look like. We have said very clearly that we give priority to the cash dividend. That has always been the legacy of this company back from going back to 2001 and the IPO, and to get that back on track and actually on a higher level now than the trajectory that we left back in 2015.
It's competitive as we think it is, and it's our idea to sustain that. Buybacks is something that we state in our dividend policy. It's an additional tool that we might use given these conditions. Then we are back to the commodity environment and opportunities and gearing. Our priority is still to improve the balance sheet, strengthen the balance sheet further. We are in the middle of the range now that we talked about. We definitely would like to strengthen that. If the projection goes like sort of indicated on this slide, and no additional sort of acquisition, we are heading towards a good place. We'll have to take that when we get to that space. The $70, that's for you, Lars Christian, yes? It's not your invention, but you have to take it.
I think when you want an answer and look at what you're doing, you need to go back and see what we experienced during the downturn. The strength of the resource base today means that we do not have to buy barrels. Eventually, we will, but we have the time to choose and go for the best stuff. The strength of the balance sheet means that we don't have to sell. We can choose the timing of this and match it according to what we feel are good deals. That is important. Then the $50 breakeven, cash flow positive below $50, that is important number. It's more important in many ways than what we do at $70.
We calculate on $70 because we have done it a couple of times, and we would like to show you consistency over time, so we see how we develop and how we strengthen as we go forward. That's the $70 and why we use that. Internally, we use different numbers for hurdle rates and follow the $50 breakeven positive and see how that develops forward.
Just to add a couple of points. When it comes to the assumptions that we make for accounting purposes and also for internal optimization of projects and activities, that is the planning assumptions, and they're actually heading for $75 in 2025. There's no change to that, been like that for a couple of years now. To be comparable, as you say, $70, just a number. It's not something we believe in or don't believe in. It's just a number so that you can have a reference point. $50 is not a criteria for us, but it's a good illustration of what we have achieved in terms of resilience. This portfolio thing, and there might be projects that might be above or beyond or below, but the portfolio is in very good state but a good place to be.
We would like to focus on resilience going forward and on whatever we believe at any point might be the oil price. That doesn't take us to a good place, because I don't know.
Sure. Just to follow up this quick point in your M&A assumptions.
Christyan . I'll follow up with you later. We have the two questions. We need to get on to other people. I'm really sorry about that one. Can I have the next question on the phone?
The next question comes from Halvor Nygård from SEB. Please go ahead, your line is open.
my questions have already been answered. Thank you.
Thank you.
We'll now take the next question from John Olaisen from ABG. Please go ahead. Your line is open.
Good afternoon, gentlemen. May I have an indication of when we should expect PDOs for the following main international projects in Bay du Nord, North Platte, Carcará , and maybe Rosebank as well, please?
I think there is an indication in your slide. Do you want to comment on that Lars Christian .
Yeah. Start of Carcará is 2023, 2024. PDO, Margareth.
PDO 2020.
PDO 2020. Rosebank, haven't said anything about because we are, as Eldar said, asking for some extensions so that we can really work the concept to bring it forward as the best possible project. North Platte, Torgrim?
North Platte, we have said startup in the 2022, 2023 area. That's Total that should respond to that, such as an operator.
Very good. Bay du Nord we will do the DG II in end of this year and the DG IV around 2025.
Thank you.
We'll now take the next question from Trond Omdal from Fearnley Securities. Please go ahead, your line is open.
Thank you, congratulations on the record cash generation and introduction, also partly reflected in your higher dividends. The question has been asked before, but I'll try in another way. Back in 2006, your total dividends, including special dividends, was more than NOK 9, and you also had a buyback program. In 2014, you paid out when you transitioned to total dividends NOK 10.6 . Is there any learnings you can share on the thought process on why you're not distributing more? Is there any triggers that you will have to go below 20%, or is it also a reflection of the recent macro uncertainty that you want to keep the flexibility? Second question, since the other has partly been answered. I noticed that Nnwa-Doro popped up again. That's been in your portfolio since the 1990s.
Is there any new developments there, do you see that moving forward to an FID maybe ahead of Tanzania? Thank you.
Are you prepared for the Nnwa-Doro, Torgrim ? It's been a long time with us. On the dividend, I realize people would like to have predictability, that's why we focused on the cash dividend, because that is really a predictable thing that you can relate to your strategies or whatever, we have a clear policy statement from that starting point. I think that's an important aspect, characteristic of preferring that as the main way of distributing capital. When it comes to share buybacks, it is an addition tool. It might be used, we also have arrangement with the government so that we can actually push that button if we like to. We have to do it through the government, who would like to maintain their ownership in Equinor. It is a complex consideration.
It has to do, as you pointed to, the commodity environment, not only where we are, but the uncertainties and the volatility, we have a lot of that. We saw it in the previous quarter. As I said, the balance sheet, sorry, I can't give you figures, this is not only about the balance sheet, but also about these other things, including the opportunity set and how we see it. I think this is something we just will have to look into, depending on how things comes together. There will be no figures coming from us on that, predefined figures .
Thank you for those who've been on the phone. We're going to come back into the room. We are going to go a little over time, we want to try and keep it efficient. I'm going to ask people to hand the mic over to the next person and start with Michele. After you finish, can you pass that over to Rob?
Sorry. Nnwa-Doro.
Sorry, forgot about that one . Okay.
Yes.
Nnwa-Doro is a very significant gas discovery that we had in Nigeria. It is within deep waters. As in Tanzania, we are dependent on agreements with the government, and establish deep water gas conditions for that field. That is what needs to happen. We are looking at it, but it will clearly take time and very dependent on discussions with the Nigerian state.
Thank you.
Okay.
Michele Della Vigna from Goldman Sachs. Eldar, you've entered the power market with a material position in wind and in trading. Some of your peers are also entering the retail market for power in specific countries. I was wondering if that is on your radar screen as well. Lars Christian, I was wondering if you could give us an indication of the tax installments in Norway for 2019. Thank you.
Okay. First the tax and on the retail, we begin there on the crude side and the gas installations and basically, as we see it's a very different game. It's a very different competence, and it's extremely competitive and a business model that we are really not set up to address. I think we could try, but I don't think we will be successful. Why try and waste ? I don't think it is necessary, really, to capture the values from our assets. What we do think is important is to be in the power markets because we see merchant risk coming into this renewable space, and we don't want to be cannibalized in that market.
Have that strength to address that and capture these values and also tying it into the natural gas business, because we see hydrocarbons from natural gas and renewables, they're interactable. Natural gas is a flexible resource, another way for combining this. I just look at my colleagues here if there are any additional variation. They are very happy with the concept. I give the go.
On tax installments, Norway, 1st of February, April and June, totaling NOK 32.5 billion. We're also changing some of the guiding for tax internationally, down from 50%-55%, to down 30%-45% due to more production from low or no tax income production. Around one third of profits internationally will come from no or low income, sort of no or low tax position products.
Thank you. Rob?
Thank you. Rob Pulleyn from Morgan Stanley. May I ask about the NCS pipeline of opportunities, particularly as major CapEx steps down over coming years. Is there enough projects on the NCS to offset the increase in cash taxes we would otherwise see? Specifically gas projects, because it looks like your portfolio post-Troll in the mid-2020s will start to see declines, and certainly I think it speaks to the question of Equinor's role in European gas supplies over the next couple of decades. Thank you.
We just put in place a major gas development that's going to stay there for a long time, opening up a new very gassy province in the Norwegian Sea, just to mention that. You mentioned that we are exploring for gas, now you had enough time to think about this answer, Arne Sigve.
Yes. When it comes to gas specifically, Troll Phase III is a very, shall I say, good project with reserves equal to the lower span of Yggdrasil, it will go 50 years into the future. We have Oseberg and looking for even more gas also at Oseberg and other fields. As we say in our roadmap, we will look for oil and gas, and that is why we have put into our roadmap a quite substantial amount of wells annually, both when it comes to production wells, but also exploration wells between 20-30. We will explore the gas. We will develop our existing assets in an efficient way. Of course, it will be something that we will be working hard on going forward in the coming years. Roadmap is a perspective of two decades.
If I'd add, the major big projects, they are there, and we need to make big discoveries to have new ones. We have a lot of projects and a lot of stuff to work with, and we enhance what we have, and we can develop new ones, but probably smaller ones. Cost is really important that we really can make these projects work, even if they are smaller wells and lean concepts.
Thank you. Jason?
Thanks. Jason Gammel with Jefferies. I just wanted to ask about the new energy portfolio. You talked about being able to achieve returns of about 10% of that business. That would be dilutive to the 14% target that you have on ROACE for the overall corporation. Just want to ask you how you think about the desire to diversify your businesses into new areas relative to the dilution that you actually have on returns, and how much capital you would actually be willing to put forward in that type of investment. Maybe just the final part of it, is there a point in time where you will start to disclose the results for the renewables business separately so that we can evaluate the financial performance of that business?
Yeah. It's very different returns from what we see within the oil and gas, but it's also an extreme volatility than oil and gas. Now it's good times, and there are worse times. There definitely have been. This risk-reward is an important part of this concept. It has to be competitive in that space. As I commented, this is strategically meaningful. It's industrially meaningful because we can leverage the competence that we have and do good projects, and it makes us competitive in this space. It also engages in the energy transition. I think that long-term, strategically, it's important. It's not something we as a major company with a long-term horizon just can look at. We have to engage in that and take part in that transition. We don't know exactly the shape and form, and I'd also talk about the oil development going forward.
I think, the returns are different. Competition is fierce. It has to work. That's why we will grow our investments into renewables. We indicate 15%-20%. The growth from the current around 5% is probably going to be backloaded a little bit as we're heading towards 2030. We are working at full speed. Right now, we are not into some major projects, but we have accessed a lot of projects. Maybe you would like to talk to that a little bit, Pål.
I guess we have three regions that stand out on the renewable side, and particularly on the offshore wind. The U.K. is clearly an area where we have been growing and also where we see the potential for more growth. It's also a country that's made a very deliberate step into renewables. You will also see that we have taken positions in the U.S. We have an upcoming auction in mid-February in New York, and that we look forward to. Recently, we also took a position in Massachusetts. Both of those, we've gone in 100%, positioning in a region that we think is going to be important for offshore wind development going forward, and also building on the footprint we already have in the northeast of the U.S. Finally, we have also taken steps into Poland.
We are quite early in Poland, and we've gone in at scale. We think that is a region that's going to be the next wave of offshore wind developments where we can leverage the capabilities and strengths that we think that we have.
On disclosure, on when are you going to disclose renewables?
Well, that's way too early. We haven't had it on the agenda yet to be discussed. It will take some time.
It will happen.
It will happen one day.
Okay. One last one from the hall.
Alastair Syme from Citi . Could I just ask on the slide 45 on the creaming curve, you show the 4.3 billion barrels of resource, and you talk about a breakeven less than $ 40. Presumably, that's a go-forward breakeven, just to clarify. Can you think about what the acquisition costs that you've made over the last couple of years would do to that breakeven if you think about full cycle? A related question, if I look at the 2017 curve, there was a very large flat line at about $40 of close to a billion barrels, and it's kind of disappeared from the 2018 curve. Can I clarify what's happened?
You're thinking about the flat line? If I may, obviously, this is forward-looking, as you say. I always have to think about looking forward, what we can do. Before that, there's been a wide range of accessing these resources from exploration to acquisition that go a long way back in different market concerns. It does some newer acquisitions as well. It's a wide range of access costs. Basically, then you're back to how we think when we do acquisitions and build the portfolio. Exploration has high priority. On top of that, we're looking for these opportunities.
Obviously when we start look at these projects, we don't look at $40. That's not the starting point. You have to take into account that you don't have all the answers where this is taking you. You do know, and we have to know, that we can make a difference.
Well, this is what it looks like now, and this is how we can enhance it going forward. Rosebank was an illustration of that. Roncador, when we started to look at that, how can we enhance that? See, that's what we can do. We can really take down costs. We've shown we've done that over the last couple of years. You need to get into the project. You need to access it, and you need to be very disciplined when you do that. You also need to see that, well, this is an asset that we can really start working on. I'm sure you will say that $40, we can improve that going forward. This is where we are now.
It's a journey, some projects take time to put them into the portfolio and might not have priority to work on it now. We'll pick it up and really start working it, then we move the needle on the cost. Putting our strength to work.
Part of our ability to deliver on the CapEx is also strict prioritization. We do not necessarily work on all the projects all the time because this needs to be stacked capacity-wise, but also from a sort of financial sound way of running your business. When you look at these slides, there has been no sort of asset long flat lines that has been sort of a reduction in volume. I'm not 100% sure where on the line you are, either it has been sanctioned and thereby sort of out of the non-sanctioned, the 4.3 billion, or it has been split because we are now talking about phase I and phase II. Most likely split sanction and thereby sort of taken out of non-sanctioned.
Okay. Now we have to call it a halt for today. I know there's a couple of people who we didn't get around to, I'm going to make sure that they get first chance to ask management direct, people we didn't get around to today. Before I pass the word back to Eldar to close proceedings, just like to thank everybody on behalf of Investor Relations for coming today. I will also remind you of the next couple of events that we've got scheduled. We've got our European Gas Seminar, which will be in London, in here, on the 21st of February. Also our SRI day will be at the back end of May. Thank you very much, and Eldar. Thank you.
Thank you, Peter. Thanks to all of you for coming and seeing us and taking the time to do that, spend these couple of hours with us. I hope this has been pretty useful for you. I brought the whole team here today, and everybody hasn't been able to have a real opportunity to ask questions on exploration and on the mid and downstream as well. They're here. Really an opportunity for you to get on to whatever you like to hear from my whole team. The reason why the whole team is here, because this is an important event for us. It's really an event that we use extensively, also internally. I use this event as a motivation for the rest of the organization. Why do I do a global town hall for 100 different locations actually tapping into that town hall.
The idea is really to make sure that everybody is on board on the promises, what is said here today. In the end, this is the slide that has been hanging on for some time. I want you to see this, bring it with you. I think it's pretty compelling, actually. I won't go through it now, but don't forget what is in the slide. Bring it with you, and I'm sure you will reflect on this and write your report or whatever you do. We will also continue with our business and go back home and do our business day- to- day. We are deeply committed to what we are presenting today. Bring the whole team on board and some of us will also do some traveling and some road shows to see investors over the next few days.
Really look forward to that. Thank you very much to all of you for coming, spending the time with us, and enjoy the rest of the day and have a safe travel back home, wherever you go. Thank you very much.