What do you call a company that strives to be a great neighbor? A company with operations around the globe whose purpose is to energize the world and make our lives better. A company that does it all by producing, refining, and delivering the energy products we use every day. What do you call a company with deep roots and a long, proud history? A company that's proud of its people and its community. What do you call a company that cares? You call that company Cenovus.
All right. Good morning, everyone. On behalf of the entire Cenovus team, welcome to our 2024 Investor Day. My name is Jason Abbate, and I'm the Senior Vice-President, Investor Relations. We hope that you enjoyed that short video. It highlights who we are as a company, the places we work, and the people that make all of this possible. It's great to be having this Investor Day in person. We appreciate you taking the time in your schedules to join us. What you'll hear from us today will provide you with a better understanding of our values, our strategy, and what we've set out to accomplish in the coming years. But before we get started with a set agenda, I'd like to take a moment to go over a few housekeeping items, starting with our safety.
In the event of an emergency, the building is equipped with a two-stage alarm. If the alarm is an intermittent single, please remain calm and stand by for further instructions. If the alarm is a continuous single, please calmly go to the exits that are to the stage right or my left. The muster point is across the street in front of the hotel main entrance. Next, I think it's extremely important to acknowledge the original stewards of the land in our many operating areas where we work, and specifically where we are gathered here today. This includes the Mississaugas of the Credit, the Anishinabek, the Chippewa, the Haudenosaunee, the Wendat, and the Métis people. Toronto is also on Treaty 13 territory, signed with the Mississaugas of the Credit, the Williams Treaty, signed with numerous Mississauga and Chippewa nations.
And we extend our most sincere thanks and respect to the members of these nations and offer our heartfelt thanks for having us guests on their traditional treaty territory. Moving on to today's content. To follow along with the presented materials, you can scan the QR code on the pamphlet that's placed on your table. This will take you to our website, where you'll find a soft copy available for download. We made limited printed copies this morning. For that, you can credit our CFO, Kam Sandhar. With my well-managed budget, I had to decide between more paper copies or better food. And you can thank me after lunch. Next, in customary legal fashion, and to ensure our General Counsel, Gary Molnar, can sleep at night, I'd like to highlight that the disclosures relevant to today's events can be found in the appendix of this presentation.
These advisories describe the forward-looking information, non-GAAP measures, oil and gas terms referenced today, and the risk factors and assumptions relevant to today's discussion. All the numbers are presented in Canadian dollars on a before royalties basis, unless otherwise noted. There is additional information available on our website and our most recent MD&A annual information form and Form 40-F. We will also be speaking through strip and flat price scenarios throughout the slides. The details specific to those price files can be found in the appendix of the presentation. I know some of you will have some detailed modeling questions. Please feel free to reach out to the team in the coming days after the event, and we'd be happy to answer any questions you may have. All right. On to our agenda.
Our President and CEO, Jon McKenzie, will start us off, and will be followed by the rest of the executive team that we have with us here today. They will provide you with the details to support our strategy, business and execution plans, sustainability, and finally, our financial framework that underpins it all. With that, I'd like to invite our President, Jon McKenzie, to the stage.
Well, thank you, Jason. Good morning to everybody, and welcome to Cenovus's 2024 Investor Day. It really is great to see everybody here in person. We sincerely appreciate your interest and support of the company. Whether you're local or you're traveling for this event, we are very glad to see that you've chosen to join us here today to hear us speak to Cenovus's value proposition. We view this as an opportunity to provide everybody with an in-depth look at the strategic initiatives that will drive this company forward. Today's discussion will include details about our strategy, our core operations, our growth plans, sustainability priorities, as well as our financial outlook. Let me start with our strategic priorities. The strategic priorities that have guided this company over the past half dozen years have not changed.
What you'll see today is a strategic business plan that reflects the strategic priorities that have underpinned this company's success since 2017. Now, what has changed are the assets that underpin this company, as well as the evolution of our integrated business model. But the strategic priorities remain steadfast today as they are going forward. We are committed and focused on top-tier operating performance and practical sustainability leadership. Now, as Keith Chiasson will describe, occupational and process safety are at the absolute heart of everything we do. With long-lived assets and a resilient, enduring business model, we run this company for the long term. We recognize that consistent top-tier operating performance is a prerequisite for long-term profitability.
While I think it's fair to say that we are recognized as being a top-tier operator in our upstream business, particularly oil sands and thermal operations, we continue to take great strides in the downstream. Ultimately, and in the near future, we expect our downstream operations to be on par with our upstream operations. Knowing that we have 35+ years of low-cost reserves in our portfolio, we recognize that we must produce these reserves as sustainably as possible. What I mean by that is that we will do our part to responsibly minimize our environmental impact, including minimizing our GHG footprint. But what we cannot do is make this company, our industry, competitively disadvantaged with our global peers.
We will continue to work with the federal and provincial governments to agree on a fiscal package that allows us to move forward with decarbonization while maintaining the competitiveness of the company and the industry. Now, as it relates to cost leadership, we fully understand that we compete in a commodity business, and the lowest cost producer always wins. Championing cost leadership and building a corporate culture that cares about shareholder capital was the very first step we took in creating a resilient and sustainable company way back in 2017. Today, Kam Sandhar and Keith will highlight the concrete steps that we are taking as a business to continue to reduce our costs in all categories to sustainably produce, transport, and market our products. With regard to financial discipline, since coming to this company, we have practiced financial discipline as defined by our financial framework.
Our financial framework is foundational to guiding the decisions we make as a company and has served us very well over the years. Under our framework, we define bottom-of-the-cycle pricing at $45 WTI. We believe that at that price, the supply of oil globally begins to decline. As such, we've engineered this company to be resilient in a $45 WTI world. All of our decisions, from capital structure to capital allocation, project approval, shareholder returns, are rooted in the discipline of ensuring we are robust at the bottom of the commodity price cycle. We also believe that capital allocation is one of the most important functions that a management team undertakes. Good capital allocation decisions are an important differentiator between successful and unsuccessful management teams.
Kam will take you through our capital allocation framework, which prioritizes capital to safe and reliable operations, sustaining capital, base and preferred dividends prior to considering any discretionary capital investments. All of these are done while maintaining a net debt of about CAD 4 billion. All investment decisions within the company are screened to ensure investments are on strategy and meet bottom-of-the-cycle hurdle rates. All capital opportunities compete internally for inclusion in the business plan, understanding that the capital budget is capped at a ceiling that is consistent with our ability to generate cash flow at the bottom of the cycle. Ultimately, this leads to generating growing free funds flow per share, which improves the company's resiliency and allows for increasing shareholder returns through time in any reasonable commodity price environment.
Now, I quite like this next slide as it highlights the accomplishments and milestones that the company has achieved in line with our strategic priorities since Alex and I arrived at Cenovus in late 2017 and early 2018. My IR team reminds me that nobody needs a history lesson or appreciates a history lesson, so I'm going to be pretty brief. In the years following the Husky acquisition, we focused on digesting this transaction, realizing the promised synergy, streamlining the asset base, and deleveraging the balance sheet. We achieved all of this while returning about CAD 3.9 billion to shareholders under the financial returns framework we implemented in 2018 through the common shared base dividend, share buybacks, and a variable dividend payment. 2023 was another important year for Cenovus with the acquisition and startup of the Toledo refinery.
2023 also marked the restart of the Superior refinery, a refinery that was rebuilt in 2021 and 2022 but had not run since 2018. While we were very focused on safely and expeditiously restarting these refineries, we continued to reduce debt and deliver attractive shareholder returns throughout the year. Now, I threw out a few numbers. For those of you doing the math, since the merger, we have reduced our long-term debt by nearly $7 billion. If I go back to 2017, it's nearly $13 billion. Since the time of the merger, we've reduced it by about 50% while also delivering shareholder returns in excess of $6.7 billion. We've taken a very balanced approach to conservatively managing the balance sheet while providing meaningful shareholder returns.
We look forward to achieving our net debt target of CAD 4 billion, where we will transition to 100% payout of our excess free cash flow. Importantly, for this management team, we've established a track record of staying disciplined to our priorities by conservatively managing our business, running the company and our assets for the long term, maintaining a strong balance sheet, and prioritizing shareholder returns. You will see and hear these themes reemerging over the course of the day. Now, shifting gears a bit, this is a slide depicting the relationship between the growth in global crude demand and growth in global GDP per capita. Global growth of crude demand is shown by the stack bars and measured on the left vertical axis. What we've seen over the decades since 1975 to today is that the global demand for crude has nearly doubled.
Much of this is being driven by the development of emerging economies around the world. The red line that's superimposed on the stack bars is the growth in per capita GDP measured on the right-hand vertical axis. The important part of this chart is the relationship between GDP growth and oil demand has been intact for 50+ years and remains intact today. While the global population is continuing to grow beyond nine billion people and the second and third world economies continue to expand and grow, we expect global demand for oil and gas to continue to grow for the foreseeable future. Primary energy supply, of which about 80% comes in the form of hydrocarbons, is a necessary prerequisite for global GDP growth and an improved standard of living.
We have a view that the world will be demanding oil and gas for decades to come and that the eventual peak in oil and gas demand, together with the eventual decline in demand, are not as imminent as some might believe. Further, we would have a view that the world will need all forms of energy going forward in increasing quantities as our global population grows and our standard of living around the world continues to improve. This is important to Cenovus as we have decades of reserves, and Canada continues to be the most responsible and sustainable producer of oil and gas among any of the material oil and gas producing nations. To the extent the world demands our product, both the incremental barrel as well as the last barrel produced should come from Canada.
Cenovus has a long history of investing practically and prudently to sustainably produce and decarbonize our barrel, investing in communities where we operate, conserving fresh water, and returning disturbed lands to their original state. But we know we must remain competitive as a company and as an industry with our global peers. We are a proud hydrocarbon company. We are proud of our employees and our contractors. And we are proud to produce products in the manner that we do. And we're proud to produce the energy the world needs and demands to the benefit of all Canadians to maintain and improve not only our Canadian standard of living but our global standard of living. I want to turn to our asset base briefly. Drew and Keith are going to take you through our strategy and asset plans. But I did want to highlight our heavy oil value chain.
It sits at the center of our strategy and generates the lion's share of value for the company. At our core, we are an oil sands company. Oil sands generated approximately 75% of our operating margin in 2023. These assets are currently producing about 850,000 barrels a day of heavy oil blend. The donut on the far left breaks down the 850,000 barrels a day of blended heavy oil by producing asset. Our largest assets are Foster Creek and Christina Lake. Together, we call that FCCL. And then you'll also see the contribution from Sunrise and Lloydminster. The rest of the midstream and the downstream assets in this value chain all serve to mitigate risk or add value to our heavy oil production. They exist in the service of the upstream.
They eliminate a portion of the location differentials we're subject to in Alberta and reduce our exposure to light heavy oil differentials. Further, we have a significant amount of heavy oil conversion capacity within our upgrading and refining assets, which convert heavy oil into intermediates and higher value transportation fuels. The second and third donuts illustrate these concepts well. Of the 850,000 barrels a day of blended bitumen, only about 250,000 is sold at Hardisty, with the remaining 600,000 barrels per day being consumed in the Lloyd complex or transported to the U.S. to be sold at world prices or consumed within our U.S. refining network. The third donut highlights the heavy oil conversion capacity within our refining network. We currently have heavy oil refining and upgrading capacity to consume about 400,000 barrels a day of the heavy blend, which is close to half of what we produce.
Now, moving to our 5-year plan, you'll hear throughout the presentation today that everything we do is grounded in our financial framework and all investments having to return a cost of capital of greater than 9% at bottom of the cycle pricing, which, as I mentioned, is rooted in $45 WTI or about $1.85 AECO. Our business plan, as shown on this slide, will grow production by about 150,000 barrels a day over the next five years, a compounded annual growth rate of 3%-5%. And this is supported by our downstream throughput capacity of 745,000 barrels per day. A large majority of the capital over the course of this plan is being spent on our upstream assets, with our downstream assets seeing a modest amount of capital to support reliability and operational improvements, which will increase our downstream profitability and drive improved margin capture.
You can see our capital starts to decrease in 2026. This is largely due to the completion of capital being spent on our West White Rose project as well as the completion of some of our oil sands projects in northern Alberta. The one thing that I want you all to be mindful of is that this plan does not include most of the capital associated with progressing our GHG initiatives, including Pathways. What is included in the plan are the projects that have achieved final investment decision and are now in flight. We expect to deliver on our GHG targets. And I believe it's in the best interest of you, our shareholders, to ensure that we have the appropriate financial framework with our governments before we sanction or approve material capital to decarbonize the upstream.
With that being said, our growing production, our focus on reducing cost structure, driving down supply costs, our rapidly improving balance sheet make this company increasingly resilient while we continue to negotiate a satisfactory framework with the federal and provincial governments. This further supports growing our shareholder returns, which I will highlight on the next slide. Now, at all reasonable commodity price scenarios, our plan drives increasing free funds flow and increasing earnings over the next five years. We see a significant free funds flow generation in multiple commodity price environments, this being driven by a continued focus on the base business together with the value being driven by the completion of our growth projects.
Overall, the plan positions us well to continue increasing returns to shareholders through base dividend growth and opportunistic returns, including share buybacks and variable dividends, which Cam will discuss in some detail at the end of the presentation. I believe what we have is unique amongst our industry peers: low-cost, long-lived assets together with low-cost organic growth that is aligned with our core competencies, together with increasing opportunities to capture margin across our value chain. Now, with that, I'm going to turn it over to Drew to walk you through our strategy as well as a deep dive on our integrated value chain.
Thanks, John. Good morning, everyone. I'm Drew Zieglgansberger, Executive Vice President and Chief Commercial Officer at Cenovus. So as the CCO, I'm focused on capturing maximum value across all our segments and value chains and orchestrating how the assets are used to deliver both on our short and long-term strategies. All of our assets serve a purpose and contribute collectively, as you just heard from John. I will dive a little deeper into each of the assets in the portfolio and then spend the second half of my presentation on the commercial aspects and with a deep dive into our integrated heavy oil value chain. I will talk you through how all of our assets fit together and support our strategy and how the integration has structurally changed our adjusted funds flow and why we are more resilient with this portfolio.
Now, as John introduced, the oil sands, thermal, conventional heavy oil businesses are the backbone of the company and the main driver behind our financial results. Our long-life reserves, low decline rates, and low-cost structure help generate exceptional returns on investment throughout the commodity price cycle. As you know, we are the industry-leading, largest, and most experienced SAGD operator with advanced operating strategies applied across the combined portfolio. Our operating experience in SAGD has enabled us to drive significant improvements at some of the legacy Husky assets, including Sunrise and the Lloyd Thermals. Keith will speak to this in more detail in his section. Our conventional heavy portfolio is something we are progressing in our plans. We have become increasingly excited about this region. In that region, we have the largest land position in the area.
It is well situated geographically and tightly integrated with the Lloyd Upgrader and refinery. Our plans are expected to improve operating costs, drive down the GHG emissions, and increase our production. Here are some examples to show the value of the oil sands assets. I talked about long reserve life. The chart on the left highlights the significant amount of inventory we have that is below a $45 WTI supply cost. With our continued focus on lowering our cost structure, we believe that through technology and operating practices, we can further reduce the supply cost of these reserves in the future. Keith will highlight how the long-term sustaining finding and development costs will outcompete all other North American barrels for decades. This is due to the low production decline and that long reserve life.
Sunrise is just one example of our short-term opportunities and how acquiring the remaining interest in that asset to owning the asset outright further enhances the development of this project. The chart on the right shows our top quartile reserve life. Again, we are well positioned with some of the best assets in the industry to sustain our base production. We are one of few global integrated companies with over two decades of 1P or proven reserves and over three decades of 2P or proved plus probable, allowing us to sustain our production and fill our refineries. All of this is underpinned by our operating practices that drive results with a constant focus on safety.
As hopefully most know, we have a strong track record in SAGD oil sands, as we are the most experienced operator, have an industry-leading operating model and practices, have demonstrated leadership in innovation, have world-class assets, have a strong track record of operational reliability, and we have a long history of a successful safety culture in everything we do. These collective assets will continue to be the backbone of this company for decades. Our offshore portfolio consists of assets in both Atlantic Canada and in the Asia-Pacific region. Our Atlantic production is a very light oil that receives Brent-like pricing and will contribute meaningful cash flow for the next number of years. Later this morning, you will hear about the progress we're making at the West White Rose project in the Atlantic region.
In Asia, we really like the low volatility, highly profitable production, as it offers a unique stream to Cenovus. Asia-Pacific cash flows are supported by mostly fixed-price contracts that we are looking to extend, as we are not bound by reservoir constraints but by the commercial contract tenures. These assets have a long reserve life that extends beyond our contract terms. These assets diversify our cash flows and are the significant contributors to the bottom line. In fact, the offshore segment has generated over $1 billion of operating margin each year over the last three years. Our goal is to continue this trend. Let's move to our conventional segment in western Canada. This is another part of our portfolio that is an important part of our overall diversification and cash flow mix.
Even though we have a large portfolio and a deep list of organic, highly accretive opportunities, we have only invested the necessary capital to sustain this business over the past several years, with deleveraging the balance sheet and allocating investment into the oil sands as being our primary focus. These assets provide us with a cash flow stream from an energy source that has different risks and opportunities with it. Alongside oil and other liquids, natural gas is also a needed fuel and energy source for decades to come. In particular, we see the increased need for electricity generation and other uses as the energy demand balance shifts and grows. It will continue to be a part of our portfolio and our strategy. The short-cycle nature of this business allows us to be reactive with commodity prices and our capital.
Combined with our technical capabilities that are not dissimilar to our other upstream assets, we are confident we can drive down costs and increase cash flows. We will continue to invest conservatively in opportunities that beat our cost of capital. As John noted, at $1.85 AECO. Our strategy is anchored in our heavy oil assets. Their value is enhanced by how we move our barrels through the Canadian and U.S. markets to maximize the total value we receive for our barrels. I will introduce our midstream and downstream assets as I walk through our heavy oil value chain. In the upstream, as John noted, we currently produce about 850,000 barrels a day of blended bitumen in both Alberta and Saskatchewan and have 600,000 barrels a day of heavy processing and takeaway capacity beyond Alberta.
As you can see on the slide, our pipeline egress allows us to move barrels into different markets, helping mitigate the locational differential and getting crude to higher-priced markets for low cost. Note the transit times by location, as I will reference this on the coming slides. Once TMX comes online, we'll have another avenue to redistribute barrels to different markets. Through this exposure, we expect to benefit to the upside of a narrowing WCS differential as egress and other market options are made available. Our midstream network allows us to deliver our barrels directly into our owned and operated refineries, which consumes over 400,000 barrels a day. This leaves us about 250,000 barrels a day of blend to be sold in Alberta, predominantly at Hardisty.
Our refineries in PAD2 can take advantage and offset price dislocation when we see WCS volatility in Alberta, as they benefit from widening light-heavy differentials. As you see from the map, our PAD2 refining network is close to Canada. Our assets are some of the first stops for Canadian crudes on the network. For example, we can get heavy oil to Superior for about $3 a barrel, to Toledo for about $6-$7 a barrel. This compares to shipping all the way to the Gulf Coast for about $10 a barrel. The location of our refineries also provides us downstream verification on the pipeline network, which mitigates potential apportionment challenges. Couple this with our low cost of transport. Our refineries can benefit from a significant crude advantage, which increases our margin capture.
In summary, our molecular integration serves us well, as we can take full advantage of feeding heavy barrels into our refineries, whether they are direct equity barrels or third-party barrels. But we can get a crude advantage compared to WTI to maximize our returns. So diving in a little further, this slide provides a bit more insight into our connectivity through our integrated value chain and how we can use the assets to market our production and increase our value. So we have created a broad portfolio with a competitive advantage that provides the company with optionality and flexibility. And we have the commercial expertise to capture market share and profit from price dislocations. Our production is connected to all North American hubs.
Our refineries provide a network for our marketing teams to move large volumes of feedstock and refined products through the system to increase margins in our downstream segment. We have over 300,000 barrels a day of heavy refining capacity at our U.S. refineries, plus an additional 110,000 barrels a day of heavy refining and upgrading capacity in Canada to capture a higher margin across the value chain. By consuming heavy barrels, we realize a feedstock advantage. Now, we also have significant midstream and storage assets. We are the largest shipper on TMX and are set to move 144,000 barrels a day to the West Coast once the pipeline comes into service. This represents a new pathway into global markets.
Our teams are busy implementing our marketing strategy to maximize the value of our bitumen barrels, which include selling Free on Board or FOB at the dock and eventually taking our barrels on the water as time progresses. Just to make it clear, this new capacity will replace some of our existing pipeline capacity and space down to the US Gulf Coast. It is not fully additive to our 600,000 barrels a day of takeaway and refining capacity. Now, our value chain is a bit unique when compared to our direct peers due to both the location of our downstream assets in the US. This can create a longer cycle time to convert our upstream production to finished products in the market.
As a result, with our crude and transit times, at any given time, we expect to have about 45-50 million barrels of inventory to support this full portfolio. While we have seen volatility in commodity prices, we believe that in the medium to long term, the benefit of our integrated model is that it provides more stable cash flows and further opportunities to maximize profitability. We will continue to use our assets and commercial capability to the full extent to extract the most value for our barrels. It's important to keep in mind, with the integrated model and asset base, our volume and transit times will result in some cash flow per share and working capital fluctuations, but only over a short period of time.
The chart on this slide starts to show an illustration of what is the operating margin uplift we receive through this integrated model based on a forward look using a $75 WTI in comparison to selling a barrel at Hardisty. Our pipeline egress and optionality, combined with the Canadian refining and upgrading and ultimately the US refining, benefits us by providing an operating margin uplift of about 70% on every barrel in the portfolio. When the light-heavy differential is wider, we expect to see a reduction in our oil sands net back. But our refineries can source cheaper feedstock and generate higher returns with increased crude advantage. Conversely, when the light-heavy differential tightens, we expect to see the returns on our oil sands assets improve while we see an increase in feedstock costs translating to lower refinery margins.
From a corporate perspective, it's important to note that we are long-heavy oil. Overall, our corporate cash flows benefit from a tighter WCS differential both globally and in Alberta. However, our portfolio of assets de-risks our cash flow from being only exposed to WCS in Alberta to now being exposed more outright to WTI and a crack spread and now to a much lesser extent WCS pricing in Alberta. So we believe North American refining will continue to be preferred over global refining. This is due to lower natural gas prices, inexpensive feedstock, a strong product offtake market, and a reasonably supportive regulatory environment relative to other jurisdictions. The PAD2 refineries and the product market have a structural and commercial advantage because they have direct access to Canadian crudes at the first stop on the mainline.
The benefit of these assets is supported by low natural gas prices relative to global pricing, resulting in lower costs to process our heavy crude. Having molecular integration with low transport costs combined with a strong market in Chicago and the Mid-Continent region, we believe this is a competitive advantage. We also see strong commercial opportunities to move products into markets outside of the Chicago region, further increasing the margin capture. Now, I want to highlight a subset of our integrated heavy oil value chain and focus you into our Canadian value chain specifically. Our portfolio of long-life reserves and downstream integration exists right in our backyard in Alberta with our Canadian refining business in the Lloydminster region. This is a great example where not only the molecular integration creates a unique advantage, but also our proximity and the direct resource access extracts more value than most.
Our upstream resource in this area, both in the Lloyd thermal business, but more uniquely in our conventional heavy oil area shown on the map on the right, has billions of barrels of resource in place. To date, our conventional heavy production has only extracted about 5%-8% of the reserves. This leaves us with a large opportunity to grow this business. A few interesting characteristics of the Lloyd region. First, our thermal production only requires about 17% condensate blend for transport to our upgrader and refinery and is essentially an integrated loop as our produced condensate returns to the field. By comparison, 25%-32% of condensate is needed for other SAGD operating areas for blending and transport. Second, the Canadian refining is a proven value chain with minimal transport or egress constraints. It's geographically located right next to the volumes we produce.
Combined with a strong product market for diesel, asphalt, and synthetic crude, we see the ability to grow and sustain this value for decades either from our thermal operations or growth optionality in our conventional heavy oil portfolio in this region. Third, we are the biggest producer of asphalt in Canada to serve this market directly. Finally, we have a direct demand for our diesel production out of the Lloydminster Upgrader, which is more than a traditional upgrader as it refines products further than just producing a synthetic crude. The diesel volumes are distributed through our own 170 owned commercial card-lock locations across Canada. This is an exciting value growth area for the company. And we have yet to realize the full potential of these assets and put it into our business plan. Keith will speak more to this in his section as well.
I'd also like to highlight, though, that because of this vast opportunity and the ability to support our Lloydminster complex with decades of crude, we are no longer pursuing our Rewire Alberta project in line with our evolving view of the Lloydminster regional strategy. Our Lloydminster refining debottleneck that'll add 3,000 barrels a day of processing capacity is moving forward. It's expected to be completed in the near future. We are also advancing a diesel expansion project at the Lloyd upgrader, enabling us to expand margins and unlock incremental diesel production during the blending season. As I walked through earlier, the direct value chain connection of our midstream and downstream assets is here to support this long-life oil resource.
As I close my section, I would like to remind everyone that over the last few years, as we have shifted the portfolio, we have remained very consistent in our strategic priorities. We have built a more resilient business model through our integrated heavy oil value chain and diversified our cash flow mix through our offshore and natural gas businesses. As you will hear from Keith, we have a solid capital investment plan that generates strong returns in the bottom of the cycle WTI environment and generates growth as an outcome over the next five years. Interestingly, we will come out of this capital investment cycle at the end of 2025. You will have already started to see the benefits of that spend. That gives us optionality beyond 2025 to explore further economic growth translating to higher returns to shareholders.
But meanwhile, we are very focused on completing this current investment cycle, achieving our net debt target, and remaining disciplined in our capital allocation. Our portfolio today has enabled us to become more resilient in almost any price environment. Before Husky, we were much more exposed to the locational and quality differential of our barrels sold at Hardisty. Today, we produce and send three crudes to be sold in multiple markets with several end-market products. We have now shifted and de-risked our cash flow to be anchored in WTI and crack spread with modest exposure to WCS. We will remain focused on the same strategy and executing with the same discipline that you have come to know us by. We will deliver on our commitments. We believe we have a strong business plan that generates significant value upside to our shareholders.
Now, I'll invite Keith to come to the podium to provide a closer look at the operating portfolio. He'll dive deeper into the details of our five-year business plan.
Thanks, Drew. Good morning, everyone. I'm Keith Chiasson. I'm the Chief Operating Officer. I'm responsible for all aspects of our operations as well as our execution on our capital programs. With Drew having provided some details on our assets and strategy, I'd like to spend some time going into the details of what we aim to deliver in the upcoming years. I'm going to provide you with a lot of details and a lot of information on our plans and activities underway to deliver on them. But I really want you to take away four things. First, we are a top-tier SAGD oil sand asset producer that make up a large portion of our operating margin. These are robust. They're growing. They're improving in cost structure. And they have decades of reserves left.
Second, our growth projects are well underway, are very capital efficient, deliver meaningful cash flow growth at the bottom of the pricing cycle. Third, we have optionality in our conventional heavy oil and conventional gas businesses with short cycle returns and ability to grow if we so choose. Fourth, we are hard at work in our downstream to improve reliability and profitability. While 2023 was a tough year in that business unit, a lot of progress was made. Two refineries were restarted. It has set us up to deliver material improvement in 2024 and beyond. Before we dive into that, I want to start off with safety. At Cenovus, we value safety above all else. It is reinforced in every decision we make. Our approach to safety is a continuous journey where we learn and improve every day.
Our goal is to be significant incident and injury-free and sustain a position as a top quartile performer in process and occupational safety. Our proactive safety structure and culture is underpinned by eight safety commitments and four corporate values that support everything we do. We strongly believe that excellence in safety is not only a moral obligation, but it also leads to excellence in business. Anchored by these values and commitments and our Cenovus Operations Integrity Framework, we are driving consistent and improving performance across all of our assets. Our goal with the five-year plan is to continue to deliver on our strengths. As Drew highlighted, in our upstream business, our long reserve life and top-tier asset quality is supported by our best-in-class operating performance and strong financial discipline that is always focused on improving our cost structure and adding long-term value.
What sets Cenovus apart as a top-tier operator is our years of experience combined with our ongoing improvements in SAGD. We are working to replicate that in our downstream business. We have brought in the right people with the right experience. We intend to deliver the same type of results in the downstream that you've come to expect of us in the upstream. More on the downstream later. First, let's look at the upstream business plan. These assets continue to be our core focus and will become an even bigger contributor to the bottom line as we grow over the next few years. In 2021, we showed you a flat production profile at Investor Day. This looks a bit different now for a couple of reasons. First, as Cam will show a little later, our balance sheet has improved significantly.
Secondly, our level of portfolio integration, as Drew has highlighted, has increased with the strategic addition of the downstream assets. This supports growing this business, largely mitigating the impacts of a heavy oil discount in Hardisty. Our five-year plan, with the progress on our organic growth opportunities, is set to deliver a measurable increase in our operating margin through all commodity price cycles. We will grow production from what is now 800,000 barrels of oil equivalent a day to 950,000 barrels of oil equivalent a day over the next five years. In addition, we continue to improve our cost structure through better operating practices, more efficient execution, and innovation. This results in operating margin growth of approximately 5% per year. I will highlight this later on. But first, let's look at our growth projects.
As I discussed, our production growth over the five-year plan represents approximately 150,000 barrels of oil equivalent a day. Most of that growth comes from our oil sands assets, executing low-risk, short-cycle brownfield opportunities that we believe are unique amongst our peer group. At Foster Creek, we are completing the tie-in of additional steam capacity that wasn't fully completed in 2017. As a result of this previous work, this project has limited procurement exposure and can be completed at very attractive capital efficiencies with a total installed cost of CAD 290 million, resulting in an incremental 30,000 barrels a day starting in 2026 and ramping into 2027. At Christina Lake, we continue to progress the Narrows Lake tie-back that will add 20,000 to 30,000 barrels a day of production. This is a 17-kilometer pipeline with a total installed cost of CAD 295 million, which will connect to the higher-quality Narrows Lake resource.
It'll connect back to the Christina Lake processing facility. This will result in lower steam oil ratios, or SORs, and incremental oil production in late 2025 into 2026. At Sunrise, we are growing production by 15,000-20,000 barrels a day starting in late 2025 and into 2026 by continuing to progress the proven Foster Creek and Christina Lake operating and development practices at the Sunrise asset. Our organic growth projects are very economic, with half-cycle capital efficiencies below $20,000 per flowing barrel. Our best projects average between $6,000 and $12,000 per flowing barrel. In the offshore business, we continue to drive towards completing the West White Rose project. It is a unique opportunity in Atlantic Canada. It is expected to come on in 2026 and ramp to peak rates in 2028, adding another 45,000 barrels a day.
Turning to our conventional heavy oil assets, we see an exciting opportunity to reduce development costs with some of the new drilling techniques being used at this play. And this, coupled with our industry-leading land position, we see opportunity to grow this business, currently in the plan at 20,000 barrels a day, but with additional upside potential. In the conventional business, we have been focused on reducing operating costs through facility optimization and investments in our core high-value areas. We see a lot of high-return opportunities in this portfolio to further develop our production and maximize returns. By executing the five-year plan with the capital that's currently in the plan, we expect to grow our production to approximately 950,000 barrels a day by 2028.
As discussed on the previous slide and seen on the left side of this slide, we have a large number of low-capital, high-return organic opportunities we are pursuing in our portfolio. We've already laid out that there is a growing demand for our production. With our improved integrated strategy, this improves the margins we capture on these growth barrels. As you can see from the chart, the rate of returns we generate as a result of our disciplined capital investment goes well beyond covering the cost of capital return at the bottom-of-the-cycle prices and even greater returns at $60 US WTI or in the environment we are in today. The projects are highly capital efficient and increase bottom-of-the-cycle cash flows, as evident in the chart on the right. This increases our ability to continue to grow our shareholder return capacity.
I talked about the growth and investments we are making in the portfolio. There are a few things I would like to highlight. Our weighted average sustaining capital efficiency of the oil sands portfolio is around CAD 7,500 per flowing barrel. As you can see, Christina Lake and Foster Creek are well below that. These are industry-leading projects and reservoirs. We are making real improvements at Sunrise to drive down sustaining costs by implementing our proven Cenovus operating strategies. We expect sustaining costs to decrease at Sunrise from what is currently about 11,000 per flowing barrel to just over CAD 8,000 per flowing barrel in 2028. That's a 25% reduction. Our drive to reduce costs is in everything we do.
These numbers demonstrate our disciplined approach to capital execution while progressing initiatives to improve our designs combined with our world-class resource, allowing us to maintain our F&D costs over the years at FCCL, and why we are confident in our ability to further reduce costs across the portfolio. Two of the key items I want you to take away are highlighted in this chart. Our growth projects in oil sands and conventional heavy oil are well underway. We expect to see production growth from around 600,000 barrels a day today to approximately 700,000 barrels a day starting in 2025 and ramping up through 2027. That's approximately 100,000 barrels a day alone growth from these assets. This will not only grow these world-class assets but also continue to improve cost structure and operating margin.
This growth, coupled with the implementation of ongoing cost improvements, will reduce our per-barrel operating costs in the oil sands by approximately 18%. In addition, through the five-year plan, we will see an incremental $1.4 billion of annual operating margin in oil sands at $75 U.S. WTI. That is approximately a 20% increase in operating margin. I want to pause here and reiterate just how much value oil sands generate for the company and why growing these assets is the best return on investment in the basin. For example, of magnitude, these assets generated over $8 billion of operating margin in 2023. That represents approximately 75% of the operating margin of the entire company. We've shown you at previous Investor Days that Cenovus is a leader in SAGD operations.
We will continue to draw on our experience in developing the assets, getting even more efficient as we move forward. First, let me explain the chart. On the bars, the dark blue is current steam oil ratio, or SOR, performance for the asset. The light blue is anticipated performance in 10 years' time. As we know, the lower the bar, the lower the cost in the business. Over the next 10 years, we will see modest increase in SOR from Christina Lake and Foster Creek assets as they will remain industry-paced setters. With the deployment of the Cenovus subsurface development and operating practices, we see significant reductions in SOR at the Lloydminster Thermals in Sunrise. The result? The red dotted line. All of our assets, in 10 years' time, will be below the current 2023 industry average SOR.
While we lead the industry and this chart represents implementing our known practices, I can assure you that our teams will continue to strive to further improve these assets. I'd like to use the next several slides to highlight some technology and cost structure initiatives that our teams are currently pursuing. Turning to our Lloyd Thermals in Sunrise assets, we have increased the amount of drilling activity since acquiring them and have seen significant improvements across all metrics. At Sunrise, we have driven an 85% improvement in drilling on a meters per day metric. At the Lloyd Thermals, we have seen a 45% improvement in meters per day drilled. In our first year as a combined company, we made significant progress in increasing production at the Lloyd Thermals and still see an opportunity to keep these assets improving over the next 10 years.
As many of you may already know, Sunrise didn't have a new well drilled since 2017. We have been busy drilling wells and enhancing production rates through our redevelopment and redrill programs through 2023. As we continue to bring new wells online and optimize the steam usage, we expect to sustain an SOR below 3.0. That's a reduction of 10% since we took over operatorship in 2021. And that's without adding a new pad. By drilling and completing new pads, using Cenovus's development techniques, fully utilizing plant steam capacity, and using our recovery techniques like non-condensable gas, we expect to grow Sunrise production by 20,000 barrels a day through the plan. Also, Sunrise is expected to remain royalty prepayout over the plan, will receive reductions in unit OpEx, and will provide some of the higher net-back growth in the portfolio.
A few things I want you to take away on the Narrows Lake tie-back at Christina Lake. First off, the red line in the picture at the right is the pipeline. You can see how it leaves Christina Lake and heads up to the Narrows resource. In the left picture, you can see the actual lines on the racks. Key message: the project is well advanced, approaching 45% complete. Also, it's largely de-risked from a cost perspective. The 17-kilometer pipeline, at a total installed cost of CAD 295 million, opens up low F&D, low SOR resource, allowing Christina Lake SOR to come down and thus deliver oil production growth. We expect the project will be complete. We will start steaming pads in 2025 and start to see additional production from Christina Lake at the back end of 2025. Moving to technology advancements, including digital technology.
With minimal investment, we have continued to innovate and drive value and performance improvements, whether it be steam injection optimization, which automates the prioritization of steam injection at all our pads, keeping them running at targets and reducing SOR, or on electrical submersible pumps, or ESPs, optimizing those to prevent trips. This reduces operator interventions, pump shutdowns, which increases production and reduces operating expenses. We have been innovating and utilizing digital technologies across all of our assets to reduce SORs and improve our facility operating performance. These innovations allow us to reduce our operating costs, mitigate inflationary pressures, and improve our uptime, maximizing production. We will continue to utilize new technologies and apply them efficiently across all of our assets, driving continuous improvement through the plan. So wrapping up the oil sands story, I love it when a picture says it all.
At Cenovus, we believe we have the best assets in the industry. We have some of the lowest F&D costs. Our cost structure improves as we bring new production online. The chart on the left, sourced from McDaniel & Associates, shows that oil sands F&D costs, as an industry, remain relatively flat over the decade. This is not the case for our U.S. shale peers. Cenovus, with its best-in-class assets, growth potential, and cost reduction initiatives, combined with our long resource life, should set us apart as a broad industry leader. All our projects meet our investment hurdle rates and generate a positive return over the cost of capital at bottom-of-the-cycle pricing. This growth comes from projects that we expect will be highly profitable and collectively add significant incremental value at a very low cost.
The disciplined investment towards optimization and brownfield-type growth should improve future cash flows and support growing shareholder returns. We believe our best-in-class resource quality, combined with our operational experience and low cost of execution, will continue to set our upstream operations apart from our peers for years to come. Moving to the East Coast. The Atlantic region is home to our largest growth project within the portfolio. The West White Rose project is about 75% complete and is progressing well. All the marine contracts are in place, giving us cost certainty as we move towards project completion. Recently, we reached a major milestone by completing the gravity-based structure. This year, we plan to spend about $800 million on the project, including the SeaRose FPSO asset life extension.
The Sea Rose is currently in dry dock and is getting upgraded to extend the production life from our West White Rose fields. We anticipate the Sea Rose will return to production late in the third quarter of this year, the bulk of the total capital being spent over 2024 and 2025. We expect production at the West White Rose to begin ramping up in 2026, peaking in 2028 at an additional 45,000 barrels a day net to Cenovus. Receiving Brent-based pricing, this asset will move from consuming cash to delivering over $1 billion of free funds flow in 2028 at $75 WTI. We will continue to deliver free funds flow for many years to come. The Asia-Pacific region is also a unique asset in our portfolio, further diversifying our cash flow with consistent fixed-price contracts that extend into the 2030s.
We continue to see CNOOC as a supportive partner in the region and continue to work with them to further improve both short-term and long-term production from the region. Our teams continue to look for low-capital opportunities directly adjacent to our operations to further increase productivity and utilize the capacity of existing infrastructure, as we are not resource-limited in the region, rather contract-limited. I had mentioned in my opening remarks that we have optionality to grow our conventional heavy oil business beyond what is current in the plan. Today, this business produces about 19,000 barrels a day of lighter non-thermal oil with no steam required, a perfect fit for our Lloyd upgrader and refining assets in the region. There is a lot of momentum in this area. Cenovus holds the largest land position. This is a short-cycle capital opportunity, providing us flexibility to grow at varying rates.
Historically, over 100,000 barrels a day was produced from this area using vertical well bores, resulting in low production rates, high decline rates, and low oil recovery, which was in the 5%-8% range. With the advancements in horizontal drilling techniques, we are seeing significantly improved results. This, combined with Cenovus's core competency in oil exploration and production and our aptitude to progress technology quickly, in addition to our owned midstream and downstream assets near this play, we are confident that this is a high-return opportunity in our future portfolio. We continue to optimize our natural gas portfolio as well. We will be spending modest amounts of capital to grow production volumes and improve our operating costs. These projects are tested at a CAD 1.85 AECO price, ensuring that we can generate a solid rate of return through the commodity price cycle.
With our significant land position in this area and excess processing capacity, the conventional gas business lends itself well to short-cycle opportunistic growth that can be accelerated in a constructive price environment. We also see the ability to reduce our cost structure through targeted cost reduction initiatives and increase production volumes. Our Ex-Alberta pipeline egress, which Drew has shown, is growing in future years, allowing us to capture higher netbacks for our gas. We are currently moving about 220 million standard cubic feet a day to price points outside of AECO. Now, let's move to downstream. 2023 was a challenging year. We weren't happy with the overall downstream results. We struggled to restart Superior Refinery and had some reliability events happen during peak margin times at Lima and the Lloydminster upgrader, in addition to our non-operated refining assets.
Over the last couple of years, we have been rebuilding the teams at our assets, developing a technical services organization to support refinery operations and maintenance, and implementing refinery reliability improvement programs. We have also built out our commercial capabilities to enhance margin capture. With the exception of the large turnaround activity at Lima and Lloydminster upgrader this year and a delay getting Superior to full utilization rates, if market cracks support it, we are expecting much higher utilization rates in 2024 versus 2023, with an increase of about 15%-20%. When we think of the strategic nature of our assets as we enter 2024, we have an additional 120,000 barrels a day of heavy oil conversion capacity online. This we didn't have in 2023.
With all assets running, we can process over 400,000 barrels a day of our own oil sands production through our operated and JV-operated assets. Our focus in 2024 and throughout the five-year plan is to continue to improve our reliability, unit availability, and margin capture at these assets. We can already see the benefits of our integrated value chain optimizing across our upstream and downstream refining network. We recognize that we are on a journey with our downstream and the need to improve our overall downstream operation and financial performance. We have made a number of changes within the business specifically related to leadership, where we have brought in senior leaders from industry peers in both Canada and the U.S. to drive this performance improvement. We are using our two sister refineries to lead on Lima to move products back and forth to capture additional margin.
We have implemented the Cenovus Operations Integrity Management System, or COIMS, to drive consistency in our approach. We have a new downstream technical services team in place that is improving standardization around turnaround planning and execution that will result in reduced downtime and costs. We have implemented reliability improvements focused on bad actor identification, assessment, and mitigation. We are already seeing improvements in our reliability maintenance indices across our portfolio from these actions. These are only a few examples. But we are driving the organization in the right direction. Let's discuss targeted actions we are taking at some of the refineries to drive this improvement. At the Lloyd upgrader, the H-Oil units, or the hydrocracker or hydrotreating units, are the moneymakers. To ensure we see reliability improvements that we expect, we have implemented an H-Oil reliability accelerator program.
This is a team whose only mission is to identify reliability threats and mitigate them at these units. They have taken action on mechanical clamps that were causing us issues in the past, again, bad actor elimination and electrical system improvements. They also improved our winterization preparedness. Since the team was implemented in early 2023, we have seen no impacts from mechanical clamp events. We have been able to ride through some power trips from our third-party power provider, which in the past would have taken these units offline. We will also utilize the upcoming turnaround to change out catalyst, improve metallurgy, and finish some electrical system improvements. This focus will allow us to set utilization, see utilization outside of turnarounds, improve from around 90% in 2023 to 94% in 2024. At the Lima refinery, the Isocracker is a unit that converts intermediates into finished products.
In 2023, we had an unplanned outage in Q4 that resulted in delaying a catalyst changeout at our diesel hydrotreater until December. These two actions meant that we were not capturing gasoline crack margins in October when prices were good and not capturing diesel crack margins in December when gasoline had come off but diesel prices remained robust. Similar to the upgrader, we have targeted improvement on the Isocracker through reliability improvement programs like the compressor seal system design that will be implemented in 2024. We also have a large turnaround at Lima in the fall of 2024 to further embed reliability improvements like our Coker handling project. The winterization program implemented in 2022, targeted to improve reliability through cold weather events, was effective at Lima as it ran through the recent cold snap in January with very few issues.
At the Superior refinery, we expect to run at reduced rates into the second quarter of 2024 as we run down some of the intermediate inventory we have built during the start and stop nature as we progress the restart of the FCC at the refinery in the back half of 2023. We also had some reformer and hydrotreater issues in November and December. Unlike Lima, Superior was impacted by the weather in December and January and highlighted some improvements we needed to make to the winterization of the units and instruments, which we have completed. We have redeployed some additional resources to Superior to support both operation and maintenance execution teams. We have brought in secondary hydrogen supply to enable the team to run down inventories even before the planned reformer outage in March. We have restarted the FCC and the butane-propane splitters.
We are also in the process of fixing the bad actors that will help improve long-term reliability. The restart of the last unit at the refinery is the HF Alkylation. All units will then be online with reduced inventories following the reformer outage. We expect to see this refinery running near full rates at the back end of the second quarter. Ultimately, the investments we are making in the business are expected to increase run-rate operating margins over the course of the five-year plan. We are expecting our cost structures to improve throughout the plan and increase reliability. And we'll keep our turnaround costs in check as we look to improve this business both for today and well into the future. On this chart, you'll see that we expect the operating margin from our collective downstream business to generate meaningful returns across multiple crack spread scenarios.
With the work underway to improve reliability and margin capture, we're anticipating a growing contribution from our US downstream assets. At a US $75 WTI price environment, or $18 net crack ex-RINs, and the availability of all of our assets through an entire calendar year, we anticipate our operating margins to improve, generating over $2 billion of operating margin in the US refinery-based business on our 2024 guidance. To recap what I hope we took away from today, we have world-class SAGD oil sands assets that make up a large portion of our operating margin. These are robust, growing, improving in cost structure with decades of reserves. Our growth projects are well underway, are very capital-efficient, and deliver meaningful cash flow growth at bottom of the cycle pricing. We have optionality in our conventional heavy oil business and our conventional gas business with short-cycle returns and ability for growth.
And finally, we are hard at work in our downstream to improve reliability and profitability. While 2023 was a tough year in that business unit, a lot of progress was made with two refineries restarted. And it has set us up to deliver meaningful improvement in 2024. Now, I think we're heading to a break, after which our Chief Sustainability Officer, Rhona DelFrari, will come up to discuss our approach to sustainability and provide an update on our five ESG focus areas. Thank you. All right, everyone, we're going to get started again here in five minutes. So if you can find your seats in the 10:15, we'll get going with Rhona. All right. Welcome back from break, everybody. I'm glad that you're refreshed with your caffeine because the sustainability section is really exciting. So you need lots of caffeine for that.
For those I've met, most of you, but for those I haven't met, I'm Rhona DelFrari. I'm the Chief Sustainability Officer at Cenovus, and I also lead our stakeholder engagement for the company. So far, you've heard about our strategy and vision for the company. You've heard about our disciplined approach to enhancing shareholder value, and you've heard how we're going to execute on our commercial and operating plans. Now I'm going to provide insights on how we're further integrating sustainability into our business to help drive both economic and environmental performance. We're committed to being a top-tier sustainability performer and a cost leader. We're focused on strong shareholder returns. This isn't an either/or choice. We will achieve both. We went through a robust process in 2021 to determine which environmental, social, and governance, or ESG topics, were most meaningful to our stakeholders and material to our business.
That's how we landed on the five focus areas that you see here: climate and GHG emissions, water stewardship, biodiversity, Indigenous reconciliation, and inclusion and diversity. Just recently, we just finished a review of these ESG focus areas. That review determined that they remain the most relevant to our business today. As our business evolves, we'll continue to reassess and adjust as required. After establishing those focus areas, we worked with teams across our business to set targets for each one. These targets help guide where we place our efforts, and they measure our progress. Our ESG targets are embedded in our capital allocation framework, and for a number of years now, they've been tied to our corporate scorecard, which impacts compensation. This ensures ESG considerations are part of all of our decision-making alongside other key financial criteria.
While I am starting to get more questions about Indigenous engagement and our biodiversity practices, GHG emissions remain the focal point for our ESG conversations. As you heard from Keith, we have a significant low-decline resource available to us, primarily through our oil sands business. Our oil sands are exceptionally well-positioned to supply the preferred barrel of oil as we move to a lower-carbon world. On our way to achieving our ambition of net zero by 2050, we have a target to reduce emissions from our operations, that's Scope 1 and Scope 2 emissions, by year-end 2035 by 35% compared with 2019. And there are several levers we can pull to help us reach that target. Now, 2035 may seem like a long time away, but many of the initiatives needed to address emissions, like carbon capture and storage, or CCS, take several years of planning and pre-work.
We have to start moving on them now, and we are. In the near term, our emissions reduction focus is on activities that are both cost-effective and provide environmental improvements. Keith mentioned several reliability projects that are underway at our operations, while many of those also reduce emissions. In both upstream and downstream, we're focusing on operating improvements, like temperature optimization, improved heat integration, and steam management. We're also assessing downstream opportunities to upgrade some of our equipment that generates emissions, like our furnaces and our major heat exchangers. And we're pursuing a number of opportunities in our upstream business with a strong focus on reducing our methane emissions, which I'll talk more about in a couple of minutes. For our Scope 2 emissions, mainly related to the power that we import, we've been actively pursuing renewable power purchase agreements.
These not only offset emissions from our electricity, but they're expected to have cost benefits for us as well over the long term. The larger bar you see in the middle of the slide is carbon capture. Now, that's where the biggest investment is going to be required for our 2035 emissions target. The next slide gives a more detailed view of the technology levers that we're working on now or exploring for future use to reach our 2035 emissions target and ultimately our 2050 net zero ambition. This year alone, our emissions reduction investments are expected to be about $100 million. About a quarter of that budget is directed towards our methane reduction initiatives. Another $28 million, give or take, is our contribution to progressing the Pathways Alliance Foundational CCS Pipeline and Hub Project. That's for activities like advancing regulatory applications and early engineering work on that pipeline.
The remaining GHG capital for 2024 is to advance projects that are farther out but that require early-stage work now to prepare us for final investment decisions for them. The more significant spend on these types of projects would come in the later years as they get closer to construction. For example, we're progressing carbon capture projects at the Lloyd Upgrader, at Christina Lake, the Elmworth Gas Plant, and our Minnedosa Ethanol Plant. Work this year includes further assessment of sequestration zones and advancing front-end engineering and design work and development plans. We've been piloting Svante's solid adsorbent capture technology at our thermal assets since 2019, and we continue to work with that company to assess whether this technology could be implemented at a larger scale.
Small modular nuclear reactors could have longer-term potential as a near-zero source of both industrial heat for high-quality steam and for electricity generation at our oil sands assets in particular. But this technology is still at the very early stages of assessment, and it requires a lot more study. We're watching what others are doing in this space, and we're pursuing our own feasibility studies on it as well. Methane abatement is a critical part of Cenovus's emissions reduction plan, and Cenovus is a leader in this area. We've set a milestone to reduce absolute methane emissions in our upstream assets by 80% by year-end 2028, and that's from a 2019 baseline. We've already achieved a 62% reduction in our upstream methane emissions from 2019. That's about 1.5 million tons of methane that's not going to hit the atmosphere.
In 2024, we plan to invest almost CAD 25 million to further reduce methane emissions, and we've allocated about CAD 94 million in our five-year business plan for methane abatement alone. There's a financial incentive for us to move aggressively on methane abatement. By moving voluntarily now to reduce our methane emissions rather than waiting for stricter regulations to come into effect, we can generate carbon offset credits. These credits improve the economics of these early reduction initiatives and can be used to offset compliance obligations now or in the future, or we can sell them to other companies. Over 90% of Cenovus's methane emissions are concentrated in our upstream conventional and conventional heavy oil operations. To tackle those emissions, we're focused on improved methane detection, quantification, mitigation, and reporting. We've stood up a cross-functional methane challenge team to evaluate and accelerate the most efficient approaches.
These include work at our conventional sites to detect methane leaks using optical gas imaging and aerial screening, as well as converting instruments that use natural gas to instruments powered by air or electricity, like you see in this photo. Another example at our Canadian offshore assets is retrofits of several natural gas-powered engines to improve combustion and reduce methane emissions. This is a massive effort, and it's paying off in immediate methane emissions reductions in a cost-effective way. Now, as most of you are aware, Cenovus is a founding member of the Pathways Alliance, a collaboration among Canada's six largest oil sands companies to achieve net zero emissions from oil sands operations by 2050. Pathways has made significant strides on multiple projects towards its 2030 goal of reducing annual CO2 emissions from operations by 22 million tons. The largest near-term focus is on Pathways' proposed CCS project.
Significant engineering, subsurface evaluation, and environmental fieldwork, as well as Indigenous community consultation, has already been completed in preparation for our imminent regulatory applications. To achieve its 2030 goal, Pathways estimates CAD 16.5 billion will be invested in the CCS network alone, split between our companies and governments. Another CAD 7.6 billion will be invested in other emissions reduction projects. These types of projects include fuel switching to lower emissions fuel sources, advancing work on solvents projects, and research and development on dozens of other emissions abatement technologies. I can tell you that Cenovus and our Pathways peers have been focusing a tremendous effort on achieving the goals we've established. But these massive projects take a lot of thought, and they take a lot of time.
That's why I do get a bit frustrated when I hear some politicians and others publicly state that we should already have shovels in the ground for the Pathways CCS project. First of all, we can't start construction of a CO2 pipeline or sequestration hub without regulatory approval. And that process, as I mentioned, is still underway. And as John suggested earlier, government support of these multibillion-dollar decarbonization projects must be competitive with other jurisdictions to make the projects feasible. On this slide, analysis from BMO compares public funding for global CCS projects. As you can see, industrial CCS projects elsewhere in the world have only proceeded with significant co-investment and policy certainty from the governments in those countries. For the Pathways CCS project, we continue to work closely with both the Alberta and the federal governments together on funding model and mechanisms.
The CCS Investment Tax Credit, or ITC, was announced by the federal government in 2021, and final details are still being worked now. As it stands, there's a lack of clarity in the draft regulation that may result in us not being able to access the ITC's full value. The Alberta government is still working details of its 12% carbon capture incentive program that was further detailed in the provincial budget last week. Those two incentives are both designed to help with capital costs. When it comes to the significant operating costs for CCS in the oil sands, we still need to better understand how carbon contracts for difference, which were announced by the federal government a couple of years ago, and other potential options will help play a role.
With what we know today and from what you see on this slide, the government funding partnerships in Canada are not enough for large-scale CCS to proceed in the oil sands. To achieve emissions reductions, Canada is employing a complex, multi-layered, and evolving stick-based approach with some carrots thrown in. Our closest neighbor to the south is using a straightforward, pure carrot approach that's far more attractive for CCS projects. Without competitive fiscal incentives, our country risks being left out as large-scale emissions reduction investments are developed and deployed elsewhere where they get the best returns. We're also dealing in Canada with significant policy uncertainty right now. The proposed emissions cap, Clean Fuel Standard , Clean Electricity Regulation , and new methane regulations are just a few to name. The result is a lack of clarity that companies need to make long-term, multi-decade, multi-billion-dollar decarbonization investment decisions.
That said, we continue to work constructively with governments at both levels to achieve the clarity that we need. We remain optimistic about decarbonization projects in our sector. Sustainability, though, is not all about emissions. We have lots of other projects underway that address our environmental performance and demonstrate industry leadership. We're always looking for ways to improve our water use practices at Cenovus. This includes using water sources other than freshwater where possible and being more efficient with how we produce, source, and discharge our water. When we conserve more water, we also better control our operating capital costs. For example, it allows us to potentially reduce the amount of water treatment equipment that's needed at our assets. Much of the opportunity to reduce upstream freshwater use is focused on our thermal assets in the Lloydminster area.
At our Foster Creek and Christina Lake oil sands assets, the water we use is primarily brackish, non-fresh water, and we have fulsome recycling processes in place. Biodiversity is another area where our teams are showing industry leadership. We consider our potential impact on land, plants, and wildlife from the moment we begin project planning through to the retirement of an asset. We account for and we identify potential environmental impacts so they can be avoided, minimized, or mitigated to more quickly restore healthy, functioning ecosystems and achieve regulatory site closures. We actively prioritize our asset retirement portfolio to ensure we're managing safety, environmental risk, and regulatory compliance while also speeding up reclamation closure efforts. Not only is this good for the environment, but it's also good for our bottom line.
It ensures we're effectively managing the financial liability associated with our reclamation and remediation activities over the longer term. For example, once a well site gets a reclamation certificate, the land can once again be returned to full use by the land owner. That eliminates our land use fees. Our target is to reclaim 3,000 decommissioned well sites by year-end 2025. By the end of last year, we were already two-thirds of the way there. In 2023 alone, we planted more than 800,000 trees within our forested reclamation areas, all part of our commitment to strong biodiversity practices. I'm going to turn now to one aspect of the S in ESG, our engagement with indigenous communities. Now, having grown up in rural Saskatchewan with indigenous communities as some of my closest neighbors, this is the topic that's really close to my heart.
With many of our operations located on or near Indigenous lands, maintaining positive relationships with Indigenous communities is critical to our success. When we speak with leaders from the Indigenous communities near our operations, one of the main topics of discussion is business opportunities and how they can work with Cenovus to create greater prosperity and jobs for their members. That's why we set a target to spend at least CAD 1.2 billion with Indigenous businesses between 2019 and 2025. I am proud to say that we have already exceeded that. Last year alone, Indigenous-owned businesses supplied Cenovus with more than CAD 600 million in goods and services. Since 2010, we've spent about CAD 4.5 billion doing business with Indigenous companies. Another way we contribute to reconciliation for Indigenous people is through our Indigenous Housing Initiative. That was championed by Alex, and it launched in 2020.
It's the largest social investment in Cenovus's history. Communities told us that one of their most significant challenges was a lack of adequate housing. So we worked with them to start addressing that. We originally committed CAD 50 million over 5 years to build new homes in six Indigenous communities nearest our oil sands operations. In 2023, we increased our funding by 20% due to increased construction material costs. We wanted to maintain our goal of building 200 houses in those communities. By the end of last year, about halfway through the initial program, we had funded 121 homes. The communities are going full steam ahead building those additional houses. Every single time we speak with community leaders for an update on the program, they tell us that our Indigenous Housing Initiative has been life-changing for their communities.
Now, before I turn it over to Cam, I want to leave you with this. We believe strong sustainability performance is tied to strong business results and long-term financial resilience. When it comes to decarbonization, we're working to find the right balance between emissions reduction, contributing to global energy security, supporting a thriving Canadian economy, and ensuring our shareholders receive strong returns so you continue to invest in Cenovus and Canadian oil and gas over the long term. We strongly believe that Canada should be the supplier of choice to help meet global demand for decades to come. This country has the fourth-largest oil resource in the world. We have world-leading sustainability practices relating to biodiversity, water use, human rights, and Indigenous partnerships. And we have transparent environmental reporting. By continuing our ESG efforts, we're positioning Cenovus as a leader to provide that secure, affordable energy for the world.
Our sustainability leadership is good for the company. It's good for investors, and it's good for Canada. With that, I will hand it over to Kam Sandhar to take you through our financial framework.
Thanks, Rhona. Good morning, everyone. For those that you don't know me, I am Kam Sandhar. I'm the CFO of Cenovus Energy. I oversee the finance, capital markets, risk, and investor relations activity for the organization. Great to see everybody today, and welcome everybody who's on the webcast. So the team today is giving you a fairly detailed overview of the strategy and our plan for the next five years. And I'm going to spend a bit of time and show you how that translates into compelling financial results and shareholder returns for all of our shareholders. First, I'm going to talk just a minute about kind of two themes you're going to see throughout my presentation today. First, consistency. Our principles around how we manage the capital structure, how we invest in the business, and how we return cash to shareholders is unchanged. Second is conservatism.
We've committed to achieving our debt target that's, to some people, I think, might appear conservative or too low for today's commodity price environment. But I want to make one thing clear. It is anchored on managing volatility and risk and making sure we can weather almost any price environment, and we continue to expect to see volatility going forward. So our financial framework, which you see on this next slide, it's really based on four key principles, the first being financial resilience. Number one, we want to be able to continue to manage the balance sheet at bottom of the cycle prices or $45 WTI, which equates to that 1x net debt to adjusted funds flow target we have, which is the basis of our $4 billion net debt target.
Second, we are committed to maintaining and holding our mid-BBB investment-grade credit ratings, which is now pretty much in our sights. We're also committed to, as Keith and the team talked about, is making sure our cost structure remains competitive and continues to improve over time. Second box is return-focused capital allocation. As Jon talked about earlier, we are investing in projects that meet hurdle rates at $45 WTI, $1.85 AECO, and around a $12 Chicago crack. We'll continue to use those going forward. We're focused on stewarding the company to a capital reinvestment rate plus our base dividend that is sustained in low commodity pricing environments. This is a key driver of why we've chosen to cap our capital in any particular year at around $5 billion.
We've got lots of opportunities in our portfolio that we can deploy in any particular year, but the result is that only the best projects continue to get funded in the portfolio. This return-focused framework is also how we evaluate opportunities from an M&A perspective. Inorganic and organic projects compete for the same capital. The outcome of our capital allocation framework is to maximize free cash regeneration across the business, both from our integrated heavy oil portfolio and the strong free cash flow assets we have in our offshore, conventional, and Asia businesses. This ultimately translates into providing investors with a balance: growth and shareholder returns in the form of a sustainable dividend, which is tested at bottom of the cycle, and the remainder being returned through excess free funds flow, which could come in the form of opportunistic buybacks and variable dividends.
I'm going to take a few minutes here to talk a little bit about the financial position we're in today and the progress we've made over the past several years. As we set out after the Husky transaction, we took a very focused approach to debt reduction through 2021. Since then, we've reduced our gross debt by almost CAD 7 billion. We've increased the base dividend every year and returned, in aggregate, CAD 6.7 billion of shareholder returns through a combination of base preferred dividends, share repurchases, a variable dividend, and a repurchase of 45 million warrants. In late 2022 and 2023, we introduced high-return growth capital as our financial position improved, putting us at a place where we could continue to deleverage and provide modest growth and continue to deliver on shareholder returns. This next slide talks really about the significant gross deleveraging we've accomplished since 2020.
This strategy is really driven by our view that a resilient capital structure provides us significant financial flexibility and will create opportunities for the company at weaker points in the cycle. When we did the Husky transaction, we began the year with approximately CAD 13 billion of net debt. Today, our net debt sits around CAD 5 billion and is quickly approaching that CAD 4 billion debt target. Our focus on reducing gross debt has resulted in over CAD 300 million in annual interest cost savings. Our average debt tenor remains very healthy at around 10 years, with our average interest costs now sitting at just under 4.5%, a really strong position to be in when you look at the current interest rate environment we're in today and does allow us to be opportunistic going forward.
The result of this debt profile now has us comfortably in the mid-BBB investment-grade credit ratings, and we have minimal debt maturities through until 2027. We'll continue to look at opportunities to optimize this debt profile, but I think we can be patient and opportunistic going forward when we look at the position we are in today. We are very comfortable holding our long-term debt at around CAD 7 billion, which means as we approach the CAD 4 billion net debt target, we'll be in a position where we will be holding around CAD 3 billion of cash on the balance sheet at any point in time. Excuse me. Improving our balance sheet has been more than a five to seven-year journey for the company, but we are near the end.
As I said earlier, we are committed to achieving this target by focusing on the organization, on the things that are in our control. The reality is commodity prices will dictate when we get to that target. But in any reasonable price environment similar to where we sit today, we think we should get there comfortably in 2024, and it remains our number one priority. Once we've achieved this target, we expect to have one of the strongest balance sheets among our peers, with liquidity at just under $9 billion today, growing to close to $10 billion once we hit that net debt target, really giving us a lot of financial flexibility going forward. This will result in net debt to adjusted funds flow at around 0.3 times when you look at $75 WTI and around that 1 times $45 WTI that we use for the basis of our target.
The work on our balance sheet is almost done, and we are close to returning 100% excess free cash flow to shareholders. We take a lot of pride, I think, in this next slide. It's really grounded in the management being prudent financial stewards of the shareholders' money and ensuring we are clear in our capital allocation priorities to drive shareholder value over the long term. The box in the top left highlights what we call committed capital. This is spending for safe, reliable operations, sustaining capital, continuing to move forward on our asset retirement obligations, and capital lease payments. We view these cash outlays as uncompromising in any price environment and are permanent. As you look further down in the boxes to the right of discretionary capital, these are areas where we have options to deploy incremental capital.
You'll notice that deleveraging is not part of this allocation once we achieve CAD 4 billion of net debt. At that point, we will not be directing any more excess cash flow to debt reduction to the extent that we remain at or below CAD 4 billion. We believe investment in our base business and growth are critical to increasing our ability to generate free funds flow growth at bottom of the cycle. And as a result of that, you're going to also see a growing base dividend. Today, we've allocated about CAD 1.5-CAD 2 billion to growth in 2024, and you should expect, as we've shown earlier, a similar level of capital going into 2025.
As Keith spoke to, we believe this is high-value, very capital-efficient growth and will be critical in growing our cash flow and lowering our cost structure as we go into 2025 and beyond, and will result in a growing dividend capacity by 2028. The remaining cash flow will continue to be returned to shareholders in the form of share buybacks and variable dividends, which I'll touch more on in a moment. M&A also fits in this framework. Any transactions we consider must compete for capital against our organic opportunities. But today, M&A is not a priority for us, as we do not see any significant holes in our portfolio, nor do we see any material portfolio divestitures in the future.
In addition, we are focused on executing on the organic high-return growth projects we have in our plan and focused on completing some of the critical enterprise-wide systems projects that will position us to create efficiencies in the future and then ultimately provide us options for both organic and inorganic options as we get into 2026 and beyond. Now, looking at shareholder returns, first of all, what you see on this slide is largely unchanged from our last investor day. Starting with the base dividend, we see the base dividend as being a permanent fixture in our capital structure and sustainable and a commitment to our shareholders. This dividend sustainability will be tested again at $45 WTI cash flow less sustaining capital, ARO, and lease payments.
As I'll show you later, the outcome of the business plan the team walked you through will afford us the ability to grow that base dividend very comfortably at more than 10% a year over the five-year plan period. Rather than focusing on a particular dividend yield or competing on dividends alone, we are focused on delivering a sustainable dividend that grows over time, with yield being an outcome of our share price and our ability to sustain that dividend. As you would expect, we will revisit the level of the dividend in April. Buybacks are a key tool for Cenovus to return meaningful cash to shareholders. We believe our strategy is differentiated in that we will be opportunistic in our approach in deploying that cash. When we look at more discretionary options for shareholder returns, these include both buybacks and variable dividends.
We will take our share price into consideration when using our buyback program. We look at our intrinsic value at mid-cycle pricing or around $60 WTI, which we believe will provide value for shareholders. Simply put, if our share price is trading below intrinsic value, we will enter the market and buy back shares. If our share price appreciates to a level above that value, you'll see us move more towards variable dividends, allowing them to make a decision on that reinvestment back into the market. I want to be clear on one point. We don't believe our intrinsic value is a static or a singular number, meaning as we continue to buy back shares below intrinsic value, that's going to grow the underlying value of the business.
As we grow our production to 950,000 barrels a day and you lower our cost structure, that's going to create more value. Then obviously, as we reduce our debt, that's going to create more value. Point being, our goal is to continue to grow this value over time, and the intrinsic value will continue to move upwards and to the right. We will continue to stay disciplined and remain within the parameters of our shareholder return strategy. But today, we do see compelling value and continue to repurchase shares and have made significant strides in doing so. Since the inception of our financial framework, we've returned about CAD 3.6 billion to shareholders through buybacks and repurchased about 177 million shares. Overall, when adding the base dividend, variable dividend, we've delivered close to CAD 6.7 billion since the beginning of 2021.
When looking at our base dividend, the key takeaway here is we've got material capacity to grow the base dividend over time. We will always test our dividend at $45 WTI and measure the amount of cash flow we can generate above our sustaining capital requirements. In running these tests, you can see that we will be able to deliver close to CAD 2 billion of dividend capacity by the end of 2028. All that said, we'll continue to take a disciplined approach in growing our base dividend in lockstep with the growth that we've shown you today and continue to look for business improvements that will support further growth of this dividend over time, taking the reliance out of commodity prices. As I mentioned, we see our base dividend as being permanent in our capital structure and sustainable through all price cycles.
Keith showed you that we have the lowest F&D and lowest SOR in the industry, which is a reflection of our high-quality assets and low sustaining capital requirements, but also a reflection of the team's experience and execution. We see our per-barrel operating cost metrics improve by more than 15% over the five-year plan period as we bring on new production. These cost reductions are really a reflection of more production going through existing infrastructure with limited infrastructure expansion needed to bring on this volume. As you saw in our 2024 budget, we are investing in an IT upgrade project which will modernize and replace some of the existing enterprise resource planning systems we have in the organization. These are non-discretionary and critical investments to enhance cybersecurity and standardize data across the company, but will be behind us by the end of 2025, as the chart shows.
The combination of the high-quality assets we have, low SOR, low sustaining capital, and high-value integration results in one of the lowest WTI break-even costs among our peers. With the investments that we are making, we expect this break-even to go even lower over time. When you look at how we've set up our capital allocation and shareholder returns framework, the outcome of that framework is a business plan that has a clear balance between investing in the business and returning cash to shareholders. We expect that the investments we're going to make are going to drive annual cash flow growth of around 5% per year. We see an inflection in 2026 with the additional production from our various growth projects starting to come off and capital rolling off, particularly on the West White Rose project, as cash flow continues to shift and improve.
Our shareholders should expect if we get the right fiscal and regulatory outcomes from our discussions with government on decarbonization, such as Pathways as Rona talked about, some of that wedge or drop in capital will be filled with some of that spend for decarbonization. Secondly, we have other growth projects that we would consider, particularly in our conventional heavy business, but are not contemplated in our plan today. But in earnest, I think one of the things to keep in mind is we will continue to steward to make sure we hold overall capital spending below CAD 5 billion to ensure affordability of our investments and that they're resilient in low prices and continue to be balanced with shareholder returns.
When you combine our capital structure with our capital allocation framework and the annual limits we put on capital, the prudent approach allows us the ability to continue to spend through various price cycles and alleviate the need to make any significant adjustments to our capital programs in almost any environment. To this end, you should expect that we will remain consistent in our capital programs and predictability in our execution to maintain efficiencies across the business. As a result of the cost improvements I've spoken about, combined with the benefits of our disciplined capital investment, we expect to see significant free funds flow through 2025 and over the five-year plan. You'll notice that our plan is not fully funded in a $45 WTI world.
This is really a reflection of the significant capital commitment around West White Rose and our need to complete that project, and stopping and starting it becomes very inefficient if we go into lower prices. Importantly, even in 2024, our current level of capital spending is still fully funded in a very low price environment. We have flexibility in our balance sheet to withstand lower commodity prices, which affords us the ability to maintain stable capital programs going forward. The key takeaway on this chart is really we can generate free cash flow in almost any environment, which positions us well to return significant cash to shareholders in almost any environment. Let's recap what you've heard today. Why is Cenovus such a great opportunity, and what's the value proposition for our shareholders?
First, we will be a safe and reliable operator, have disciplined capital allocation, and continue to be a sustainable and responsible energy company. We are committed to and focused on top-tier operating performance, practical sustainability leadership enabled by our high-quality assets. We are committed to cost leadership and a drive towards continuous improvement in costs with our plan lowering operating costs by about 15% and G&A by about 30% by 2028 while maintaining our competitive and peer group-leading sustaining capital costs leading to best-in-class WTI break-even. We are committed to financial discipline, including a conservative capital structure, and will have one of the strongest balance sheets in industry coupled with a disciplined capital allocation framework. We will steward towards returns-focused capital allocation and ultimately leading to growing free funds flow per share and increasing our bottom-of-the-cycle cash flow from $4-$6 billion by 2028.
At around current WTI prices or $75, you should see adjusted funds flow grow to nearly CAD 12 billion by 2028 in our plans. Our highly efficient growth projects are expected to generate upstream production of 3%-5% per year, growing to 950,000 barrels a day by 2028. Lastly but not least, we are committed to growing shareholder returns as the business grows. We forecast the base dividend capacity to grow to over CAD 2 billion by 2028 against our current dividend, which sits just under CAD 1.1 billion. We expect to generate excess free funds flow, which will move to 100% as we achieve the CAD 4 billion net debt target, which we expect in 2024. I hope the last couple of hours have been very informative to you, and I leave you today.
I hope you guys leave here today as excited as we are about the prospects of the company. With that, we've covered a lot of material today. I'm going to bring up the team here to do a Q&A, and then also our Executive Chairman, Alex Pourbaix, will join us for the Q&A section. Thank you very much.