Good morning. Welcome to the Phillips 66 investor day. On behalf of the Phillips 66 executive leadership team, thank you all for being here. We also appreciate those of you that are following us via the webcast, and appreciate your time and interest in Phillips 66. My name's Jeff Dietert. I'm responsible for the investor relations effort at Phillips 66. There's no scheduled fire alarms today, so if the alarms go off, it's real. There's a fire escape on the other side of the foyer and across from the restrooms. The webcast will be available on our website, and after the presentations, we'll post the transcripts from today's presentations. Included here is our safe harbor statement. We'll be making forward-looking statements today, and the results will probably be different. Factors that could cause the results to be different are included here, as well as in our SEC filings.
We encourage you to review this carefully. Today's agenda will start with a review of the Phillips 66 strategy by Greg Garland, our Chairman and CEO. After a market update, we'll hear from all the business leaders of all our segments. We'll then take a quick break. Kevin Mitchell, our CFO, will provide a financial update, then Greg will provide closing remarks. After that, we'll open up the floor for questions. We ask that you save your questions until after the presentation. We thank you for coming, appreciate your interest in Phillips 66. Now we'll go to a short video, followed by Greg's opening remarks.
[Break]
Good morning, everyone. Welcome. Thanks for being here today. You might not believe this, but we've actually been looking forward to being with you today. We want you to know we value your time today, the relationships that we have with you in this room, and thank you for your interest in Phillips 66. We're a leading energy manufacturing and logistics company. Our portfolio of integrated assets spans across the downstream value chain with midstream, chemicals, refining, marketing, and specialties. Okay. It's been five years since our last analyst day or investor day. While we spend a lot of time with investors, including many of you here in the room today, we thought it was time to give you a strategic update and to showcase what we think is a very strong management team.
We've created compelling value for the owners of our company in the past seven years. We've executed the strategy well. We've transformed our portfolio by growing our midstream and our chemicals businesses. We've been diligent around prudently investing in our refining business, and where we have invested, it's been to protect the core cash generation ability of the business, as well as increase the access to advantage crudes and push our yield structure for the purpose of improving returns in this important business. We've been very disciplined around our capital allocation. We've returned significant distributions back to our shareholders. We've got a lot of great opportunities that we're excited to share with you today. This is our leadership team. All are here with you today, many of whom you're going to hear from.
Of the original leadership team when we formed the company, only three remain, Paula, Bob, and myself. The original leadership team did a great job of standing up a Fortune 25 company flawlessly. They're instrumental in setting the original strategic foundation of our company. I would tell you that this group of leaders that you have here with you today is even stronger and even better. They're not just a collection of individuals, that they truly function as a team, and that the sum of parts of executive leadership at Phillips 66 far exceeds the 12 people that you see on this screen. I want you to know I'm very proud of them, and I believe them to be one of the strongest management teams in energy today. Also pleased to have with us Glenn Tilton. Glenn is our Lead Director. He chairs our Nominating and Governance Committee.
He's also a member of our human resources and compensation committee, as well as our public policy committee. Glenn, thanks for making the trip and being here. From the beginning, our focus has been to create value for the shareholders of Phillips 66. Our strategy has been simple. We believe that it's been effective. Growth, returns, and distributions built on a strong foundation to an unwavering commitment to operating excellence and being a high-performing organization. The strategy hasn't changed since day one. It shouldn't surprise you, we're not going to recommend that we change it today. For our growth opportunities, we've been investing in our faster-growing, more highly valued businesses in Midstream and Chemicals. For us, it's just not about growth. It's about creating value. Returns matter. We don't care about being big. We care about being good.
We only invest in projects that meet our internal stringent hurdle rates. These are comfortably above our cost of capital. You've seen us divest of assets where others have seen more value. You've seen us slow capital investments when we could not find value-creating opportunities, and you've seen us accelerate investments when we saw value-creating opportunities before us. In midstream, we're building out our integrated network with crude pipelines from the key oil shale basins to the Gulf Coast. We're expanding our export capabilities. We continue to see opportunities across the NGL value chain in transportation, fractionation, storage, and export. Tim Roberts will be highlighting several of these infrastructure opportunities for you today. In chemicals, we continue to be constructive about the long-term demand for petrochemicals globally. We believe that the U.S. and the Middle East will remain feedstock advantage regions for many years to come.
CPChem has added significant cost-advantaged assets over the last seven years. Mark Lashier is going to share with you some exciting new projects under development with Qatar Petroleum to develop projects both in Qatar and on the U.S. Gulf Coast. In refining, our investment focus has been improving margins. These are high-return projects in excess of 30% returns, and they have quick paybacks. Bob Herman is going to go through some of the opportunities we have in the portfolio to increase further our advantage feedstock position as well as improve our yield structure. In marketing, we're revitalizing our branded network by updating our images. We continue to see uplift both in inside store sales and outside store sales from our customers who have updated their images. We're also investing in the U.S. to secure placement of our clean products.
Today, you'll be hearing from Brian Mandell about a new partnership within our marketing business. We know that strong shareholder distributions create value, and importantly, are valued by our shareholders. We've established a track record of significant shareholder distributions. We remain fully committed to a strong, secure, growing, competitive dividend and buying our shares back when they trade below intrinsic value. Our strategy is built on a best-in-class foundation of operating excellence, and it wouldn't happen without the 14,000 people of Phillips 66. Our investments and our focus on returns have increased the cash generation capability of our portfolio. We've added about $2 billion in mid-cycle cash flow to our company in 2019 versus 2012. We believe that these investments are creating value for our shareholders.
At our 2014 Investor Day, we said we want to double the enterprise value of the company in 5- 10 years. 2012, EV was $21 billion. Today, it's about $60 billion. We have a strong portfolio of growth investments that we expect to deliver solid returns. These projects are in various stages of development, and you're going to hear a lot of details about these projects today. Since our formation, we've returned $25 billion back to our shareholders through dividends, share repurchases, and exchanges. We've increased the dividend nine times for 25% compounding annual growth rate, and we reduced the initial share count outstanding by 32%. I want to walk you through how we transformed the portfolio with our investments. This map highlights the new midstream and chemicals assets that have been placed in service from 2012 - 2019.
We've constructed the Sweeny Hub, 100,000 barrels a day fractionation capacity, 200,000 barrels a day of LPG export capacity. We purchased the Beaumont Terminal, we've doubled the capacity to 14.6 million barrels. We've invested in the Bakken, the Bayou Bridge, the Sand Hills, and the Southern Hills pipelines that are integrated with our existing assets. Currently, we're in the final stages of commissioning the Gray Oak pipeline. Since 2012, we've added 3,000 miles of pipeline, 27 million barrels of storage. Our crude export capacity has grown to 400,000 barrels a day. We've doubled our NGL fractionation capacity. We've added world-scale LPG export capacity. CPChem's completed a major U.S. Gulf Coast project that's increased their olefins and polyolefins capacity by more than a third. Looking ahead, we have high-quality projects underway and some opportunities in development. We're going to continue to expand the Sweeny Hub.
We're building three new fractionators. We're expanding the Clemens storage. We're building an ethane pipeline from Clemens to Gregory, Texas. We're advancing the Red Oak and Liberty pipeline projects, which will connect to the major market centers on the Gulf Coast, including our South Texas Gateway Terminal and our Beaumont Terminal. Looking further out, we have a project that's in the permitting phase today for deepwater crude oil export facility offshore Corpus Christi, which we call Bluewater. This layers on the investments in projects and development on top of the assets that we started with in 2012. You can see the transformation of the portfolio. We've built one of the most robust midstream and downstream networks. Our midstream infrastructure touches all the major producing basins, from the Canadian border to the Bakken, the Rockies, the DJ, the Mid-Continent, the Permian, and the Eagle Ford.
Our pipeline network provides connectivity to the market centers in Texas and in Louisiana. I would tell you by design, our pipelines have strong integration with our Gulf Coast assets and our Central Corridor assets, as well as our terminals and export facilities. We believe this integration is a competitive advantage that further enhances value across our assets. Our values are safety, honor, and commitment. The people of Phillips 66 are highly engaged. In fact, our benchmarking tells us they're among the most highly engaged workers in the U.S. today. The driver of our engagement is our values. There's a reason that safety is first among our values. Our company has a deep commitment to operating excellence. It's foundational to everything we do. We're industry leaders across our businesses. Our goal is zero incidents, zero accidents, and zero injuries.
We believe this is attainable, and we work hard every day to make this happen. We know that we're creating value for our shareholders by getting this right every day. We have an expectation that every employee and every contractor goes home safe to their families every day. Nothing else is acceptable to us. In refining, in the last three years, our refineries have won the AFPM's Distinguished Safety Award. This is the highest honor given in our industry by our industry peers. Last year, out of 15 refineries, so top decile of the industry, that received AFPM safety recognition, six were Phillips 66 refineries. The AFPM also recognized five CPChem sites. In midstream, Phillips 66 Midstream and DCP Midstream received first-place awards in their respective divisions from the Gas Processors Association.
Year after year, we demonstrate leading safety performance, high reliability, and we consistently run at or better than industry operating rates. I would also tell you that fundamental to operating excellence is managing your cost. We've grown the portfolio significantly over the last seven years, and with this growth, we get base cost increase. We've been able to absorb some of these costs through reductions in efficiencies in other areas. Our corporate costs have been flat over that period of time. When you exclude our growth activities, our base costs of about $6.5 billion a year have grown at about 1.4% annual rate. We believe that we can do even better. In fact, I would tell you we must do better.
Through technology and new ways of working, we're going to deliver cost efficiencies and savings across our enterprise, and we're going to tell you more about that here today. Sustainability is important to our investors, to our stakeholders, and it's important to Phillips 66. We recognize that ESG done well is critical to our success and increasingly is becoming a strategic differentiator. I would tell you, we are proud of our record. For us, ESG starts at the very top with our board of directors. We have a diverse board of directors. They understand our business, they oversee our strategy, and they understand the risks associated with our business. We strive for transparency in ESG reporting. We identify our key safety and environmental performance metrics. We disclose this data in our sustainability report. You can find it on our website.
Since 2012, we've invested $6 billion to ensure continued safe, reliable, and environmentally responsible operations, resulting in a 25% reduction in emissions since 2012. We're one of the few companies in our industry with a dedicated technology program. We invest in research and technology to better understand our impacts to the air, the land, and the water, how we can use our natural resources more sustainably. We focus on running our refineries and our midstream assets, Mark runs his chemicals assets that we use less energy and less water. We're also performing research on energy of the future, including renewable fuels, organic photovoltaics, current and next-generation batteries, solid oxide fuel cells. In addition, we're developing a portfolio of renewable diesel projects that meet Low Carbon Fuel Standards. We're working hard to position Phillips 66 to be competitive in the long term.
We wouldn't be where we are today or who we are as Phillips 66 without the 14,500 amazing people of Phillips 66 Company. They are a high-performing organization. They're working hard to position themselves to be even more competitive in the future. We believe that our people are a competitive advantage. We're attracting and we're retaining the very best people. We focus on making Phillips 66 a great place to work, and our people want to work for Phillips 66 Company by choice. We're an inclusive and diverse workplace. We believe this brings us value through different perspectives that lead to better decisions and better results. We're investing in our people. We're developing our future leaders. Culture is a cornerstone of our high-performing organization. Our leadership behaviors influence how we work together as the people of Phillips 66, but also how we engage with our external stakeholders.
Every day, the people of Phillips 66, they live our values of safety, honor, and commitment. They're dedicated to providing energy and improving lives. We have an exciting and transformational new program called AdvantEdge66 that we want to talk to you about today. We've been working on it for the last two years. Through technology and through new ways of working, we're going to transform our company. With AdvantEdge66, we're adopting digital tools. We're automating processes to empower our people to innovate and to work in new ways. For example, many of our transactional activities in our back office are being automated with bots. This creates efficiencies that frees people up to do higher valued work.
You're going to hear examples today from Bob and Tim and Brian, where we're applying advanced data analytics and technology to better understand our businesses and our operations, and improve our asset performance. We're creating enterprise value today through end-to-end value chain optimization. Historically, we've been organized around functional centers of excellence. We've changed our operating model, and we've changed our decision-making processes to work and make decisions for the general interest of Phillips 66 rather than around a functional work process or an organization. Our people, they're measured and they're rewarded for making the best decisions for the greater good of Phillips 66. Our AdvantEdge66 journey began in 2017. It's making a difference today, and it's showing up. We started this journey not because we had to, or that we had a burning platform, but because we had a burning desire to be the very best.
We believe that the value capture opportunities are real, and that all things digital will fundamentally change how we work and unleash the power of our organization to deliver more value. We anticipate achieving $1.2 billion of enhancements from organizational efficiencies, improved asset performance, and value chain optimization by 2021. These enhancements are reflected in our budgets, and we're holding ourselves accountable for hitting these targets. The benefit from these initiatives will show up in the form of margin improvement and cost savings and cost avoidance and capital savings. We're calculating enhancement values very similar to the way most people would calculate synergies. We're using 2017 as a baseline year. We expect that there will be visibility to 50%-70% of these enhancements in mid-cycle EBITDA after adjusting for inflation and market conditions. We built that value into the numbers we're going to share with you today.
Advantage66 is going to make our company more competitive, and by working smarter and being more agile and more efficient, we will deliver differentiated performance. 2019, our portfolio has the capability to generate about $9 billion of Adjusted EBITDA on a mid-cycle margin basis. This will result in about $6.5 billion of operating cash flow when you deduct for interest, taxes, non-controlling interest, and you adjust for our major JVs cash distributions to us. From 2019 - 2022, we expect to add an incremental $2 billion of mid-cycle EBITDA, which will come from our growth and our return investments as well as our Advantage66 initiatives. By 2022, we expect our mid-cycle EBITDA will reach $11 billion and result in operating cash flow of about $8 billion. Disciplined capital allocation is fundamental to our strategy.
Over the long term, our objective is to reinvest 60% of our operating cash flow back into the business and return 40% back to our shareholders through dividends and share repurchases. Over the 2012 - 2018 period, our allocation was closer to 50/50 based on our consolidated capital spend. If you factor in the capital spend of our major joint ventures, it moves towards a 60/40 distribution. Our capital priorities have not changed. Our first dollar goes to sustaining capital, which is about $1 billion a year, and this is to ensure continued safe, reliable, environmentally responsible operations. Next, we fund our dividend, which is currently $1.6 billion. You should expect us to deliver another strong competitive dividend increase next year. That leaves us over $4 billion to allocate between growth capital and share buybacks.
We expect the growth capital and share repurchases each will fall between $1.5 billion-$2.5 billion over the next couple of years. This range is going to vary by year depending on investable opportunities and where we trade relative to intrinsic value. With the bulk of the spend for both Red Oak and Liberty expected to occur in 2020 growth capital will be in the $2 billion-$2.5 billion range. Through our ongoing share repurchase program, we buy back our shares when we trade below intrinsic value. As I said, since 2012, we returned $25 billion back to our shareholders through dividends, share repurchase, and exchanges. We thank our strong financial position and our disciplined capital allocation enables us to execute our long-term strategy throughout our commodity cycles.
With that, I'm going to turn it over to Jeff, who's going to come and give us a market update.
Over the next few minutes, I'll discuss a number of market considerations that will impact our businesses. There's a wide band of consultant expectations for US production growth following the robust performance that we saw last year. The pace is expected to slow. When you look at last year's performance, US production experienced the largest single year oil production increase of any country in recorded history. Last year's growth highlights the potential for substantial resource development, but the pace had to slow to prevent oversupplying the market. The US E&P industry has significantly outperformed forecasts and expectations from 2010 - 2018, but a new focus on capital discipline has resulted in a declining rig count and slower production growth. In fact, we're relatively flat since the end of last year.
We expect new infrastructure development will relieve bottlenecks, improve producer netbacks, and result in continued support of the development of this large resource base. The Permian Basin provides the majority of the growth with low break-even cost, a large resource base, and desirable quality. This production growth has provided an opportunity for logistics growth in our midstream business, as well as low feedstock and energy costs for our refining and chemicals businesses. The U.S. is the fastest-growing exporter of crude and NGLs. We expect domestic growth to be relatively flat, so the majority of this is going to need to be exported. The shale crude quality is light and sweet and attractive in a low sulfur IMO environment, especially in Asia and Europe for low complexity refining. LPG exports have more than doubled since 2014, and we expect another 50% increase between now and 2024.
The U.S. is the largest exporter of refined products and the most competitive supplier to the Atlantic Basin. Many of the shale crudes have large volumes of associated natural gas liquids production, incremental NGL demand growth in crudes, ethane demand growth in the U.S. for petrochemical plants, as well as LPG demand growth in the international markets, especially the developing countries, including Asia, for residential, commercial, petrochemical feedstocks, and gasoline blending. In recent years, about 40% of total global demand growth has been NGL related. Today, about 60% of ethane produced from the natural gas stream is recovered in gas processing plants. Even at today's low natural gas prices, 40% is being rejected back into the natural gas stream. We estimate that over 1 million barrels a day of ethane is currently being rejected, and that volume has been growing despite the increase in new domestic ethylene cracker additions.
Recoverable ethane is expected to increase by another 1 million barrels a day between now and 2024, and expected rejected ethane could grow at over 1.5 million barrels a day by 2024. This represents enough supply to supply over 15 new world scale ethylene crackers, substantially more than what's currently under construction. Ethane is expected to price near its natural gas price equivalent. When you look at the forward curve for natural gas at the Henry Hub, prices are expected to remain in between $2.50 and $3 in MMBtu over the next few years. This resource base assures that the U.S. Gulf Coast will continue to be one of the lowest cost producers of ethylene globally, supporting continued opportunities for CPChem to expand its business. CPChem is the world's largest producer of high-density polyethylene used in plastics manufacturing.
US ethylene and polyethylene production capacity has expanded by 30% since 2014. The U.S. Gulf Coast produces about 20% of global high-density polyethylene, and about a third of domestic production is exported. Historically, global high-density polyethylene demand has grown at about a 5% per annum pace. About 1.4 x the global GDP growth. High-density polyethylene demand is expected to continue to outpace global GDP growth for the foreseeable future, with new applications expected to more than offset any potential decline in single-use plastics. The IMO's new specifications require an 85% reduction in sulfur content for the 4 million barrel a day marine fuel market. These changes are just beginning to be implemented. There's a fair amount of uncertainty associated with the amplitude and duration of the impact on refining profitability. We expect high complexity refineries like Phillips 66, to experience considerable benefits relative to low complexity refining.
The diesel crack has averaged about $13 a barrel over the last 10 years. The current 2020 futures forecast or prices indicate a crack about $4.50 a barrel wider or almost $18 a barrel crack for 2020. Industry consultants are even more optimistic. Every $1 per barrel change in the diesel crack is about $300 million a year of incremental EBITDA for our refining segment. Calendar year 2024 prices for high sulfur fuel discounts have expanded recently to about $24 a barrel. This compares to a $12 a barrel historical average. Consultants believe the discount will widen further as the world works to dispose of excess high sulfur resid. We expect high sulfur fuel oil to contribute to wider differentials on heavy sour crudes, and every dollar per barrel change in heavy sour discounts is worth $250 million a year in EBITDA for us.
Crude prices are beginning to reflect in the value of crudes, and as we look at IMO product prices, compliant IMO fuels are trading for delivery next year at prices above gasoline. We expect this to result in a wider premium for Cabinda crude, which is a medium sweet crude. Alternatively, Dubai is a medium sour crude that produces a large percentage of high sulfur resid, and that's likely to result in a wider discount. As Bob will discuss later this morning, Phillips 66 is well-positioned for the IMO environment with high diesel yield and more coking capacity than our peers. We'll also hear more about compliant bunker fuels from Brian Mandell in the marketing discussion. Phillips 66 is the largest importer of Canadian crude. Heavy Canadian crudes trade at discounts for both transportation as well as quality differentials.
We expect IMO bunker fuel changes will result in a reduction in the price for heavy sour crudes, and as the price of Maya and other heavy sour crudes decline, Canadian heavy prices will decline as well, resulting in a wider discount for our purchases. The calendar year 2020 forward curve for Canadian heavy is currently about $17.50 a barrel. Year -to -date 2019, heavy sour discounts for Canadian is about $12.50, so about a $5 increase expected in the forward curve for next year. Every dollar per barrel change in Canadian heavy is worth about $100 million a year in the EBITDA to us.
Canadian heavy differentials are going to be driven going forward by the government curtailments, by the incremental production adds, progress on new refining capacity, the government's effort to sell rail capacity, as well as ultimately the value of heavy sour crudes on the U.S. Gulf Coast. In summary, while the pace of US production growth has slowed, there are substantial remaining resources to be developed. This supply will provide opportunities for our midstream business, as well as low cost feedstocks and energy costs for refining and chemicals. The IMO environment provides a tailwind for refining. We're optimistic about the outlook for our portfolio. Let's get started with the business segment discussions. We're going to lead off with Tim Roberts in a discussion of our midstream business.
Thanks, Jeff, and good morning everyone. Glad to be here. Today, I'm going to update you on our midstream business, the progress we have made in executing our strategy. As you can see from the map up here, in 2012, a lot's changed. Midstream is not new to Phillips 66. We have over 140 years of experience in infrastructure, energy infrastructure, and at Phillips 66 since spin in 2012, the midstream assets mainly have serviced the needs of the refining and marketing businesses. These integrated assets facilitated the transportation and storage of crude oil, products, and NGLs. Approximately 25% of the business was with third parties at that time. As domestic liquids production started to accelerate, we seized on an opportunity to leverage our operational know-how and our existing asset footprint. We expanded our midstream business to provide logistic services to third parties, producers, refiners, and exporters.
This also created deeper integration within our own existing refining assets. We improved our crude feedstock flexibility and optimized our commercial options for product placement. Bob and Brian will provide more color about this integration a little bit later this morning. As you fast-forward to 2022, you see the map here. You can see the execution of our midstream strategy and how we are transforming our portfolio. We will have constructed by 2022 over 550,000 barrels per day of fractionation capacity, 16 million barrels of storage at Clemens Caverns, and 200,000 barrels per day of capacity at the Freeport LPG export facility. We will also add about 6,000 miles of long-haul crude oil pipelines that connect key production basins to the major Gulf Coast market centers while providing access to key domestic and international markets.
With our portfolio of in-flight and developing growth projects, we will have a leading crude oil products and NGL system. With the transformation of our portfolio, approximately 70% of our 2022 EBITDA will come from third-party customers and be backed by fee-based long-term commitments. Our strategy is focused on expanding and optimizing our integrated systems, and a key piece of this is operating excellence. It is foundational to support our strategy. As a leading operator in the industry, we must get this right. Good enough is simply not good enough. Our asset base is highly integrated with Phillips 66 segments. As we grow our midstream business, we are creating value for both our internal and our external customers. We believe our crude value chain will be one of the most competitive systems in the country. We are connecting key production basins with a significant portion of the US
refining complex, as well as U.S. Gulf Coast export terminals in Corpus Christi, Beaumont, and Houston. We will provide optionality and quality service to all of our shippers. We continue to enhance our clean products distribution network as we leverage our pipelines and terminals to place products from our Phillips 66 refineries to the Phillips 66 marketing business. NGLs are a key growth area for us. At the Sweeny Hub, we have world-class fractionation, cavern storage, connections, and export capability. As we have expanded our value chains, we are aware that to be the service provider of choice, we need to perform and deliver as promised and create value for the customer. The customer has choices. We want Phillips 66 to be their choice. With regards to capital investment, it's not about getting bigger. It's about creating more value.
We will continue to take a disciplined, returns-based approach with our midstream investments. Our projects are backed by long-term fee-based contracts. Where it enables value, we will partner with other companies in our projects. This reduces risk, maximizes returns, and helps to reduce volatility in earnings. We will continue to be very thoughtful about our growth and how we leverage Phillips 66 Partners to create value for both shareholders and unitholders. Again, from meager beginnings, you can see we've moved the ball quite a bit. As you fast-forward to 2022, you can see the breadth of the integrated system that we expect to have up and running. I'll highlight a couple of our projects in midstream, both by Phillips 66 and Phillips 66 Partners.
Gray Oak is an 850-mile pipeline joint venture capable of shipping 900,000 barrels per day of crude from the Permian and Eagle Ford to multiple Gulf Coast destinations. As the operator of the pipeline, we have commenced line fill and commissioning. We anticipate offering limited service from West Texas to Central Junction later this month. Full service is expected by the end of the first quarter of 2020. The Liberty Pipeline will transport up to 400,000 barrels per day of light crude from the Rockies to the Cushing Hub. The 30-inch Red Oak Pipeline will provide transportation service from Cushing and Midland to Beaumont, Houston, and Corpus Christi market centers. Gray Oak and Red Oak will connect to the South Texas Gateway Terminal in Ingleside, Texas.
The terminal will be able to partially load VLCCs and have 8.5 million barrels of storage, and will be permitted up to 800,000 barrels per day of export capacity. We have received the Army Corps of Engineers permit, and we expect the terminal to be in service by mid-2020. We expect continued growth in exports and believe offshore loading will provide customers with cost-efficient access to global markets. We are developing the Bluewater Texas offshore loading facility in Corpus Christi to extend our crude system and grow our Gulf Coast export capability. We submitted our permit application in the second quarter of 2019 and expect receipt by mid-2020. Pending a final investment decision in 2020, the facility will be capable of fully loading VLCCs with a throughput capacity of approximately 1 million barrels per day.
Bluewater will be an advantaged export option for multiple crude pipelines terminating in the Corpus Christi area. Much like our crude network, we have come a long way since 2012 in building out our NGL system. Our system is well-positioned to support growing global growth. By 2022, Phillips 66 will have a leading platform at the Sweeny Hub. Let's talk a little bit about some of the projects. We have 100,000 barrels per day of fractionation capacity at Sweeny that's been operating since 2016, and we are adding 450,000 barrels per day of new capacity. Fracs 2 and 3 are expected to be in service by the fourth quarter of 2020. Frac 4 has made significant progress and is expected to be in service by the second quarter of 2021. Each frac will have nameplate capacity of 150,000 barrels per day, which is world-class.
The new fracs will provide a low-cost supply of LPGs for the export terminal and the local petrochemical market. Today, our Freeport LPG terminal is running at full rates and supplying customers in Asia, Latin America, and Europe. At Clemens, Phillips 66 Partners is expanding the existing nine million barrels of NGL and purity storage capacity to 16 million barrels. As we build out our NGL system, we are connecting to local petrochemical customers. The C2G pipeline is a 16-inch bi-directional ethane pipeline that will supply the new ExxonMobil SABIC petrochemical facility in Gregory, Texas. We are targeting completion in mid-2021. Looking forward, we continue to see long-term demand for additional fractionation and export capacity in the Sweeny/Freeport area. We are evaluating future frac growth, and we have ample room under our current permit to grow our storage at Clemens Caverns. Let's talk a little bit about AdvantEdge66.
We recognize that to be the service provider of choice, what got us here won't necessarily get us to where we are going. Our transformation is more than just digital. It is changing the way we do business and how we strive to be better today than we were yesterday. We undertook this initiative because we believe it will improve operational excellence. This is also about reliability, keeping our cost structure competitive, improving the customer experience, and building a platform from which we can grow. We are leveraging artificial intelligence and data analytics to improve pipeline reliability. For example, what if we could accurately predict when a pump will fail? This will help us manage an outcome versus reacting to it. We're also collaborating with technology startups to develop advanced control room automation. This enhances asset throughput and automates repeatable activities.
These advances allow us to take our business to a new level of performance. To maintain competitive advantage, we must continuously transform our business. We are investing in our people, our assets, and our processes to ensure that we deliver industry-leading performance. Let's move from Phillips 66 and talk about DCP. They play an integral and important role in complementing our NGL value chain. DCP is an integrated logistics and marketing in gathering and processing business, and is one of the largest US NGL producers and gas processors with assets in key producing basins. The Sand Hills and Southern Hills NGL pipelines provide connections to the Sweeny Hub and Mont Belvieu. Over the past several years, DCP has had a clear focus on optimizing assets, reducing costs, and improving reliability. They have increased their fee-based business and significantly reduced commodity exposure.
This was accomplished by restructuring existing contracts and by investing in strong fee-based logistics projects. DCP also has an option to participate in our Sweeny fractionator projects to further integrate the NGL value chain. For the last several years, DCP has also been going through their own business transformation. They are focused on leveraging technology to automate facilities and processes and have made great improvements. DCP 2.0 has made great strides in increasing cash flow, lowering costs, and minimizing risk. Let's spend some time talking about our MLP, Phillips 66 Partners. It's my pleasure to introduce Rosy.
Thank you, Tim. Hello, everyone. It's great to be here. Phillips 66 formed Phillips 66 Partners in 2013 to support midstream growth. During the first four years, PSXP grew significantly through drops of high-quality assets with stable and predictable cash flows. With the change in market sentiment, we pivoted and became an organic growth MLP, intentionally growing to the point we had size and scale to take on significant projects such as the Gray Oak Pipeline, which was a differentiator for us. We are a premier MLP. We have a competitive cost of capital, highly integrated assets, and competitive and growing distributions. We expect the 2019 exit run -rate Adjusted EBITDA to be $1.3 billion, and 2020 exit run -rate to be $1.5 billion.
The 2020 EBITDA includes the Gray Oak Pipeline, South Texas Gateway Terminal, additional storage at the Clemens Caverns, and the Sweeny to Pasadena products expansion starting up throughout the year. We know investors today are looking for MLPs to be increasingly self-funding, and unlike others in this space, we are in a financially strong position. We have a plan that allows us to maintain this position, which is consistent with investor preferences of low leverage and strong coverage ratios. Foundational to financial strength is a disciplined approach to capital allocation. We have a high-quality organic projects well underway. The Gray Oak Pipeline has line fill today and is expected to ramp up to full operations during the first quarter. All of the other projects are ramping up and progressing as planned. We expect 2020 capital to be about $900 million, and this includes approximately $130 million for sustaining capital.
The increase in sustaining capital from prior levels reflects the growth of the asset base and our continued focus on reliability and integrity of our pipelines. Growth capital will fund in-flight projects such as Gray Oak, South Texas Gateway, the Bakken Pipeline, as well as new projects such as the C2G pipeline. We have the strong support from our sponsor, which has a number of great investments underway, which have the potential to make their way into PSXP either before or after completion. To wrap up Midstream, we have a great future as we execute projects and as we run our assets. Operating excellence is always top of mind. The business has grown significantly from where we were in 2012, and we look forward to the trajectory as we continue on to 2022. Now, I'll turn it over to Mark to discuss chemicals.
Thanks, Rosy, good morning, everyone. I'm excited to share with you an update on our chemicals business. The global demand for the products that we produce, chemicals and plastics, is increasing, and we're poised to meet it. At CPChem, we have a top-tier asset base and a strong platform for growth, with access to advantage feedstocks around the world. CPChem is a global leader in ethane cracking to produce ethylene, which is the fundamental building block for many chemicals and plastics, including polyethylene. We currently are the number one producer of high-density polyethylene in the world, and we're a leader in licensing proprietary technology to produce polyethylene. We're also the second-largest producer for Normal Alpha Olefins, or NAOs, which is used extensively in polyethylene, plasticizers, motor oils, lubricants, and many other applications.
We're also the second-largest propylene merchant producer on the U.S. Gulf Coast, and we have a very strong pipeline network on the U.S. Gulf Coast, which provides us with a great competitive advantage. We've always been focused on growing in parts of the world where feedstock is plentiful and competitively priced. We currently operate 16 facilities in North America and five in the Middle East. Today, North America and the Middle East remain the two best places in the world for ethane supply. That's why we're pursuing two major growth projects in these regions, consistent with our strategy from day one, just as outlined by Greg Garland in his opening comments. This slide gives you a high look at the chemicals value chain and our foundational strategy. Up to 80% of the feedstock that we use today is ethane.
The low cost of ethane gives us an advantage over naphtha-based producers. We upgrade that low-cost ethane feedstock with world-scale manufacturing facilities and proprietary technologies to produce in-demand products that serve the world's growing middle class. Our plastics and chemicals are the building blocks for more than 70,000 end-use products. We're focused on delivering strong financial returns for our owners, we leverage our core strengths to do that. A key differentiator for CPChem is our safety performance. We consistently rank among the top in our industry against American Chemistry Council benchmarks, we have a strong safety culture throughout our company. Our employees are focused on eliminating personal and process safety incidents. In 2018, we achieved our best ever performance for employee and contractor personal safety. This year, we're on track to deliver best ever process safety performance. Reliability also sets us apart.
Our operating rates for polyethylene production are consistently better than the industry average. As you saw in the opening video, year -to -date, we're running those assets at 100%. As we went through the bid process for the project we were recently awarded by Qatar Petroleum in Ras Laffan, we consistently heard that CPChem is the best operator in Qatar. This helped us succeed and win that project. Our polyethylene manufacturing technology was developed by Phillips Petroleum R&D well before the CPChem joint venture was formed. It continues to be a competitive advantage for us today. We're the leading licensor of this loop slurry technology, and we have a great brand recognition globally for our Marlex polyethylene portfolio. This strong brand helps enhance our global marketing network. We're confident that we are positioned well, particularly in Asia, to serve the growing demand for our products.
Finally, we're advancing high return opportunities to incrementally grow our business while progressing our two mega projects towards final investment decisions. We have a project to debottleneck our U.S. Gulf Coast petrochemical cracker in Baytown. We're also studying an expansion of our 1-hexene product. 1-hexene is a critical component to polyethylene manufacturing, and we have proprietary technology to produce this material. The Adjusted EBITDA you see here represents the Phillips 66 50% equity share of CPChem. You can see here that our capital spending peaked in 2015 through 2017 as we invested in our U.S. Gulf Coast petrochemical project assets in Baytown and Old Ocean, Texas. Those assets are running extremely well and delivering value for us and our owners. Overall, it's a great time to be in the petrochemicals industry, and we believe we're well positioned to deliver our growth goals and enhance value for our owners.
Our long-term outlook on chemicals is very positive. I mentioned that North America and the Middle East are the best places to be for petrochemicals right now. The ethylene cash cost curve here tells you why. Our geographic footprint sets us up well to serve the growing demand driven by expanding middle class. For the first time ever, the global middle class represents the majority of the world's population. People rising out of poverty drives demand for products that makes their lives safer and more convenient. Data from the Brookings Institution predict that the middle class will grow to 5.2 billion in just 10 years from 3.2 billion in 2016. 88% of the next billion entrants will be in Asia, and the majority of those will be in India and China. Because of this middle class growth, global demand for polyethylene will continue to increase.
We believe the long-term fundamentals are good. Our industry is currently combating some short-term headwinds. One of those is the ongoing trade dispute with China, which is creating some uncertainty in softening demand for our products. We've been able to leverage our global supply chain network to reduce the impact of tariffs on our business, and we're also supporting our industry associations as they progress their efforts to advocate for free and fair trade. As a JV, we keenly understand the importance of cost discipline and have always operated our business that way. This approach is especially important as we navigate this margin pressure due to soft demand and compressed chain margins. We're continuously looking for identifying opportunities to improve efficiencies, particularly in manufacturing, supply chain, and procurement. In the last two years, we've put an additional focus on proactively helping the world find sustainable solutions.
We've created an executive leadership position to guide our sustainability strategy and grow a team to support our efforts around sustainability. Part of this work is to reduce our own footprint and ensure we do our part to recycle at our facilities. We recently announced commitment to Operation Clean Sweep Blue, which aims to keep pellets from our manufacturing facilities from ending up in unintended places. I'm proud that in 2018, we had less than four pounds of plastic pellets released out of our facilities out of the billions of pounds that we produce every year. Our sites are also engaged in strengthening their office and industrial recycling programs to reduce our waste footprint. However, the biggest challenge we face today is plastic waste in the environment and its impact on the perception of plastics. Single-use plastic bans continue to be introduced by state and local officials.
About 7% of CPChem's polyethylene production goes into single-use applications. However, IHS expects these bans will have a limited impact on demand over the next 10 years as the primary target has been single service disposables, which is a very small segment of the market. Furthermore, there are technical limitations and infrastructure limitations to produce viable alternatives. Still, this is a global issue that needs to be addressed. That's why in January, we became a founding member of the Alliance to End Plastic Waste. We agree that plastic should not end up in the environment. The global companies that are members of the Alliance have committed to invest $1.5 billion on cleanup, innovation, infrastructure, and education projects over the next five years. As part of our commitment to the Alliance, we're evaluating projects to fund at CPChem that will advance sustainability efforts.
One area we're exploring is chemical recycling to support a circular economy. At a high level, this would take waste plastics, turn them back into ethylene that we can reuse to produce new polyethylene. Our AmSty joint venture is already doing something very similar to this. They take polystyrene foam, convert it back to styrene monomer that they can use as feedstock to produce polystyrene. There's much work left to be done in the area of sustainability, but we're very proud of the progress that we're making. I'll wrap up with some additional details about our recently announced growth opportunities with Qatar Petroleum. CPChem and Qatar Petroleum were recently invited to the White House to sign an agreement to jointly pursue development of our U.S. Gulf Coast 2 project. It was my honor to represent Chevron and Phillips 66 on this world stage.
As I mentioned earlier, we were selected by Qatar Petroleum as a 30% owner in the JV to develop a new world-scale petrochemical complex in Ras Laffan, which will access competitive feedstock from Qatar's North Field gas development. This partnership will help us spread risk across these two projects. The capital spend is roughly equivalent to what we would spend if we were to pursue Gulf Coast 2 on our own. Now we have access to competitive feedstock in both regions. As we demonstrated through our existing JVs in Qatar, both companies share the values of safety and operational excellence.
Qatar Petroleum CEO and Minister of State for Energy Affairs, Saad Al-Kaabi, has been very vocal around both of these announcements that our ability to construct and operate assets safely and successfully is why they want to collaborate with us, and we look forward to building on this successful relationship. We're currently advancing these two projects with Qatar Petroleum toward final investment decisions. On the U.S. Gulf Coast 2, CP Chem will own 51% majority interest, and we're targeting startup in late 2024. The preliminary cost estimate for this project is about $8 billion. The Ras Laffan petrochemicals project will be built near our existing Arla 32 facility, and we're targeting startup in 2025. These two projects reinforce the strong fundamentals of our business. Global demand is increasing, and CP Chem has the asset base and growth platform to meet it.
Now I'll turn it over to Bob Herman for refining.
Thanks, Mark. Good morning, everyone. I'm pleased to be here to share with you our refining performance over the last few years and a few of our plans for the future. Our refining organization focuses on operating excellence, capturing the market that's available to us, and generating strong free cash flow. We performed well historically. We think we're set up to compete very well in the changing market dynamics over the next few years. This map shows the locations of our refineries, 11 in the U.S., two in Western Europe. As you can see, our assets are well distributed across the United States, limiting our exposure to market anomalies in any given region at any given time. The map also shows the Phillips 66 and our main joint venture pipelines that service the refining business.
As you can see, for both crude and for product offtake, we are well-positioned to take advantage of our midstream business. The highly integrated business gives us flexibility across our entire refining system. Phillips 66, third-largest refiner in the U.S. with 1.9 million barrels per day of capacity. We have another 300,000 barrels per day in Western Europe for 2.2 million barrels per day of global crude capacity. Many of our refineries were built to process heavy and high sulfur crudes, produce high yields of transportation fuels, and specialty products. Our system ranks third among the top third in the U.S. in complexity, and our Western European assets are even stronger, ranking in the top 10% of European refiners. Our crude slate's diversified with approximately equal amounts of heavy, medium, and light crudes being processed in our refineries.
We have the flexibility to optimize our crude slate into each one of our refining assets. As I mentioned before, refining focuses on operating excellence, and the key metric for this is health, safety, and environmental performance. Our results have consistently been among the industry leaders, but that's not good enough. We have a goal to send everybody home at the end of every shift better than they came to work that day. We want them to go home safe. We believe operating well maintains our license to operate in the communities where we're located. More importantly, it preserves shareholder value by operating well. A main business objective for refining is to generate strong free cash flow, support shareholder distributions, fuel our midstream growth, and invest back into refining with high return projects. As the top chart shows, we've generated over $17 billion of Adjusted EBITDA since 2015.
That works out to about $3 of pre-tax free cash flow for every barrel we've processed in that same time period. As you can see by the bottom graph, we're disciplined in our approach to capital with about $1 billion per year of spend. Capital program consists of sustaining capital to ensure continued high reliability, and we focused on high return projects that increase our product values and support increased runs of cost advantage feedstocks. I'll talk more about our capital plans in a few slides. The configuration and complexity of our assets has resulted in our ability to outperform our peer group. The metrics shown are very important over the next few years as the markets respond to the IMO sulfur specification change.
We expect to benefit from strong distillate demand, from a widening spread between low sulfur and high sulfur fuel oil, and from continued discounting of heavy sour crudes as the full effect of IMO hits this market. This creates an opportunity for Phillips 66 as our industry leading coking capacity results in fuel oil production that is less than half of the U.S. average. Phillips 66 has an advantage as these key indicators demonstrate, which positions us well to outperform our peers in the coming years. For every $1 per barrel of distillate margin improvement, we'll generate an additional $300 million of EBITDA every year. A $1 widening in the WCS differential results in $100 million of additional EBITDA every year for Phillips 66. We're also investing to improve our performance in these areas for the long term.
Projects at Borger, Bayway, Wood River, and Ferndale are increasing our diesel and jet production, and at the same time reducing our already minimal high sulfur fuel oil make. We're also increasing our ability to run heavy Canadian crudes at Wood River, Billings, and Sweeny. Canadian Bakken and Permian Basin crude production over the last few years has grown. These crudes are now advantaged to North American refiners. We've leveraged our midstream business to improve our access to them and increase our flexibility to respond to the crude market. Our diversified midstream assets and our commercial integration assures access to these crudes for all of our refineries. Bakken reaches Ferndale and Bayway by rail. The Bakken Pipeline takes crude down to the Mid-Continent and then onto our Beaumont terminal.
From Beaumont, we can get onto the Bayou Bridge pipeline over to Lake Charles, and our midstream group is currently developing a project called the ACE Pipeline that will extend our reach all the way to the Alliance Refinery. We've made high return investments in both Alliance and Lake Charles to run the Permian and Bakken crudes. At Billings, we've recently invested to run 100% heavy Canadian crudes. The chart on the lower right shows the change since 2013 in the crudes that we've been processing in our US refineries. We've reduced our dependency on non-Canadian foreign crudes, at the same time, increasing our ability to process light sweet domestic crudes. Our Gulf Coast refineries have really led the way, doubling their capacity to run light sweet advantage crudes. Refining is an extremely competitive commodity business, and keeping our costs under control are critical.
For a number of years, we participated in the Solomon Associates benchmarking studies. The results from the last three studies are the key cost metrics shown on the chart. We're proud to say that we've improved in all three of these metrics. The overall key metric is on the left, non-energy cash OPEX. This is cost to operate a refinery if you exclude consumed energy. Since 2014, we've controlled our costs better than most of the industry, resulting now in top quartile performance. That means that 75% of the refiners who participated in the study had higher cost per barrel than Phillips 66. The cost to maintain our assets and our personnel costs are also trending towards the top 25%. I think this positions our portfolio to compete in any kind of market in the future.
Our current initiative to control costs and stay competitive is the use of digital technology for operations and maintenance. Digital technology provides easy access to the right information at the right time to improve productivity. Elimination of paper forms and checklists, implementation of operator data systems, electronic work orders, and digital work permitting are all examples of the way we've improved our business and our productivity, and at the same time, improving our operating excellence. In refining, we're excited about AdvantEdge66, transforming our business using technology to not only control costs, but to also improve our margins. We're fundamentally improving how we optimize and maximize the value chain across the entire company at Phillips 66. We've built predictive models to provide consolidated real-time access to information to ensure success in our optimization.
Cross-functional teams all use the same information to buy the right barrel of crude at the right time to deliver the right products into the right market. We're using advanced analytics in our linear programs to more accurately optimize our refining economics. Unit monitoring is also benefiting from advanced analytics, providing earlier indication of inefficiencies, allowing people to work on solutions rather than gathering data. Improvements in advanced control are now allowing us to optimize key profit metrics every few minutes instead of the traditional once or twice a day. Refining operates within a complex value chain that starts with buying a barrel of crude at the wellhead all the way to selling a gallon of gasoline at the pump. The integration of refining, commercial, midstream, and marketing assures that we generate the most value for Phillips 66.
I'll wrap up with a brief overview of how we're spending capital to improve our refineries and enter into the renewable diesel business. Our strategy is to build on our strength of operating excellence to improve our product values and increase our ability to process advantage feedstocks. Over the next few years, we will invest about $500 million a year in high return projects across the refining portfolio. Although we're well positioned for IMO, we are making modest investments at Wood River and Bayway. Both of these projects are to take high sulfur fuel oil and turn it into a much higher margin, low sulfur fuel oil. These projects also improve yields on those units, if the high sulfur, low sulfur fuel oil market rebalances quicker than anticipated, these projects still have a great payout. Increasing distillate yields is another focus for us.
Our projects at Borger and Wood River, along with a bunch of small projects at several of our refineries, will result in an increased distillate production of about 25,000 barrels per day. We're increasing our production of high-value products also. More high octane components and premium gasoline is now being produced on our new Isom unit at Lake Charles. The Sweeny Cat Cracker project will increase the production of high-value chemical feedstocks. At Lake Charles, the Coker Feed Flexibility project allows us to buy low-cost slurry oils, feed them to our premium coker without impacting needle coke quality. Our first entrance in renewable diesel production is at Humber, where we're taking used cooking oil and turning it into transportation fuels.
In San Francisco, we plan to convert a diesel hydrotreater to run renewable feedstocks like soybean oils, and we are developing a joint venture project at our Ferndale, Washington refinery to build an 18,000 barrel a day renewable diesel plant. To wrap up the discussion on refining, first and foremost, our priority is to be a safe and reliable operator. We'll be diligent about controlling our costs and disciplined in the capital that we spend, concentrating on high return projects that generate strong free cash flow. Thanks for your time today. With that, I'll turn it over to Brian to talk about marketing and specialties.
Good morning. I'm Brian Mandell. It's good to see you here. Today, I want to share with you the importance of marketing, which provides integration for our refinery assets. To provide this integration, we focus on continually increasing the value of our brands. In addition, we leverage our midstream assets to continue to grow our marketing business. Ultimately, our goal is to place our refined products in the highest net back margins around the world. At Phillips, we're proud of our extensive portfolio of brands and our proprietary assets. These assets provide a competitive advantage to place our products and capture greater margins. Marketing's strategic role is to enhance earnings by growing earnings, securing placement of refined products, and optimizing our assets. We will do all this while being a dependable source of earnings.
We also capture value by licensing our brands in non-core markets, including the U.S. Gulf and East Coast, Mexico, and Puerto Rico, which again demonstrates the strength and value of our brands. Marketing is a high return, low capital business. Over the past five years, we've achieved a robust 38% average adjusted return on capital employed. We continue to grow secure placement of refining product. In fact, our US placement volumes have increased over the past five years. We also continue to strengthen our base business by investing and expanding in new channels of trade globally. This includes pursuing equity partnerships in core markets, both to secure the ratable placement of our products and to participate in strong retail margins. Renewable diesel also provides an opportunity to capture additional value while meeting our regulatory requirements.
We'll participate in the manufacturing, supply, and sale of renewable diesel on the U.S. West Coast. Additionally, we're leveraging technology to further innovate, including a new, robust digital solution for our customers. This integrated platform will seamlessly allow business-to-business transactions with our customers while providing consistency and flexibility across our various Phillips 66 businesses. Secure placement is vital to our marketing business. We're investing in refreshing and reimaging our branded network across the United States. Our current converted stores are seeing a 3% volume uplift relative to non-reimage sites. We also continue to expand our award-winning mobile pay platform. We've implemented an industry-leading digital wallet, and we're exploring various connected car relationships. As we look to the future, we're focusing on engaging consumers directly with customized offerings to attract new business into our branded sites. We're also actively expanding key relationships with private label operators across the country.
Private label and high volume retailers have gained significant market share over the past 20 years in the U.S. We believe it's important to be an unbranded supplier of choice. This allows us to grow our supply share and generate incremental volume. In continental Europe, we're an industry leader with a proven low cost, high volume model. We're high-grading our JET stores and reimaging sites across the network to our new refresh design. In the U.K., we've been piloting company-owned retail sites with plans to expand in the coming years. Combined, we anticipate adding 20-30 new JET sites across Europe each year. We're pursuing equity partnerships in core markets to secure placement and capture retail margins. Phillips 66's West Coast refinery position represents about 13% of the overall regional gasoline demand and 16% of our total US production.
Consistent with our integrated value chain strategy, I'm pleased to announce today that we've signed an agreement for a joint venture with a large retail and wholesale operator. We're excited to partner with a strong operator to provide secure placement for our refinery production and to extend our value chain by capturing West Coast retail fuel and in-store margins. Along with our existing export options, this joint venture provides increased opportunities for product placement. Our strategy is to continue to remain focused on the wholesale branded business, a business comprised of about 7,500 stores across the U.S. We plan to pursue opportunities to partner with strong retail operators in markets where refinery integration is more critical and where retail will complement our wholesale business.
We believe this strategy of continued growth of our current wholesale business while adding strategic retail sites ensures Phillips 66 will be positioned long into the future. I look forward to sharing more details of this transaction upon closing, which is expected by the end of the year. Our global presence allows Phillips 66 the flexibility to place our products both domestically and internationally, depending on market dynamics. Our reputation as a valued partner is recognized both here in North America and around the world due to our strong values, our market knowledge, the strength of our asset base, and our long-standing customer relationships. Because of these relationships and our understanding of customer needs, we can meet requests while also maximizing the value of our products, of our assets, and of our investments.
On the Gulf Coast, we will be able to export 80% of our clean product by 2021. Phillips 66 participates in 50 countries and transacts with more than 100 counterparties across all major product markets. We leverage our refining facilities and our midstream pipelines and terminals to support our growing export capability. Our diverse market depth, along with our expansive understanding of the marine business, allows us to move quickly as market conditions evolve. As total US refinery utilization increases and domestic demand slows, we're positioned to capture additional value by continuing to expand our presence in export markets, including the growing Latin American and Asian markets. Similar to the shifts in product markets, we're seeing a significant change in the bunker fuel market.
With IMO set to enforce a new 0.5% sulfur cap for marine fuel by the first of the year, refiners and bunker blenders have had to modify their processes to prepare for the new, lower sulfur environment. Phillips 66 holds a competitive advantage given our ability to produce and market IMO fuels globally. Bob mentioned that we have the largest coking capacity in the world. This capacity, in conjunction with our knowledge of the global markets, allows us to purchase and run discounted sour crude and feedstocks supporting higher returns. Phillips 66 has storage positions in Singapore, the largest bunkering market in the world, as well as the U.S., to support established marine fuel blending business. We intend to further expand our bunkering business, allowing us to increase our integrated margins of refinery blend stocks.
Our technology center has already tested our 2020 bunker fuels to ensure that they meet the upcoming IMO standards. Our global presence, along with our reputation as a reliable supplier to ship owners, provides us the ability to maximize our refinery production. Additionally, to meet the demand of lower sulfur marine fuels, distillate production will be needed as a blend component, and Phillips 66 will benefit from this demand with our high distillate yields. With our strategic assets, existing businesses, and market knowledge, we are well-positioned for IMO 2020 and prepared to capture value in the changing market. Greg mentioned that we're investing in the fuels of the future to ensure long-term competitiveness. We're pursuing several renewable diesel opportunities that enables us to capture value and fulfill our regulatory obligations. Bob mentioned three of these renewable diesel projects at our Humber, San Francisco, and Ferndale refineries.
We've also signed a commercial agreement with Ryze Renewables . Ryze Renewables is currently constructing two plants in Nevada that are expected to be online by mid to late 2020. Phillips 66 has committed to a term supply and offtake agreement for the full plan volume of approximately 11,000 barrels a day of renewable diesel production. We believe that renewable diesel producers and retailers will share in the value of the obligations and of the credits associated with renewables trade. Phillips 66 plans to participate in end-use sales of renewable diesel to maximize value capture. Today in marketing, we're piloting and testing renewable sales at our sites in Northern California with plans to expand across our West Coast network. We're also expanding our placement portfolio by increasing access to end users, enabling participation in broader renewables value chain margins.
In an increasingly competitive environment, we're committed to challenging the status quo. AdvantEdge66 will ensure continued innovation across our business. As I mentioned earlier, our award-winning mobile pay platform is expanding. We've launched a pilot with an auto company to test in-car payments and promotions using infotainment center, and we expect to launch additional pilots over the coming year. As we transform and modernize our traditional advertising, we're engaging consumers more directly with targeted digital advertising, as well as customized offerings and promotion delivered right through our mobile app. Additionally, we're working smarter by using artificial intelligence and machine learning to unleash the power of data-driven marketing and to make complex decisions faster. Finally, we've introduced robotic solutions, which allow us to automate key processes and increase our efficiency. In the U.S., our optimization analytics focus has helped us to continue to lower administration costs.
In summary, our focus on strengthening and growing our marketing brands and providing optionality with our strong asset base will ensure that we continue to maximize the value of our Phillips 66 integrated value chain. Now we'll take a break. We'll resume the presentation at 10:20, and at which time Kevin Mitchell will give a financial update. As a reminder, we'll handle Q&A at the end of this session when Greg is through with our closing remarks. Thank you.
[Break]
Hello. If everyone can please take their seats, we'll begin the presentation.
Good morning. Welcome back. It's good to see everyone. Thanks for coming back. Our financial strategy is anchored by a consistent and disciplined approach to capital allocation. We create shareholder value through high-return investments in our refining and marketing businesses, while simultaneously pursuing high-value growth projects in midstream and chemicals. We're committed to shareholder distributions in the form of a growing dividend and an intrinsic value approach to share repurchases. We believe that our share repurchase program is integral to our strategy of increasing returns to shareholders. The A3 and BBB+ credit ratings at Phillips 66 distinguish us from our peers and reflect the strength and diversity of our portfolio. The balance sheet provides us with the flexibility to weather market conditions and take advantage of opportunities as they arise. Maintaining financial strength has been, and will continue to be, a key priority.
It allows us to execute our strategy through the economic cycles. The chart on the right shows our historical capital structure through the third quarter of 2019. As our MLP modestly increases debt to support its growth strategy, we expect to reduce debt at the Phillips 66 level to maintain a long-term consolidated debt-to-capital ratio in the range of 20%-30%. Our strong investment-grade credit rating provides us with significant flexibility, and we believe it can be maintained at higher debt levels. Our debt maturity profile extends almost 30 years. The debt maturities are very manageable, without significant refinancing risks in any given year. We intend to pay off the 2020 and 2021 maturities without refinancing as we continue to manage consolidated Phillips 66 leverage. We have a strong liquidity position.
At the end of the third quarter, we had a $2.3 billion cash balance and $5.7 billion of capacity under our revolving credit facilities. Our portfolio of high-quality and integrated assets and operating excellence capabilities enable us to generate a peer-leading return on capital employed. When you look at the comparisons, you might assume that we only compare our performance to the refiners. We measure ourselves against a broader peer group, including those in the chemicals and midstream sectors. This results in a higher bar for us to beat. We only invest in projects that exceed internal hurdle rates, which we set at the segment level. The returns comfortably exceed our cost of capital and position us to deliver peer-leading return on capital employed. Over the last 12 months, our adjusted return on capital employed is 16%.
We generated a record $10.1 billion of Adjusted EBITDA in 2018. EBITDA generation continues to be strong this year. Our portfolio provides us with a competitive advantage versus our peers and allows us to generate strong EBITDA through the market cycles. Continued growth of fee-based earnings from the midstream business enhances the stability of our results. We expect mid-cycle EBITDA to grow to $11 billion by 2022 from our growth and return projects, as well as the enhancements from our AdvantEdge66 initiatives. In 2018, we generated a record $7.6 billion of cash from operations. We have generated $7.3 billion during the last 12 months through the third quarter 2019. While refining is expected to continue to generate a significant share of operating cash flow, we expect contributions from midstream and chemicals will increase over time.
Our free cash flow yield, defined as the cash generated less total capital investments divided by market cap, is 9.4%. Our free cash flow yield is more than double the average of our peer group and well above the S&P 500 average. When only sustaining capital is deducted from cash flow, our free cash flow yield is 13.3%. While refining continues to be an important and significant source of cash generation, you can clearly see the impact of the growth investments. 2015 and the last 12 months through third quarter 2019 had very comparable realized cracks in refining. Over this time period, operating cash flow increased from $5.7 billion - $7.3 billion, with a significant portion of the increase coming from midstream growth. Our strong cash generation and disciplined capital allocation continue to make us an attractive and compelling investment.
At next year's projected mid-cycle cash flow of $7 billion, we can comfortably fund our sustaining capital needs and a growing and competitive dividend. Our operating cash flow gives us the ability to adjust our growth capital and share repurchases depending on the investment options available to us and our share price relative to intrinsic value. We remain committed to returning cash to our shareholders through growing the dividend annually and repurchasing shares. Since the company's inception, we have returned $25 billion to shareholders through dividends, share repurchases, and exchanges. We have an attractive distribution yield compared to our peers and the companies in the S&P 100. Disciplined capital allocation is a core focus for our company. We will continue to safeguard and be good stewards of the company's balance sheet for the benefit of shareholders and debt holders.
Long term, we continue to target a 60% reinvestment back into the business and 40% distribution to shareholders. We expect to spend around $3.3 billion-$3.6 billion in adjusted capital this year. This includes approximately $300 million for the West Coast marketing joint venture that Brian discussed earlier. Just to be clear, the increased capital guidance that we communicated at our last earnings call includes this $300 million. This is the reason for the increased guidance. In 2020, we expect to spend between $3 billion and $3.5 billion as we progress our midstream growth projects. The major midstream capital projects for 2020 include Sweeny Cracks 2, 3, and 4, the Red Oak and Liberty crude oil pipelines, and the South Texas Gateway Terminal. We have the flexibility to execute projects at either the Phillips 66 or Phillips 66 Partners.
In refining, most of the spend is on sustaining capital, but we are investing modest amounts of capital in high return, quick payback opportunities that focus on increasing crude flexibility and maximizing yield. In marketing, we invest in markets where we need to maintain the security of product placement, and we continue to grow our high return European retail footprint. We expect our major JVs, including CPChem, WRB, and DCP, to continue to self-fund their capital programs and maintain relatively modest spend through 2020. We'll provide complete details of our 2020 capital budget in December. We have a solid track record of increasing the dividend, and we're committed to annual increases. We have increased the dividend nine times since our inception, resulting in a 25% compound annual growth rate. We have repurchased and exchanged 202 million shares, or 32% of shares initially outstanding.
This represents a return of over $16 billion through share repurchases and exchanges. Our board of directors recently authorized an additional $3 billion share repurchase program. This brings our total program size to $15 billion, which does not include approximately $4.6 billion of separate transactions with Berkshire Hathaway. We will continue to repurchase shares at a pace that aligns with our view on intrinsic value. Phillips 66 Partners continues to be an integral part of our midstream growth strategy and provides a cost-efficient way to fund growth in midstream infrastructure. With the elimination of IDRs earlier this year, the partnership permanently reduced its cost of capital. The partnership can grow through organic projects, an expanding pool of drop-down opportunities at the Phillips 66 level, and potentially third-party acquisitions. The IDR elimination transaction was a win-win, creating value for PSXP unit holders and Phillips 66 shareholders.
PSXP is well-positioned, with a strong balance sheet and a robust portfolio of growth opportunities. Phillips 66 Partners has increased its distribution every quarter since the July 2013 IPO. We're committed to maintaining strong coverage and leverage ratios, targeting long-term coverage over 1.2 x and leverage up to 3.5 x. We expect most, if not all, of the Phillips 66 midstream assets and projects will make their way into the MLP over time. Commodity exposure should reside at the Phillips 66 level, providing PSXP with a clean portfolio of largely fee-based projects. Timing will be based on PSXP's capacity to manage the capital spend. We will triangulate around the availability of capital funding and our ability to stay within stated leverage and coverage targets. PSXP being publicly traded provides more transparency into our midstream business and facilitates the valuation of the Phillips 66 midstream segment.
The strong investment-grade credit ratings provide Phillips 66 Partners with competitive access to debt capital. Although the MLP equity markets remain challenged, we have options should these markets become available. Over the last two years, we have been able to execute the PSXP growth programs using the at-the-market program as the sole source of equity funding. The top chart illustrates the value to unit holders since the July 2013 IPO. As highlighted in the bottom chart, since announcing the IDR elimination in July, PSXP has meaningfully outperformed the Alerian MLP Index, benefiting PSXP unit holders and Phillips 66 shareholders through the 75% LP ownership. In summary, our financial strategy and flexibility is derived from a strong balance sheet, which is supported by robust cash generation and conservative leverage. Our diverse and integrated portfolio drives strong cash generation through the economic cycles and provides a differentiated platform for growth.
We maintain the highest credit rating among our peers and have significant capacity on our committed credit facilities. Our financial strength allows us to navigate tough market conditions and positions us to pursue opportunities as they arise. The $25 billion we have returned to shareholders represents 120% of our market cap at spin-off in May 2012. We are committed to continued shareholder distributions through a secure, growing competitive dividend and repurchasing shares when they trade below intrinsic value. Phillips 66 has generated a year-to-date total shareholder return of 37%, and PSXP has been the top performing sponsored MLP this year, generating a 42% return to unit holders. Thank you for your time today, and I'd now like to turn it back to Greg for closing comments.
We have a proven strategy that the people of Phillips 66 are executing well to create value for our shareholders. Advantage66 will unleash the power of digital technology to change the way we work, how we make general investment decisions, and how we tackle some of the biggest challenges in creating value in a world that's rapidly changing around us. We plan to increase our mid-cycle EBITDA by $2 billion over the next three years through our portfolio of growth, return, and Advantage66 initiatives. We think this cash generation growth is going to enable us to continue to provide competitive distributions to our shareholders. We believe that Phillips 66 is a compelling investment opportunity. We're one of the best operators in our industry. We have a strong management team. Our diverse portfolio provides us with strong optionality to create value from the market opportunities we see before us.
Our midstream business will continue to benefit from increasing US production. Our petrochemicals business will be a returns leader in supplying polymers to meet a growing global demand. It will do this from a position of a feedstock advantage and a technology advantage. While we've gone to great lengths over the past seven years to say we're more than just a refiner and a marketer, our refining marketing business is, and it will continue to be, a solid contributor to our value proposition. We believe that Phillips 66 refining and marketing business is as well-positioned as any business to compete in the IMO 2020. Our commitment to shareholder distributions is strong. Our people are competitive advantage for us. They show up every day to do their best to execute the plan and live our values. Thanks for being here today. Thanks for your interest.
Jeff, let's take some questions. We'll have the ELT come on up. They're going to help me.
If you could, for those of us in the room and those listening on the webcast, state your name and your firm, and then we'll ask you to ask a question. We got a lot of people in the room today, so we're going to try to move rapidly through the Q&A.
Doug?
Oh, there we are.
Yeah, you got one. Go for it.
Okay. Phillips 66 has been one of the few energy companies to balance spending and distributions over the cycle, and that's usually a winning strategy in cyclical industries. While the stock has tripled, it seems like there are value creation opportunities in the future as well, based on the presentation. My question regards the AdvantEdge66 program, and specifically, how does the $1.2 billion EBITDA uplift break down by segment? Two, how much have you already captured? Third, it seems like this helps capital productivity in the future. Do you agree or disagree, and do you have some examples that you can share with us as to how that might work?
Good. Well, I'll start, and then maybe Kevin or Jeff can pop in. Certainly, there's a $200 million there in capital efficiency. Example is the fractionators. In the old way of doing business, we would probably have designed all four fractionators over again. We've gone to just a standard industry design. It's off the shelf. Create value by doing that. That's a great example of where we're using just industry standards, which are fine. They're good. They're going to be very reliable. They're great assets, and we can save money by doing that. AdvantEdge66. Here's how I would start. The leadership team met without me, and they came up with 50%-70% of the $1.2 billion. I would tell you that's average performance, and this is not an average team.
In the time-honored tradition of under-promising and over-delivering, we set ourselves up well today is my view. I would take the over on 70%-90%. You think about the one to a couple hundred of capital savings. If you think about a billion-ish, approaching half of it is really margin capture opportunities. A lot of that's going to accrete into our refining and marketing business, although some of it will show up in our midstream businesses. About 35% is what we call our business operating model, and that's just cost efficiencies for us. Working differently, doing things differently. A lot of that's going to come out of our back office. That will show up in allocated costs down through our refining, marketing, and midstream businesses. About 12% or so is around improved purchasing, and they're consolidating.
In our old model, every refinery bought their own gloves, and they might have five different gloves. We're going to have just a couple of gloves, and all the refineries are going to wear the same gloves. Believe it or not, that's a big change. That's just a great example of where we can save money through our purchasing. You roll all that up, and it's a lot of value. I would tell you that there's probably a couple hundred million of value that we've captured in 2019. We've offset that with cost because we're implementing a new ERP system. As you know, those are very expensive implementations, but we've been paying for it through our cost savings, and so we haven't seen any increased cost with that. Frankly, as we get into 2020 and 2021, we get these new systems.
That's when you'll see the real leverage and the power of what we can do in the organization as we get these new systems in place. When we started this process, we found out we had a system that was kind of 1997 vintage. We were organized around a system that was kind of clunky, and we needed more people to make the systems work. We were working outside of the system. We had 2 million spreadsheets at Phillips 66 where people were downloading data, manipulating the data. Taking it back to the meeting, we had people that downloaded the same data and showed up with the meeting with different answers. Okay, that's not best in class. One source of truth, the tools will get the data to the people. We won't spend time grabbing the data and manipulating the data. The system will do that for us.
That increases our productivity. We're going to get to a better answer. Where's Kevin? Kevin and Jana are the executives in charge of this, if you guys, either one of you, want to add.
Yeah, I would just reinforce that the timing is right for us to be doing this. You think about we're seven years post spin-off, so the independent Phillips 66 is very well established. The technology that's available to us today is light years beyond where things were, you think about 20 year ago environment. As we're deploying technology solutions, the ERP is one element of that, and that sort of provides the foundation for all of our transactional activity, and that will enable us to leverage significant gains and benefits through that. Also the other digitally enabled technologies that we can utilize throughout our operations, whether it's in refining midstream, the marketing business, help us be both more efficient in what we do and create additional value opportunities. I think we're really hitting this at the exact right time to generate this value.
Okay. Yes. Go ahead. Phil.
Phil Gresh, JP Morgan. Thanks for the presentation today. My first question is just if we look at the EBITDA improvement that's supposed to come from midstream, it looks like it's largely projects that are already in flight. A lot of these projects have also come up recently in the past six months. I'm curious how you think about the opportunity set for future midstream projects, not just the ones that are in flight, but even beyond that as we look out to 2021, 2022. Is this a business where you think there will continue to be $2 billion, $2.5 billion type of gross capital for the company overall? Is it kind of lumpy spending in 2019 and 2020 and then it falls off after that?
Yeah. We have really no major commitments beyond 2021, Phil. If we FID Bluewater Texas, that's a billion-ish dollar investment in front of us. We're working on fracs 5 and 6, that could continue the saga, the expansion of the Sweeny Hub. We would only FID those if they're backed by contracts. I think that the ability to do that. I do think that the upstream industry is starting to slow, and I think the midstream infrastructure investments tend to be lumpy over time. You could see a couple of years where things just slow down in the midstream space. I think that's certainly a viable model path forward for the industry. I think that we have strong interest in fracs 4 and 5. I mean five and six, I think you'll see us continue to work those.
Jeff, if you want to comment on what you think midstream opportunities will be, then Tim, I'll let you follow in on that.
Yeah, I think it's going to depend on the pace of production growth and customer interest. We're going to build to serve customers and to serve demand, and based on shipper commitment. We'll have to see how that plays out. We see substantial resource base within the U.S. that's yet to be developed.
We would agree with that. You're in an advantaged position globally, so you're gonna continue to see the infrastructure come in, whether it's on the petrochemical derivative side, and then subsequently, you're gonna need the fracs, and the pipelines, and the connections to help support that derivative growth that I think is gonna be coming on because, again, you've got advantage feedstock here in the US relative to the rest of the world.
Roger.
Roger Read, Wells Fargo. Thanks. Great presentation and everything. I guess two questions. One on the chem side, just trying to understand the cash flow contribution there. EBITDA is relatively flat, but there's been a lot of investment, so DD&A is higher. I would think cash flow is higher. Any clarity on that and thought process of maybe how the margins could work out there over the next couple of years since we should remain in a relatively modest CapEx environment, it looked like FIDs in 2021. The second question I had on the refining side was, as we think about IMO coming in, you had very high utilization, so I'm presuming not a lot of slack in the system, even at the coker level.
Should we think about IMO as basically a price-driven lever, kind of the sensitivities you gave on the heavy crude side is really the mover there?
Yeah. Good. Mark, do you want to take the Chemicals part?
Sure. Glad to do that. If you look at the last wave of crackers that came up in the U.S., a lot of activity that's kind of run its course. We've got others coming on in the next several years. Where margins are today, they're compressed and largely because of the global trade challenges. Several months ago, IHS said, "Well, that's taken $0.05 a pound out of the margin." Now they're coming out and say it's more like $0.10 a pound. We're seeing compression from global trade dynamics that hopefully will get resolved, and we'll end up on a better track. Over the next couple of years, there's still more capacity coming on, so we're gonna see a margin environment similar to what we've seen this year.
If growth continues as projected, and we believe it will, you'll see in 2023, 2024, things to start to tighten up. In North America today, the ethylene overhang that's been haunting the business for the last year or so is largely passed, and that was kind of a mismatch between derivatives coming on and crackers coming on.
Probably lesser appreciated, a hangover from Hurricane Harvey, where the cracker fleet on the Gulf Coast came through relatively unscathed, derivatives were pretty well damaged. There was an imbalance that caused part of that ethylene hangover. Again, that's largely moved through the system. We're seeing ethylene prices move up today, and you'll see polyethylene prices respond to that.
Bob, you want to talk about slack in the system?
Yeah. I think as we currently sit today, if you just look at the amount of light crude that's being run across all of everybody's refining system, there is probably some slack for heavy oil yet, and cokers that aren't completely loaded. I think we've done a pretty good job, I think, of keeping most of them loaded. There's no doubt, we have run more light crudes this year in places like Wood River and Sweeny, purely for economics than we have in the past. As we see that differential move back out as it's doing today, I got to believe we'll be wanting to fill those right back up with the heavy crudes. We've seen some of that movement already starting, Roger, and there's noise in the system right now with Keystone. Even before that, we were seeing it start to move out.
I think we're right on the cusp of those that can process really heavy oils, high sulfur oils, are going to be pretty happy with the economics again.
Paul Cheng?
Thank you. Greg, I think it's interesting that you're going to reorganize the decision-making based on how that benefits Phillips 66. You have a diversified portfolio in which you end up that you have many different businesses, and a lot of them is publicly traded or they're joint venture. That seems like from time to time, it's going to create some conflict of interest that, I mean, what decision to be made. How are you going to deal with that? Whether it should lead to perhaps a simplification of your structures, that some of those that maybe you want to bring it back solely in-house, so that you will be able to do this particular strategy more effectively. Second question is that on the IMO for the VLSFO, can you talk about the compatibility issue that a lot of people have highlighted?
How challenging it is for the industry, especially if you're trying to use VGO as a blend stock to doing that? Thank you.
Good. Let's work backwards. Brian, you want to take the blends, and our bunkering position, and how long we've been in the market?
Sure. Well, we've been in the bunkering business for almost 20 years, we're very familiar with blending fuels. We blend in Ferndale area, San Francisco, New York. We blend in Singapore. We know the business. We have our technology department. I mentioned that they've tested our blended fuels, we have large shipping companies that have come to us and told us, "We're just going to buy from you because we know you can make the fuels that we need." I think for large producers that have been in the market for a long time will be in a competitive advantage. For those that are more newer to the business, they'll have a tougher time convincing ship owners that what they can make is compliant fuel.
Okay, good. I would say, managing the joint venture interface is one of our core competencies. We've been in joint ventures for more than 20 years in most of these cases. We've got great relationships. We have strong partners on the other side. We purposely chose great partners to go into business with, and I think we've been very aligned around the value creation opportunities within the joint ventures. When you think about value chain itself and where we're going to buy the crude, where we're going to run it, and what products are we going to sell, there's a lot of optimization internally between the supply folks, the refiners, the marketers, and the commercial folks, and the midstream folks in terms of how we divided up the pie in the old world.
We would ultimately get to the right decision, but it would take us a long time to get there. By the time we needed to do something, maybe the opportunity passed in the commercial world. I think that what we've done is we sped up that whole decision-making process by not worrying so much about who gets credit for it, but how do we make it the best in the general interest of Phillips 66. I think that we'll continue to work on that, refine that. Do we got it exactly right? I don't know, but we'll figure it out as we go. I think we've got it mostly right, Paul. I'm gonna let you do that. Paul Sankey.
Thank you, Jeff. I'll take the opportunity to congratulate you and thank you on your macro presentation. It's nice to have one that's not pitched at the level of kindergarten at an analyst meeting. Greg, when we go back to the analyst meeting 5.5 Years ago, I believe it was, when I think back to the time that we've known you as a CEO, you started out very negative about growth and conservative about how much you would want to invest in growth as a refiner, as a cyclical business. It's worked very well for you, obviously. As we've seen here, you started the presentation really with the word growth. I just wonder, given that you haven't seen a down cycle as a separate company, the extent to which you've become sort of more and more sucked in to your own success.
If I could add, without wanting to be too critical, I've had feedback from a couple of clients that you're using a lot of off-balance sheet financing as part of the way to, if you like, maintain a sort of, without me wanting to be too negative, financial conservatism while actually pursuing quite a lot of growth. Could you just directly address those potential concerns? Thank you.
No, certainly. I think that certainly as we started off, we kind of had our foot on the brake, particularly on growth investments within refining. As we started digging in deeper and we looked and you see 30%, 40%, 50%, 100% return projects, we should do all those. That creates value. So we have raised the level of gross spending within the refining business. They're all pretty quick payouts. They're high return projects. They add value. Shifting yield, getting more advantaged crude, makes a strong system even stronger. I think that that's the right tack for us. I would come back to-- I'll let Kevin comment on that off-balance sheet financing, but I would make a point that we've been doing off-balance sheet financing for more than 20 years. It's not new. Every Middle East joint venture we've done has been project financed.
I think it's just another lever in our toolkit that we use. If it brings value, we can add value by doing that, we'll do it. We're completely transparent. We report out those numbers. We're not trying to hide anything at all. Kevin spends a lot of time with the rating agencies going through our funding structure and the choices we make and why we make that. Kevin, I'll let you speak to that a little bit.
Yes. As we think about the project financing, in many cases, what that does, what that structure enables us to do, is move ahead with projects that might not otherwise happen. That may not be a requirement of ours, but in these joint ventures, when you bring all that together, some form of financing solution may be a requirement to make that happen. That creates incremental value in terms of enabling that project to move forward. When you bring all this up to a consolidated Phillips 66 level, you actually get the benefit of the leverage returns from that. What I'd also say is, you look at the transactions we've done, in the overall scheme of things, it's small. Our share of the Bakken Pipeline, there's $625 million of financing on it. Our share of Gray Oak is $300 million, $400 million of financing.
These are taking place, year. Three, four, $500 million of project financing in any given year is really not that significant relative to mid-cycle cash generation of $6.5 billion and a balance sheet at the scale that it's at. For us, it's really not driven by we're trying to manage the balance sheet. It's usually the right decision for the project and for our overall economic return.
Good.
Spiro?
Thanks. Good afternoon. Excuse me. Good morning, everyone. Maybe this one for Rosy. With respect to Liberty and Grove. I think you mentioned earlier that the assets potentially could move their way into PSXP either before or after completion. Wondering, can you expand on that comment? Maybe walk us through the variables that would maybe decide either early stage?
Really, Wick, it's going to end up being really more of a sponsor decision as far as for Liberty. I can talk about Gray Oak, and really what it comes down to is what will the capacity of PSXP be. As Kevin touched on it's really triangulating the coverage ratio, the leverage ratio, and the ability for the MLP, for the balance sheet of the MLP. Greg or Kevin, do you want to touch on-
No. I guess we're good.
Very good. Sam.
Hello, Sam Margolin, Wolfe Research. My question's on integration between midstream and refining. Look, under a transitory environment where there's maybe less crude production growth and therefore tighter differentials, it's still better to be integrated than not integrated, it would seem. You've got sensitivities on the refining side for different laid-in crude cost savings. Do you have anything for the light sweet laid-in cost savings in the Gulf Coast in terms of sensitivity? If you don't want to reveal that on a granular level, maybe you could share whether that concept underwrites any of these midstream projects as well, or if they're purely supported by the fee structure of the new pipes.
Yeah, I think from a rough perspective, we're about a third, a third, a third light, sweet, medium sour, and heavy sour. There's some modest variation from region to region. That falls relatively close across the board. I think as we think about the domestic sweet grades and the benefits, Tim, please feel free to jump in, but with our pipelines, we're restoring the capability of keeping grades clean, that West Texas Intermediate, West Texas Light, West Texas Sour in the Permian Basin shows up as the same grade in the U.S. Gulf Coast. That's important both for US refiners. It's important in the international markets as well. I think being able to segregate those grades really maximizes the value for the producer and maximizes value for the refiners as well.
Yeah, Sam, these are fee-based projects. Ultimately, that is the driver for the pipeline. It's not any arb that we are implying or assuming would be there. Naturally, Brian's team and Bob's team would get any benefit of any barrels they want to ship that would go to any of our respective refineries. We could capture that, but that's not driving any decision with regard to our return investments on pipelines.
Here's an example. Before we were barging Eagle Ford from, say, Corpus around to Lake Charles, and now we can get it there by pipe. That's probably $1 a barrel general interest to us. There's one example where the infrastructure creates the opportunity to make more money at the refinery.
Good. Theresa.
Theresa Chen from Barclays. Thank you for taking my question. Just digging a little deeper into the long-haul pipe projects, as well as midstream in general. One of your consistent messages has been that the parent PSX is not underwriting any of the midstream projects, either at the parent level or the MLP level, that they are underwritten by third-party shippers.
Can you help us quantify what is the inflection point between being an anchor shipper, which PSX often is, versus underwriting the project? For example, if PSX had to take 50% of the capacity, would that be considered underwriting, but less than that threshold, it would be just be considered anchor shipper?
Theresa, we don't disclose all the machinations on how we get here. I would tell you that these are predominantly third-party shippers on these lines. That is the main driver. We may take a position. It is certainly not a material position on any of these pipes. We want our refineries to obviously get some benefit on having some barrels on this line. The driver is really third-party barrels, getting those contracted and commitments.
Yes. We've got a question in the back here.
Thank you. Eve Siegel with Neuberger Berman. Really appreciate. Great presentation today, especially on ESG and talking about renewables. The question is, where do you see the company 10 years from now? What is it going to look like? The other half of that question is, when you think about capital investments, how do you think about terminal value in a changing environment?
Okay. Jeff, you want to take that, and then I'll come back.
I'm sorry.
You're supposed to listen to the question. Here, even in a carbon-constrained world, we think that there's going to be room for crude oil, natural gas growth out three decades out into the future. We think there'll be opportunities. When we think about North America, we think transportation fuel demand will peak in the coming decade and could be there today even. Although we've been forecasting this for two decades and have been wrong. That's why we're building our export capabilities, because we think that the US refining fleet in general is advantaged versus the Euro Asian fleet. Phillips 66 is well-positioned within the US refining fleet. I think certainly our view is that our closest markets in Latin America, South America, West Africa, will be the export destinations of choice out of the U.S.
We think we're going to be able to run the assets at higher than global operating rates during that period of time. Thanks. Jason.
Hey, Jason Gabelman from Cowen.
Hey, Jason.
Thanks for taking my questions. First is just a quick clarification. On the $500 million of CFO growth year-over-year, how much of that is at PSX parent, and how much of that is at the midstream level? Then just a more general question. Greg, you've been one of the more bearish CEOs on IMO 2020 benefits. I'm wondering what has changed in the market that has made you what sounds like more constructive on those tailwinds. Thanks.
Okay. Kevin, you take the first part of that.
Yeah. Most of that growth is at the PSX level. The midstream, the MLP has grown from approximately $1.1 billion last year to $1.2 ending run -rate end of this year, exit run -rate $1.3 billion. The bulk of that growth is actually taking place at the PSX level.
Okay. For me, I'm just tired of arguing with Jeff. I think that Jeff and Brian probably have pretty constructive views. Brian, you want to chime in? What are we seeing today in IMO in the marketplace?
Yeah. Well, if you just look at the differentials between high sulfur fuel oil and the compliant fuel, that differential is over $40 today. You can see, if you take a look at the forward curve, there's something there, and we're starting to see ship owners ask us to supply them, starting to see the value of the product. For us, it's here. I wouldn't say we've been negative or even Greg's been negative. He's just been less positive. That's our conservative nature at our company. We like to be conservative, and that's how we operate. We can see the advantages, and we can see the advantages in our own system with the coking capacity and the distillate yields and our expertise in blending compliant fuels. We feel pretty positive.
Matt Blair.
Thanks. Matt Blair from Tudor, Pickering. Greg, do you view marketing as the long-term part of the portfolio, or would you be open to spinning it if valuations dictated? Could you also touch on the IDR situation at DCP? Are you looking to eliminate those and any sort of timeline you could provide?
Yeah. Okay. We look at our marketing and specialties business as a strong competitor. Certainly, very stable cash flows, $1.2 billion, $1.4 billion a year of EBITDA. We've got 38% return on capital employed. It's a star in our portfolio. Importantly, particularly in the U.S., it's a source that allows us to put these refining volumes to bed at good values rather than showing up at the rack on the spot and taking the lowest price available to you. I think it's certainly a strong business. It's a business that we value. I think there's markets that are highly liquid, like Texas and New York Harbor, where we don't see a way that we bring a lot of advantage through our marketing organization.
In liquid markets, you think about the kind of the Central Corridor and the West Coast, we bring a lot of value to the U.S. and those organizations. Brian, I'll let you defend yourself if you want.
Okay. I think in the U.S., would be very difficult to do anything with the business because it's mostly a wholesale business, not a retail business. As Greg said, it's integrated with our assets. As we talked about the retail joint venture we're doing, that's another opportunity to integrate. We're going to do that in small areas. We actually already have a retail joint venture in the United States in Oklahoma City. When we looked at around the Ponca City Refinery, we said we need more integration. We're not getting it enough from our wholesale branded customers. We started in 2014, a retail joint venture, small 36 stores, but now we have 35% of the market share in Oklahoma City as an example.
There's a real value for adding retail to kind of fill in to make sure we have the integration, because if you believe that demand in the U.S. is going to start to slow, and again, Greg said we were talking about that for a long time, but if you believe that, the alternative is to export your product, and in some markets, exporting is not possible. In Middle America, it's hard to export out of Middle America. Additionally, in some markets like the West Coast, exporting may be a cost versus domestic barrels. If you can get the barrels in the domestic market, that's where you want to get it. If you have the integration, you're going to be ahead of your competitors.
Okay, DCP. DCP is a much different company today than it was back in 2015. If you go back to 2013, crude is $100 essentially, NGLs are $0.92, DCP 4x levered. They are making about $1.1 billion a year EBITDA. Kind of fast-forward to 2015, crude falls in half. NGLs, they go to $0.49 or so. We find DCP is 8x levered, generating $600 million of EBITDA.
We had to do something. We invested between Spectra and ourselves, $3 billion into DCP to buy time for Wouter and his team to do what they needed to do. I think they have done a really nice job. They have taken 20% of the headcount out of DCP. They have restructured their contract portfolio. They have gone from mostly commodity exposed to mostly fee-based. Their marketing logistics business has been increased from very little to more than 50% of their business.
In today's environment, with $55 crude and kind of $0.47 NGLs, they're back to under 4x levered and $1.2 billion of EBITDA. You can see the progress that they've made. I think that Wouter and his team have been working on all the right things. I would tell you, for us as owners, the status quo is not acceptable. We have to deal with IDRs. I think we see a clear path to how to do that now. I think that's a good thing for DCP. Then I think Wouter and his team, they've got to figure out how they're going to grow distributions in the environment they're in, and that could be asset related, it could be cost related, but they're going to have to come forward with a plan that generates 3%-5% distributable cash flow growth.
A, to get the market back interested in them because they're trading at a 13% yield. B, to make their owners happy because we expect distribution growth out of DCP.
Prashant.
Yeah.
Thanks. Prashant Rao, Citigroup. I wanted to ask a question on the renewable diesel project. You've historically been very conservative and prudent on refining CapEx spend, especially in growth, and this looks like a pretty targeted suite of projects with three renewable diesel projects in there. A couple of questions there. One, when you talked about the potential for some of these projects to present, it's like over 50% sort of returns. Where does renewable diesel sit on that spectrum? Then two, when we think about the appetite for adding on to this suite as we go forward, what are some of the considerations geographically between the U.S. and Europe? Then also maybe some of the constraints in terms of feedstock supply and sourcing and things that we may need to think about.
Let me take it from a high level then Jeff and Brian can kind of chime in, and Bob. When you have a business model where the feedstock costs more than the product that you're selling, and you're depending on the credits to make your return, that always bothers me. When you look at our approach, if you dissect it down, it's using existing assets, it's using partnerships, and it's using business arrangements to use other people's technology. We're trying to triangulate on the best value-creating model, if you will, to supply that. I think over time, our plan would say that we want to meet about 80% of our requirements for Low Carbon Fuel Standards through our own sources, and then we'll probably use credits for the balance because we're not sure exactly where this is going to go.
Our own view is that the ultimate objective of CARB is not achievable, and so you don't want to get over invested in this space. Certainly, 50% returns are very attractive to us. I think this is a space you want to be really careful in. Brian or Jeff or Bob, if you want to add.
I would just say, with the products we have now, we have line of sight on 30,000 - 40,000 barrels a day renewable diesel. That's a good start because we're starting at zero today. That's the next few years, as Greg said, as we take a look at what the market demands, we'll think about the next projects. We have opportunities to expand in those projects as well. We could use those projects as a base to continue to expand. As I mentioned in my presentation, the next thing to think about is how do we sell those barrels? Because we want to get to the end users where we don't have to share in the credits or the obligations.
Whether they're through municipalities or through truck stops or however we want to sell those barrels to make sure that we retain all the credits associated with renewable diesel.
I do think that we'll see the LCFS standard move beyond just California. It's going to go into Oregon and Washington State, into Canada also. I think this is something that we're going to be dealing with over the next decade or so.
Benny?
Thanks. Benny Wong from Morgan Stanley. Just wanted to get a sense, maybe an update on strategy and outlook on the crude sourcing strategy on the West Coast, and maybe comment on how the difficulties in railing crude in Washington now is for you guys and your strategies to work around that.
Okay, good. Bob, you want to take that, and then Brian?
I think, when it comes to California, with the SJV supply continues to decline over time, we look more and more towards foreign source barrels, particularly in Los Angeles, where we have the capability to run foreign source barrels quite easily. In reference to Washington, the law as written about volatility of crude stuff has impacted us a little bit on our rail rack as to the maximums we can run there. We, as an industry, are challenging that law. I think we'll be successful. At the end of the day, we're supporting North Dakota on that challenge, I think eventually we'll get back. The impact right now is immaterial, I would say, on our crude supply into Ferndale.
Brian, you want to comment on West Coast and crude supply?
I would just reiterate what Bob said. As domestic demand decreases, we bring in barrels as far away as Saudi Arabia, Arab Light. We bring in barrels from the West Coast of Latin America, including Ecuadorian and Colombian barrels. We have a huge portfolio of crude to satisfy our needs in the West Coast.
All right. Brad?
Thanks. Brad Heffern from RBC. Couple of questions for Brian, just on the West Coast JV. First of all, has anything changed on the West Coast that made you want to change the retail model that you pursued there historically? Is this something that we're going to see in more markets going forward? Yeah, that's it.
As we spend a lot of time thinking about strategy basis, every one of our refineries, and if you take a look at the West Coast, it's a tough market. If you don't have retail and integrated sales from your refineries, over time, you're going to have to export. Our view is that export will be at a negative versus the import market. It was important for us to think about integration. This is an opportunity for us to integrate. It's not the first joint venture retail business we have. We also have a joint venture in Oklahoma City. I think as I mentioned in the presentation, our goal for retail, we want to remain a wholesale branded marketer.
We'll remain a wholesale branded marketer into the future, but where we see opportunities to fill in with retail, where we see markets where we don't have the strength that we need to have to get the offtake from our refineries, we're going to fill in with retail. I don't think anything's changed. It was a great opportunity. We want to have the long-term offtake from our refineries. West Coast is a tough market, and having that offtake puts us in a competitive advantage.
Chris?
Hi, good morning. Chris Sighinolfi with Jefferies.
Yes.
Greg, I don't know if this is for you or Mark, I wanted to go back to a question Roger was asking earlier about CPChem. Just as you work towards FIDs on two major projects, should we think about the cash that's been paid out by CPChem maybe being restrained ahead of maybe some big capital investments there? Second, there were some articles this summer about potential interest perhaps in acquiring a competitor. I'm just wondering at what point you and your partner would be willing to maybe participate in capital spending down at the CPChem level. I have a follow-up.
Okay, good. First of all, we expect that our joint ventures are self-funded. That's point one.
The way the formation agreements work at CPChem is we essentially hold enough cash to pay what we think is going to be the capital plan for that year, everything, and then we distribute for taxes and everything else. We really don't hold a lot of cash at CPChem by design. CPChem has a balance sheet, and they have cash generation. We'd fully expect that they would utilize that. They've got a pretty good portfolio of great organic projects in front of them. Mark didn't talk about maybe some of the other opportunities. Maybe I'll give you a chance, Mark, and be thinking about that, of what we can do debottlenecking, expanding around the portfolio. I don't think we have to go to an acquisition or merger at CPChem to continue to create value. I think we're like everyone else out there.
We look at everything every day, and if we can find something that would create value, I think we'd probably be willing to do that. That would be the exception versus the norm at CPChem.
I think the first comment I'd make is that if you look at our capital outflow with these two new projects, doing them both with Qatar Petroleum makes that profile look about like our profile was with Gulf Coast 1, but we've got a higher ability to generate cash at the same time because of that earlier investment. In the interim period, we're looking at a number of debottlenecks, a number of kind of brownfield things that we can do to continue to incrementally really add capability to consume ethylene, because we've got a great ethylene position in the U.S. I did mention the capacity. We're going to add another furnace to our newest cracker in Baytown. That will give us enough to really cover the hexene project is another ethylene derivative. We're continuing to grow that way as well.
As Greg said, we've got options between our balance sheet or even these larger projects where we're looking at the possibility of project finance, and we'll sustain ourselves that way.
Yeah. Okay.
Thank you for that. I did have a follow-up, if that's possible.
Okay.
That's just, you've mentioned numerous times on conference calls, you mentioned again this morning, the intrinsic framework for your buybacks, and Kevin has as well. I'm just curious, you've been a very ratable buyer of your own security over time, and that has its own benefits, but because you couch it in an intrinsic framework, and I'm not looking for a number.
Good
Just more of an idea around what is that. Can you help us understand your internal framework?
Sure.
Thanks.
I think we're about $73 all in today, or $74 in our entire share repurchase program. We have a matrix that we reset every quarter. Share price goes up, we buy less. It goes down, we buy more. We're thinking about intrinsic value based upon our view of the world three years out. We're putting in our model numbers, and we're using historical multiples. You think about eight-ish for chemicals, you think about eight for marketing and specialties, 10-12 for midstream, and kind of five to six for refining would get you kind of that historical basis of multiples. We'll just do the sum of the parts, and if we're trading below that, we're buying.
I think we've got time for one last question. Elvira?
Hi, thanks. Elvira Scotto with RBC. This is a PSXP question. I think PSXP has outperformed largely because it's really stuck to its knitting. As we think about PSXP longer term, I know you mentioned that a lot of the midstream assets at PSX will flow into PSXP. You also talked about third-party M&A. Can we expect more of the same PSXP largely fee-based logistics assets, or do you see longer-term expansion into other areas and other areas potentially closer to the wellhead?
Yeah. I'll talk and anyone else who wants to pile on, they can. I think our view is we'll keep PSXP pretty clean in terms of a fee-based MLP. Where DCP goes, I think that's a question for the future, and do they do something different. In terms of the PSXP master limited partnership, we've got great portfolio organic growth projects. We can continue to grow it. The equity markets may or may not ever come back our way. We'll see. If they do, we'll think about that. In terms of dropping assets, the point is, for the immediate future near term, we really don't have to drop anything. We really don't have to go to the equity markets. We can execute these great growth projects that we have within the capability of PSXP. Since it's a sponsored MLP, we have a choice.
Do we put these projects at PSXP or do we execute them at PSX? Given the cost of capital of PSXP, given the transparency we get from the multiple of where it trades, we want to do as much as we can at PSXP over time. That's kind of the framework we use and how we think about it. With that, we're out of time. Thank you for being here. We appreciate your interest in our company and your questions and your thoughtfulness, and we'll see you sometime in the future. Take care.