Good morning, and welcome to ExxonMobil's 2020 Investor Day. We very much appreciate you joining us this morning, and we look forward to an engaging discussion today. For those of you that I have not met yet, my name is Neil Hansen. I am the Vice President of Investor Relations and the Secretary. I want to begin by reminding you of the safety procedures here at the New York Stock Exchange. There are two exits from this room, one to the left of the stage and one in the back of the room. Both of these will take you to a stairwell down to the street level. In case of an emergency, there will be an audible message that will give instructions and stock exchange personnel to provide directions.
I would ask that everyone please silence any electronic devices, including cell phones and tablets, so we're not disturbed during the presentation. This month marks the 100th year of ExxonMobil's listing on the New York Stock Exchange. In recognition of this impressive milestone, we have provided you with a gift at your seat to commemorate this special occasion. Next, I would like to draw your attention to our cautionary statement, found in the front of the presentation material and our supplemental information. As you know, these statements contain information that is relevant to today's discussion, and I encourage you to read them. You may also access our website at exxonmobil.com for additional information on factors that may affect future results, as well as supplemental information that provides definitions for some of the terms that we will use today. Let me start by reviewing the agenda.
Darren Woods, Chairman and Chief Executive Officer, will lead the presentation today with members of the Management Committee. Darren will begin with an overview of the business fundamentals supporting our investments and our plans for growing shareholder value. Neil Chapman will then provide an update on the upstream business. Jack Williams will provide updates on the downstream and chemical businesses and give some perspective on our new global projects organization. Andy Swiger will close our discussion with some insights into the technology that we are developing and deploying, and then review our investment and financial plans. We'll have an opportunity, after prepared remarks, to take questions. At the conclusion of the morning session, we will host a lunch on the seventh floor of the Stock Exchange.
Before we get started, I'd like to take a few minutes to walk through an update to the price and margin basis that we will use today throughout the presentation. These changes are being made in response to the feedback that we've received from many of you during the past year. I'll start with the fundamentals. We operate a capital-intensive business. It's a commodity business, as you know, that is subject to price and margin cycles. The business results we deliver are obviously substantially impacted by the price and margin environment in which we operate.
Recognizing that the business moves in cycles, it is important to establish a constant price and margin basis to evaluate the structural business improvements that we are making, as well as provide a framework by which we can communicate the changes in the capacity of the business to grow earnings and cash flow over the long term. It's important to note that the basis we have provided is in no way a prediction of the future market environment. Further, it's not used as a justification of our investments. As we have said many times, our investments are tested to ensure they are robust across a range of prices and market scenarios.
When we first communicated the growth potential of our business back in 2018, the intent was to demonstrate the structural improvements underway that would increase the earnings and cash generation capacity of the business relative to the price and margin environment in 2017. Now, with the passage of time, as prices and margins have moved through the cycles, using that specific point in time as a reference for future growth has become less relevant. We are updating how we communicate the potential of our business in two important ways. First, we are updating the price and margin basis to reflect five-year historical averages, which we believe are more indicative of the commodity cycles that we typically experience. Second, we are providing ranges of potential for each of our businesses, using the high and low points over the past five years.
We've also indicated what we would expect results to be if 2019 market conditions persist. The key takeaway from all of this is there is no change in the underlying business improvements that we communicated to you two years ago. The next two pages show how the previous price and margin basis compare to the five-year averages, again, as well as the high and low points that we've used to illustrate the ranges of potential. We've included additional information in the supplement for your reference. With that, it is now my pleasure to introduce Mr. Darren Woods, Chairman and CEO of ExxonMobil.
Thank you, Neil. Good morning, everyone.
Good morning.
Come on, now. A little bit of energy here. It's really good to be back to share some plans with you today, and I appreciate all of you joining us here, and for those viewing remotely. As Neil said, today's event coincides with our 100 years of ExxonMobil's listing on the New York Stock Exchange. That, I think, is a noteworthy accomplishment and really a great backdrop for the discussion we're going to have today. I think also, though, it's important context for viewing the current challenges that we see in today's market. You all know, today, oversupply is driven by industry investments, and some of these growth markets have exceeded demand. We've got a very challenging short-term margin environment, which is now being compounded by the growing economic impact of the coronavirus that we're seeing around the world.
That is creating a lot of uncertainty, particularly in the near term, and I would say particularly here in Wall Street. However, the longer-term horizon is clear, and today our focus is on that horizon and the future, and on providing all of you an update on the progress we've made on our long-term plans to structurally grow our earnings and cash flow while improving returns. We're going to spend some time this morning highlighting the advantages we expect to gain from really leaning into this market when others have pulled back. While saying that, remain very mindful of the challenges of the current market environment. We'll show how we're leveraging the flexibility of our plans to adjust the pace of development.
I am going to highlight how our plans are built around supporting society's dual challenge, meeting the increasing demand for energy, while lowering carbon emissions to address the risk of climate change. The full management committee is going to share our perspective. Neil and Jack are going to provide updates on the progress we are making across each of our businesses. Andy will show how all that translates into our financial results across a wide range of price scenarios. We are also going to devote some time to describing how two of our key competitive advantages, project execution and technology, are driving value today and ensuring that we remain well-positioned for success in the future. As Neil said, after that, we will take some time to address your questions. What is our discussion going to focus on? A few key themes.
I'll cover the fundamentals, how growing global populations and increasing prosperity are driving a corresponding increase in energy demand, which supports our investments and the industry's investments in oil, natural gas, and chemicals. We'll also discuss how consumer demand is evolving towards cleaner and higher value products, and how those changes are driving our investments in refining and technology. Two years ago, we laid out a plan to expand our earnings and cash flow potential of our businesses, and today we are reaffirming those plans. They're supported by our advantage investments, projects, a very robust portfolio of investments, a favorable cost environment, and the opportunities created by the industry under-investing. As Neil covered in his opening remarks, the nature of our capital-intensive commodity businesses result in price and margin cycles, which really underscore the importance of investment flexibility and the advantages we have to successfully manage through that flexibility.
Today, we'll cover some of the adjustments that we've made while preserving the advantages and the value of our projects. We'll provide an overview of some very important R&D work that further strengthens our advantage of our investments, our business, and importantly, are working to develop solutions to address the risk of climate change. Today, we will demonstrate that we are delivering on the structural business improvements and the growth potential that we shared in 2018. We're doing that despite the significant swings in the commodity price and margin cycles, which I want to spend just a little bit of time now talking about. We all know these commodity businesses generally rise and fall with the overall market. Capital-intensive commodity businesses have the price margin cycles. When demands exceed supply, prices rise, revenue increases. That sparks investment.
Highly competitive markets with lots of independent players start investing and tend to then overinvest. Supply exceeds demand. Prices drop, revenues drop, investments pull back, eventually growth catches up to that and we see prices rise. A very classic commodity cycle. This is very well understood. If you're focused on the here and now, the short term, current conditions, and let the current conditions define the industry, which is a lot of what I'm hearing today, you take a very different view on the future. For us to successfully run this business, we've got to take a much broader perspective and a much longer time horizon. The chart that you see here on the left is for polyethylene, which is our proxy for our chemical business. You can clearly see the cycles.
Some will question, will we recover from this low as we have in the past? The answer lies on the right-hand side of the chart. It shows solid demand growth for a product that enables modern life and supports higher standards of living. Jack's going to spend some time in his section taking you through more detail on that. You see a very similar story in the downstream using refining margins as a proxy. We see cyclical margins with slightly shorter cycle times. We also see demand growth on the right, pretty steady, a little slower, but consistent as economies around the world continue to expand. Likewise, we see similar ups and downs with the natural gas prices in the upstream. Again, on the right, a steady growth and demand.
You lay all those on top of one another, we see reasonably good growth businesses where capacity investments have overwhelmed the growth and demand, leading to the down cycle and waiting for demand to catch up. These are typical cycles. Unfortunately, they're hitting multiple businesses at once, creating a short-term issue that unfortunately is impacting short-term industry earnings. Now I look at the chart, and the question I ask myself, and I would ask all of you is, when is the best time to invest in these types of businesses? We expect these down markets to discourage industry investment, setting the stage for a significant upswing. We believe the best time to invest in these businesses is during a low, which will lead to greater value capture in the coming upswing. You can do that if you have the opportunities and the financial capacity, which we do.
This is a key competitive advantage of ours. The red line on this chart shows the debt-to-capital ratio for our corporation over the last several years. The range for our competitors is shown by the blue band. We have been, as you can see, and continue to be, at the bottom of the range with a very strong financial position, one we've had for decades. To realize the value of this, it has to be deployed, which is an integral part of the strategy that we laid out. The red shaded range here shows a projection of our debt-to-capital ratio based on our current investment plans, assuming cycle average margins for the downstream and chemical businesses and crude between $50 and $70 a bbl.
As you can see here with crude at $50 a bbl, for this entire timeframe, our debt-to-capital ratio remains below 25% and at the low end of the industry. Let's take another scenario. A more aggressive one, where we have sustained low margins for the Downstream and Chemical businesses, similar to what we see today over this entire timeframe, and we have crude at $50 a bbl over this entire timeframe. Our current investment plan would result in a debt-to-capital ratio shown by the top of that hatched area. Under that scenario, our debt-to-capital would rise to 30%, still within the range of peers. I want to be really clear on this chart. We're not predicting this, nor do we expect it.
Being at the low end of all of our businesses for the five-year period, we haven't ever seen that in the past, we wanted to stress test it. I would also tell you, if we found ourselves in this unprecedented environment for five years, we would change our plans. The point of this scenario is that we wouldn't have to. We would still remain within the historical range of our peers. Using our balance sheet to invest through the cycle is a key element of our strategy and how we take advantage of that key competitive advantage, enabling us to invest in advantage projects, capture value in an attractive cost environment, take advantage of low-cost debt, and strengthen our position for that eventual upswing while improving our market position.
Having said all this, we want to be judicious, preserving capacity and optionality to ensure that we maintain balance across our longstanding capital allocation priorities. We remain committed to a reliable and growing dividend, which we've demonstrated through 37 years of consecutive growth. We're also committed to building a strong foundation through advantage investments that underpin our long-term success and grow earnings and cash flow. The progress that we've made over the last year has only reaffirmed the advantages and the value of our existing investment portfolio, including the advances we've made in the Permian, additional exploration discoveries in Guyana, and the success of our recent downstream and chemical projects, which have been accretive to earnings and cash flow, even in this very low margin environment.
With these challenging conditions, we have stepped back to evaluate the pace of our business improvements, and we've tested options to defer investments without compromising their advantages or their value. To date, we've slowed some spending, which will have a minor impact on short-term volumes, but no material impact on the structural business improvements that we've committed to. Over the course of the presentations today, we'll cover these changes and their impact. We're also increasing the organization's focus on expense management, ensuring every dollar spent is necessary and generates additional value. This year, we'll reduce our operating cost on our base assets by over $1 billion. It will be even better in 2021.
As we move forward in this year, we'll obviously keep a very close eye on market developments to make further adjustments if necessary. Given the advantages of our projects, the industry decline rates, and the growth and demand that I showed, we're being very, very thoughtful in our deferrals. We want to ensure that we're well-positioned for the inevitable upswing as growth and demand outstrips current supply. We certainly don't want to compromise our ability to meet society's growing needs, which I want to turn to next, the fundamentals that drive demand for our products. I've talked about this before. It begins with people. People trying to improve their standards of living, access to food, water, and housing, light, heat, and air conditioning, access to medical treatment, transportation, higher levels of education and income, all that leading to improved living conditions and longer and healthier lives.
The United Nations characterizes people's wellbeing with the Human Development Index. It measures achievement in three key dimensions, gross national income per capita, which is a proxy for standards of living, longevity, which is a proxy for health, and years of education. This chart links the index for a country shown on the Y-axis with energy consumption shown on the X-axis, and the size of that bubble represents the population size. As you can see, there is a clear correlation. As living standards rise, so does the consumption of energy. This makes sense if you think about all the modern conveniences of life.
For those of us here in the U.S. and much of the developed world, which you can see in the upper right of the chart, it's difficult to imagine that half of the world's population, roughly 4 billion people, have a life expectancy that is 10 years less than ours and receive a third less education. 900 million people still don't have access to electricity. This has enormous implications for the future of energy demand. As billions of people strive for better living conditions, the world's demand for energy and products that support modern life will grow, this relationship is very important and critical to our strategies and our investment plans. In fact, it underpins them all. Between now and 2030, the global population is expected to grow by approximately 1 billion people. The middle class will expand to more than 5 billion people.
That growth drives demand for energy, which is expected to increase by 20% between now and 2030. Unfortunately, it also drives an increase in emissions. The lack of widely available and affordable energy alternatives will lead to emissions growth of 9%, driven primarily by the expansion of the middle class in developing areas of the world. Some people question this, particularly since the signing of the Paris Agreement. This chart provides a little perspective on that. Since signing the Paris Agreement, global emifactorssions have risen by 4%, with a corresponding 6% growth in energy demand. This is society's challenge. This is the dual challenge that I talk about, meeting the growth and demand for energy while reducing emissions. Let's focus on the sources of this challenge. I'm gonna start with some context using the most recent data, 2017.
The energy system accounts for about 65% of the world's total GHG emissions. Of that, nearly 2/3 come from non-OECD countries. Going forward, all the growth in global emissions is expected to come from non-OECD countries. This is important. If society's gonna find solutions to significantly reduce the world's GHG emissions, the solutions have to work in non-OECD countries, which means they have to be affordable, and they have to address these three sectors, commercial transportation, power generation, and industrial, which account for more than 80% of energy-related emissions. Today, hydrocarbons meet more than 85% of the energy needs from these three sectors. Why is it? They are the fuel of choice. They're energy-dense. They work at scale. They're easily transportable, therefore globally available. Most importantly, they are affordable.
To reduce energy-related emissions, the world needs alternatives in these three sectors that consistently provide those same benefits across all economies and geographies. Unfortunately, today they don't exist. That's where ExxonMobil thinks they can make a difference by leveraging our long history and strong capabilities in researching new technologies, developing them, and then deploying them at scale. We hope to expand the solution set and help fill the gaps in today's existing set of alternatives. Let's look at the challenges and start in the commercial transportation sector. The donut on the left represents the share of total energy demand from commercial transportation, 11%. The donut on the right shows the share of total energy-related emissions from commercial transportation, about 15%. Barriers to affordable, scalable solutions include lack of energy density, which is absolutely critical for long-haul transportation, battery range and storage limitations, and the potential need for new infrastructure.
What are we doing? We're looking at advancing potential solutions to address these barriers by working to develop advanced biofuels from algae and cellulosic biomass. In addition to providing the necessary energy density, they can leverage existing infrastructure, which encourages broad adoption and accelerated penetration, and at the same time, they're reducing emissions significantly compared to today's fuels. Turn to power generation, which represents 40% of energy emissions. Advantages of today's alternatives vary by geography. As we've seen here in the U.S., there's tremendous potential for natural gas to replace coal and significantly reduce emissions. However, coal remains widely available and can be lower in cost in some areas, particularly developing countries, which becomes a significant barrier to switching. Wind and solar, while growing rapidly, are challenged in some areas.
Availability of sunshine and wind, density, solar and wind are diffused sources, so require large installations, and then intermittency, requiring redundant power sources or significant advances in storage and transmission capacity. What is ExxonMobil doing? Instead of trying to replace the world's existing power generation system, we're collaborating with others in researching more effective technologies to capture the carbon they emit. Using existing infrastructure significantly lowers the cost of transition and could accelerate decarbonization of the power generation sector, particularly when you couple that with natural gas. Our developments in this area are leveraging decades of experience in capturing carbon dioxide. ExxonMobil has cumulatively captured more CO2 than any other company, accounting for more than 40% of all CO2 captured in the world. We're working on fuel cells that concentrate CO2 while generating power, and new materials to separate carbon dioxide from air, increasing the potential for direct air capture.
In this space, we agree with independent experts, carbon capture is absolutely necessary if society's going to achieve its aspiration of eliminating CO2 emissions. The industrial sector, which manufactures the basic building blocks of modern life, including cement, steel, and plastic. It's the third emission-intensive sector, accounting for 30% of emissions from energy use. Given the energy intensity required for this sector, today, there are no real alternatives, with the exception of carbon capture. We're progressing novel technologies in support of energy-efficient manufacturing. We're looking at advanced membranes, state-of-the-art catalysts, and new equipment designs. We're also looking at fundamentally redesigning our existing processes to require less heat and energy. We're also looking at technologies that could potentially replace energy-intensive materials like steel and concrete. Imagine if city buildings were made of novel materials with a much lower GHG impact. That's a game-changing concept and one that we're working on.
You'll hear more about this in Andy's section on technology. Now, as excited as we are about the potential of technology, we recognize that discovery, development, and deployment will take time, particularly when you consider the scale and complexity and all the existing infrastructure of a global energy system. This chart provides a perspective of the time required for a transition using history and a projection from the IEA's Stated Policies Scenario. It took roughly 100 years for oil to replace coal as the world's dominant form of energy. While coal has been recognized for decades as a carbon-intensive, particulate-laden energy source, its use continued to grow through 2013. Traditional biomass such as wood, crops, dung, and garbage still are widely used as a source of energy in many societies today, despite its many deficiencies and the impact on health. Its use illustrates a fundamental reality.
Society's choice of energy is often driven by availability and affordability. Alternatives will have to meet these requirements before they become widely adopted, and even then it will take time. Oil and natural gas will continue to be needed, with the IEA estimating their share of total energy in 2040 to be more than 50%. Even in a hypothetical less than two-degree world, as shown in the IEA Sustainable Development Scenario, oil and gas still represent nearly half of the world's total energy mix. This is an important point, a really important point which is worth pausing for, particularly given the rhetoric that's out there today. Knowledgeable, independent third parties confirm the importance of oil and gas well into the future. Transitioning a large, complex, capital-intensive global system that, by the way, plays an incredibly important role in people's lives, is going to take time.
When depletion is factored in, substantial industry investment will be needed for the foreseeable future, which you can see in this slide. Oil demand is expected to grow at 0.6% per year, and natural gas demand to grow by 1.3% per year. When you factor in depletion rates, new oil production needs to increase by nearly 8% per year and natural gas by 6%. You can see this when we overlay our demand charts with the depletion charts. The green and red areas on the chart show existing supplies that decline over time. The lines show the demand, and the gap between the two is the additional supply required to meet that demand. Under a range of scenarios, including third-party 2-degree scenarios, which are shown by the red diamond, significant investments in oil and natural gas are required.
In fact, the IEA estimates that approximately $20 trillion of additional investments are needed by 2040. This is a compelling investment case for ExxonMobil and the industry. If you look at our investment plans, they roughly maintain our share of the world's oil and gas market at less than 3%. The rest of industry appears to be falling behind. The chart on the left is from the International Energy Agency as well and shows annual levels of conventional resources approved for development. Relative to 2011, investment levels are significantly down and well short of what the IEA believes the world needs. You can see this in the two bars on the far right of that graph. These show two different IEA scenarios, including the Paris-compliant Sustainable Development Scenario.
In five of the last six years, industry has failed to sanction enough developments to meet the requirements of either scenario. The chart on the right demonstrates the challenge the industry will have going forward. It shows global resource discoveries and exploration spend. You can see in 2019, exploration spend was down more than 60% relative to the highs. Over the last seven years, industry has failed to discover the resources needed for either one of those scenarios. In 2019, only 16 billion bbls of resource was discovered. This represents just 2/3 of the annual resources needed under the Paris compliant Sustainable Development Scenario. I'll look at this through another lens. This chart shows the average reinvestment rate for the leading IOCs. Over the last 10 years, the IOCs' average investments exceeded 75% of their operating cash flow.
Based on their announcements, investments as a % of cash flow will drop 25%, well below the investment levels the IEA believes is needed. Interestingly, their relative levels of investment are now consistent with our historical rate of spend and in line with our go-forward plans, albeit with a much weaker set of opportunities. Our investment portfolio leads industry and is the best we've had since the merger. Each project is robust to a range of price environments and leverages some combination of our competitive advantages, yielding an average portfolio return of 20%. We continue to see upside potential in many of them and remain very committed to their development. As such, our CapEx guidance over this plan horizon remains consistent, between $30 billion and $35 billion per year.
In 2020, we expect to be in the bottom half of that range, a decrease from what we said last year when we projected that we would be in the top half. Of course, our actual investment levels will depend on the developments in the industry environment for both product prices, which move around quite a bit and change what comes into the corporation, and development cost, which up to now have been very favorable. As industry has pulled back from investing, the oversupply in services has led to a very attractive cost environment. You can see that in both of these charts. Lower onshore and offshore construction costs, so think of steel, materials, and construction labor, have created a favorable environment. Drilling rates shown on the right are down considerably from recent levels, providing additional advantage as we've scaled up our developments in the Permian and in Guyana.
You can also see that seismic rates are down, providing significant support for our exploration activities. This is an area we watch very carefully, to make any adjustments that we think are necessary to maximize the value of our investments. What I would say is while a low-cost environment helps and adds to our existing advantages, it certainly doesn't define them. Our criteria for an industry-leading returns are met by the unique capabilities of our organization. As I've spoken about on many occasions, technology, scale, integration, functional excellence, and most importantly, people. Each of these advantages is significant in its own rights. When you take them together, they provide a competitive position unmatched in our industry.
As Neil, Jack, and Andy take you through their presentations, you'll see how these strengths are manifesting themselves in our work and future results. It's going to allow us to deliver on the structural improvements that we laid out two years ago. In each of our businesses, we are delivering on the commitments we made in 2018 to invest in projects that generate industry-leading returns and improve our competitive position. As we move through the presentation, you'll see the progress that we're making in each area. I'm going to summarize it very succinctly. The work that we've done over the last two years has only improved the benefits and grown our confidence in these projects. By 2025, we will approximately double the corporation's earnings and cash flow capacity from when we first introduced the plan.
Of course, today's current price and margin environment is very different from when we first discussed this plan, and no doubt it will be different in 2025. Our plans and investments are not dependent on a specific market environment. Each of our investments are robust to a wide range of price scenarios. In fact, we demonstrated that last year with the downstream and chemical projects that we recently started up. Even in that decade-low price environment, these projects contributed positive earnings and cash. We don't control prices and margins, but we do control the quality of the projects and their inherent advantages. You can see in this chart on a 2019 constant price environment. Last year's price environment, taking to our plans going forward, you can see that earnings still almost double in that environment from 2017.
Of course, we also control the pace of execution, and to date, that pace has served us well, allowing us to capture a lot of cost savings. As the price environment evolves, we'll continue to evaluate that pace and adjust where appropriate, ensuring that we're still realizing the advantages of our projects. Before I hand things over to Neil, let me quickly recap. Energy is essential to human development, and demand will grow as the global population increases and more people move into the middle class. This fact, coupled with the evolving consumer demand, including the desire for lower emissions, underpins our technology efforts and our investments. Our portfolio of investments look even better today and remain robust to a wide range of price environments.
We have the capacity to weather the short-term impacts of the price cycles, but can make adjustments to preserve optionality without compromising the value of our projects. Finally, we are delivering on the plans we laid out in 2018 to structurally improve our business. With that, let me turn the floor over to Neil so he can discuss how all that translates into his business. Neil? There you go. Have fun.
Well, good morning, everybody. As Darren said, in the next 45 minutes or so, we'll look at the Upstream part of the corporation. The intent is to provide further transparency, not just on our performance, but on the progress we're making towards our value growth plan. Like Darren, let me start with some overarching messages on our Upstream business. These four messages here will serve as the flow for my part of this morning's presentation. The majority of the Upstream organization are focused on driving performance from our current assets. Actually, I'm not going to talk a lot about that this morning, but that doesn't reflect on the very high level of importance that we place on driving value from our current facilities. I said before, the key to winning in this Upstream business is developing the most competitive value growth portfolio in the industry.
There are three key drivers to achieving that objective, and they're captured in the next three bullets on this chart. First, high-grade your portfolio by divesting less strategic assets. We're on schedule with the targets and plans that I laid out here last year. Second, we need to high-grade our portfolio by investing in the most competitive developments in our industry. Our developments are unmatched. They're the strongest set of developments this corporation has had since the merger of Exxon and Mobil. We have five key developments, all generate high returns. All generate high returns at low prices. The portfolio contains flexibility in the pace of execution, and I will reference that as we go through these slides coming up. As Darren commented, we are adjusting our execution pace and our CapEx spend based on the current business environment.
Third, we must maintain a strong pipeline of new opportunities. At its core, this is an extraction depletion business. Critical to our long-term success is finding competitive opportunities to offset depletion. We have had unmatched exploration success in recent years. I'll discuss this success at the end of my presentation. Let me turn briefly to getting the most out of our current facilities. The chart on the left sets our high-level expectations of our existing or current assets through 2025. Of course, depletion and volume decline will happen. The objective is to offset that decline where economically practical. Typically, that's well work or infill d rilling. These are often among the lowest cost and the highest return bbls. We are constantly assessing where capital is spent on our existing assets.
For example, the current low Henry Hub prices in North America, and with the amount of associated gas that's being produced with liquids production in North America, we're reducing our capital expenditure this year on North American dry gas. I've said before, not all volumes are equal, and with the price of Henry Hub at that low price, of course, it makes sense for us to pull back capital in that segment of our business. Our main focus on these assets continues to be on cost control and reliability. Each asset that we have in our upstream portfolio is charged to maintain or reduce unit operating expenses despite falling volumes. We're now leveraging new industry benchmarking data to further stretch our organization. Operationally, 2019 was a very strong year for the upstream.
We had plenty of production records at many of our assets, and they included assets such as Sakhalin, Hebron, Kearl, and Kashagan, amongst others. This slide summarizes our divestment activities. We're on plan. As I discussed last year, we've identified divestment candidates based on the combination of the strategic fit, the materiality, and the growth potential to our portfolio. The program will streamline and simplify our portfolio. It will allow us to deploy resources on higher value opportunities. Of course, and really importantly to me, this streamlining provides the platform to further reduce costs across our upstream business. Through the end of last year, we'd captured one-third of our risked three-year target. The largest, of course, was the Norway OBO sale. Importantly, that was one year ahead of what I said last year. I had anticipated we would complete that Norway OBO sale at the end of 2020.
The opportunity was there. We've moved on that sale at the end of last year. The $15 billion target, as I said last year, it's a risked number. We don't expect success on every asset that we put in the market. If the value is not there, we're not going to transact. It's a continuous process of looking at if and when we need to put further assets in the market. Let me move next to our progress on our value growth plan. I'll focus on the five key assets that I discussed in 2018 and I discussed last year. They're in unconventional, deep water, and liquefied natural gas. It's a diverse mix of resource types. It includes short and longer cycle investments, which therefore provides optionality in investment timing and pace. All these are very competitive, all are attractive at low prices.
When I walked into the room half an hour ago, a couple of the guys here asked me, "What should we take away, Neil, from the upstream part of the story this morning?" I would tell you the success in the Permian and the success in the Guyana would be top of my list. I'm going to reflect on those in the following slides. I'll begin, in fact, with the Permian, and I'm going to start by saying I'm extremely proud of our organization who's working in the Permian. There are a lot of people working on the Permian. We're making terrific progress. I'm excited by the improvements that we're seeing every month. Most importantly, we're delivering or exceeding on what we said we would deliver on. Let's go into a little bit of detail on Permian.
The map here plots our acreage across the whole of the Permian. It contains a combined recoverable resource of about 10 billion oil-equivalent bbls. We hold a large acreage position. Importantly, we hold a large position with large blocks of contiguous acreage. You can see them on the chart there, on the map there. There are important differences between the basins. The Midland is more mature. It has largely established infrastructure. We have drilled wells, and we've installed facilities sufficient to produce 20% of our resource in the Midland Basin. That is not 20% of the resource has already been produced. It means that 20% of the resource is currently in production. It's an important distinction. Our acreage in the Delaware is three times the size of the resource we have in the Midland. Of course, the infrastructure is much less developed.
This means that we have been, and we continue to expand the surface infrastructure ahead of our significant production ramp-up. Despite that in the Delaware, we still produced about 100,000 bbls in 2019, despite having just 3% of the resource in production. 100K BOE/D, 3% of the resource in production. Our resource inventory is large, and I would tell you it is significantly underestimated by many observers. Our inventory is based on delineation that we have been doing over the last two and a half years, and our economic assessments which underpin our development plans. Our current drilling pace is 250 wells per year in the Delaware. 250. We have an inventory in excess of 6,000 wells. That means we can maintain that pace, if we choose to, of 250 wells per year for the next 20 years and beyond. There is a large inventory.
These charts summarize the allocation of our rig activity back to 2017. On the left is the Delaware. We have been in the early stages in the Delaware. Remember, the Delaware has three times the resource. We only purchased the Bass acreage in 2017. Our focus in the Delaware has been on rapidly understanding the resource and building the surface infrastructure ahead of a full-scale development plan and a full-scale production ramp-up. As you can see on the chart, the high % of rigs that have been used on delineating the resource through the middle of last year. I want to emphasize, understanding the subsurface in this unconventional business is critical to optimizing the development plan and to ensure you generate the highest value and highest return. We believe that's strongly and importantly underestimated.
The importance of understanding the subsurface to generate the value that we're going to generate from these facilities and from this resource. Having gained so much understanding, we've now transitioned the Delaware to a development phase in 2019. Remember in 2017, we just had three rigs running. At the beginning of this year, we had 40 rigs running in the Delaware Basin. Even though we've not yet had a full year of development drilling, we're seeing very solid progress. Drilling times are reducing, and we are very pleased with what we see in the rocks and with our well performance. On the right, you can see the Midland development. It's more mature. You can see that for some time, more than 90% of our rigs have been focused on development drilling. We saw strong improvements in our drilling last year in the Midland.
Drilling times were down sharply. This has continued in the first two, three months of this year. Our rig count in the Midland peaked last year at 22. As of February this year, we had 18 rigs running in the Midland Basin. This improvement in drilling times is what we had anticipated. It will result in less rigs and lower cost. Based on the improvements we're seeing, combined with the current market conditions, we anticipate reducing the number of rigs in 2020 by more than 20% this year versus where we are today. That's more than 20% versus where we are today. As you'll see later, these reductions are only having a very moderate impact on our volumes. This slide summarizes the Permian production over the last five years versus our plans. It's what I expect. We met or exceeded our plans each year.
Our volumes last year increased by about 80%. While volumes are an important metric, our focus will remain on value. I continue to believe, we continue to believe, that the way to maximize the value out of this 10 billion oil equivalent bbl resource comes from optimizing three factors: the production rates, the resource recovery, in other words, how much hydrocarbon you can get out of the rock, and capital efficiency. Production rates, resource recovery, and capital efficiency. In the following slides, I'm going to expand on how we're managing this balance. This is a key slide. It's the basis of our development plan. This is built on leveraging our unique combination of competitive advantages. On the left-hand side, I've listed those key competitive advantages. We have a strong proprietary technology set, particularly in the subsurface technology, think of it as subsurface understanding, and in drilling.
Andy is going to provide some further details and perspective on these technologies later this morning. We have large blocks of contiguous acreage that enables us to develop at scale and at lower cost than the rest of industry. We have industry-leading capability to execute major projects. The way we're developing in the Permian is a major project. As we're all aware, other companies have struggled to develop major projects on time and on budget. Lastly, we have the largest refining and chemical footprint on the U.S. Gulf Coast in the industry that can take advantage from the molecules we're producing in the Permian. These advantages form the foundation of this higher value development plan. It's differentiated, and it's tailored to those advantages. We describe it as being built on three platforms. First of all, we are focusing on cube development.
Cube development maximizes the resource recovery, it lowers capital costs, it generates higher long-term value. We're developing at scale to further drive down capital costs and to further drive down operating costs. Securing ownership and a long-term position in takeaway capacity ensures that we can leverage and take advantage of our unique Gulf Coast position. Later, Jack will discuss how we're leveraging that opportunity. From upstream perspective, this is truly applying a manufacturing approach to an upstream development. I continue to believe we have an unmatched capability to deliver an efficient development at scale. It's something that others simply cannot replicate. I'm going to focus on the two upstream components to this plan. First of all, maximizing the long-term value through cube development, and then secondly, how we're using scale to drive capital efficiency and lower operating costs. Let's look at cube development first.
I think it's well understood one of the challenges in the Permian is the stacked pay zones that can be connected. We often describe it as these zones, these laterals are in communication with each other. Drilling one well or drilling one lateral can reduce the pressure in the surrounding laterals or the surrounding rocks. This lowers the ability to recover hydrocarbons with future neighboring wells. It's a so-called parent-child effect. It's important. It's important because of the strong correlation between resource recovery and net present value. Cube drilling is the simultaneous development of multiple stacked pay zones to reduce these parent-child effects. The graphic on the left is a simplified view of a seven-rig, five-lateral cube development. The colored layers are the stacked pay zones. The red dots are the wells in the cube. The black lines, those thicker black lines, illustrate the impermeable rock layers.
What that means is the rocks above and below those black lines are not in communication with each other. You need to understand that to effectively develop cubes. A large-scale cube development is capitally efficient, but it's challenging for most operators. It requires a capacity to run multiple rigs simultaneously in one development area. It requires surface infrastructure and logistics to be in place to ensure that you have the takeaway capacity. The cost benefits of scale we see as being very significant. This is the surface view of what a rig development look like. This is seven rigs in the Midland Basin, all drilling simultaneously. The schematic. Well, I tell you, the schematic's a gross oversimplification of the subsurface. The reality is, it's not like that. It's much more complicated. The subsurface is not homogeneous. The geology and reservoir properties vary by locality.
They vary by zip code. Successful cube development is only possible-- I'm not talking about cube development, I'm talking about successful cube development is only possible if you truly understand the subsurface, understand the reservoir characteristics, understand the fluid properties. That's why the application of our proprietary subsurface technologies is so important to our development. It's key to determining the optimum well spacing, the well stacking, the lateral length, the completion intensity. Not all cubes are the same size. Not all wells are spaced equally. I read, like you do, many of the reports that talk about all of these wells being spaced equally. We don't think that's the way to succeed. You need to understand the subsurface to know where to place these wells. They need to be tailored to the local geology.
This slide quantifies the value of cube development based on a combination of our experience and our modeling. Here we compare the NPV, the value impact, of developing best wells versus best bench versus cube development. The bars illustrate the NPV from the different development options. The top two bars are developing the best wells or the best benches. Of course, it requires multiple drilling phases. You come in and drill, and then you go away, and you come back later and drill again. It does create the potential for higher initial production rates. If you're looking at IP 30s, IP 90s, even IP 365s alone, you can get high numbers from drilling the best wells and the best benches. Parent-child impacts reduce the overall recovery and reduce the overall value. The lower bar is the cube development.
In this case, all the wells are drilled in a single phase. It has higher initial capital investment, it's more capitally efficient. The parent-child effects we now know are greatly reduced by developing in this way. This 40% increase in net present value comes from the combination of efficient development and higher resource recovery. That's why focusing on metrics like initial production rates is helpful, but we don't believe it's sufficient to determine how best to attempt a full-scale development of this resource. It's not difficult to obtain high IPs, but the result is you're going to leave value in the resource. This slide illustrates two metrics on our performance in the Delaware Basin. The left is our initial production rates over a 365-day period compared to our competitors. Now, as I discussed, our focus in the last two years has been on delineation, not on full-scale development.
Even in delineation drilling, we're achieving the highest industry production rates. I would tell you that illustrates the quality of the resource that we sit on. The right compares the cumulative average production for wells we drilled in the year that's noted on that chart. The key is looking for continuous improvement recovery. I would tell you this is less meaningful during the delineation period. Delineation wells can be good, but not necessarily give you the complete answer. We bring in the Midland. On the Midland part of our development, we have had cube development for several years. Much greater experience. The Midland is more mature, and we've transitioned to this more widespread cube development. This is the recovery trend that we're targeting. You can see the significant improvement year on year, and we anticipate this continuing.
We're now applying that cube development to our larger Delaware resource. The second part of our differentiated plan is driving lower costs by developing at scale, and at scale that others are not attempting to do, I'm not sure they can do. A reminder, our plan is built on a combination of a proven track record in delivering major projects and on leveraging these large blocks of contiguous acreage, which you can see there on the Big Eddy and Poker Lake sections of the Delaware Basin. One year on, we've gained more experience in the field, and we're increasingly able to quantify the savings. Like last year, I'm going to use the highlighted block, which is Poker Lake, to demonstrate what we're doing. Our plan is based on multi-well pads arranged in development corridors. These corridors are up to 10 mi in length, not possible without contiguous acreage.
The blue squares are the individual multi-well pads. The number of wells on each pad may well vary. Typically, we're drilling 10,000-foot laterals. If you think about the space between those corridors, north to south, there's some four mi distance. If you go out into the Delaware Basin, you'll see a bunch of rigs, and way on the distance, you'll see the next set of rigs. The key here is to develop all the geography in the most efficient manner. One obvious benefit is from moving the drilling rigs short distances between wells with this approach. The contrast is moving longer distances, which costs more money, and that's typical with the checkerboard acreage that most of the industry sits on. It's not just about efficient drilling. This approach drives capital efficiency above ground as well. Surface facilities, water and gas separation, compression, pumping stations.
The simplicity of this approach means that we can design once and then build many. That results in lower engineering costs, lower fabrication costs, lower installation costs, and ultimately, it's going to result in lower operating costs. We can also size the facilities larger. That improves capital utilization. In these corridors, we use the surface facilities over and over for multiple wells. The only way to do this at low cost is to develop at scale. A typical industry approach results in smaller, higher-cost, remotely spaced facilities that cannot be leveraged over a high number of wells, and it means that facilities have to be oversized to handle the initial high production during the flowback period. I included some metrics here. You can look through them. They illustrate the cost savings we are seeing. On the left is D&C costs in the Delaware. We're down 23% in 2019.
With the number of wells we're drilling, obviously, it's a critical metric to get the returns we're looking for. We're now applying ExxonMobil's global drilling capability to the Delaware and Midland basins. We're confident this continuous improvement will continue, will further drive down costs. I've said to my organization, we will do better than the 2020 outlook on the chart. The right illustrates the improvement in frack stage completions per day. Think of it as a measure of frack crew productivity. It's a similar story to drilling. It's important to recognize we're only just into the development drilling phase in the Delaware. Looking at the surface facilities, the left illustrates the cost savings we're seeing in tank battery costs as we build at larger scale. The right illustrates compressor station costs as we grow the number of trains.
Typically, we use the same design to build multiple trains, but not all trains are built at the same time. They're added over time, and of course, they're optimized with our production. Both examples illustrate how we can deliver up to 50% cost reduction versus the rest of industry. As you can tell, there are a lot of advantages with this approach. Another example is we build these single transportation, call them right of way or pipeline corridors for gas, for oil, for water, for NGLs. We're even running fiber optic cables in the same trench, which of course allows us to have remote monitoring and controls, and it provides the potential for an increasingly autonomous operation, which will drive longer term operational efficiencies.
In Poker Lake alone, that's just the one area of the Delaware Basin, we've already installed more than 350 mi of oil and gas gathering pipe and 150 mi of water pipelines. These logistics deliver product to large-scale consolidated gathering facilities. This is one of our large-scale facilities. It's a photo of the Cowboy Central Gathering Facility in Poker Lake. It's centralized within our acreage, and it contains a unique integration of crude stabilization, gas treating, and processing. This particular facility, the construction is near completion, at least for the initial stages. We'll start this up in June of this year. You can see noted on the slide the size of the facilities. There's been an absolute focus on capital efficiency. The design provides optionality for phased development. We're building at scale, we're pacing the trains consistent with the pace of field development.
Inherent in this design is a focus on our environmental footprint. Our Permian flaring intensity was at the lowest levels in late 2019 and decreased by more than 75% versus the prior year. We're on target to reduce our methane emissions across the upstream by 15%. The unconventional segment is a large part of that. We're testing emerging technologies for methane detection, and we're consistently and continuously replacing pneumatic devices with instrument air systems. These large gathering systems will form an important part of our further reductions in emissions. Our approach also increases the use of recycled water in fracking. Producing and fracking in close proximity allows us to build a lower cost integrated water process. By 2022, we expect to have 100% recycled water use for fracking in the Delaware core areas.
If you think about those well pad corridors, we're drilling alongside where we're fracking, and we can take that produced water, clean it up, and then use it back in the fracking operation. If you have remote assets and dispersed acreage, that's very expensive to do. Let me close this Permian section with a few comments on the pace of development. Inherent in short cycle unconventional developments is flexibility and optionality on pace. In principle, we range-bound that pace. First, we want to achieve our capital efficiency targets by building at scale. That sets the floor on the pace of development. You go too slow, there's potential to lose capital efficiency. Second, we don't want to go too fast to compromise the organization's capacity. It's important that we maintain our high standards of project execution. The indicative range between those points is illustrated by the shaded region on those bars.
Leveraging We've Experienced and the inherent flexibility in unconventional business has resulted in us reducing our pace and capital spend in the next two y ears versus last year's outlook. In part, what Darren was talking about, tightening our capital expenditure across the corporation in the current environment. The result is pretty moderate. We anticipate to be 20,000 bbls a day lower this year than we said last year and 40,000 bbls a day lower in 2021. Nevertheless, we'll still increase volumes by 90 kbd this year versus 2019 and 240,000 bbls a day in 2021 versus 2020. There's no change to our 2024 outlook of 1 million bbls a day. Let me switch to deep water and focus on Guyana and Brazil. This chart on the slide illustrates the quality of these developments. This is WoodMac data.
It compares the value of our projects to other industry projects. They're going to FID by 2023. The project returns are on the vertical scale. The cost of supply, in other words, the Brent price to achieve a 10% return is on the horizontal axis. The size of the bubble is the value or NPV10 of the projects. Guyana includes our first five boats. The Brazil on this chart is just the Bacalhau or Carcará development. As I will talk about, there's considerable upside versus what's on that chart. Many of you have been asking me why we're not going faster in Guyana, why we cannot be more definitive on our plans of the third FPSO. There is no doubting here the exploration success. There's no doubting that this development will generate strong cash flows for many years. This is a frontier development.
We must work with the government and our partners to generate the maximum value, which means we have to strike the right balance between gaining more understanding of the resource and bringing on new production in the most cost-efficient manner. This will result in us continuing to optimize our development plans. In the next few slides, I'll walk through where we are. The map illustrates the three blocks where we're the operator. You can see the size of the Stabroek Block, 275 mi northwest to southeast. To date, all of our discoveries have been in the southeast segment of the Stabroek Block. We've a lot of exploration to go on this block, and we've not yet started drilling on Canje and Kaieteur. This focuses a close-up on the discoveries in the Stabroek Block. We had five discoveries last year.
We have one exploration well so far this year, Uaru, which was also a discovery. We've now had 16 discoveries out of eight wells, 18 wells drilled. 16 discoveries out of 18 exploration wells drilled. It's really an unparalleled success. I'll remind you, there were 40 dry holes in the offshore basin of Guyana and Suriname before the Liza discovery. The role of our technology set, we believe, has been absolutely critical to this success. Higher quality subsurface imaging has been absolutely foundational. Our technology set that's been developed over many, many years is proving pivotal to our success, and Andy will discuss that as well later on. Discoveries in 2019 added more than three billion oil equivalent bbls to our resource base. We updated that resource base in January to more than eight billion bbls, but that doesn't include the discovery we had this year.
I also understand your interest in more frequent updates on the resource size. I'll just tell you, we have a lot of geoscientists working on this region. Activity levels are extremely high as we continue to explore and develop in parallel. Of course, we'll continue to update the resource base as meaningful additions come forward. Our current plan is five additional exploration wells in 2020. That includes the first drilling on the Canje and Kaieteur blocks, and we're testing the deeper plays on the Stabroek Block. We plan to potentially add a fifth drilling ship in the second half of this year. Now just remind you, recognize these are not just working on exploration. There's a heavy focus on appraisal and development drilling as we expand our drilling plans. I would just remind you of the considerable potential on these three blocks.
Our current inventory of exploration targets is in excess of 50 on these three blocks today. With strong support from the government of Guyana, we moved quickly with Liza Phase One. You are all aware of that. Came online in December below budget, ahead of schedule. Our benchmarking tells us that it was four years ahead of the industry average. We are pushing to do better than that on the following FPSOs. We expect Liza One to be at capacity, 120,000 bbls a day, in the coming months. The 220,000 bbl a day Liza Two is also on schedule. No change. The topsides integration are ongoing. We target completion in 2021 with a startup in 2022. The startup of Phase Three, which is Payara, is also on schedule for a 2023 startup.
We're currently working with the government to obtain approvals before finalizing the FID. I think you're all aware there's an election this week. We'll see what government is in place by the end of the week. We'll work with both. Whichever party's in government, it doesn't really impact us at all. We're continuing to optimize our future developments. We still anticipate FIDs in 2021 and 2022 for the fourth and fifth boats, which will start up in 2024 and 2025. We have retained our production outlook of exceeding 750,000 bbls a day gross by 2025. I would also tell you these developments are also delivering a greater than 10% return at $40 a bbl. Very quickly on Brazil, phase 1 development of Bacalhau is on schedule.
We anticipate FID later this year with a startup at the end of 2023 or the beginning of 2024. We're very close to getting the results on our drilling on the Uirapuru block, which is just to the north of Carcará. This chart updates our offshore acreage position in Brazil. The chart illustrates the scale of our activity. We added more than 450,000 acres last year. You can see on the chart in total, we have more acreage than the other IOCs and importantly, we're the operator in greater than 60% of this acreage. The basis of our bidding strategy in Brazil is driven by leveraging this advantaged subsurface technology, which we believe has been so critical to our success in Guyana. We switch to LNG, focus on Mozambique and Papua New Guinea. Quick reminder of the LNG supply-demand balance. Darren talked about it earlier on.
Gas demand continues to grow. LNG, liquefied natural gas demand, of course, grows faster. It's a fast-growing market. Left-hand side, you can see the existing supply and the supply under construction. You can also see what happens beyond 2025. There is over 200 million tons of capacity needed by 2035. That's 60% of today's capacity that's online. There's a lot of opportunity to build capacity. On the right shows our % of the global market. You can see if we don't add capacity, our % shrinks rapidly. We're not driven by market objectives, we're driven by our investments being the most competitive in the industry. However, you can see that our plans enable us to maintain our global supply position. Mozambique Area 4, 85 Tcf in place. We have potential for more than 40 MTPA of capacity on this block.
Jack will discuss our experience on developing major projects in frontier countries later. Of course, we've done it in Chad, we've done it in Papua New Guinea, we've done it in Angola. It plays to the strengths of this corporation. Our first stage, which is the floating Coral 3.4 million tons, on schedule for 2022. The next stage, which is the two trains, 7.6 million ton trains, onshore liquefaction. Again, we're working towards an FID. Really importantly here, since the change in ownership and the change of operator in Area 1, we're working very closely with the Area 1 operator. We and Total see tremendous synergies in working to optimize the development of these two blocks. That's going to be really important both for the country and for the operators as these developments progress. Our second major development is in Papua New Guinea. This is an integrated 3-train, 8-million-ton development.
Two of those trains are going to be supplied by the Elk- Antelope, which is the Papua development. The Papua gas agreement was finalized last year, and we continue to work with the government on the gas agreement. Think gas agreement, think fiscals. The fiscals for PNG, which is going to supply the third train, and we will need that before we move ahead on the whole project. This slide looks at volumes. A reminder of what I said last year, not all volumes are equal. There are significant differences in the profitability of our assets. As we're reducing the North American dry gas volumes, at these prices, doesn't generate a lot of earnings. Our objective is to grow value, and that doesn't always equate to growing volumes. Our volumes are focused on growing the high-margin liquids and liquefied natural gas.
The 2019 volumes were in line with what I communicated in this meeting last year. Our outlook for 2019 is 3.9 million oil equivalent bbls. We expect to offset the base decline in today's assets, primarily with the high-return infield developments I discussed earlier. The growth will come from the high-value Permian and Guyana developments. That's offset by two things really. First of all, the divestment of Norway. That's 130-140 kbd. We hadn't anticipated doing that originally last year, but of course we did because it was a good time to do it. The result of that is lower volumes this year. Also, as I said earlier, we're reducing CapEx on the low-margin North American dry gas. Our outlook for 2025 remains in that 5 million-bbl-a-day region. To close, success of our exploration is something that I covered last year. It continued in 2019.
The commercial discoveries in the last six years are 3x the average of the IOCs. That's 50% higher than the next competitor. The majority of our discoveries are liquids. The majority of the discoveries in the industry have been gas. This success is feeding our pipeline of opportunities for future development. Of course, it's critical in a depletion business. Most critical is we're reloading with high-value opportunities, and we expect the discoveries we have made last year and the two years previously will be competitive across a full range of prices. In a similar format to the one Darren did, I'll summarize the upstream earnings potential through 2025. This is the growth potential at constant prices. Over this period, it's a simple story. The base developments are sufficient to offset the base decline and our divestments over this period.
As I said earlier on, in this period, the Permian and Guyana account for a very significant growth. The LNG developments that we're doing, really, they have a more material impact beyond 2025. Before I close, I'll repeat the messages I started with. We're driving utilization improvements and expense reductions in our current assets to deliver stronger cash flow. We're high-grading our asset portfolio with an aggressive divestment program. We're executing the strongest portfolio of developments this corporation has had since the merger of Exxon and Mobil. Finally, we're strengthening our future pipeline of developments with what we see and the industry sees as our success in exploration. Thank you. I look forward to taking your questions later. I'll now pass the baton to Jack.
Thank you. Appreciate it. Good morning. The picture that is behind me is an operator crew in front of our Antwerp coker that we just installed late 2018. This project significantly improves the competitiveness of this integrated complex. The distillate yield is now exceeding design by about 10%. Let me start with a couple of comments about how we think about the downstream business. Importantly, to win in the downstream, we must produce the highest demand products at the lowest delivered cost to our customers. Very simple winning proposition there. For us to be lowest cost, we have to be the most reliable and efficient, and we have to capture advantage from integration and from scale, and from logistics. The products with the highest demand growth are low sulfur distillates, chemical feeds, and high-quality lube base stocks.
To increase the production of these, we're modifying the configuration of our integrated assets with high return investments, leveraging proprietary technology and scale and integration. You notice I said a couple of words twice already. These competitive advantages that Darren mentioned earlier are critically important to the downstream. You'll hear me say these words: integration, scale, technology. You'll also hear me say logistics. These are all keys to success for us. With that, let me move to the key messages. To maximize the value from our current assets, we have to operate them safely and reliably and efficiently. We have some advantage investment opportunities to meet the growing demand for these higher value products.
However, given the current margin environment, we are adjusting the pace of these activities, but we know these investments will be robust even in a lower margin environment because they were designed to be so. We know they'll be very attractive when we return to an environment similar to the average of the last five years. Our global footprint and value chain offers us optimization opportunities, and a good example is in the Permian, where our unique position enables value capture from the reservoir all the way to the end fuels and chemicals customers. We're leveraging our manufacturing strengths to efficiently supply growth markets adjacent to our large integrated sites like Mexico and Indonesia. Let me start with a look at our current operations. Our competitive advantage in the downstream starts with our manufacturing facilities.
The size of our refineries is, on average, 75% larger than that of the rest of the industry. That scale advantage is one of the reasons why our operating costs are lower. Additionally, our refinery network delivers leading energy efficiency as this has been a priority for us for over a decade. Increasingly, we're using digital tools to improve reliability and efficiency, as all our refinery and chem plants are now feeding real-time operational data into a central data lake for advanced analytics. As an example, we're using predictive analytics on real-time data from 450 compressor trains all around our global circuit, and we're identifying degradation mechanisms and able to take actions before imminent failures. We're seeing a real positive impact from our digital investments, but we understand we're only in the first or second inning here in terms of impact on the business.
A long way to go and a lot of upside in that regard. In addition to our scale advantage, we have a clear preference to develop integrated sites. In fact, 80% of our refining capacity is integrated with chemicals or lubes plants, which reduces the aggregate feedstock costs and also ensures we achieve the highest value for all the molecules flowing through the system. To put that in perspective, 30% of the throughput winds up in streams that are interchanged between the refinery and the chemical and the lube stocks plants, base stock plants. For example, in Baytown, we have 70 streams that are interchanged from low-value fuel gas from the refinery to the steam crackers and propylene from the cat crackers to the chemical product propylene units. That all contributes to about $200 million a year of annual integration benefits at that facility.
Baytown is one of our high conversion refineries. Let's look at the full network. This is a view of our refining capacity in the three major regions back in 2008, split by conversion layer. Our North American network is very high conversion, has always been very high conversion, whereas back in 2008, Asia and Europe were quite low. High conversion refineries are generally going to be more competitive with up to $7 a bbl advantage in recent years because they yield more of these high-demand products. This shows the opportunity to add conversion capacity in Europe and Asia. This view reflects how we are today with Antwerp and Rotterdam projects, as well as asset high grading with 14 refinery divestments over that period. By 2023, we'll have completed our Singapore resid upgrade and brought online the Beaumont expansion in the U.S..
What drove all these projects were competitive advantages that enabled higher returns than those available for the rest of the industry. Where we haven't had clear competitive advantages, we've tested if these refineries are worth more to others and in many cases, divested them. We've had a long history of asset high grading through divestments, resulting in $22 billion of cash proceeds over the last 12 years, with a significant reduction in capital employed. Perhaps as importantly, it's allowed our organization to focus on a smaller set of core strategic assets. Active discipline portfolio management's an ongoing process, and we'll continue to test value with others in the marketplace. This is really another enabler for our recent investments in our refining circuit, making the retained strategic assets more competitive. Let me now talk about those investments starting with the demand trends that underpin their attractiveness.
We want to grow our specialty products with the highest demand growth, as I said earlier. Starting at the top there, today's high-efficiency engines with better fuel economy require higher quality lubricants, and those lubricants require higher quality Group II base stocks. This demand growth comes at the expense of Group I, which will be primarily limited to industrial applications. Two of our major projects are targeting increases in Group II base stock production. Chemicals demand is robust, pushing more refinery streams into chemical plants, providing considerable advantage to our integrated sites. Distillate demand will continue to grow with aviation and marine and trucking and other commercial transportation that's very difficult to electrify. This is a major theme of our investment program, with five of our projects that are targeting higher distillate production yields.
Finally, the lower demand for fuel oil is already evident, and this trend should continue, which drives investment to upgrade these streams. Two of our projects are reducing fuel oil production at their respective sites. Let's talk about how we're going to meet this demand shift into higher quality products. I'm going to walk through these growth activities in this order. First, our six major refining projects and our premium logistics projects. An important growth element, our revamp and debottleneck projects. They're happening at smaller existing assets and are a little smaller than the major projects. We'll talk about what we're doing to maximize value in the marketplace in both the fuels and the lubricants value chains. Let me start with the major projects.
On the left is a view of product yield shift impact of the recent major projects that we brought online in late 2018 and early 2019. The 2019 prices that are shown along the X-axis demonstrate the value equation here. These projects have grown volumes of $78 a bbl distillates and $109 a bbl lube base stocks at the expense of $54 a bbl fuel oil. They've also delivered earnings and cash flow, as Darren mentioned earlier. Collectively, they've contributed $300 million last year, despite lower margins and only operating the last portion of the year at full lined out rates. The performance of the advanced hydrocracker at Rotterdam is particularly encouraging given it is new to industry technology that also underpins the larger RESID upgrading project in Singapore. Let me add Singapore and the other two projects in execution onto the page now.
On the product shift graph, you'll notice the large fuel oil reduction associated with the Singapore project and the large distillate increase from both Singapore and the Beaumont expansion. Base stock volumes represent a 34% increase in our Group II production. This significant yield shift and the proprietary technology enabling it, along with some deep logistical advantages, result in returns about 8 to 10 DCFR points higher than similar industry standard projects. Let's talk about the three executing projects a little more, starting with the Beaumont expansion. I showed you earlier that we had high conversion capacity in North America. In fact, on the Gulf Coast, we actually have more conversion capacity than required for our distillation capacity, which is one reason why this project is so attractive.
It adds 250,000 bbls a day of atmospheric distillation capacity with no vacuum distillation additions, and then only 125,000 bbls a day of hydrotreating capacity to increase our production of ultra-low sulfur diesel. This project really fits hand in glove with our current Gulf Coast configuration, backing out intermediate product purchases in all three U.S. Gulf Coast refineries. Additionally, the Beaumont integrated site location is advantaged with access to light crudes as it's headed to export and discounted to compete in overseas markets. The scope includes product export logistics, so we can choose the most attractive markets for the additional distillate production. Finally, the capital efficiency of the project's being enhanced by modularizing the construction to reduce on-site work hours in a heated Gulf Coast market, reducing the cost and also improving our schedule. It's a truly advantaged project, and it improves the site competitiveness.
You might recall these charts that I’ve shown last year and throughout the year. They show the net cash margin for the entire global refinery fleet using five-year average prices. Net cash margin, it incorporates location and configuration of each refinery, along with its feedstock costs, its expected operating expenses, and its output prices. All the refineries around the world are included in this model. It does not incorporate the investment required to achieve this current configuration, and it also does not include any integration benefits of co-location with chemicals. Refineries on the left-hand side have higher cash profitability and tend to have some sort of structural or logistical advantage, and those on the right should be the first to be rationalized if the industry is oversupplied. With this project, Beaumont moves from the top third to the top 10%. Pretty significant shift.
Importantly, due to the sizable additional crude throughput, this is on a $ per bbl basis, on this additional crude throughput, it adds materially to the refinery earnings and cash flow. Startup is planned in early 2022. Let's move on to the Fawley project in the U.K.. As shown on this map, the Fawley integrated site that's located on the southern coast of England, has advantaged fuels logistics into major population centers and also the Heathrow Airport. The current refinery configuration, however, does not allow us to fully leverage this advantage, as some of the products today don't meet the local sulfur specification and are therefore exported. This project adds hydro treating capacity to increase the products for the local market, further enhances our logistics with replacement of an aging pipeline. This is a structurally attractive project.
However, it's a challenging execution environment, and it's been a concern for us ever since the project was first conceived. In light of this and the current margins, we are pausing to ensure we have the right execution plan going forward. We still like the project very much, but it has to be capital efficient. When completed, it should materially improve the refinery's competitiveness. You can see a pretty significant improvement on this same chart with the refinery moving well into the top half on the global seriatim I should note that Fawley is one of those projects where this does not include the chemical units that are pretty attractive, and so in the integrated site would be further to the left. It provides the material earnings improvement of $200 million a year. The last project I want to talk about is Singapore.
This is the largest of our major projects, and it's also a major chemicals project. In fact, this project is extraordinarily important for the future of both our refining and our chemical operations in Singapore. It's taking low-value RESID streams from both refining operations and the steam crackers and upgrading them to Group II lubes, to distillates, and also including in those distillates IMO-compliant marine fuel. The project deploys industry-first proprietary technology to transform bottom-of-the-bbl flow streams into these much higher quality products. The project is possible in very large part due to our technology organization. Andy's gonna talk more about our R&D efforts in a few minutes, and we'll specifically mention this application. Let me give you a perspective of the complexity. There's two unique but complementary processes that involve the use of 13 different catalysts, three of which were proprietary to ExxonMobil, and 17 reactors.
Very complex process we're going through to upgrade bottom-of-the-bbl up to this high-quality products. The complexity is worth it. If you take those same 2019 prices I showed you earlier, the aggregate product uplift from fuel oil to the high-quality products is $32 a bbl. You can imagine that a large technology-enabled project creating that kind of product uplift would have a significant impact on the competitiveness. You can see here it does. It moves Singapore into the top quartile of refineries worldwide. From a chemical standpoint, our unique crude cracking technology that we've deployed in Singapore generates more resid than a naphtha-fed steam cracker. This project has a big impact on the competitiveness of our steam crackers, our chemical operations as well. It will move Singapore into the first quartile of Asia liquids crackers.
Combined, this project grows integrated earnings by $700 million annually once it starts up in 2023, and it's a great example of integration. Another great example of integration is the Permian Basin value chain. Neil spoke about the upstream just a minute ago, so I'm throwing this just for a reminder. I wanna focus on how we're positioned to further benefit from the Permian production as the streams move down the value chain. Starting with the logistics as the bbls move to the Gulf Coast. The core of our logistics investments is the largest, most efficient pipeline from the Permian to the Gulf Coast. Originates in our in-basin Wink terminal and terminates in Webster, where there'll be connections to our Beaumont refinery and also to Baytown. This project is profitable with just the improved transportation efficiency, but it also offers additional optionality through trading and exports.
We're expanding our light crude processing capabilities at all three of our Gulf Coast refineries. I already spoke about the Beaumont project earlier. That's about 70% of this throughput increase. Two projects at Baton Rouge, adding 50,000 bbls a day, came on last year. There's some further small high-return projects ongoing between both Baytown and Baton Rouge that are gonna add another 50,000 bbls a day by year-end 2022. This additional processing capacity is gonna add $500 million in annual earnings potential. We're adding two new steam crackers that will be fed with ethane from the rich associated gas coming out of the Permian. One's already online in Baytown, and the second is under construction just north of Corpus Christi. The abundance of low-cost ethane in the U.S. is a significant competitive advantage, and I'll talk further about that advantage during our chemicals presentation in a few minutes.
When you look at the current and growing exposure across the full Permian value chain, what we have is really unique in industry, and it's a source of competitive advantage that's underpinned by this really attractive upstream position that Neil talked about. All these positions are attractive in and of their own right, but combined, they're unique and they're synergistic. Collectively, our logistics, refining, and chemicals earnings contributions add over a 40% earnings uplift versus a standalone upstream position. Some of these refining contributions are coming from these revamps to increase the Permian crude production. Let me talk about that whole group of these smaller projects. These projects really maximize the value of our existing assets by making small incremental improvements like creep capacity additions and debottlenecks and logistical improvements. They're much smaller than the major projects. They average about $100 million each, over the 50 that are shown.
They're high return, and with a large portfolio of these projects, collectively, they're very material in terms of earnings contribution. The 50 projects will require a total investment of under $6 billion by 2025 and will contribute over $1 billion in annual earnings potential once they're all online. Good progress was made in 2019, with seven of these projects brought online, adding about $250 million of earnings potential. We expect a pretty steady pace on this effort, with about 10 projects expected to start up in 2020, which should provide a similar earnings impact. In addition to these manufacturing projects, we've been working to grow the value of our products beyond the refinery gate through improved logistics and trading and higher volume of the products sold through our retail channel.
For example, on the left, we show how our advantage Beaumont integrated complex I spoke about earlier, supplying fuels into Mexico, a market that we expect to have a higher rate of growth than the U.S. We're utilizing our branded wholesaler model there with Mexican retail partners. As of year-end 2019, we have 350 Mobil-branded retail sites open and are targeting to nearly double that number this year. We're the second largest importer of products into Mexico, behind Pemex. The graphic on the right shows two more pure logistics examples. The gray line on the top shows how we're leveraging our U.S. Gulf Coast crude export capability to optimize our international refining circuit while also providing trading optionality. Last year, while optimizing the feed slate of our Northwest Europe circuit, we became the largest importer of U.S. crude into Europe.
The red line shows our increasing product value optimization activity through blend hubs. We can realize up to a $2 a bbl additional margin at these blend hubs with the capability to meet higher value specifications just through blending products. These are some examples of where our logistics investments are having a real positive impact on helping us to achieve the highest value for our products. The last area I'd like to touch on in terms of growth is our synthetic lubricants. Our lubricants business continues to make a strong earnings contribution to the downstream results. The primary reason for this is the strength of our Mobil 1 brand, especially in the high-end synthetic lubricants, where we're the global market leader. As you can see on the chart, our products are continuing to grow in absolute sales at about 9% a year and are also capturing higher market share.
Recently, one of the drivers of that growth has been in China, with total lubricant sales nearly doubling since 2015. We're committed to continued lubricant growth through our Mobil 1 brand with further technology and logistics investments, like with our new Mobil EV fluids for electric vehicles. Let me wrap up now these growth initiatives with this chart, similar to what Neil showed earlier. It summarizes our expected earnings improvement from all the initiatives I just covered. For 2020, if I could cover that first, we expect to see a full-year contribution of the three major projects that are already online, as well as the seven revamps that started up in 2019. Planned maintenance this year is going to be back to historic levels, and that's going to provide significant earnings tailwinds versus last year.
Of course, in the current challenging margin environment, the organization's very focused on cost management, and identification of further efficiencies to improve our bottom-line results. Looking forward beyond 2020, you see the growth areas that I discussed. The other three refining projects in the Permian pipeline are expected to be coming on in 2021 through 2023. The revamps and improvements will be coming online throughout the period, as will optimization and trading and marketing initiatives. To wrap up where we started, I'll be focused on optimizing our current assets to extract maximum value. Our demand outlook is continuing to drive investments to improve yield of our higher-value products. Our investment program remains on track. We're executing some attractive projects and market initiatives that will grow earnings and cash flow potential.
All of this with the objective of increasing production of higher-demand products at industry's overall lowest cost of supply. With that, I'll hand it back to Neil.
Great. Thank you, Jack. At this point, we're going to take a short break. After that, we'll continue the presentation with Jack covering the chemical business. We just ask that everyone be back in their seats promptly at 10:05. About a 15-minute break. Thank you.
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Okay, on to chemicals. The picture that's behind me is the Beaumont Polyethylene Expansion Project. In the front, you can see the new reactor, and in the distance, you can see the base assets at the Beaumont site. We captured scale and integration advantages by building this world-scale polyethylene reactor at an existing facility. It was started up ahead of schedule and is running 5% above design rates. The chemical business is similar to the downstream in that serving your customers at the lowest cost is critically important. The difference is in demand growth, which is much more robust across a much larger portion of the industry. The other difference is that we can bring our technology capability directly to bear on the products that we bring to market. We call these performance products, and they play a prominent role in our growth plans.
Chemicals demand is increasing with an expanding middle-class population. This demand, along with a recent surge in low-cost feedstock, has attracted significant industry investment. Our investments are delivering industry-leading returns due to advantages in technology-driven performance products, integration and scale advantages, and project execution. We're continuing to invest at bottom-of-cycle conditions due to these advantages, but we're managing the pace of the new discretionary spending in today's margin environment. Our growth plans are underpinned by a strong track record of meeting evolving customer demand with innovative new products enabled by unparalleled catalyst technology. Before talking about our portfolio and growth plans, let's first talk broadly about the petrochemical industry and its products. The chemicals demand story starts with a growing middle class that doubles by 2030. This is the same view that Darren showed you earlier. As standards of living improve, chemicals demand grows.
Shown here are India and China in 1990 on the same Human Development Index Y-axis that Darren showed, but the X-axis shows the per capita chemical demand. Here are those same countries in 2017, and as the earlier chart showed, I think the correlation is quite clear. The demand for modern conveniences will continue to grow with the middle class, and here's three examples of that. Flexible plastic packaging extends food shelf life by 2x to 5x , which helps reduce food waste. Automotive lightweighting is really important for improving vehicle fuel economy for the internal combustion engines, but even more so for electric vehicles that are seeking additional range. Polyester fiber that's in so many of our high-performing modern fabrics. There's a reason that society is increasing its use of plastics and synthetic fibers. They perform better than the alternatives.
In the optimal applications, plastics are stronger, they're lighter, they have better barrier properties, they're easier to recycle, and they're usually less expensive. Let's take a look at that top application of plastic packaging as an example. From a sustainability viewpoint, plastic packaging beats alternatives. Less energy consumption in creating the products, there's a lower carbon footprint, there's less solid waste since less material is used, there's much lower water usage. From a solid waste perspective, alternatives generate 5x the waste of plastic. Plastic waste is an important societal issue, and it must be addressed. It's part of a larger solid waste management problem, primarily in lower income countries. Solutions are needed here, and we're advancing several. First, we're a founding member of the Alliance to End Plastic Waste and part of an over $1 billion pledged to find solutions for plastic waste management.
Next, we're developing products that enable use of more recycled material. We're currently expanding our production of Vistamaxx, which enables end-use products such as crates and bins to contain up to 90% recycled material. We're working on ways to take difficult-to-recycle plastics as feedstock back into our integrated manufacturing sites to further expand the recycling envelope at scale. Bottom line, plastics provide a net benefit to society and to the environment, and there's an opportunity to substantially grow this benefit through better waste management. We're playing a role in bringing solutions to this important effort. Because of this net benefit, demand for plastics from petrochemicals will continue to grow. This chart highlights the growth of three of our highest volume products, representing about 60% of our sales.
The demand for these products is robust, growing at about 4% a year over the past decade, and most industry analysts expect this to continue. As an example, just take polyethylene, and I'm showing a different view here. The annual demand growth is now plotted as those solid red lines, and it's plotted over the last decade. The blue bars are supply capacity additions. You can see that the blue bars are below the red lines back in the 2012 through '15 timeframe, which supported strong margins. They're above in 2016- 2019, which has led to oversupply and lower margins. This is how cycles are created. Long-term success depends on capturing value in a cyclical business. Now I've expanded this timeframe back another decade, showing the same chart that Darren showed earlier, and you can clearly see the market cyclicality.
We are well-positioned to compete in this type of business. We bring some unique advantages, world-scale integrated assets, and innovative product development. The current market environment is clearly challenged, while we're continuing to invest, we're also focused on managing costs, prioritizing, and where appropriate, pacing some of these developments, and maximizing the value from our base assets. For example, over the last 10 years, we've de-bottlenecked our base assets to deliver another 700,000 tons of additional capacity, which is the equivalent of a world-scale polyethylene line. Here's what that base asset portfolio looks like. On the left, depicts our manufacturing facilities, and on the right, you see the products that they produce. Our large manufacturing footprint is located across 16 countries, in North America and Europe and Africa, excuse me, Asia, and the Middle East.
90% of the facilities are co-located with refineries or natural gas processing plants. This provides those integration benefits that I mentioned back in the downstream presentation. On the right-hand side of this chart are the markets and the applications for our highest volume products. Our market position is number one or number two in over 80% of the product markets in which we compete. In 2019, our total production capacity was nearly 29 MTPA, with products sold to customers in 130 countries. I'll talk about the polyethylene and the polypropylene at the top in more detail throughout the presentation. Let me look at that other section of the bar and talk about that for a second.
These are generally lower volume individually, like Vistamaxx and Synthetics, but collectively, these products make up 40% of our total sales, and we have strong market positions in these areas. These products generally benefit from integration with refining and generate high product realizations. A large asset base that we're working to profitably grow. The growth plan for chemicals that's shown here is relatively straightforward. We're finding opportunities to add new manufacturing capacity where we can bring an advantage, like an integration with another facility or lower cost feedstock or superior logistics, and then utilizing those new facilities to manufacture our growing portfolio of performance products. Let me go back to the portfolio chart and show you where we're adding. First, we're adding new world-scale steam crackers.
Building on the success of the third steam cracker that we added at Baytown back in 2018, we're progressing two further steam cracker projects. The first one's under construction in Corpus Christi, and like Baytown, it also benefits from low cost advantage ethane feed, and this is ExxonMobil joint venture with SABIC. The second steam cracker complex that we're progressing is in China, the world's largest market for plastics. Our exports to China have continued to grow, and this new China cracker would allow us to efficiently maintain our growth trajectory in this important market. Next, we're adding olefin derivative units. Most of these are integrated with the two crackers that I just talked about, but three of these are further projects at existing integrated sites that are focused exclusively on growing production and performance products.
Let me talk more about these projects, starting with the funded steam crackers. The chart on the left shows the average cost of ethylene in North America from methane, Asia Pacific from naphtha, and you can see that the U.S. Gulf Coast crackers are clearly advantaged due to low cost ethane from the Permian. On this advantage, we brought the Baytown cracker online in 2018. It was the third steam cracker at Baytown, it captured significant synergies with the other two crackers and also the Baytown refinery. It's currently producing 10% above the 1.5 MTA design capacity, it feeds polyethylene units in Mont Belvieu and also that new line in Beaumont. The cracker under construction just north of Corpus Christi is even larger than the one in Baytown at 1.8 MTA. It will be the world's largest when it starts up, planned for 2022.
Building on the advantages of scale and performance products, it's also being built in modules, which is an industry first for chemical plants, and it's delivering significant cost savings. In addition to these new large steam crackers taking ethane feed and converting all the way to polyethylene and other olefin derivatives, we have several smaller projects downstream of the crackers that take ethylene or polypropylene feed and manufacture performance products. The Beaumont polyethylene line, the subject of that opening picture, is fed ethylene from the new Baytown cracker and is producing Exceed performance polyethylene. As I mentioned before, its startup was ahead of schedule in July of last year. The next to start up will be a new polypropylene unit at Baton Rouge to be built right next to a similar existing unit.
It's gonna produce our performance impact copolymer polypropylene that provides added strength and lighter weight in automotive and appliance applications. The last two projects that are shown are being executed at Baytown together, saving $250 million through project synergies. I mentioned the Vistamaxx earlier. This is an expansion train that's needed to satisfy increasing demand for the product. We have one plant right now in Singapore that's supplying the whole world. This will be our second plant. The LAO project, this will be executed along with it, gains economic advantage by the fact that 75% of the output from this plant is needed to manufacture our own performance polyethylene and Synthetics products. We'll be backing out third-party supply. All these projects are advantaged and robust in the current market environment. Let me summarize the product slate that's rising out of these new projects.
We're adding significant capacity in polyethylene and polypropylene in addition to some other key products. Combined, these product additions total 4.6 MTA, and 70% of this volume is in higher margin performance products. Let's look at how this impacts the whole product portfolio. This chart shows the portfolio split between performance and commodity products, and then the second bar shows a projection out to 2025, with a greater portion of total sales coming from performance products reflecting the additions from the last slide. Once those projects are online, performance products will be 30% of our sales, but more than 50% of our earnings. They'll be driving our growth activities and enabled by our long-term commitment to technological innovation. Let's talk more about these performance products, starting with our metallocene polyethylene platform.
We show here a depiction of our family of metallocene polyethylene products plotted on the Y-axis being film properties and the X-axis being processability for our customers. Our products are stronger, which enables customers to use thinner film while maintaining the same quality. For example, the Exceed XT film is 4x tougher than the commodity alternative, which would be extraordinarily important in a liquids containment application. This helps our customers continuously improve their products to meet their customers' needs, their customers' evolving demand. The value proposition of our performance products to customers is clear. For example, the Exceed XT provides about 25% value and use advantage above a commodity product. From the chart, you can see that our performance polyethylene product family has grown at pretty impressive rates over the last two decades.
In fact, the performance polyethylene sales grew by 9% in 2019. The projection is that we're going to continue growing it at around that same rate. Let me expand the view now and talk about the whole full performance product portfolio. The plot on the left shows growth of our performance and commodity products over the last five years and the projections for the next five. We expect performance products to supply most of the sales growth through 2025. On the right, we've described the elements of success in our performance products, and this success was built up over decades and would be very difficult to replicate. Our unique proprietary catalyst technology was developed over 30 years. We have a pipeline of new products. We've commercialized 200 over the last 10 years. A very large customer base who are constantly evolving their applications and demand new innovative products.
We have this large, globally deployed market-facing organization that work with customers for new applications for our products. Let me show you how these growth activities are all adding to earnings. For 2020, our recent cracker and polyethylene investments, including the Beaumont expansion, will be contributing for the full year, improving our earnings potential. Beyond 2020, the organization is progressing several low-cost debottleneck projects and some cost efficiencies, which should ratably add to earnings through the period. Major projects do provide the bulk of the earnings growth potential. The Corpus and olefin derivative projects on our Gulf Coast are in construction and coming online in 2021 and 2022. We're progressing engineering on the China project, that'll be later in the period before it'll be contributing any earnings growth. These key messages are the same ones I started with.
Long-term demand looks strong, and it's attracting investments. Our growth plans are on track with our recent projects delivering solid earnings, even in the current market environment. We're continuing to identify ways to increase our value proposition to our customers, and technology's gonna play an ever-increasing important role. Our organization is working to ensure maximum efficiency in the current market environment while continuing to progress the elements of long-term success in the chemicals business. That concludes the chemical presentation. Let me now turn and kind of change gears a bit and talk about our global projects organization and the benefits that it's providing. The picture here was taken during the Hebron project execution. This was a very successful project, and that success has continued into the operations phase. Production averaged over 100,000 bbls a day in 2019, which is well above expectations.
We bring some deep competitive advantages to project execution. It comes from a long history of successfully executing some of the industry's most challenging projects. With the advent of the new global projects organization back in the second quarter of last year, we became even stronger by bringing together the project expertise from the downstream and chemicals organizations and combining it with the upstream all under one umbrella. Our approach is unique, it's advantaged, and it's very important because project execution is key to delivery of our growth plans. Scale, technology, and functional excellence are advantages we bring to project execution. Scale enables strategic partnerships with EPC contractors. It means we have an extensive playbook of proven execution strategies that can be tailored to the specifics of new project concepts. It means as issues arise, we've likely dealt with them before, and we can quickly respond.
Bringing new technology to bear is imperative to industry leadership, be it proprietary process technologies to upgrade heavy molecules or project execution technology to build a gas processing plant on top of a remote mountain. Functional excellence means having the comprehensive corporate competency that enables strong project teams across multiple projects simultaneously, all supported by industry-leading expertise. This combination is being deployed to today's project portfolio, and it's why we're confident it'll be successfully executed. Since Exxon and Mobil merged back in 2000, we've completed 127 major projects all across the globe. For 20 years, we've been consistently executing large projects, and our experienced project professionals of today were being developed during this whole timeframe. I'd like to quickly look at a few past projects that are relevant to today's challenges. Starting with Sakhalin.
We began developing Sakhalin back in 2002, brought on production from the Chayvo field in 2005, Odoptu in 2010, and Arkutun-Dagi in 2015. Two of these developments were onshore operations with extended reach drill wells to offshore fields, with some over six mi long. In fact, eight of the industry's 10 longest reach wells were drilled by us at Sakhalin. There's a large onshore processing plant that we keep full by adding subsequent phases of development, most recently the Chayvo expansion in 2012 and Odoptu Stage 2 in 2018. This area is remote, environmentally sensitive, and has a complex regulatory regime. It was one of the earliest experiences with large-scale modularization. It's now being used at our Corpus Steamcracker and also in the Singapore Resid project. The bar chart shows how we performed on complex projects like Sakhalin versus similar industry projects where we've had an interest. Next, Angola.
I used to compare Guyana to Angola Block 15 about six or seven discoveries ago. The current resource estimate for Guyana is now over three times larger than Angola Block 15. From a project development perspective, they're really quite similar. Development in Angola began around the same time as Sakhalin. In total, we installed five FPSOs, with Kizomba A and B being the anchor vessels. There were many industry firsts during this development, but the most memorable was this design one build many philosophy. That's very relevant for Guyana as we seek to standardize much of our sub-sea architecture. The bar chart shows benchmarking data on how our deep water projects stack up against the rest of industry on unit development cost. The impressive Kizomba B achievement of 31 months from FID to startup has now been matched by our first Guyana FPSO, Liza Destiny.
Let me now talk about more recent experience in PNG. PNG LNG, we delivered a project that likely no other company could have. It was really a unique accomplishment. Our execution planning enabled a startup on schedule despite the challenges of developing a remote resource in the mountains of a frontier country. Since startup, we've seen that our design and operations readiness enabled world-class reliability, and it's directly relevant to Mozambique in terms of developing a large LNG resource in a remote location, dealing with security and logistics challenges, selecting the right EPC contractors, securing project financing. Of course, we hope to have the opportunity to deliver a repeat performance in PNG itself. The bar chart shows our LNG unit development cost is very advantaged versus the rest of industry.
Those three examples demonstrate a long heritage of project management accomplishments that are very relevant to today's projects. Now let me look to further advantages that are rising out of our global projects organization. The two project groups that we brought together had complementary strengths that we brought to this new construct. Upstream brought mega project capability, development planning expertise, deep experience with numerous EPC contractors, and a global execution capability. The downstream and chemicals organization brought an expertise with deploying new proprietary process technology, deep experience with brownfield projects at existing facilities, experience with a largely different set of contractors, and a large discipline engineering organization. These complementary skill sets have been brought together to create a project management organization that really is without peer in industry. Two quick examples of showing the advantages of this combination.
The Corpus Christi Steamcracker project brought the large-scale modularization approach previously used at Sakhalin to avoid a heated labor market and accelerate startup in that project. The Singapore resid up grade takes the advantage we have from this proprietary technology. Our engineering organization is an integral part of that project. The project team itself has benefited from upstream expertise and experience. Before wrapping up, I want to elaborate on what I mean by organizational competency. Across the top of the slide are the key project execution phases with requisite skills listed below. We ensure the corporation has adequate competency in all these skill areas to capably execute our projects in the medium to long-term business plans. This is the responsibility of our project management career community. These skills are tracked to ensure the corporate competency today and also in the future.
The current assessment is listed below each column, the number of professionals with advanced competency and the number of subject matter experts. Of course, real-world experience plays a prominent role in assessing competency. As I said earlier, these professionals have been developed over the last 20 years through involvement in those 127 major projects that we've executed. With that, I'll wrap up our projects execution discussion. We're really pleased with our new global projects organization and believe it provides unique competitive advantage. It's already bearing fruit, and it increases our confidence in efficiently executing our current portfolio of projects on time and on budget. With that, I'll now hand it over to Andy to talk about technology.
Thank you, Jack. Technology has been referenced frequently this morning. It remains an important competitive advantage for ExxonMobil. We have a proven track record of translating fundamental science to commercial success, ideas to invention, scale to commercial success. We are steadily advancing our capabilities, process, and products to create value. While others have let their capacity and their capabilities attrit, we have strengthened and added to our capabilities. We look at the area of research and development, looking out to the longer term. Our R&D programs are aligned with our corporate and our business strategies, enabling value creation and advancing solutions to the dual challenge, the challenge of supplying the energy the world needs while lowering emissions. Finally, we maintain a very wide line of sight to new ideas and advances in technology through very extensive collaborations. A few examples of translating science to scale to commercial success.
We invented butyl rubber back before World War II. It provided the United States with a viable alternative to natural rubber during the war. By 1950, butyl had surpassed natural rubber in use. Imagine a world today that we're dependent on natural rubber. We invented fluid catalyzed cracking. The first commercial FCC unit was at our Baton Rouge refinery. By the 1950s, this was back in the '40s, but in the 1950s, in wide-scale use. Our leadership in process technology, catalysts, and active materials that continues to this day was built on this foundation. 3D seismic, invented by Exxon. It revolutionized the search for oil and gas. Over the years, 3D seismic concepts were enhanced, utilizing the advances in computing power, the kinds of things that became available over the following decades as computing power increased. We now apply 3D seismic across the upstream portfolio.
It has led to greater success in exploration and greater success in capital-efficient development. Deepwater Guyana provides a good example. After the discovery of the Liza-1 well, we launched, at that time, the largest 3D seismic survey in our history using a proprietary design to capture and be able to utilize more of the signal. The advanced imaging and analysis led to the significant exploration success we've seen in Guyana, 16 of 18 wells. You can see the differences in the images there before and after. Importantly, our advanced capabilities also serve as a key input for reservoir modeling and development planning, from the 3D seismic to the reservoir model to the simulations. We use proprietary tools, including our integrated reservoir modeling and simulation, or IRMS. IRMS combines our subsurface modeling capabilities, reservoir simulation, and high-performance computing clusters for rapid scenario testing.
This is a tool we apply across the upstream, including unconventional reservoirs. Unconventional reservoirs, IRMS is coupled with proprietary techniques we have developed for fracture and tight reservoir modeling. Using this, we're able to drive value by improving capital efficiency and recovery. In these areas, things like well landing and spacing are key. Initial deployments in the Permian have demonstrated the ability to improve capital efficiency. See the figures there. This makes this also a very key tool for cube development. Neil showed on the screens there, those complicated structures, the big cubes we're having, made possible by IRMS. In the downstream, the Singapore RESID upgrade project that Jack discussed, our technology was an important step in improving profitability. It was enabled by our expertise in process technology, catalysts, and modeling.
Knowledge of the feed composition, illustrated second from the left there, almost a unique characteristic that we've retained to this day. To be able to look at and map every molecule in all the different feeds we may run in a facility is a unique proprietary characteristic we have. You take that and you couple it with our catalyst activity and selectivity knowledge, and our process engineering capability, you came up with a unique configuration that Jack described, multiple catalysts, including three very important proprietary ones, and a cost-efficient conversion of residual fuel streams to clean products. Just the technology piece of this alone, the proprietary technology piece of this alone, above what might have been an industry-standard upgrading project, adds $200 million in earnings potential versus that industry-standard configuration. Another example in the chemicals field, Jack alluded to this, our performance product portfolio.
Our scientists and engineers working with customers combine their knowledge of product and applications with catalyst and process technology to develop new performance products. In the PE performance example shown here, working with customers, we develop products with continued improvement in the trade-off between greater processability, the ability of that customer to turn that plastic into a packaging material, processability, ease of use by the customers, trade-off between that and the product properties, such as strength and transparency, coupled with thinner films and lighter weights. All of this means a winning value proposition, including improved sustainability that translates to higher margins. Looking at our research and development portfolio, as said earlier, it is shaped by the business strategies and our work involved in addressing the dual challenge, how to deliver that energy the world needs while reducing emissions. I've noted five key areas here.
The work draws on the expertise of both our internal scientists and engineers, the 2,300 I have listed there, as well as an extensive network of external collaborations, more than 80 university collaborations just in this space. Take a few examples from this, starting with unconventional development. We're progressing a lot of R&D in the unconventionals, seeking to improve both recovery and capital efficiency for a better understanding of fundamental resource characteristics and what we can do to that relatively new to industry resource. The images I've shown here display simulation results of novel fracturing technologies we're investigating. You think about the purpose of fracturing in unconventional rocks, it's about exposing more of the reservoir through the fracture system to the pressure drop in the wellbore to get more recovery. We look at adjusting the processes used to break rock, you can see changes in the fracture patterns here.
We can generate outcomes that lead to substantially greater reservoir contact area to provide the potential for increased recovery. We're in the midst of breaking rock in the lab right now, validating the science, and we expect to be doing field demonstrations in the near future. The work we're doing in this general space indicates the potential to more than double recovery in unconventional reservoirs. Novel products. Another very different area. Darren alluded to this earlier on. We're building on our long history of polymerization expertise and thermal chemistry fundamentals. Why? To create new structural materials from hydrocarbons. Developing materials with suitable properties to replace steel or cement in applications such as buildings, roads, and bridges. Some of the structures you see illustrated on the right side there.
Doing this offers the high volume opportunity for hydrocarbons with processes that are less CO2 intensive than those used to produce steel and cement. Think about it in terms of this: lightweight, low maintenance, low cost structures, developed in a very efficient way to replace processes that are very CO2 intensive and inefficient now, steel and cement. In the area of carbon capture and sequestration, we're working with multiple partners. When I say working with multiple partners, one of the things that differentiates us is we're not really in the business of passive investment. When we enter into a partnership with one of the many companies, some of whom are illustrated up there, it's an active partnership to develop an idea, to develop an invention, to be able to do one of the things that makes us unique, take that idea or invention potentially to scale and commercial success.
In this space in particular right now, no shortage of ideas. There's no shortage of money. A new fund created every week in this space, it would seem. What the world is short on, entities like us that have the expertise to scale that up and turn it into a success, turn it into something that's going to make a difference in the dual challenge. Some of the examples there, we're currently progressing the design of a carbonate fuel cell demonstration plant for our Rotterdam refinery. This particular design has some really neat positive attributes because not only does it concentrate low concentration CO2 into high concentration CO2 for sequestration, but is also going to produce high value streams, electricity and hydrogen, in the industrial area there for other use.
We're also working on direct air capture technologies that leverage the process heat generated by industrial facilities to economically capture CO2 directly from the air. We've got some great ideas in that space. Talk a little bit about biofuels. Our work on biofuels from algae has been fairly extensively publicly discussed. It plays specifically to the heavy-duty transportation sector, one of those very difficult to decarbonize portions of the economy that is so important in addressing the dual challenge. We like algae as a source for biofuel. It has high productivity, and it doesn't compete for agricultural land or fresh water. If you look at the competing biofuels there on a scale that has bbls per acre per year, you can see the advantage of natural algae and the algae potential we have.
The productivity of our genetically engineered algae is already more than double that of the next most productive source, more than double in that bbls per acre per year metric. Our work in Synthetic Genomics continues to advance, and we feel very encouraged in achieving the potential productivity of the algae depicted. Think about this in another way. The relative land area required to produce sufficient fuel to replace 10% of the U.S. transportation demand is reflected here in comparison to the area of Texas. If you look at corn there, Texas is about 270 million sq mi. Corn, 90 million. Algae, as it exists now, 30 million. Algae target, 3,300 sq mi. We're rapidly progressing the scale-up of outdoor growth systems now.
Looking at different strains of the algae, taking it out of the lab into the natural environment where it's exposed to all kinds of things, including predators, to learn how to do this. Our goal is technical readiness to scale algae biofuels to 10,000 bbls a day by the year 2025. As I said before, we recognize good ideas come from all over, and our external collaborations provide a diversity of thought and capabilities. We have a breadth of collaborations in place already with five university energy centers. Arranged them here around the difficulty decarbonized energy sectors that Darren discussed. You can see we cover a large space of the low emission technologies in these collaborations. I noted before, what we bring to this space is our expertise in scaling technologies, taking science to commercial success.
Beyond this, we're also progressing collaborations with other universities, national labs such as the U.S. National Renewable Energy Laboratory and the National Energy Technology Laboratory, and industry partners. Back to the key messages. I talked about some industry transforming potential. There are several recent examples of applied technology. These are programs that are adding business value, meeting societal needs. We are leveraging our own scientists and talents and the talents of external organizations. Think about it. We are a technology company that's in the oil, gas, and petrochemicals business, with technology programs aligned with our business strategies delivering value today and in the future. I'll now move on and discuss the summary of our investment and financial plan. You've heard about the plans for each of our businesses. Jack and I have discussed some of the competitive advantages that enable us to achieve those plans.
I'll provide some perspective on the resulting financial performance of the corporation. The investments we're making to structurally improve the capacity of the business to grow earnings and cash flow while we're improving returns. As you've heard today, we are progressing advantaged investments that are attractive across a range of prices and market scenarios. Alongside these investments, we have efforts ongoing to high-grade our portfolio to strengthen our industry-leading returns on capital employed. In light of the current margin environment, we are evaluating the pace of investment as we look to balance our capital allocation priorities with the opportunities we have to generate value. Our balance sheet strength provides us with the capacity to pursue advantage growth opportunities across commodity price cycles. Fundamentally, growing long-term shareholder value remains the priority.
Earlier today, Neil Hansen walked through the changes we've made to the price and margin basis to communicate earnings and cash flow potential. These are more reflective of the cyclical nature of the businesses we operate. The charts on this page show the earnings potential. The earnings potential for the upstream, downstream, and chemical on a mid-cycle basis, that's the bars, as well as the potential ranges based on recent history. We've also noted the 2019 price margins with the red diamonds. We fundamentally remain price-agnostic. We're not good enough to call the price next month, next year, five years from now. The reality is that in a capital-intensive commodity industry such as ours, we are going to experience cycles over time. That's why we're progressing our investment plans to grow earnings capacity under a range of prices and market scenarios.
The underlying improvement in the plans we are progressing remains intact, with earnings potential in 2025 double that of our 2017 earnings in a flat price and margin environment. This chart outlines our capital investment plans through 2025. We expect, as Darren said earlier, our investment levels to be in the range of $30 billion-$35 billion per year. 2020, we expect to be in the bottom half of that range, as Darren said before, versus what we thought about the upper half of that range last year. The activity level is reflective of our industry-leading portfolio, which generates average returns of 20% and includes investments that are accretive across a range of prices and scenarios, including the low margin environment we experienced last year. The pace of investment is also reflective of our execution capability and our financial capacity. It is also consistent with previous guidance.
It is important to note that the depth and quality of our opportunity portfolio does provide us with the optionality to respond to changes in market conditions. As Darren mentioned, we anticipate using that flexibility to respond to the broader environment while preserving value. These advantage growth opportunities, alongside our portfolio high-grading efforts, result in improved returns on capital employed in a flat price and margin basis. Our return on capital employed over the past five years has led our peer group. This chart illustrates our ROCE potential out to 2025, showing significant improvement in demonstrating the quality of our portfolio. As we've often said, our focus is on managing the business to grow value over the long term. This chart shows cumulative free cash flow since 2012 in the area portion of the chart.
On the other side, the chart also illustrates cumulative free cash flow potential from 2020 to 2025, assuming a flat real $60 crude price. The actual result will obviously depend on market conditions, the improvements will nonetheless structurally increase the capacity of the business to grow free cash flow over time. Over this time, cash flow from operations grows at an annual rate of 10%. Our capital allocation priorities are focused on the fundamentals. In a depletion business, accretive investments are a necessity to increase free cash flow over time. This in turn enables us to provide our shareholders with a reliable and growing dividend. I said our capital priorities remain unchanged. To fund accretive investments, to provide a reliable and growing dividend, reserve financial flexibility, and provide additional returns to our shareholders through buybacks. Look at the chart here.
Over the last 10 years, we've distributed dividends at leading growth rates, well in excess of peers. In closing, our strategy is to structurally improve our capacity to grow earnings and cash flow and returns. This is achieved through high-grading and advantage investments. We are committed to maintaining the financial strength that provides us with the capacity to deploy capital despite market volatility. This ultimately generates significant free cash flow potential and the capacity to grow shareholder distributions over the long term. At this time, I'd like to ask the management committee to come up on stage. Darren will provide some closing remarks, and we'll move into the Q&A session.
Thanks, Andy. We're reaching the end of the presentation. I hope today you've got a good understanding of where we're taking the business and how we intend to do that. Importantly, how we're responding to near-term market conditions. Our plans are built on a human fundamental, the desire to improve life and the demand growth that results from that. We have a robust portfolio of advantage investments driven by our competitive advantages, hopefully you got a sense for that today, and supported today by a very favorable cost environment. We are developing and progressing the best set of opportunities we've seen since the merger of Exxon with Mobil. Relying on our financial strength to ride through these short-term market turbulence while exercising judgment in the flexibility of our investment portfolio to strike this balance across our capital allocation priorities.
I hope today as well, you got a sense for the importance of technology and the potential that it has to further strengthen our advantages, and at the same time, address the risk of climate change. I'm very proud of the work that we're doing, and I remain extremely confident in the organization's ability to deliver on the commitments that we laid out two years ago. With that, I'll close. Thank you for your attention and look forward to your questions.
Great. Thank you, Darren. We'd like to now open the floor to your questions. When I call on you, if you'll please state your name and your affiliation. Of course, we would appreciate if you could limit your questions to one, plus one follow-up so that we can allow time for others. Let me go ahead and start here in the front with Doug.
Thank you. Thank you, Neil. It's Doug Leggate from Banc of America. Darren, thanks for all the detail today. Your share price is at a 15-year low. Your dividend is at a 7% yield. Some in this room have suggested you're borrowing to pay the dividend. The investment through the cycle, we get that. I guess my question is, what can you say to investors today about your commitment to cash returns to the dividend policy, and how you can sustain that dividend growth through the cycle? If I could just add an add-on to that, when would you expect cash flow to cover the dividend and the capital program?
Well, the way I'd answer that, Doug, I think as you look at value creation and cash flow to shareholders, you've got to focus on the right time horizon. As I said, and tried to demonstrate in the early parts of this conversation, if you're caught in the moment of a down cycle and focused on trying to do that in the moment, you come to a different conclusion than if you're looking at the longer term, and thinking about how you build that capacity for a sustained period. That's what you see us working on today, is building the capacity to generate free cash flow on a sustained basis and improve the portfolio to do that, and it's going forward. That's what we're working on doing, and that's why we're putting the investments into the projects that we're putting them in.
The other point that I was trying to make with these presentations is this is the time to be doing it, to take advantage of the low-cost environment, take advantage of the low debt markets price, and invest in these projects that are going to give us a competitive advantage as we go forward. That's the value proposition here. With respect to when does this all balance out, it's a function of where the prices go, obviously, and the margins, which frankly we can't predict. Which comes back to the other thing, which is everything that we're working on today. All the investments that we have have been tested against the low margin and low price environment, and we've demonstrated that when we bring those on in low price and margin environments, that we're getting the returns that we would've expected. It's not a theory on paper.
It's what we're realizing in practice. The challenge that we have is not on the value of the investments themselves. The challenge is doing that in a time period where several of our businesses are in a down cycle. That is a short-term phenomenon. If you think about how you generate the most value, it's doing exactly that, investing in the downside, which is what the whole premise of what we're doing here is, and I think we'll continue to do that.
We should expect dividend growth?
Pardon?
We should expect dividend growth?
If you look at the different priorities that we've laid out for capital allocation, a reliable growing dividend, a capital investment, a strong balance sheet, and then excess cash back to the shareholders. The point that I made throughout, you heard me make several times, is balancing between those in the time horizon that we're in. We're not going to back away from any of those priorities. It's just a question of how we balance them going forward.
Thank you, Neil. My follow-up, if I may, is, not to be too predictable, but page 64, the Guyana guidance, more than 750,000 bbls a day hasn't changed, but the chart says something different. Can you reconcile the two and tell us what you think phase 4 and phase 5 will look like? Thanks.
Yeah. Doug, I don't have the chart. I think you're talking about the chart with the capacity of the boats on there. It's all a question of timing. There's the capacity of the boats versus the production. I said two years ago, 750,000 bbls a day gross was a target, and I said that was an aggressive target at the time. I think it's important to put a perspective on what's happening on Guyana, and I tried to make some comments earlier on in this. We're bringing on five FPSOs in six years. We're bringing those on twice as fast as the industry has done. We're doing it in a basin and with a country that has no experience of hydrocarbon development. At the same time as we're developing, we're exploring and discovering.
It's really important that we take those lessons and those learnings from the discovery program and build them back into the development program. That's why I know there's been questions around why don't you define what boat four is and what boat five is, and is it going to be on Hammerhead? Is it going to be on Snoek? Is it going to be where else? The reality is, we've learned so much from what's truly an unprecedented exploration and discovery program. We owe it to the shareholders, we owe it to the partners, we owe it to the country to get the maximum value out of that resource base. I still stick by what I said two years ago. A target is over 750,000 bbls a day. Those fourth and fifth boats will be appropriated in 2021 and 2022, and they'll start up in 2024 and 2025.
I know there's a thirst with all this exploration success to why can't you give us it? That's the reason. I think it's a balance between getting the capital efficiency right versus bringing that oil to market.
Russell, could we come up to Doug Terreson?
Doug Terreson, Evercore ISI. Darren, you seem as confident as ever about the direction of the company and future execution and the financial profile too. Along these lines, some of your peers have repositioned their value propositions to become more competitive with S&P 500, which has been a higher bar than a lot of your super major peers. My question is, why wouldn't this be an element of your approach, or is it? Either way, what aspects of your value proposition do you think are differentially compelling for generalist investors, which could obviously be a huge source of demand for ExxonMobil stock?
Thanks, Doug. The drive and maybe the lack of interest in the industry is a function of the returns that the industry's demonstrated over the last, say, 10 years or so. Frankly, we have reflected a lot on how do we get to a point where we get our returns back to where we'd expect them to be. Frankly, I actually see the broader dynamic playing out to repeat the sins of the past in the industry as a whole.
What do I mean by that? Just think about the dynamics and the pressure that certainly I feel in this job with our company to chase the cycle. If you go back in time and look at our industry, what happens when these revenues come up and people start making more money, they go out and start investing. Why are they doing that? Because supply is short of demand. They're rushing through that. The market gets overheated, and they pay a lot to bring these projects on, and they get low returns. We've seen that. Of course, they generate cash afterwards, which we're experiencing today. We get into a low market. You're generating the cash, don't invest that, pay it back out to the investors. You're in a low part of the market, pay the money out and don't invest. What's going to happen?
We will go short again, as the point I tried to make in the chart. Prices will rise again, and the industry will rush in to invest, and we'll repeat that cycle over again. I will promise you that as a whole, there will be lower returns because of that dynamic that's out there. We're trying to do something different than that. We want to get our returns back, which is what we're trying to show through this chart. How are we doing that? We invest counter cyclically. We've picked up an opportunity set that, as we continue to say, is the best we've ever seen. We're executing it in a low-cost environment when everybody else has pulled back. We're relying on our financial capacity, which is what it was built for. What good is it if it just sits?
We're doing it at a time when debt costs are low. That, to me, is a winning proposition. Okay, it is different than what everybody else does, but if you're going to generate returns higher than everyone else, you can't do it following them. That's the proposition. My view is get our returns up. We'll compete with the S&P 500. My point is we've got a higher yield today than the S&P 500 in general. I'm not worried about competing with the S&P 500. I think what I'm worried about doing is generating the value for this corporation based on the competitive advantages that I know we have. What we tried to demonstrate to you up here today is that we're doing that, and that our plans will accomplish it.
The progress that we've made since 2018 is actually demonstrating that in terms of the money and the returns that we're getting on the projects that we've brought on. That's our strategy. The final point I'd make on that is we're not blinded by the short term as well. As you think about climate change and this transition, you heard about the technologies that we're pursuing to think through where does this eventually go to? He talked about us being a technology company. I would say we're a technology company first, hydrocarbon second, and then you get into oil and gas and chemicals and refining. That's the basis on which we're progressing the longer-term horizon in the longer-term future. All of that is around generating better returns.
My expectation is not only will we do better than our competitors in this industry, we'll be competitive with the S&P 500.
Okay, thanks a lot.
Ryan, can you go back here to Jeanine in the middle there?
Hi, good morning. Jeanine Wai from Barclays. First off, thank you so much for your time, and we really appreciate all the detail today.
Sure.
My two questions are on the Permian, so maybe for Neil.
You emphasized the importance of having these large, big, contiguous acreage blocks and that it's key to underpinning your design strategy of design one, build many. Our question is, beyond kind of the Poker Lake and Big Eddy area, what is your capacity to repeat this throughout other areas in the Permian to continue to drive those efficiencies? My follow-up, depending on the answer to that question is, what's your strategy in order to create more of these big contiguous blocks? Is that really mainly through trades or is it through other inorganic opportunities? I think having this competitive footprint that you have in the Permian is really the key to what's making Exxon different.
Well, I thank you for the question, and I agree with your last comment. I think it is key to doing it differently. It's a little bit analogous to what Darren just said about how we're acting as a corporation. We're acting differently in the Permian Basin. In terms of the Big Eddy and the Poker Lake, it's interesting you asking the question on what next. They are so large. I talked about the 10 mi east to west. It's getting up towards 50 mi north to south. There is an extraordinary resource base to capture there. That's going to keep us going, as I said in the discussion, through the next 20+ years at the rates we were drilling at in the fourth quarter of last year and the first quarter of this year. It's an incredible resource.
What we do all of the time is we look for value-based opportunities in the Permian. That's in the Midland and the Delaware, they can be small opportunities, what I call bolt-on acreage, where it adds more value to us than it is to the person who's selling. What we're not doing is going after checkerboard acreage everywhere. To get the capital efficiency that we're already demonstrating, a key component, and I would tell you, it's not the only component, a key component is having large contiguous acreage over good rocks. Not all rocks are equal in the Permian. You've seen that demonstrated by the results across the industry. What's really, really important to me is we focus on developing what we've got because it is extremely large, and we are finding that more and more of these benches are prospective.
We've got a lot of running room in the Big Eddy and Poker Lake, and that will be our priority. We look for bolt-ons all the time. We've added bolt-ons even in the last year. We do swaps all of the time. It really comes for anything larger than that if the opportunity set comes up. Frankly, and Liza he tells me differently, I don't feel a need to because we have so much running room in what we've got.
It'll be a value opportunity. If it's available to us, we'll look at capturing that. I wanted to add to what Neil said, too, because I think we're doing things differently there. The way I would characterize or how we got to that, we challenged ourselves. I talk about these five competitive advantages. Again, those aren't just talking points. We challenged ourselves as how do we, given that we've built these advantages up over decades, how do you leverage those in the resources that we're going after? In the Permian, how do those manifest themselves in what we do, which is now the strategy that you're seeing beginning to unfold. Obviously, when we brought that out, a lot of people thought they don't recognize that and can't compare it to what's currently going on out there, and that was our point.
We hope you can't, because if you can compare it, then we're not truly differentiating ourselves there. Everything that we're doing out there is a function of leveraging the functional excellence, the scale, things that we've talked about, the technology. You heard Andy talk about that. All that is the competitive advantages brought to bear in what I think is a very immature resource. The challenge that we've given ourselves is not only to capture additional value, but to keep that value.
Yeah. Darren, it's an immature resource. Again, for our largest resource, which is in the Delaware Basin, we're only just about to unleash the hounds. We spent two and a half years delineating, preparing, putting surface infrastructure in place. It's when you get into that true manufacturing mode, drill, frack, drill, frack, drill, that you truly drive down the costs and you drive down the drilling times.
I'd just remind you of the charts I showed showing the value we capture as those molecules make their way to the Gulf Coast as well through the logistics and refining and chemical additional uplift we get beyond the upstream.
Good point.
Russell, could you get me Sam Margolin?
Thank you. Sam Margolin, Wolfe Research. Appreciate the point about countercyclical spending. I think it's really easy to see it in the Permian and deepwater because, as you point out, costs on a lot of fronts are down materially even since the bottom of the cycle in 2016.
Frankly, it's a little bit tougher to spot these countercyclical benefits in LNG and chemicals. Overlaid with the fact that your working interest in these projects, especially in LNG, is probably a little bit lower than what you're accustomed to or what you prefer. Are LNG and chemicals higher on the list in your potential CapEx rationalization if the margin profile stays low? I know you're dropping rigs in the Permian now, maybe that was part of the development plan all along. Can you just talk about the outlook in LNG and chemicals in a very weak margin environment with a pretty high CapEx commitment in an uncertain outlook?
Yeah. I'll talk maybe some broad comments and then pass it to the two guys in their areas to kind of cover up. I agree with you that some of the advantages that we see in the other areas aren't as evident in the LNG space today. A lot of the work that we're doing is, and same with chemicals in the cracker that we're developing in China, is really around, we got to find advantages to deliver return that's competitive in this portfolio. Andy talked about a 20% return. If we can't find that, if it gets eaten up through contracting costs, the rest of it, we will not progress those projects. One of the reasons that we're spending as much time as we are developing these things, is making sure we find the advantages to make those returns attractive and accretive.
Neil talked about the work that we're doing with Total. With Total coming into Area 1 in th e Mozambique and thinking long term about developing kind of a bedrock project. The two of us now look at that together and the adjacency of those areas, we see a lot of opportunity to bring costs and advantages down. I'd say we're both working that hard because it's good for both of our companies, and it's good for the country of Mozambique. We're going to work that till we get to a point where we're comfortable we're getting the kind of returns that we need. With chemicals, it's got to have performance products and some of the other advantages in order to offset any costs that aren't advantageous in this environment. You guys want to add anything to that?
Well, I just say on liquid, Darren said it's got to compete in our portfolio. Absolutely. It's got to compete in the industry as well. We're going to invest in liquefied natural gas facilities, which are advantaged in the industry. That's an absolute benchmark that we hold. Our Golden Pass that we're building with our Qatari partner on the Gulf Coast, of course, that was an import terminal, and so we can build this at significantly lower cost than other facilities on the Gulf Coast. In Papua New Guinea and Area Four in Mozambique, they have to be competitive with the best in the industry. The Total Darren talked about, I talked about, it's the same in Papua New Guinea. The Papua New Guinea three train, we're very optimistic that'll be a great story for the co-venturers and for the country.
It's got to do what the first facility did. The first facility was a great investment for us. It's operating at 20% above its design capacity now. That kind of performance enables you to compete against other LNG facilities around the world. It's got to compete not just in our portfolio, it's got to compete against other LNG opportunities around the world.
If I could mention on chemicals, just take a second and talk about the chemicals business, and our role in it. We have a very unique chemicals company versus what anybody else has. We have the integration with our refining assets that several other companies have, we combine that with the technology we bring these performance products, and the scale we bring, the global scale, in not only our manufacturing facilities, but also our marketing operations, our research operations.
Our customer-facing organization. It really is unique. What we're doing in the chemicals business is largely investing with demand growth. Demand is 3% or 4% a year. That's kind of what our top-line volume growth would be. We're investing with demand growth because we feel like we need to maintain our market share at a minimum because we bring some real strengths. Really top of the list of those strengths are these performance products, where we're bringing our technology organization to bear. Very few other companies are investing in technology in the chemicals business like we are. I think when you combine that piece with the scale and the integration, we're extraordinarily unique. I feel like that over time, over the cycles, we are going to generate superior returns.
I don't know when that next cycle, when it's going to turn up, but it will. The seeds are in place for that next cycle to turn. When it does, we're going to have good returns.
Thanks. That actually leads me to a follow-up, if I may. On the financial performance section, there's a pretty big uplift in the 2020 expected results versus some 2019 performance measures. 2019 was impacted by significant margin headwinds at multi-year lows in both Downstream and Chemicals, but there was also some maintenance effects in Downstream. In Chemicals, can you talk about what your expectations are to lift you from the 2019 level to the 2020 benchmark, if it's more than just margins and commodity?
A lot of it is just normalizing for margins. We should expect on a normalized basis increase from 2019 to 2020. We are expecting reliability improvements. We do have a full year of some of the projects we brought on that only got half a year last year. The organization's very focused on cost right now, and that's going to translate to the bottom line, too. We should see on a normalized price basis earnings growth year-on-year.
Okay. Ryan, could you get Phil over here?
Hi. Phil Gresh, J.P. Morgan. First question is for Neil, and then I have one for Andy. For Neil, you made the comment in reference to a prior question, about 250 wells per year at the current run rate and the 6,000 wells of inventory. That's at 250,000 bbls a day, but you're planning to take it to 1 million bbls a day. How do you think about where that well count would go in the future, 2024 or 2025 to get to that level, and how the remaining inventory would play out at that point in time and where you want to take the Permian thereafter?
Phil, did you say 250?
250 wells
Yeah
per year. You said you had 6,000 remaining wells in inventory.
We are. Okay.
I'm thinking as you quadruple your production, what happens to your well count and where do you go post-2025?
Yeah. In the Delaware, we're talking about.
Yeah.
We have 6,000. In fact, we say greater than 6,000. We haven't quantified it above that. Greater than 6,000. About the running rate we're running today is about 250 wells per year. All I was saying was if you maintained that rate, you could run that same rate right the way through, I think we said 2040 or something like that. Is that the question you're asking?
Well, you're quadrupling your production, so I assume that well count's going to go up significantly. One of the questions I think investors have is what is your remaining inventory once you get to peak production levels?
Oh, I don't know the exact number of that. Our inventory, we would expect once we get up to the 1 million, 1.2 million bbls a day, our modeling would say that we can maintain that run rate, that production well beyond 2035. Frankly, we haven't done a lot of modeling beyond that time.
Okay.
Hey, Neil, if I could just interject. Phil, I think one thing to keep in mind is that ramp up in production is not a ramp up in rigs. The rigs will stay constant, and it's just a cumulative building of that production.
Okay.
We're not talking about going out and bringing a whole bunch more rigs out.
Okay. Second question for Andy. I was just looking at last year's presentation versus this year's presentation on the free cash flow. The cumulative free cash flow that you guided to last year is around $190 billion. If I look at the slides here, give or take $130 billion-$140 billion. The ROCE goes from 15% guidance last year to 12% this year. I'm trying to understand the deltas here. Is it just the rebasing of the margins, or are there any other moving pieces? The production looks a little bit lower too, so I'm just trying to understand all the moving pieces. Thanks.
The bigger portion, in simple terms, is down to the rebasing. What Neil took us through, going to the mid-cycle margins and so forth. Then, of course, we've had improvements in the plan. As we high grade, we get better plans every year. There's a bit of that as well. The bigger piece of it would be the rebasing.
Okay. Hey, Russell, how about Paul Cheng right there?
Thank you. Paul Cheng, Scotiabank. Darren, I think Exxon, the whole market stand is a great execution company, both in development and operation. Development remain terrific. Over the last two years, seems like you have more than your traditional fair share of the operating upset, whether it's in chemical or refining. What exactly is happening here? Is there any root cause that we should be aware of, or that is it truly just being unlucky and from time to time, power? If every couple of quarters that we have that, is that truly considered as unlucky, even though on the surface that they may not have seems like a common cause on that?
Yeah.
Also, along that, I was surprised in the fourth quarter, Chemical actually lost money. I've been covering the company 27 years. I don't recall Chemical in any quarter actually lost money, and I'm not sure. Margin is actually lowest in the last 30 years. Maybe perhaps that with all this new project that Jack had shown on the earning improvement, why that we will actually have lost money in Chemical?
Well, I'll start with the last one. First, which is, if you think about the investments that we're making and the expenses that are associated with that investment, we haven't seen a period where we've been investing in the bottom of the cycle in the past. It's not a function. You got a lot of expenses and capital going into unproductive projects as they are being built and brought out and as you're bringing in workforce and getting ready to get those facilities started up. That's a big piece of that. I would tell you the margin environment was the worst we've seen for a long time. I'll let Jack expand on that. Let me come back to the reliability question that you asked.
We've done a lot of work in this space, and I've spent probably 20 years of my life working reliability in refineries. It's something that I've beaten my head against the wall on for a long time. I would tell you, if you go look at the last couple of years and go back and look at offline capacity across our refining circuit. Look at where it's coming from, whether it's reliability incidents or routine maintenance or turnaround maintenance. The big difference between the last couple of years and history is the size of the turnaround maintenance. We took a lot of capacity off, more than we've ever done before on turnaround maintenance, which then left a much smaller layer of refining capacity available. When you had an upset in one of those, that smaller layer had a bigger impact or more visible impact.
Having said that, we're not satisfied with that reliability performance. It's not something that has degraded or is unusually high. I would tell you, it's unacceptable for us because every time you've got assets on the ground that aren't producing, it's wasted value. One of the things that we've done is launched a team to try to step back and look at not only what's the best practice within our corporation as a whole and our industry, but across the entire relevant industry space around reliability practices to see if we can't kind of reset and change the game with respect to reliability across all of our manufacturing facilities. Not just the downstream and chemical, but with our upstream assets as well. Jack, you want to add anything to that?
I'll just say the same effort Darren just talked about, we went through about three or four years ago in process safety. Again, this was not just refining and chemical, this include the upstream across the whole corporation. We went through that extensive process. We're just now kind of rolling it out to all our organization. It's very early days, but we really do think that fundamentally, we're going to be driving a big improvement in process safety. It's very related to reliability. The two are very related. Most of the incidents you have, that you're down for some period of time, started with a process safety issue. We're kind of methodically working through this with the corporation, as Darren said, and we started with process safety and we moved on to reliability. I'll tell you two trends on the incidents.
One is that if you look at the trends over the last four or five years, we've had a steady increase in the number of incidents due to what would be termed operator error. Our workforce is performing better and better day in, day out. That's really pleasing to see. The second thing is the response to those incidents on site were all excellent.
Everybody did exactly what they should have and prevented any incident from getting any worse than it was. I think when you look at the damage and so forth, it was pretty minimal in all those incidents. The answer to your fourth quarter question, as Darren said, the margin environment for all our products, when you look at our footprint across the world, all our products, we had kind of a couple dominoes line up from a margin standpoint. Also we did have one of our Baytown crackers and our Fife E thylene Plant were both down for the fourth quarter, and those are pretty good assets for us. That kind of built on to the margin issue as well.
A quick second question is that it looked like for the next several years, global refining capacity addition is going to be much higher than the refined product increase. In the Beaumont capacity increase, does it really necessary or that is it better off since that you are integrated company that just to export those oil and start processing yourself? Is it really generating much better return for you? Thank you.
Yeah. You want to go ahead?
Yeah. Let me start there and you can help me out. Yeah, Paul, we're not investing to increase refining capacity. We're investing to increase our refinery competitiveness, our integrated site competitiveness. That's why I showed that net cash margin trial on each of these projects to show you how much we're moving the site competitiveness. At Beaumont, the reason why we added the distillation capacity was it helped balance the circuit, balance our Gulf Coast circuit. It's 250,000 bbls a day more crude throughput, but only 100,000 bbls a day additional product. It's product that we think is growing in demand. Again, we're not expanding, we're reconfiguring our refinery kit to be better advantaged in the industry. I think the projects we're working on, we're very optimistic. They're making significant moves in terms of our competitiveness.
The challenge in refining is to be the lowest cost supplier and then lowest laydown cost at your customer's doorstep. If you look at where growth is happening in South America and Africa, given the size and the scale and some of the things that Jack's just talked about, you look at what your laydown cost to bring bbls out of that Gulf Coast high conversion refinery that's integrated with the rest of the circuit and deliver it to customers at a price that others can't compete with, we've got an advantage on that. That was the drive for it. We're not interested in growing refining capacity per se. It's really around making the ones that we've got more advantaged. The other thing you'll see with the investments that we're making in refining, they're only in our integrated sites, where you've got a chemical platform.
The challenge, the focus we've got with this is to make sure that the refining assets are as competitive as can be to support the chemical business so that they're not a weight on that chemical business, which we desperately need and see good returns on. It's making sure that we've got competitive assets across these integrated sites. By the way, the investment in that Beaumont was justified not on market prices and things changing, it's transportation differentials and backing out imported intermediate feedstocks. Pretty fundamental project.
Hey, Russell, could you come up to the front? Paul Sankey.
Paul Sankey, Mizuho. Darren, you've spoken very forcefully about the cycle and investing through the cycle. Logically, you should be buying back stock or buying another company or two, or in the past, you've talked about a balance sheet that would be strong enough to do both. Can you talk about why you're not buying back stock or buying another company? Thanks.
I'll answer that in two phases. First is our key priority to make sure that we're able to manage all the capital allocation priorities, including buying back stock, is to have a competitive platform that grows earnings and generates and grows cash. As you're looking forward and thinking about all these metrics that are rightly valued out there is, how do we make sure we can do that on a sustainable basis? That's got to be priority number one, because if I don't have a strong foundation to grow earnings and cash flow, I can't keep a reliable and growing dividend, and I'm not going to generate the cash to buy back stock. I got to make sure that's happening, which has always been our focus and what we've been doing here. Now, unfortunately, in this time horizon, we've bitten the bottom of the cycle.
That's brought some advantages to us. When the top of the cycle comes, it'll be, I think, a lot more revenue coming in than we've had before. We'll have opportunities to look at these other priorities. Frankly, buying back stock in this kind of environment, not just as Paul Cheng, I think a couple of years ago, talked about why don't you think about that as investment? Well, yeah, it is an investment once you made sure you got a foundation and a platform that's going to sustain you for years ahead. Now you've got some discretionary spend that is a good investment to look at. Today with where the stock price is, I would tell you it's very attractive. It's why I use this word balance across these priorities. We've got to keep strike a balance there.
We're having those conversations with the board around how best to do that.
On acquisitions?
Always looking for it. That's again, one of the reasons why you've seen us pull back. From an NPV standpoint, the projects that we're pursuing are robust to the environment that we're in today and across the board. We don't have any concerns about those projects, and getting those in place sooner rather than later brings that NPV forward and there's a value proposition there. Yet you heard us today talk about pacing and slowing some of that down. Well, why are you doing it if the value proposition is as high as it is? We want to make sure that we're preserving some flexibility on the balance sheet in anticipation of, or maintaining the optionality of, if something comes onto the radar that we think is a unique value proposition that we want to be in a position to act on that.
Thank you. Neil, if I could follow up on Phil's question. Can you talk about the Midland inventory? It appears that your 20% developed was the slide, which again would suggest a pretty short inventory life there. Can you go back over the 250 wells, 6,000 well inventory was for Delaware, then could you talk about the Midland? Thanks.
Yeaph. Your question is not on the Delaware, on the Midland, Paul?
Yeah, I think so because I think what you were talking about was 250 wells a year in the Delaware only. Is that correct?
With the 6,000 inventory.
Yeah.
At that point, could you do the same for the Midland?
Our Midland inventory, as you know, is much smaller and it's more developed, and we have more of those resources in production. It doesn't mean to say that it's produced, as I made that distinction earlier on. It's in production. I think we have, Darren, maybe you can correct me if I got the numbers wrong here. I think we have 600 wells in production. Maybe I'll just look at the data. Out of 2,100 inventory, something like that. The inventory is much larger in the Delaware than it is in the Midland.
Brian, could you get Roger?
Thanks. Roger Read, Wells Fargo. One question just to follow up on the Permian, since we're all trying to get a better feel on that. As we look at, I think it's page 47, the production performance in the Delaware basin. I know you showed a tremendous amount of effort on delineation as opposed to production, the sort of lack of performance improvement over the years is in contrast to some of your competitors. I was curious, is that what we're seeing there and that will improve? You would just simply say your well design was so advanced that, I mean, this is what the Delaware-
No, I was making the point. We've been in delineation drilling. We've been drilling best wells, best benches. We've been looking for those opportunities. The point I was making when I rolled over and showed you what the advantages have been and what the performance improvement have been in the Delaware, that's because we've been in development drilling. We can model very clearly where we will get to in the Delaware, and I was trying to lead you to, we'll have something analogous to that continuous improvement. We've been quoting these numbers before. I was really making the point that it reflects the type of drilling we've been doing over the three years on delineation. You will see a significant improvement as we drive forward on development drilling.
The Midland example that he transitioned to is what he's referring to.
All right. Thanks for that clarification.
Sure.
On the overall goal to get to 5 million bbls of productive capacity by 2025. You've got an M&A or a disposition program ongoing. Typically, as you've brought on, or this would even be true across the industry. As you bring on the new projects, thinking, what'll come on in Mozambique, what'll come on in Guyana, and obviously the growth in the Permian. Typically, it's hard for the other projects to compete as much, and they should be sold. Is 5 million a day something that's aspirational, something we should actually think about putting in a model? As Neil knows, we all like to do aggressive modeling. Something in between. I'd like to think about how you're looking at it. You talked about flexibility earlier.
If things go the other way, what's the flexibility if you're able to actually dispose of more and thinking of that as moving towards maybe accelerating shareholder cash returns?
Yeah. Let me be crystal clear. Volume is not a target for us. I said that two years ago, and I said it last year, and I'll repeat it. Volume is not a target for us. Volume is an outcome of our value growth plan. The growth plan between now and 2025, which is the time range horizon we're talking about, the large elements of growth come from those two developments, from the Permian and from Guyana, and that's the most significant part of that volume increase. Not all volumes are equal. I was making the point earlier on today that we've pared back on unconventional dry gas, and we're down to what I would call lease hold maintenance right now.
You can build that into what we're currently producing at 4 million oil equivalent bbls, but obviously, that's a lot lower value than other bbls we have in our portfolio. That's why I think it's really important that we don't focus on a total volume target. It's an outcome. To go back to where the five comes from, five comes from primarily the increases in getting up to 1 million bbls a day in the Permian and getting up to our 45% share of the 750,000 bbls a day in Guyana.
It has risk divestments in it. That in terms of the program that we've thought about, that's included in there now. Like Norway, as Neil mentioned, that happened sooner than anticipated, so there is a reconciling item. Who knows how that divestment program will go, and the other point that Neil made is we've got more in the market than we expect to transact on because of this value drive. It could go either way, less or more. I think all those will play into that, but that five million bbls is not aspirational. It is an outcome of the plans that we've put together and our best assessment of how we risk divestments and how all that fits together.
Yeah.
Hey, Russell, could you get Neil Mehta?
Thank you very much. Neil Mehta here from Goldman Sachs. The first question is around carbon intensity, and some of your peers have put out explicit carbon targets. I was curious on Exxon's view of whether it makes sense to put out a carbon target, and in what form it would look like.
Sure. Yeah, this is an area that there's a lot of discussion on, frankly. I think, just, let's talk about our approach to this more broadly. We're very focused on making sure that we're managing the emissions of our business and our operations. You saw that we put out a target to reduce methane emissions by 15% this year from 2016 to 2020 and reduce flaring by 25%. We've been working that and making good progress, and our expectation is that we will hit that this year. We're also developing products to help consumers reduce their emissions. That's another key element of looking at this bigger climate change risk and how do we help the world solve this problem. Let's help our customers do that as well.
You heard Andy talk about the third leg of that is looking at what other solutions are needed to enable society to meet its aspirations, which is a technology program, focusing on solution sets in those three primary areas that represent the largest portion of greenhouse gas emissions that today don't have an adequate solution set. The fourth area I'd say we're focused on is engaging with policymakers all around the world as to the best way to approach this lowest cost to society to get the benefits that they're looking for. That's the broader portfolio of how we're working and very focused on and driving the organization to get more efficient and less emissions within our base operation.
What I would say we don't think is a good idea, and one of the challenges looking at individual targets is we think about this on a global scale. Individual companies setting targets and then selling assets to another company so that their portfolio has a different carbon intensity has not solved the problem for the world. It hasn't made a dent in it. In some cases, if you're moving to a less effective operator, you've actually made the problem worse. We're not motivated to do that. We're trying to stick to what is going to make a difference when you draw the circle around the globe, which is what this challenge is. This is not a company challenge. This is a global challenge. How best to address that from a global standpoint?
That's the way we're thinking about it, and I think this idea of moving things in and out of the portfolio from one company to the other actually isn't getting us any closer to the solution in this space. The last point I'll make on that is there's been a lot of discussion around going after the supply side of the equation. Companies like ourselves, ExxonMobil and other IOCs, which are high-profile companies. I understand why people are targeting on that. I think the point that I would make there, though, is changing our supply in whatever direction we're talking about here, doesn't change the demand. If you don't have a viable alternative set, all you're doing is moving that from one company or one country to someplace else. Again, it doesn't solve the problem.
We're very focused on trying to make sure that we're talking about this holistically and actually taking steps to solve the problem for society as a whole, and not to try to get into a beauty match, beauty competition around whose sheet looks like what. We're going to try to get our emissions down as best as we can. We're going to try to solve our customers' issues as best as we can, find new solutions, advocate for the right policy, and then think globally about this, what else we can do to contribute.
Yeah, to be clear, Darren, the demand is not changing. If one company drops out of supply, someone else is going to fill it in. That's the point you're making.
Okay, great. The follow-up question is around the return on capital employed target or goal in 2025 of 12%. Just to be clear, that's based on a real price versus a nominal price at $60. Can you just talk about how that number would look and what the inflator that you're using that underpins that assumption?
Yeah. Let me just start by saying it's not a target. I know with this group I've had a really hard time with that. I think, ROCE, our view is if we're investing in the right projects and their advantage versus industry, that we should see an improvement in return on capital employed, and that's what that chart tried to represent. With respect to nominal, there's this, do you use real or nominal? What I would tell you, that's looking at one piece of the equation. When we look at margins, when you've got kind of the differential, we keep those flat on a nominal basis going forward because you've got the pluses and the minuses mixed together. We're going to hold that flat. When you talk about an absolute price, it's relative to what other costs are doing.
What we tend to do in our plan is we drive costs up to inflation. Our view is, since it's a commodity market and prices are set by the marginal player, that if there's inflation in the market that's driving everybody's costs, that that will manifest itself in the price. That's the way we think about it. When you get down into our plans and think about the value creation, it's really the difference between the cost it takes to realize that price and the fact that we're inflating both of them means the differential's pretty constant. That's how we think about it.
Ryan, could you come up front and get Ryan Todd?
Great. Thanks. Ryan Todd at Simmons Energy. You're pursuing a strategy which contrasts pretty sharply with a lot of your peers, and you referenced that earlier, Darren. The market hasn't liked it for a couple of years. It's not liking it very much today. The market can clearly be wrong for long periods of time. That's maybe another issue. As you think about the discussions that you have within your management committee and with the board on this, what would you need to see to drive a material course correction for you guys? Is it a different view on supply-demand balances going forward? How do those discussions play out internally?
I think that the way we have these discussions and talk with the board about it, which are very involved. We have a lot of engagement around where we're trying to take the company and how we're trying to do that. It would be a function of the outlook and where do we see the world going, and does it change the value proposition of the projects that we're pursuing? I come back to this, that was the point of the early section that I showed, the chart, that demand for oil and gas is going to sustain itself for decades to come. Decline rate that's happening in that part of the sector, the oil and the gas sectors, mean you got to have investments to fill that. The question is: do we have investments that are advantaged versus the rest of industry?
I think as you look at what we're talking about with Guyana and Permian, we've got clear distinction there. That brings on low-cost capacity that's advantaged, gives us a return. There's a value proposition there. If that value proposition changed, if something was to make the outcome or the outlook different, then that would change the direction that we're taking.
All right. Thanks. Then maybe in the Permian, I appreciate all the detail that you gave in the Permian. As you think about the overall pace of the multiyear program, there's a balance there. It's a very high rate of return opportunity, it's also one of the more flexible things in the portfolio. You talked about a small near-term reduction, can you talk about the drivers of the overall pace? I mean, you're running an activity level that's probably twice as high as just about anybody else in the basin. What are the benefits of driving a pace that's that aggressive versus materially slowing it down?
Maybe I'll start this. Okay. I tried to describe that in the chart. In my mind, we range bound it. We range bound it. I don't want to go too fast where we lose project execution excellence. That really caps the top end of this range. The bottom end of the range, I want to make sure we're capturing the capital efficiency advantages versus anybody else, because that's what drives the return. If you go too slow, you don't capture those capital efficiency advantages. You build big kit, and you don't fill it up quickly. That's not a good efficient use of capital. We sort of range bound it by that. Then we'll make a decision on where between those two boundaries that we decide to invest in.
I would tell you, if you look at most of the other players in the basin, for sure they're running less rigs and a lower production rate. They don't have the capacity of this corporation in terms of executing projects, in terms of drilling, in terms of subsurface understanding, in terms of financial capacity. Absolutely, I understand that we're running more rigs and we're going at a faster pace than the vast majority. I would expect us to, because we have the advantages that we have in the corporation. I am very, very comfortable with the rate we're going. What's really important to me is we're demonstrating improvement year after year. To go back to some of the comments Phil made earlier on, we talked about the number of wells. What we're drilling is more efficiently every year. In fact, we're drilling more efficiently every month.
We need less rigs for the same number of wells all the time. That comes from driving efficiencies. We have 40 rigs in the Delaware today, and I get asked a lot, "Surely that's too many. Surely it's inefficient." We're micromanaging every single rig. Every single rig. How can we do 40 versus others doing 10? Because we have the capacity to do it. We have the organizational capacity to do it. I would tell you there's no less intensity in our 40 rigs than there are on others who are running 8 to 10. That's the way I look at this business. If I thought that we were operating inefficiently, I would be the first to pull back.
Okay, thanks.
Russell, can you get Jason up there?
Thanks. Jason Gabelman from Cowen. I'd like to ask a question about these price cycles. You mentioned, Darren, that the industry as a whole has under-invested in conventional oil and gas projects over the last five years. It seems like there's still some spare production capacity out there. My question is: is the characterization of the price cycle changing, meaning either the magnitude of the peaks and troughs or the magnitude between the peaks and troughs, do you see that shifting at all in traditional oil and gas or, quite frankly, the other verticals that you participate in, like LNG, chems, and refining? Thanks.
Yeah. First, I'd just make the point, that chart with the under-investment, that's IEA data. That's not our data. That's kind of the outside view, and it's taken on top of what is needed beyond the unconventional space. It's looking at the conventional with the unconventional considered in that growth. That's kind of where that's come from and that view of under-investing. I would tell you that what supports that perspective is the price environment that I showed and the cost. It's clearly shown that the demand for the services is lower than it has been historically. With respect to how the cycles move, I think it's hard to see a differential in the downstream in chemical businesses. In the upstream, I think the big differential is the unconventional and the short cycle time.
I also think it comes back to the availability of capital and the advantages that these companies will be able to sustain over time. We started the unconventional business with a fragment and with a lot of different players. That has consolidated some, and my suspicion is, if you look at the natural evolution of businesses like that over time you'd see more consolidation, and that will be driven in part by some of this cyclicality. I think maybe in the short term, there's some differences there, but maybe longer term, less so.
You guys want to add anything to that? Andy?
No, I agree with that.
Great. Thanks. My follow-up is just your earnings potential out to 2025 from the base plan that you presented in 2018. I think it's unchanged. It's two times the 2018 earnings baseline, but it seems like a couple of the large capital projects have been pushed out. The two LNG projects, the Singapore or the China Chems project. Where's the delta in keeping that 2025 earnings potential, despite moving some of those large project startups out beyond the planning timeline? How did that impact the change in CapEx for this year?
Yeah.
Well, just to answer on the LNG ones, to be clear on what I said, was the LNG projects don't have a material impact before 2025 is through. That has always been our plan. We would start these facilities up on that base plan in that timeframe, but you really only ramp up and see the earnings and bigger impact in the 2025 through 2030 period, and that's always been the case.
The China cracker is still included in 2025. I said it's coming on late in the cycle, it's coming on in 2025.
Which was the earlier basis as well. It was always coming in the back end of that cycle, so it doesn't have any real material impact on the 2025 number.
I think we have time for one more question. Russell, right there behind you. If you don't mind.
Yes. Thank you. Marshall Carver with Heikkinen Energy. In the Midland and Delaware, as you switch to more cube development and therefore tighter spacing this year, how much of a reduction do you anticipate in oil recovery per well compared to last year?
Yeah. One of the things I'm very careful of, and I'm very careful with our organization, is not to be predicting out into the future what we're doing on things like well recovery. I don't think it's right. You'll see the results, we publish the results. I strongly believe in our cube development, we have a terrific advantage. I laid that out, and it was important for me that I laid out the details for that. It will be advantaged versus everyone else, but I don't want to get into the exact well recovery. What I suggested in the Delaware is that trend that we've seen in the Midland. We've drilled 18 cubes, if my numbers are correct. It's not like we've just started this. We've drilled 18 cubes, and 18 cubes have got something like 200 wells in them over the last 18 months or so.
This is not brand spanking new. We've been delivering on that performance. You've seen it in the Midland. That trend we would expect to take place in the Delaware, but I don't really want to get into a prediction on the exact number.
Just one thing I'd add, if I caught your question correctly. Cube development does not mean decreased spacing.
No.
It just means drilling all the wells that you're going to be drilling at whatever spacing you deem correct at the same time. We're not decreasing the spacing.
Others have decreased the spacing, as you know.
The reduction in the Permian production from last year's plan to this year's plan for 2020 and 2021, was all of that based on lower activity? Were there any other adjustments there?
Yeah. As Darren was describing, we pulled back on some capital expenditure. It's short cycle. We can do it. It's been offset a lot by the improvements we've made. Less rigs that we need for the same production. We pulled back on capital expenditures, part of our capital expenditure reduction program across the corporation. Darren said we were flagging we were top end of that $30 billion-$35 billion range. We're now at the lower end. Some of that has come out of that pulling back in the Permian. I think what's really interesting about that is despite that pullback, you can see, and it's on the charts, the volume reduction versus what I said last year is pretty small. That gives you an indication of the improvements that we're making.
Okay. Before we break, let me just make a few comments. As I mentioned, the ExxonMobil management team will be hosting lunch upstairs until 1:00. If you'd like to attend lunch, if you'll exit through the back, staff will lead you up to the seventh floor. Once you get your plate, seating is open, so if you'll just find your way to a table. If I could ask if you could please allow the management committee to quickly move upstairs so they can take their seats. I'm not trying to discourage the interaction. I know it's important, but if we could just move it up to the seventh floor, we would appreciate that. Again, we thank you for your time today, and we appreciate your continued interest in ExxonMobil, and please travel safely. Thank you.